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This issue is supported by Berylls by AlixPartners

For this issue, I spoke to Jürgen Simon. He co-authored the new TOP-100 supplier study from Berylls by AlixPartners. His analysis and the study’s data run throughout.

👉 See the full TOP-100 data

Berylls by AlixPartners had no editorial influence over this issue.

Welcome to Issue #121 of The German Autopreneur.

In 2025, the world built more cars than the year before. And yet the combined revenue of the world’s 100 largest suppliers fell. More cars, less money.

Germany is hit the hardest. 17 German companies rank in the top 100. That puts Germany 2nd by revenue. And yet German suppliers have the thinnest margins of any major supplier nation.

They still sell a lot. More than almost anyone. They just don’t make money anymore. And if they don’t rebuild their businesses now, they won’t be around much longer.

I looked at the new TOP-100 supplier study from Berylls by AlixPartners and spoke to Jürgen Simon. He’s one of its authors.

In this issue:

• Why suppliers now earn more than the manufacturers they supply, for the first time in years

• Why German suppliers are down to 1.7% margins

• What Japan and China do differently. And how Germany can find its way out

Suppliers Now Earn More Than Manufacturers

That sounds backwards. For the first time in years, the average supplier earns more than the manufacturer it supplies:

• Suppliers: 5.2% margin (down from 5.8%)

• Manufacturers: 4.2% (down from 6.9%)

2 very different stories drive those numbers.

1) Manufacturers are having an especially hard time. There’s intense global price competition. Add geopolitical tensions and tariffs. And on top of that, they still have to invest billions in future technologies.

2) Not all suppliers are the same. “Supplier” is just a catchall (from chipmakers to seat manufacturers). A few are doing very well and pulling the average up. Others barely earn anything.

What separates winners from losers? Not who sells the most. 3 things matter most:

• What you build

• Where you build it

• Who you sell to

And on all 3 counts, German suppliers are in a weak position:

• Many build what’s earning the least right now

• They often produce where it’s expensive

• Their most important customers are German automakers, and those are struggling the most

The result: the typical German supplier (median) is left with 1.7% margin.

The Segment Decides Everything

Just how big is the gap? Look at the typical margin by segment:

• Strong: semiconductors 24.6%, glass 23.2%, tires 10.2%

• Weak: powertrain 4.5%, batteries -11.3%

Some segments make serious money. One is actually burning cash. And of all things, it’s batteries. The segment everyone considers the future.

The interesting detail: no segment has grown faster in revenue than batteries. They’re up +27.9% per year since 2020. And no segment has worse margins.

How is that possible when more EVs sell every year?

Building batteries means putting billions into massive factories upfront. Those factories aren’t running at full capacity. EV demand grew more slowly in 2025 than planned.

On top of that, falling cell prices are squeezing margins. Companies sell more and still make almost nothing. Jürgen summed it up: sectors like batteries and electronics sold very well. But that doesn’t automatically mean profit.

South Korea shows what that looks like. They’re stuck at 2.9% margin because the major battery manufacturers are deep in the red.

China is different. Market leaders like CATL don’t publish margins, but are seen as clearly profitable.

The lesson: the wrong segment drags down an entire nation’s average.

German Suppliers Barely Make Money Anymore

It shows up most clearly in Germany:

• 2nd in revenue

• Last in margins

That’s the worst result of any major supplier nation.

You can see it with Bosch. Around $60 billion in revenue. By far the world’s largest auto supplier. And the margin: 1.8%.

The main reason is the segment. Germany’s biggest suppliers are heavily tied to traditional powertrain. That’s everything around the combustion engine. And that segment is weakening. 5 of the 10 lowest-margin companies in the top 100 are German.

2 German companies side by side show why the segment matters so much:

• ZF in traditional powertrain: -2.8% margin

• Infineon in semiconductors: 21.5%

Location is the other factor. Producer prices in Germany rise around 6.7% per year. In China: 0.8%.

What that looks like in practice: in 2025, 10 factories closed in Germany and just 1 opened. Germany is the only major region where more plants are closing than opening.

The thin margins are becoming a real problem for many. To get through it, these companies need to rebuild their businesses. That costs a fortune. It can’t come from the business itself. They don’t earn enough. The only option: take on debt.

