Germany’s three largest carmakers are undergoing their most severe restructurings in history as a result of a rapid loss of competitiveness against Chinese rivals. Some of the measures being taken by these carmakers include: Volkswagen planning to cut up to 100,000 jobs, BMW warning investors of up to €1 billion in restructuring costs, and Mercedes-Benz scrapping summer bonuses for 90,000 German workers.

These measures reflect a sharp acceleration of Chinese success in eroding the market share of European carmakers. This year, the combined market share of BYD, Chery, and other Chinese brands exceeded 10% in Europe for the first time.

Chinese carmakers have achieved cost advantages in the production of electric vehicles that European manufacturers have failed to match, and this gap is continuously widening. Even these aggressive cost-cutting measures by the three European carmakers may only serve to slow their decline in sales/profits rather than reverse it.

These restructurings are especially significant given that German industrial trade unions possess a legal role in approving restructuring plans, which has historically made large cost-cutting measures slow and expensive to execute.

What does this mean for the sector?

• The speed of Chinese market share gains in Europe suggests that even EU tariffs on Chinese EVs have not been successful in restraining Chinese market penetration.

• Supplier companies across the European automotive ecosystem face significant revenue risks as the production volume of these large German carmakers falls.

• The Iran war, through energy price shocks and supply chain exposure, compounds the pressures on European carmakers.