⚠️ TRYONEREAD EXCLUSIVE
German Car Industry in Crisis: VW May Close 4 Factories, 50,000 Jobs at Risk – TryOneRead Report
TryOneRead has been tracking the German auto industry closely. The picture emerging from Wolfsburg, Stuttgart, and Munich is grim. Volkswagen may close up to four factories in Germany for the first time in its 89-year history. Mercedes and BMW profits are collapsing. And the entire industry is bracing for what analysts call an "economic war" from the United States.
🚗 Volkswagen: The Crisis Deepens
Volkswagen is in survival mode. The company that once symbolized German engineering excellence is now fighting for its future.
According to German media reports, VW CEO Oliver Blume is evaluating the closure of up to four domestic factories. The facilities at risk include Emden, Zwickau, Hanover, and the Audi plant at Neckarsulm. These four plants employ about 40,000 workers. If the closures happen, VW would reduce its German production capacity by approximately 750,000 vehicles annually [citation:3].
The financial numbers explain why. Volkswagen's first-quarter net profit plunged 28 percent to 1.56 billion euros. Revenues dropped to 76 billion euros. Sales in China – once VW's most profitable market – fell 15 percent overall, with electric vehicle sales down a staggering 64 percent [citation:7].
The company is also cutting its workforce. VW plans to reduce its German headcount by up to 50,000 jobs by 2030. Most of the reductions will come through attrition, partial retirement, and buyout packages rather than forced layoffs, thanks to agreements with the IG Metall union [citation:3].
Perhaps most dramatically, VW is exploring unconventional alternatives for its idle plants. The Osnabrück factory, which currently employs 2,300 workers, may be converted to manufacture missile defense systems in partnership with Israeli defense contractor Rafael. VW is also considering producing Chinese-brand vehicles in Europe to utilize excess capacity. These moves would have been unthinkable just five years ago [citation:3].
💰 Mercedes-Benz: China Collapse Hits Hard
Mercedes-Benz is suffering its own crisis. First-quarter net profit fell 17 percent to 14.33 billion euros. Revenues dropped 4.9 percent to 31.6 billion euros. The carmaking unit's adjusted operating margin compressed to 4.1 percent, down from 7.3 percent a year earlier [citation:2][citation:6].
The culprit is China. Mercedes sales in its largest single market collapsed 27 percent in the first quarter. Chinese consumers are increasingly choosing domestic premium brands over German imports. The competition from BYD, Nio, and others has intensified dramatically [citation:6].
Mercedes CFO Harald Wilhelm blamed "intense competition and subdued demand" in China. He described 2026 as "a transition year marked by model changeovers across the portfolio." The company is betting on a revamped S-Class sedan, set to debut in the second half of the year, to revive momentum [citation:6].
On the positive side, Mercedes performed better than analysts expected. The 17 percent profit drop was actually smaller than the 29 percent decline that analysts had predicted. And the company's 4.1 percent margin fell within its full-year guidance range of 3 to 5 percent [citation:6].
But the company is not out of the woods. Mercedes is reducing its total manufacturing output by more than 10 percent, to about 2.2 million vehicles. And US tariffs are projected to shave 1.5 percentage points off the carmaker's core automotive margin in 2026 [citation:6].
📉 BMW: Profit Plunge Amid Transition
BMW is not immune. First-quarter net profit fell 23.1 percent to 16.72 billion euros. Revenues dropped 8.1 percent to 31.01 billion euros. Deliveries fell 3.5 percent to 565,800 vehicles. The company's automotive EBIT margin fell to 5.0 percent, down from 6.9 percent a year earlier [citation:2].
In China, BMW's sales dropped 10 percent. CEO Oliver Zipse described this as a "normalization" as the Chinese market shifts toward domestic manufacturers. But he insisted that China will remain BMW's largest market – a sign of just how important the country is to German automakers [citation:2].
Unlike Volkswagen and Mercedes, BMW has not yet announced major job cuts. But the pressure is mounting. The company continues to invest heavily in electric vehicles and digital technology, even as profits erode [citation:3].
🇨🇳 The China Problem: Why It Matters
China has been the profit engine for German automakers for two decades. That engine is sputtering.
Volkswagen's China sales fell 15 percent in the first quarter. Mercedes fell 27 percent. BMW fell 10 percent. The reasons are multiple. Chinese consumers are buying fewer cars overall as the economy slows. Domestic brands like BYD, Nio, and Xpeng have become genuinely competitive – especially in electric vehicles. And geopolitical tensions are pushing Chinese consumers away from Western brands [citation:2].
