German chancellor hosts auto summit as carmakers bleed jobs – DW – 10/09/2025 | EUROtoday

Never has state assist been extra vital to the survival of Germany’s auto trade . Thursday’s Autogipfel (“auto summit,” in English) — a high-stakes assembly in Berlin of political leaders, automotive executives and unions — got here at a second of deep disaster because the sector faces stagnation, mass layoffs and a rocky transition to electrical autos (EVs).

Once dominant in engineering and model status, the likes of Volkswagen, BMW and Mercedes-Benz now lag behind Chinese rivals in software program innovation and adopting EVs. China’s BYD, Nio and others are increasing aggressively into the European market, providing cheaper, tech-savvy EVs.

US President Donald Trump’s protectionist insurance policies have additionally dealt a blow to Germany’s dominant export sector.

Merz backs delay to diesel/petrol ban

Showing that the federal government’s prepared to face by the auto trade in powerful instances, German Chancellor Friedrich Merz mentioned after the summit that he would “do everything possible” to scrap the European Union’s deliberate ban on the sale of latest inside combustion engine autos starting in 2035.

The measure, launched in 2022, would levy heavy fines on automakers that fail to scale back carbon emissions. Germany’s conservatives have labeled this a “straitjacket” on automakers’ competitiveness. The ban is presently topic to a assessment by the European Commission amid fierce lobbying by the auto sector.

Merz mentioned that, in talks with Brussels, he would advocate “comprehensive technological advancement towards climate neutrality, but not with a date on the calendar that we cannot meet, that is unrealistic.”

Consumer confidence in EVs is essential

Craig Mailey, chief technique officer at Cox Automotive analysis home, informed DW that Merz dangers undermining confidence within the EV transition by calling for a delay.

“Consumers need clarity, not ambiguity, within these uncertain market conditions,” Mailey mentioned. “While some express concerns that the 2035 deadline is stifling innovation, consumers need certainty that electric transport is the technology of choice.”

Sander Tordoir, the chief economist on the London-based Centre for European Reform (CER), informed DW that Merz’s protection of petrol and diesel-engine automobiles is a “sideshow” to the a lot bigger menace dealing with Germany’s auto sector.

“It is hard to argue that a deadline 10 years away is the driving factor behind Germany losing half of its net car exports in the last four years,” Tordoir mentioned. “There’s clearly something else going on here, and that’s China. So there needs to be an industrial and trade policy response to China.”

Tordoir mentioned it was unclear whether or not Germany alone might roll again EU laws so simply. German media reported {that a} compromise was prone to be agreed at Thursday’s summit to permit hybrid autos — these with batteries and inside combustion engines — to be offered past 2035.

EV subsidies might enhance automakers’ fortunes

Ahead of the talks, German Finance Minister Lars Klingbeil introduced the extension of a tax break on EVs to assist reignite shopper and fleet demand. The exemption was as a consequence of expire on January 1, 2026, however is now set to be prolonged till the tip of 2030, in accordance with draft laws, with these shopping for EVs earlier receiving the most important advantages.

Earlier Thursday, Merz introduced a further €3 billion ($3.5 billion) in subsidies to assist electrical car purchases by middle- and lower-income households.

“The obvious move is to reinstate subsidies to purchase electric vehicles, which Germany cut at the end of 2023, then to coordinate those subsidies across the European Union,” mentioned CER’s Tordoir, referring to an efficient low cost of as much as €7,500 ($8,750) on purchases of latest EVs. “There is overcapacity and a lack of demand for European carmaking across the continent. And so we need to work on the demand side.”

German enterprise each day Handelsblatt reported Tuesday that Berlin needs to hyperlink auto trade assist with support for the home metal sector, which might see carmakers CO2 targets eased in the event that they use European inexperienced metal, which is extra climate-friendly than metal from China, for instance.

Auto sector faces most disruptive yr in many years

The woes dealing with Germany’s auto trade have been described as a polycrisis, marked by slowing EV gross sales, fierce Chinese competitors, escalating US tariffs, excessive power and labor prices, and structural shifts towards electromobility.

In the primary half of 2025, Mercedes-Benz noticed income plummet 56% to €2.7 billion, Volkswagen’s working revenue fell by a 3rd to €6.7 billion, whereas BMW’s pre-tax revenue dropped 29% to €4.02 billion.

European automobile exports to China, largely pushed by Germany, plunged 42% within the first half of the yr, in accordance with the EU’s statistics company Eurostat, whereas exports to the US dropped by 13.6% in the identical interval.

The sector misplaced round 6.7% of its workforce in Germany, almost 52,000 jobs, from June 2024 to June 2025, in accordance with a report by world consultancy EY.

The battle has additionally unfold to German auto elements suppliers, with almost half of these surveyed by the German Association of the Automotive Industry (VDA) describing their present scenario as “poor” or “very poor.”

Nearly two-thirds of suppliers mentioned they plan to chop jobs, whereas round 80% intend to delay, relocate overseas or cancel deliberate investments. Almost none plan to extend funding as they do not count on enterprise situations to enhance within the close to time period, the survey revealed this week discovered.

Boost EU demand, harder response to China?

Speaking forward of the summit, Tordoir known as for extra consideration from Berlin and Brussels to boosting Europe’s auto sector as an entire, noting that France, Italy and Spain have been additionally shedding world export market share to China.

“The best way out is to grow our own [European] market, which is still very sizeable and has the potential to create more demand than it currently does,” he informed DW.

France, for instance, has revised its incentive scheme of as much as €7,000 per car to exclude these from non-EU nations, together with China, whose EVs are produced with coal-heavy power. Chinese EVs are additionally topic to as much as 45.3% EU import tariffs, though most producers negotiated a a lot decrease levy.

Some trade watchers consider the EU ought to undertake a world technique to chop the flood of Chinese EVs that profit from enormous subsidies by Beijing. They say this may be achieved by leveraging robust relations with the world’s different high automakers, like Japan, South Korea, the United States and the United Kingdom.

“Our key export markets also happen to be our allies,” mentioned Tordoir. “The US and the UK are very important markets for German and European carmaking. So there is the potential to create measures that will really move the needle.”

Cox Automotive’s Mailey, in the meantime, warned towards downplaying the menace from Chinese automakers as purely a “low cost option.”

“Their proposition spans a huge portion of the market, across ICE [internal combustion engine] and electric vehicles, from city cars to luxury SUVs. Their designs and technology have drawn a high level of interest from younger drivers who may be less concerned with the heritage of the brand,” he added.

German auto sector down however not out

Despite the numerous challenges, automobile manufacturing in Germany is much from over. With the correct mix of insurance policies and strategic funding, many specialists consider the trade can purchase the time it must adapt, innovate and stay aggressive in a quickly evolving world market.

Tordoir, for instance, believes the European automobile trade has “some catching up to do, but it is not like Europe shows no potential in building the cars of the future. It’s worth providing some support to essentially try to stay in the race and to get the transition right,” he concludes.

Edited by: Uwe Hessler