German automakers in crisis mode as Chinese EVs bear down

The big picture: All three companies are facing major challenges in the form of Chinese EVs, both at home and abroad.

• Volkswagen is attempting to cut up to 100,000 employees from a total global staff of about 667,000 — a bureaucracy of staggering proportions by all accounts. And the company is bleeding market share in the critical Chinese market. "We're super concerned" about that, Citi analyst Harald Hendrikse said in September.
• BMW is wracked by bureaucracy of its own and recently pledged to cut 20% of its managers, vowing to use more AI. It's also losing significant ground in China.
• Mercedes-Benz is fretting about a bipartisan bill on Capitol Hill that would ban automakers with more than 15% Chinese ownership from selling vehicles in the U.S. Nearly 20% of Mercedes is owned by Chinese entities.

The challenges illustrate how the German auto industry's competitive position on the global stage is at serious risk of continuing to erode.

• "The changes in our industry require decisive action and they require a comprehensive transformation of our group," Volkswagen CEO Oliver Blume said on a conference call.

Zoom in: A spokesperson for the German Association of the Automotive Industry pointed Axios to a recent report in which the organization acknowledged a "lack of technological openness, excessive regulation, and uncompetitive business conditions" as serious threats for its members.

• The organization called for easing EU regulations that would effectively ban conventional engine vehicles, the bread and butter of the horsepower-fueled German automakers.
• The association estimated that the German auto industry could have 190,000 fewer jobs in 2035 than it had in 2019 as EVs usurp gas-powered cars.

In the U.S., the German automakers aren't faring particularly well, either.

• Volkswagen is particularly troubled here.
• U.S. market share for the Volkswagen brand was 2% in 2025, down from 2.5% in 2021, according to car research site Edmunds. U.S. market share for the company's luxury Audi brand declined from 1.4% to 1% during that span.

Between the lines: With vehicle prices soaring industrywide in the 2020s, consumers have become less interested in the intensive and costly engineering that the German automakers have long emphasized, says Edmunds analyst Ivan Drury.

• "These things they had done so well on for so long — they kind of had the rug pulled out from under them," Drury said.
• Plus, the luxury models that the Germans have long prioritized have lost their edge on mainstream models, which have added more features previously exclusive to premium brands.

By the numbers: Shoppers are 11.5% less likely to consider a luxury model now than they were in 2019, according to Cars.com.

• "Shoppers are prioritizing value and reliability to hedge against higher costs, leading shoppers to consider mainstream automakers over luxury automakers," Cars.com editor-in-chief Jenni Newman tells Axios in an email.

Threat level: Globally, the biggest challenge facing the German automakers is the arrival of cheap and well-engineered Chinese EVs, prompting growing chatter of European trade action.

• German Finance Minister Lars Klingbeil said in September during a visit to Volkswagen's headquarters in Wolfsburg that it's time for the EU to stand "up to unfair trade practices" in China.
• "We cannot, when all is said and done, be naive in our dealings with China," Klingbeil said, calling on "concrete measures" from the EU, according to AFP.

What we're watching: In the U.S., the legislative effort to ban auto sales from companies with 15%+ Chinese ownership is on hold until after the midterm elections.

• It has significant bipartisan support, but Republican Sen. Bernie Moreno vowed last week to make sure that the final bill doesn't ban Mercedes.

The bottom line: "For anybody who's competing on a global scale, every single one of them sees Chinese EVs as the largest threat to their existence," Drury says.