But when you barely make money and are already heavily indebted, banks aren’t offering much:

• Either no credit at all

• Or only at very high interest rates

At exactly the moment they need money most, it’s at its most expensive.

Berylls by AlixPartners expects a wave of bankruptcies and mergers through 2027/28.

Japan Earns 3x What Germany Does

The comparison with Japan is striking. Japan is actually very similar to Germany: an old, strong combustion-engine nation with well-established manufacturers and suppliers. Japan has 21 suppliers in the top 100. Germany has 17.

And yet the typical Japanese supplier earns 5.9% margin. More than 3 times what a German supplier earns.

How is that possible, with such similar starting conditions?

It’s not about the product. It’s about the relationship between manufacturer and supplier.

In Japan, manufacturers and suppliers work together. The relationships are close and built on mutual respect. Companies often hold stakes in each other.

The manufacturer doesn’t just squeeze prices. Both sides get through the rough years together.

In Germany, it’s the opposite: take it or leave it. If you supply Mercedes, VW, or BMW, you’re just a cost to cut. Pressure gets passed straight down the chain. I hear this from suppliers constantly.

And that’s dangerous. We in Germany are destroying our own supplier base piece by piece. Germany needs these suppliers for development and production. And we’re the ones pushing them out of the market.

Same starting conditions. Completely different relationship with the customer. That 3x gap is entirely self-inflicted.

China Earns the Most and Grows the Fastest

And China? You’d expect brutal price competition, nobody making money. It’s the opposite:

• 15 companies in the top 100, 3 of them new this year

• +11.0% revenue growth for the typical company

• 9.6% margin (median), roughly 5 times what Germany earns

One caveat: only 7 of the 15 Chinese companies actually report their margins. Major players like CATL aren’t included here.

But the speed is what’s really unsettling. China is growing fastest:

• 8 of the 10 fastest-growing suppliers in the world are Chinese

• By revenue, China has just overtaken the US and now sits at 3rd place, right behind Germany and Japan

Until now, China’s growth has come mainly at Japan’s expense. Since 2020, Japan has lost 6 spots in the top 100. China has gained 8. Germany has held its 17.

The question is how long that lasts. Jürgen’s assessment: holding on to those 17 spots will be “very difficult.”

How German Suppliers Can Still Survive

For German suppliers, it’s no longer just the margin under pressure. It’s the business model itself. From 3 directions at once:

1. Their core business is shrinking. Everything around the combustion engine is in decline

2. Chinese suppliers are taking market share. Even German manufacturers are increasingly buying from China

3. Chinese automakers are becoming more important as customers. But they’re more vertically integrated and buy less from outside. And when they do, they prefer Chinese suppliers

Getting cheaper or better isn’t enough anymore. Jürgen’s words: “The old German premium supplier model has to change, at least in part.”

So there are 2 directions:

1. Expand into more profitable segments

2. Or exit automotive entirely and move into new markets

What the restructuring looks like in practice:

• ZF is selling its entire driver assistance division to Harman for around $1.6 billion. That cuts its debt

• Continental is spinning off its entire automotive business as Aumovio

• Mahle is building cooling modules for stationary battery storage systems

• Schaeffler is making components for humanoid robots and cooling technology for data centers

The AI boom is both a threat and an opportunity. Data centers are buying up the chips the automotive industry needs. But that same wave creates an opening: suppliers who build components for those data centers benefit disproportionately.

My Take

For me, this won’t be decided by the numbers. It’ll be decided in people’s heads.

German suppliers had a stable business for decades. Same customers, same market. Our industry is cyclical: you move from one crisis to the next. But until now, each was temporary. You got through it by becoming more efficient and cheaper. Then things picked back up. The business model itself was never in question.

This crisis is different. Getting more efficient isn’t enough this time. For the first time in generations, these companies have to rethink what they actually do.

And they can. Bosch, Continental, ZF. Some have been around for over 100 years. They all started with a bet: someone took a risk and saw a market that didn’t exist yet. The quiet decades came after. The job changed: optimize, manage.

That’s exactly where they need to go back. From manager to founder. The hard part isn’t figuring out which segment is performing. The hard part is this shift in mindset. Getting curious again. Being brave again. Making bets again. And most of all: learning how to learn again. What do I bet on? What do I let go of? Where do I want to be in 10 years?

Jürgen put it bluntly: “The core isn’t necessarily what I’ve been doing for the last 100 years.” This is “far from a temporary dip.” It’s “more like a new reality.”