The shift is structural, not cyclical. As VW's China chief Ralf Brandstätter put it at the Beijing Auto Show, "If you no longer play a role in the largest, most competitive market with the highest speed of innovation, you will struggle globally as well."
VW is now planning to export cars developed in China to the Global South – a move that would have been unthinkable just a few years ago. The company aims to use China's cost advantages and technological expertise to compete in markets where it has been underrepresented [citation:10].
🇺🇸 The Tariff Threat: An 'Economic War'
President Trump has threatened to raise tariffs on European car imports from the current 15 percent to 25 percent. The CAR research center in Germany called this "the beginning of an economic war against Germany" [citation:8].
Analysts at Bernstein calculated the potential damage. Volkswagen's earnings could fall 9 percent in 2026 (1.289 billion euros). Mercedes could take a 14 percent hit (589 million euros). BMW could see a 12 percent reduction (757 million euros). Porsche is the most exposed because it has no local production in the United States; its earnings could drop 16 percent (311 million euros) [citation:8].
Volkswagen has already warned that tariffs are costing the company about 4 billion euros annually. And that is before any increase. The new 25 percent tariffs would add billions more [citation:7].
There is a glimmer of hope. The US Supreme Court found in February that many of Trump's tariffs were illegal. Carmakers are now eligible for refunds. Mercedes booked a 115 million euro tariff refund in the first quarter. Stellantis booked 400 million euros. Industry-wide, the refunds could total nearly 20 billion dollars [citation:8].
🔋 The EV Transition: Progress and Problems
The shift to electric vehicles is the fundamental challenge facing German automakers. They are investing billions. But the market is not cooperating.
Here is the disconnect. According to a new report, almost two-thirds of all vehicle searches in Germany now involve electric or hybrid models. But actual sales tell a different story. Electric vehicles accounted for only 19.1 percent of new car sales in Germany in 2026, despite making up about 32 percent of searches. People are interested. They are just not buying [citation:1].
There are bright spots. April 2026 saw electric vehicle registrations surge 41.3 percent to 64,350 units. More than one in four new cars registered in Germany is now fully electric [citation:4].
The beneficiaries are not German. Chinese manufacturers BYD, Leapmotor, and MG are the ones gaining market share. BYD tripled its German sales to 4,705 vehicles in April. Leapmotor sold more than four times its previous year volume. German automakers are losing the EV race on their home turf [citation:4].
The German Association of the Automotive Industry (VDA) warns that the situation is "dramatic," particularly for suppliers. A survey found that 72 percent of suppliers intend to postpone planned investments in Germany. Of those, 28 percent plan to relocate investments abroad entirely [citation:10].
🏭 The Supplier Crisis: The Hidden Casualty
The pain is not limited to the big automakers. Suppliers are getting crushed.
VDA President Hildegard Müller warned of "thousands of jobs" being lost across Germany's supplier network. "The stability and development of entire regions in Germany" are at risk, she said [citation:10].
The math is brutal. German automakers are producing fewer cars. They are shifting toward electric vehicles, which have fewer moving parts and require fewer suppliers. And they are moving production overseas to avoid tariffs and be closer to customers.
The ZF Friedrichshafen supplier group has already announced thousands of job cuts. Continental is restructuring. Bosch is investing billions in chip production – a bet on a future where German industry still matters.
📊 German Auto Industry at a Glance
| Company | China Sales Change (Q1) | Profit Change (Q1) | Margin |
|---|---|---|---|
| Volkswagen | -15% | Net profit -28% | 3.3% |
| Mercedes-Benz | -27% | Net profit -17% | 4.1% |
| BMW | -10% | Net profit -23% | 5.0% |
🎙️ TryOneRead Bottom Line
Here is the truth that German automakers do not want to admit. The crisis is not temporary. It is structural.
China is not coming back. The days of double-digit growth and fat margins in the world's largest car market are over. German brands will have to fight for every sale against aggressive, innovative domestic competitors.
The United States is not a reliable partner. Tariffs can be raised at any time. Carmakers cannot plan around political whims. Moving production to the US is expensive and complicated – but may be unavoidable.
Electric vehicles are the future. But German automakers are not leading the transition. They are following. Chinese manufacturers are ahead on technology, cost, and speed. Tesla remains a formidable competitor. German EVs are good. They are not good enough.
The good news? German engineering still matters. The brands still have global recognition. And the industry is capable of reinvention. But the reinvention will be painful. Thousands of jobs will be lost. Factories will close. The comfortable days of predictable profits are over.
TryOneRead will continue tracking this story. The German auto industry is not dead. But it is fighting for its life.