German Auto Industry Faces Crisis as China Sales Plummet

The German automotive industry is grappling with a deepening crisis, marked by a significant decline in exports to China and a broader slowdown in key markets. A recent study by consultancy EY reveals a 33 percent drop in German auto exports to China in 2025, falling to €13.6 billion ($15.7 billion) from the previous year. This shift has caused China to fall from its position as the second-largest export market to sixth.

Decline in Key Markets

The downturn isn’t limited to China. Sales for German premium carmakers—Volkswagen, BMW, and Mercedes-Benz—have also been battered in Germany. BMW experienced a 13.4% sales decline in China and a 5.3% drop in Germany. Mercedes-Benz saw a 7% decrease in China and a 9% decline domestically. Audi’s sales figures mirrored this trend, with an 11% fall in China and a substantial 21% decrease in Germany [1].

Increased Competition and EV Transition Challenges

The decline in exports is attributed to several factors, including fierce competition from domestic Chinese automakers, particularly in the electric vehicle (EV) sector. Brands like BYD are gaining significant traction, challenging the traditional dominance of German manufacturers. German carmakers are also facing difficulties in their transition to EVs and weaker demand in Europe [3].

Investment Despite Declining Sales

Despite the challenging market conditions, Volkswagen, BMW, and Mercedes-Benz have continued to invest heavily in China. In 2024, Volkswagen and BMW each committed an additional €2.5 billion to their innovation hub in Hefei and production base in Shenyang, respectively. Mercedes-Benz is investing €1.8 billion with its Chinese joint venture partner BAIC. These commitments follow a record €11 billion in new investments announced in 2022 [1].

Broader Industry Impact

The fall in exports to both China and the United States is contributing to overcapacity within the German automotive industry. German auto sector exports were down around four percent in 2025. The industry has also experienced job losses, shedding nearly 50,000 positions, bringing the total number of workers to a 14-year low. Bankruptcies in the sector have also reached a 14-year high [3].

EU-China Trade Dynamics

The trade imbalance between the EU and China in the automotive sector has also shifted. In 2025, the value of cars and auto parts imported from China into the European Union exceeded the value of auto sector exports from the EU to China, despite the EU imposing hefty tariffs on Chinese-made EVs to protect domestic manufacturers [3].

Key Takeaways

• German auto exports to China plummeted 33% in 2025.
• Sales for Volkswagen, BMW, and Mercedes-Benz are down in both China and Germany.
• Increased competition from Chinese EV manufacturers is a major factor.
• The German auto industry is facing overcapacity and job losses.
• Trade dynamics between the EU and China are shifting.