Realistically, that means: in a few years, maybe fewer than 17 German companies will still sit in the top 100. That doesn’t have to be bad news. Some might be missing simply because they found a far more profitable business outside automotive. And the ones that remain will be making money again. Not because they were the biggest. But because they made the right bet at the right time.

🔗 Berylls by AlixPartners TOP 100 Supplier Study 2026

A note on methodology: Margins by nation reflect the typical company (median), not the average. Individual figures may therefore differ from the study’s published numbers.

That’s all for today.

Until next week,

Philipp

PS: If you find value here, share it with someone who should read it too.

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Welcome to Issue #120 of The German Autopreneur.

By 2035, 1 in 4 jobs in Germany’s car industry will be gone.

The VDA (Germany’s auto industry association) says 100,000 have already disappeared since 2019. Another 125,000 are set to follow.

And it’s not just the car sector. Across German industry, more than 10,000 jobs have disappeared every month for the past 2 years.

Audi CEO Gernot Döllner put it bluntly to his own people:

“This is no longer about a single model or market share here and there. It’s about the survival of the German auto industry.”

That’s a lot at once. And it sounds like the end.

Still, every week I get messages like this: why don’t you write something positive about the German car industry for once? Usually with a link to some shiny new model. I get it.

But here’s how I see it. Plenty of outlets celebrate those wins already. My job is to zoom out.

To ask where the industry is heading as a whole. To connect the scattered headlines into one picture. And to give decision-makers the signals that matter.

And when I zoom out, it doesn’t look good.

Germany’s time as a car nation is over.

Today we’ll look at:

• Why Germany’s car business model is broken

• Why the fight against China is a fight between systems, one we can’t win the way we’re playing it

• Why we showed up late to 3 car technologies

• And how we get out of this

Why Germany’s Car Business Model Is Broken

The “Made in Germany” success model always stood on 4 pillars:

1. Complexity. A combustion engine is one of the most complicated mechanical devices ever built. Thousands of parts, tolerances down to the micrometer. We did this better than anyone. That was our moat

2. An industrial ecosystem. Carmakers, suppliers, and research institutes next door to each other. Stuttgart, Munich, Wolfsburg, Ingolstadt. Entire cities built around the car, with hundreds of players packed close together, pushing each other to peak performance

3. Cheap energy from Russia

4. Profits from China. Our biggest growth market since the 1990s. We developed in Germany and sold in China. More every year. For decades the money just came in. Cash was never the problem

From these 4 pillars came a story that worked worldwide. A German car stands for quality and high tech. That’s why Mercedes, BMW, and Audi could charge a premium everywhere. More expensive, but better. That was the story.

Today all 4 pillars are crumbling at once:

• The combustion engine matters less and less

• The ecosystem is moving abroad

• The Russian gas is gone

• And China is buying fewer and fewer German cars

Volkswagen, Mercedes, and BMW now sell nearly a third fewer cars in China than in 2018. And that’s even though the overall market grew by about 25% in the same period. The market is booming, just without us. The money machine has stopped.

And the “Germany equals high tech” story doesn’t hold anymore. Because German cars no longer lead where high tech gets defined today. In the electric powertrain. In software. In AI.

And most of it leads back to China. So that’s where we look next.

Why the Fight Against China Is a Fight Between Systems

China built its own car industry in just a few years. One that has already overtaken us. For a long time, nobody in Germany took it seriously.

They did it by leapfrogging. They skipped an entire stage of development.

China realized early that it would never catch us in the traditional car market. We spent 100 years perfecting the combustion engine. No one gets close to that.

So the Chinese skipped the combustion engine. And asked themselves what comes next.

The electric, software-defined car.

They didn’t invent it. They copied it from Tesla.

They just understood earlier that this was where the future lay. And whoever controls the world’s biggest car market gets to shape that future.

This is even built into China’s industrial policy: first adopt, then understand, then do it better yourself. That’s how it went with high-speed trains, with solar, with AI. And now with the car.

And all of it was possible for one reason. China competes as an entire system.

Picture 2 soccer teams.

One has a coach. He sets the tactics, picks the lineup, and subs out anyone who doesn’t deliver. All 11 play toward the same goal.

The other has no coach. 11 individual players on the field. Each with their own strategy. And each one wants to score for himself.

