German Auto Industry Braces for Turbulence as Profits Plunge
In a blow to Europe’s automotive powerhouse, German vehicle giant BMW revealed a substantial drop in first-half profits, signaling a rough time ahead for the sector. The company posted a profit after tax of €4 billion ($4.6 billion), a 29% drop from the same period last year, marking its third consecutive first-half decline.
BMW attributed the slump to a perfect storm of challenges, including soaring energy costs, U.S. import tariffs, weak demand, and intensifying competition, particularly from Chinese rivals. The company warned that trade-related charges could slice 1.25 percentage points off its automotive margin this year, potentially costing billions.
President Donald Trump’s 25% tariff on imported vehicles and parts, imposed in April, has added financial strain. While EU automakers negotiated a lower 15% tariff set to take effect in August, EU officials have lambasted the deal, calling it “scandalous” and “a disaster” for securing no concessions from Washington.
BMW CEO Oliver Zipse welcomed the tariff deal but underscored that duties continue to burden exports and drive up consumer prices. He also highlighted the intense competitive pressure, particularly from Chinese automakers.
BMW is not alone in its struggles. Fellow German automotive giants Volkswagen and Audi saw earnings tumble by over a third, while Mercedes’ profits plunged more than 50%.
The sector’s woes have fueled concerns about the health of Germany’s economy and the broader EU. Germany experienced a recession last year, and the IMF now forecasts zero growth for the country in 2025, the weakest outlook among G7 nations.
The German automotive sector’s trials are not merely a domestic issue. As a significant contributor to Europe’s economic output and a major global innovator in clean tech and advanced manufacturing, its fortunes deeply impact the global economy.
Read more about the U.S. tariffs’ potential impact on German car giants in our related story: “US tariffs to cost German car giants over €10bn – study.”
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