German automakers' profits are shrinking while they still outperform many global peers, signalling a deteriorating competitive edge
Executive summary: Volkswagen, Mercedes‑Benz and BMW reported declining profits while global competitors expand; an EY study concludes that the German auto industry’s historical advantage is becoming a liability. The profit decline threatens Germany’s key export sector, potentially affecting employment, investment and trade balances if the trend continues.
Who is involved: Volkswagen, Mercedes‑Benz, BMW, IG Metall (trade union), EY consultancy, and the broader German automotive industry.
Likely next: Further cost‑cutting measures, possible plant adjustments, union protests, and renewed debate over policy support for the sector.
Volkswagen, Mercedes-Benz and BMW are seeing their businesses shrink as international rivals grow, according to an EY study cited by Handelsblatt. The study warns that a long‑standing competitive advantage is turning into a burden. While the companies remain ahead of many peers, the trend points to structural challenges in Germany’s auto sector.
What's next — scenarios
Base: modest profit stabilisation after cost cuts (40%)
Volkswagen, Mercedes‑Benz and BMW achieve flat to slightly positive profit growth in 2027 after implementing efficiency programmes.
- Union negotiations avoid major strikes by Q1 2027
- Cost‑saving programmes deliver ≥3% EBITDA improvement by mid‑2027
- Global auto demand remains within ±2% of 2026 levels
Upside: EV transition drives profit recovery (30%)
Successful rollout of electric‑vehicle models lifts combined profits of the three automakers by ≥8% in FY 2028.
- EV sales exceed 20% of total group sales by end‑2027
- Battery pack costs fall ≥15% versus 2026 levels
- Government subsidies for EVs remain at or above current levels
Downside: continued profit erosion leads to capacity cuts (30%)
Ongoing profit decline forces at least one of the three OEMs to announce plant closures or capacity reductions affecting >10,000 jobs by 2028.
- Global auto demand falls >5% YoY in 2027
- Regulatory penalties for CO2 fleet targets increase by ≥20%
- Union‑led protests disrupt production at ≥2 major plants for >2 weeks
What to watch
- IG Metall protest attendance and outcomes on 2026-09-21
- Follow‑up statements from EY or the automakers regarding profit outlook after the protest
Timeline
- — Industrie: Deutsche Autobauer verlieren weiter an Gewinn – verdienen aber mehr als andere (Handelsblatt)
Analysis — what this means
Likely next events
- IG Metall plans protests at over 200 locations across Germany on Monday, 2026-09-21.
Sectors affected
- German automobile manufacturing (Volkswagen, Mercedes-Benz, BMW)