That’s China versus us. A collective against individual players.

What does that mean? Here every company fights for itself. Each one runs its own strategy.

China works differently. There, an entire economy pulls toward one goal. Hundreds of companies, 1.4 billion people.

And above all those individual strategies sits a government master plan. A national industrial strategy that sets the direction.

The companies still compete with each other, of course. They’re meant to. But in the end they all pull in the same direction.

And it’s planned from the start that most of them will go under. That’s exactly the point. The goal is to produce global champions.

Here’s how the Chinese playbook runs in 5 steps:

1. The state sets the stage. Capital, subsidies, market access, talent, infrastructure

2. Hundreds of startups jump in. A whole ecosystem forms

3. Oversupply is allowed on purpose. More supply than demand

4. Whoever isn’t efficient and innovative dies. Brutal competition does the rest

5. The survivors are unbeatable. That’s how BYD and CATL were born. Today the biggest EV maker and the biggest battery maker in the world

VW CEO Oliver Blume said recently: “Our business model doesn’t work anymore. Not at Volkswagen. Not for Germany as a whole.”

He means more than a business model. He means a whole system that belongs to another era. Our system. Everyone fights for himself. Against an opponent that competes as a collective. With plans that run for decades.

And it gets worse. Because the car itself is becoming something entirely new.

Software Is Eating the Car

In 2011, tech investor Marc Andreessen wrote a line that became the most important thesis of the decade: “Software is eating the world.”

In Germany, that line never really clicked for us. We only understood what it meant once it had already happened:

• 2007, the phone. Nokia was the world leader. Then came the iPhone. Today Nokia doesn’t build phones anymore

• 2015, music. Once the CD on the shelf. Then came Spotify. Today nobody owns music

• 2020, banking. Once the branch with a counter and an advisor. Then came banking apps like N26 and Revolut. Today the bank is an app

Same pattern every time. An industry, stable for decades. Then software comes in and rewrites the rules. And the old leaders disappear.

And that’s exactly what’s happening to the car now. Except here the wave didn’t come once, but 3 times. First the powertrain went electric. Then the car became software. Now AI takes the wheel. Each wave built on the one before. And each came faster. We were late to every one. The third is rolling right now.

The car today is no longer the car we knew. It’s a computer on wheels. A robot that drives itself. The heart is a software platform. Everything runs on it: driving, assistance, AI. The metal around it becomes an afterthought.

That’s why the new generation of carmakers builds completely differently. Software first, then the car. They think like a tech company, not a carmaker.

And this is exactly where it gets dangerous for us. When the product changes this fundamentally, you need a completely different organization to build it. A different culture. Different processes. Different people. You have to turn your entire company inside out.

Almost no one manages it. German carmakers have been trying to pull off this exact rebuild for over 10 years. And still haven’t cracked it.

But why is that?

These companies were trained for over 100 years on a single task. Squeezing more and more out of a mature technology. 3% cost out, 5% efficiency in.

The system rewarded the optimizers and weeded out the inventors. For decades that was exactly right.

Today the game has changed. Now what counts is inventing something brand new. And that’s exactly what’s catching up with them. Perfecting something that exists and inventing something new are a whole different ballgame. A single company can almost never do both.

Volkswagen tried it with its software unit CARIAD. 6,000 developers, over $13 billion. In the end, the old organization smothered the new one.

And I want to make one thing clear. Inside these companies are plenty of people who want to break it open. They’re just fighting a system that doesn’t want to change. The problem isn’t the people. It’s the machinery they’re stuck in.

That’s the one reason German carmakers can’t move forward at home.

There’s a second. The most uncomfortable one.

The German customer doesn’t even want the car of the future. He wants a solid car, the way he knows it. He doesn’t need all the digital extras.

With the combustion engine it was different. Germany was the test lab. German carmakers could develop here and test the newest technology directly with customers. What worked here was then sold to the whole world. That was our success model.

Today that doesn’t work anymore. Nobody here wants the car of tomorrow. In China they do.

Together, those two forces push German carmakers out of the country. At home they lack the organization that can build the new car. And the market that wants it. So they go where both exist.

That’s why VW and supplier Bosch are moving their development to China. And why Mercedes CEO Ola Källenius says: “I am Chinese.”

