Volkswagen has posted a 5.8 billion euro loss for the third quarter as German carmakers face a crisis in China, with BMW and Mercedes-Benz also cutting jobs and issuing profit warnings.
The big three German carmakers' annual vehicle deliveries in China fell about a third between 2019 and 2025 to 3.87 million, according to calculations by the AFP news agency. Chinese carmakers' share of their domestic market rose to 65.3 percent from 37.8 percent, according to the China Passenger Car Association (CPCA).
Volkswagen's restructuring drive could see it shed up to 120,000 jobs by the end of the decade. BMW and Mercedes-Benz are also cutting jobs. All three have issued profit warnings this year.
New energy vehicles made up a record 67.8 percent of sales in China last month, according to the CPCA. Volkswagen remains the country's number-one carmaker for petrol and diesel vehicles. That segment is shrinking.
"Nobody was prepared for the swiftness or the violence of the pivot," said Tu Le of Sino Auto Insights. "The fall for the German automakers has been really abrupt."
A former Mercedes-Benz strategy expert who later consulted for BMW said the German brands were long dismissive of Chinese competition. "When I was doing analyses of the market in China there was not appreciation," she told AFP. "It was coming from a place of elitism."
The Chinese government stepped up support for electric vehicles with subsidies and charging infrastructure. That made the Germans' strength in internal combustion engines increasingly irrelevant. "What the market demanded was not a skillset they had," said Le. "The legacy automakers were bringing analogue toys to a digital party."
Ingo Speich of Deka Investment, which holds shares in the German carmakers, said Chinese consumers associate brands with specific technologies. "If you think of Volkswagen, you think petrol, not electric," he said. "It's like after 2007 when Apple invented the iPhone."
Volkswagen said it can now design cars from start to finish in China at its centre in Hefei. Both BMW and VW hope to export vehicles from China to other parts of Asia-Pacific. The ID.Every1, slated for European launch in 2027, will have an electric motor made in China.
"You can see us also as a Chinese player," Volkswagen CEO Oliver Blume said in July. "We can do the same as the Chinese can do."
Speaking in October, Mercedes-Benz CEO Ola Kaellenius said the company would overhaul its China strategy. He added that giving up on the world's toughest but largest market was not an option.
VW and Mercedes have written down their China businesses and now show losses for the first time. BMW does not show results separately but is likely close. Thomas Luk, an independent automotive consultant, said the China strategy has failed completely. Sales this year are 20 to 40 percent below last year's poor values.
