Although Germany is entering its third consecutive year of recession, the country’s economic woes can be traced back to 2019, when decarbonization efforts kicked off in earnest, threatening its traditional industrial prowess. Meanwhile, China, the country German industry once relied upon for massive profits, has become its biggest competitor.
A toxic relationship
Germany’s auto giants got rich in China, entering the market decades ago when domestic car sales were just starting to creep up; their Asian success helped support higher wages at home.
That trend reversed in 2018 when China’s market for new cars contracted for the first time since the 1990s, falling 3 percent. It went down 8 percent more in 2019 before the pandemic ground global markets to a halt.
These days, the market shares of the big three German automakers are shriveling as Chinese rivals introduce cheaper electric vehicles that often sport better technology.
In 2024, BMW’s sales fell 13 percent in China; Mercedes-Benz dropped 7 percent; and Volkswagen — which counts China as its largest market — declined 10 percent.
“It was so good in China for so long that the German carmakers, despite the troubles that they’re experiencing now, are trying to recreate the magic of past decades,” said Noah Barkin, a senior adviser with consultancy Rhodium Group.