And sadly it’s not the factories that are leaving. It’s the R&D. The know-how. The most valuable thing we have. They’re now developing the car of the future 8,000 kilometers away. The car nobody wants here.

It comes down to one thing. These companies have to reinvent themselves. As software firms. And in history that has almost never worked. Nokia, music, the banks. When the software wave hits an industry, the newcomers always win in the end. Not the old market leaders.

German carmakers want to be the exception. But inside the old structures that’s barely possible. So they look for a place where they can start from scratch again. Far from the old machine. With new people who don’t have the old thinking baked in.

My Take

I’m not saying this as an outsider. I’ve been in this industry since 2011. My livelihood depends on it. If it goes down, it hits me too.

Before we look ahead, we still have to be honest with ourselves. In the car industry, we no longer set the pace. We’re running behind. For Germany, the car business probably won’t ever be what it once was. Too much has happened.

The car was never just a product for us. It was always part of our identity too. Tell someone abroad you’re from Germany. Almost always the same thing comes back: soccer, beer, and cars. That’s exactly why it hurts when this slips away. And that’s exactly why I do this. Because it’s not only about cars. It’s about us.

The end of the car is not the end of Germany.

So the question isn’t how we get the car back. It’s how we secure our prosperity when the car no longer carries it.

And that’s exactly where our problem lies. When an industry stumbles here, everything revolves around preserving it. The tax money, the lobbying, the whole debate. Everything goes into keeping the old alive. Almost nothing into building the new.

This time we should do it differently.

1) Protect your own market

We’re always told politics should stay out and the market will sort itself out. Open borders, fair competition, may the best one win. That made us rich. But today that belief is mostly one thing. Naive.

Because the free market doesn’t work against an opponent that plays as a system and doesn’t follow the rules. You only beat a system as a system. That includes shielding your own market. Uncomfortable. But it’s exactly what China and the US do too.

But a wall only protects whoever builds something behind it. This isn’t about closing ourselves off. It’s about a deal. Whoever wants to sell here should also leave something behind. Produce here, share technology, create good jobs. Market access for real value. That’s exactly what China demanded from us for years.

Former ECB chief Mario Draghi described this in his 2024 EU competitiveness report. Europe has to stop playing nice. Everyone else plays industrial policy hard. Europe has to act as one player and work on a strategy for years. When we say “together,” we usually mean just 27 EU foreign ministers trying to speak with one voice. That’s not enough. We need industry and politics working on the same plan for decades. Airbus proved it can be done. Several countries joined forces and invested billions together. Today Airbus and Boeing split the global market between them.

2) Build the new

That was the defense. But it won’t secure our prosperity. Because in the future, prosperity won’t come from the car anymore. It’ll come from industries that don’t even exist yet.

And here China is worth a look. They were once exactly where we stand today. Left behind, with no chance of ever closing the gap. Their answer was to leapfrog. Don’t fight where the game is already decided. Step in where it’s just beginning. Get ahead of the wave. That’s exactly what we have to do now.

We have to find the markets where we can build a lead that lasts for decades.

And then we have to stick with it. For the long haul. That’s exactly where we failed once before. About 15 years ago, Germany was the world leader in solar. We were ahead of the wave. Then we cut the subsidies. The Chinese kept subsidizing and took over the market. Our industry didn’t survive it. Today almost every solar cell comes from China.

We still live off the industries of the last century. But they have an expiration date. And if nothing new is ready by then, we’ll have nothing left.

In the end it all comes down to a single question. Do we keep putting our money and energy into preserving yesterday? Or into building tomorrow?

Germany’s time as a car nation is over. But what comes next is up to us.

🔗 vda | jobs | audi | china | solar | draghi

That’s all for today.

Until next week,

Philipp

PS: If you find value here, share it with someone who should read it too.

Want to work with me?

I help global B2B companies connect with 100,000+ automotive decision makers in Germany.

Learn how we can work together →

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Welcome to Issue #119 of The German Autopreneur.

15 years ago, German carmakers faced a decision. Build it themselves? Or buy it? The answer: buy. It’s just a commodity.

Today the battery is the most expensive part of an EV. And most of it comes from China. The industry feels those consequences every day.

That same pattern is repeating right now. This time with self-driving.

Your own car. The taxi you hail. The bus you take to work. All 3 will drive themselves in the coming years. And the technology behind it probably won’t come from Europe.

