Key players such as Volkswagen, Mercedes-Benz and BMW are facing serious difficulties. In the core market of China, prices and profits are falling, demand in Europe is weak and US tariffs are creating uncertainty. This is forcing companies to focus on cutting costs.
Oliver Blum, CEO of Volkswagen and Porsche AG, said that “the celebration that we have been celebrating in the automotive industry for decades is over in its current form“. According to Patrick Schaufus, partner at McKinsey, “the coming years will be the years of truth”. He stressed that European manufacturers must speed up and simplify the development of new products to compete with fast-growing Chinese brands.
A fierce price war and a change in strategies
European automakers are looking for new ways to survive. McKinsey predicts that 350 new electric car models will be launched by 2032. However, experts are adamant that the development process must be accelerated in order not to lag behind agile Chinese competitors.
Here is how some of the leading companies are adapting their strategies:
Porsche AG: After a 27.9% drop in sales in China, the company abandoned its long-term goal of a 20% margin. Volkswagen management announced that it would invest heavily in the US.
BMW: The company is closely monitoring the "fierce price war" in China to adequately price its new model from 2026.
Mercedes-Benz: By 2027, the company will launch around 40 new models, including the electric GLC. However, aware of "strong competition", Mercedes-Benz is simultaneously cutting costs by billions of euros.
Renault: The French manufacturer, which withdrew from the Chinese market five years ago, is focusing on affordable batteries for electric vehicles, a key element for the success of Chinese manufacturers.
The market situation is forcing European giants to rethink their strategies as competition, especially from Chinese electric vehicle manufacturers, is becoming increasingly fierce. Will the European giants be able to meet this challenge and maintain their positions in the global market? Time will tell.