Today I’ll show you:

• How a research curiosity became a real market overnight

• Why this market is actually 3 different markets

• And how Europe is sliding into the next big tech dependency

Self-Driving Is Here Now

For years the line was: self-driving will come eventually. In early 2026, it arrived.

In the first 4 months, $21B poured into the market. More than 2024 and 2025 combined. Waymo alone raised $16B and is now worth $126B. More than Mercedes, VW, and Stellantis combined.

And this time, the money is no longer chasing hype. In 2024, 127 companies raised fresh capital for self-driving. In 2026, only 34. But total funding didn’t shrink. It’s 4 times larger. 3 of every 4 dollars go to Waymo. The winners are emerging.

The technology is being built in 2 places. The US and China. But it doesn’t stay there.

In the US, Waymo runs about 500,000 paid rides per week. Across 10 US cities. London and Tokyo come online this year.

In China, Apollo Go, Pony(.ai), and WeRide are on the road. Apollo Go in Wuhan. Pony(.ai) in Beijing, Shanghai, Shenzhen, and Guangzhou. WeRide in more than 40 cities worldwide.

Why is it suddenly moving so fast? Cost. Apollo Go builds its robotaxi for $28,000 today. Sensors and chips included. A robotaxi already costs less than most new private cars.

The experimental phase is over. But in Europe, not a single robotaxi operates without a safety driver.

3 Markets for Self-Driving. Europe Only Plays in 1

Use these 3 markets to make sense of every self-driving story in the years ahead.

Market 1: The private car

This is about private cars that drive themselves. The market closest to the traditional auto industry. 2 strategies are in play.

Strategy 1: Build everything in-house. Their own chips, their own software, their own car. Tesla, Xpeng, NIO, and Li Auto take this path. All of them are based in the US or China.

Strategy 2: Buy it. Every European automaker takes this path. I’ll show you how in a moment.

Market 2: The robotaxi

This is about cars you order through an app. No driver. They take you from A to B. Usually within a city.

• US: Waymo, Tesla, Zoox

• China: Pony(.ai), WeRide, Apollo Go

In London, 4 robotaxi services launch side by side this year:

• Waymo with its own app

• Uber with software from Wayve

• Apollo Go through Uber and Lyft

• Pony(.ai) via Bolt

And in the EU? The first commercial robotaxi service runs in Zagreb, Croatia. Operator: Verne. The vehicles: Arcfox from BAIC. The virtual driver: Pony(.ai). Both from China. Stellantis is building the same setup in Luxembourg. Also with Pony(.ai).

Market 3: The shuttle

This is about self-driving minibuses. They run fixed public transit routes at low speeds.

This is where Europe is supposedly ahead:

• MOIA from VW operates in Hamburg, Germany

• KIRA from Deutsche Bahn operates in Langen, near Frankfurt

• HOLON from Benteler launches in Jacksonville, Florida, in late 2026

But all of them run with a safety driver. And none of them builds its own virtual driver. They buy it from Mobileye in Israel. On top of that, they build the rest of the service themselves: vehicle, route, app, operations.

Even Mobileye itself doesn’t yet operate anywhere without a safety driver.

The only German startup with its own technology is MOTOR Ai in Berlin. They call themselves Germany’s Only Full-Stack Level 4 AV Startup.

Money Is Moving From Cars to Software

To play in any of these markets, you need 5 building blocks in the car:

1. The sensors. Cameras, LiDAR, radar. The eyes and ears of the car.

2. The compute chips. They process all sensor data in real time.

3. The virtual driver. The software and AI that actually drives the car.

4. The car itself.

5. The service. App, fleet, pricing, cleaning, support. Everything around the ride that touches the customer.

On top of that, 3 more things:

• Cloud compute to train the AI

• Experts who develop the AI

• A lot of capital. 10 to 15 years before the first dollar comes back

This is exactly where the battery pattern repeats. In a combustion car, the engine was the core and the most expensive part. In an EV, that role moved to the battery. In a self-driving car, it moves to the virtual driver.

And the virtual driver probably won’t be built 3 times. Once for the private car, once for the robotaxi, once for the shuttle. Once one player builds it cheaply at scale, that player serves all 3 markets.

It’s like Google licensing Android to dozens of phone makers. Tesla already runs the same software in private cars and robotaxis. In China, Xpeng licenses its virtual driver to VW. Whoever has the best and cheapest virtual driver wins in all 3 markets.

Anyone who doesn’t build the virtual driver themselves depends on a supplier for the most valuable part of the car.

On top of that, robotaxis will take over part of urban mobility. And whoever uses one orders it through an app. That app usually doesn’t belong to the automaker. It belongs to Uber, Lyft, or Bolt.

So value is moving away from automakers in 2 directions:

• Upstream to the technology players who sell them the virtual driver

• Downstream to the platforms that own the customer relationship

What’s left in the middle: building the car.

Where Do German Automakers Really Stand?

The bottom line up front: Mercedes, BMW, and VW still develop in-house up to Level 2. At Level 4, they don’t.

Why not? Because it’s very expensive and very slow. Waymo has existed since 2009. Alphabet has invested billions over 15 years. Only now are they starting to commercialize. No publicly traded European company waits that long for revenue. And Europe doesn’t have venture capital on a US or China scale.

In Q1 2026, Waymo raised $16B. Wayve raised $1.5B. Germany’s hope, MOTOR Ai, raised $18M.

With that gap, only one conclusion follows. German automakers can’t build the Level 4 virtual driver themselves. So they buy it.

Mercedes and BMW:

• Both shut down their own Level 3 programs in early 2026. The reason: Level 3 became irrelevant. The industry is moving directly from Level 2 to Level 4

• Both still have in-house solutions up to Level 2. Anything beyond that, they buy

• Mercedes uses NVIDIA globally. Momenta in China. Plus a stake in Wayve in London

• BMW uses Qualcomm and Mobileye. Also Momenta in China

Volkswagen:

• In Europe and the US: CARIAD develops software for Level 2 and 3. Qualcomm supplies the high-performance chips. Audi, Bentley, and Porsche also use Mobileye. The MOIA shuttles run on Mobileye too

• In China: VW paid $1B for a stake in Horizon Robotics. In their joint venture CARIZON (60% VW, 40% Horizon), the 2 companies develop software up to Level 2 and their own chips. VW also buys solutions from Xpeng and ZYT

Bosch:

• Bosch and CARIAD have developed software for VW group brands together for years. Based in Germany. Up to Level 3. Level 4 is explicitly off the table

• For robotaxis, Bosch supplies sensors, brakes, and compute. Bosch does not build the virtual driver

The picture is the same everywhere. For the most valuable building block, every German automaker depends on a supplier. From the US, Israel, China, or the UK. From the EU: nobody.

So Who Is Building the European Solution?

3 companies are trying.

Wayve in London:

• In February 2026, Wayve raised $1.5B. Valuation after: $8.6B. Investors: Mercedes, Stellantis, Nissan, Uber, NVIDIA, Microsoft, SoftBank

• Europe’s biggest hope. With 1 catch: they’re based in the UK, outside the EU

MOTOR Ai in Berlin:

• The only German startup trying to build the full stack itself. Sensors, chips, virtual driver. Their own technology for Level 4

• On funding, they’re in a different league from Waymo or Wayve. But the only team in Germany with this ambition

Verne in Zagreb:

• In April 2026, Verne launched the first commercial robotaxi service in the EU. Robotaxis powered by Pony(.ai). From China. Still with a safety driver for now

• Background: Verne received about $190M in EU funding. The condition: the technology had to be European. The original plan was for its own robotaxi with Mobileye as the virtual driver

• But the in-house development wasn’t ready in time. 5 days before the funding deadline, Verne announced the partnership with Pony(.ai) and Uber. 1 day before the deadline, the first paid ride took place. With a robotaxi from China

I wrote about this on LinkedIn a few weeks ago. In the comments, the CEO clarified that the EU funding went exclusively to in-house development. The Chinese robotaxis were paid for with private capital from external investors. According to him, the 2 buckets stayed strictly separate.

Whether that explanation holds or not, Verne represents a pattern. Europe can’t get its own technology on the road in time. And in the end, the order goes to China.

My Take

15 years ago, with the battery, German carmakers could still say they didn’t see it coming. With self-driving, Europe shouldn’t make the same mistake. The shift is happening in real time. Europe could push back. But it isn’t.

How? China and the US show how.

China keeps foreign technology out. Not through a single law, but through several rules:

• Data can’t leave the country

• Only licensed companies can create maps

• Every software update needs prior approval

That’s why Mercedes, BMW, and Audi have to buy their China software from Momenta. They don’t have a choice.

The US blocks Chinese robotaxi technology outright. Chinese software is banned from 2027. Chinese hardware from 2030. The main argument: national security.

The other clear driver: protecting their own industry. Robotaxis will be a cost game. Whoever scales cheapest wins. And at scale, nobody will match China.

Open your market to China now, and no domestic industry will emerge. The US understands that.

Europe could do the same. One rule would be enough. Anyone who wants to run a self-driving service in Europe has to use European technology. Private car, robotaxi, or shuttle.

That would be a political decision. It would trigger private investment in a European industry overnight.

It won’t be made.

With the battery, we couldn’t fully see the consequences 15 years ago. This time, we can. And we’re watching it happen anyway.

PS: Big thanks to for the conversation that shaped this analysis.

🔗 re | way | dam2 | ele1 | rt | hr | tnw | dam | bis

That’s all for today.

Until next week,

Philipp

PS: If you find value here, share it with someone who should read it too.

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Welcome to Issue #118 of The German Autopreneur.

A few things happening right now:

• BYD starts production in Hungary

• Chery produces cars in a former Nissan plant in Barcelona

• Stellantis builds Leapmotor cars in Spain

• Geely takes over part of a Ford plant in Spain

• Xpeng wants to acquire a VW factory

• Xiaomi is aggressively hiring BMW, Porsche, and Mercedes talent in Munich

• And BYD wants to take over VW’s Transparent Factory in Dresden

Chinese automakers are no longer coming to Europe as importers. They’re coming as manufacturers, technology suppliers, partners, and employers.

The question: Will Europe be a partner? Or China’s assembly line?

Today we’ll look at:

• Why the first wave of Chinese automakers in Europe failed

• The 4 strategies they’re using now

• What this really means for the European auto industry

How Chinese Automakers First Tried to Crack Europe

2-3 years ago, the fear in Europe was clear. A Chinese tsunami of cheap EVs would flood the market. European manufacturers would be wiped out.

That’s not what happened.

But let’s go back to the beginning.

In 2007, SAIC bought British heritage brand MG. In 2010, Geely acquired Volvo.

The idea: Building a brand from scratch in Europe takes years. Faster to buy one that already has trust.

The real push came later:

• NIO launched in Norway in 2021

• BYD brought its first models to Europe in 2022

• MG sold 233,000 units in Europe in 2024. 5x more than in 2021

Things seemed to be going really well.

JPMorgan predicted 20% market share for Chinese manufacturers in Europe by 2028. Brussels started openly discussing protective measures for the first time.

By late 2024, the EU introduced tariffs on Chinese EV imports. Direct imports became much more expensive overnight.

The result? MG’s EV sales dropped 58%. Their electric share fell from 47% to 30%.

And beyond tariffs, Chinese brands struggled. NIO bet on its own stores and direct sales in Germany. No traditional dealers. That model works in China. In Germany, it didn’t. In Q1 2026, NIO registered 8 new cars in Germany. Down 87.5%. NIO abandoned its direct sales model.

What works in China doesn’t automatically work in Europe. Chinese automakers had to learn that the hard way. Just like German automakers had to learn the same lesson in China.

Chinese brands’ market share in Europe by the end of 2024: about 4%. In 2025: 6%.

So the Chinese didn’t steamroll Europe. But nobody gave up either. Quite the opposite. They completely rebuilt their strategy.

The 4 Strategies They’re Using Now

1) They’re producing in Europe

The EU tariffs worked. Direct imports are less profitable. Producing in Europe is cheaper than importing with tariffs.

The answer: Assemble the cars directly in Europe. Either build new factories. Or take over existing ones.

• BYD built plants in Hungary and Turkey. Now they’re negotiating with Stellantis and other EU manufacturers to take over underutilized factories

• Geely is taking over part of a Ford plant in Spain

• Chery assembles cars in a former Nissan plant in Barcelona

• MG plans its own factory in Spain

• Xpeng has Magna Steyr in Graz build its cars and is negotiating with VW for a German plant

• Stellantis is openly considering selling 4 European factories to Chinese partners

What European carmakers no longer need, the Chinese do.

Where the Chinese invest isn’t random. The money flows into countries that didn’t vote for the tariffs. Poland voted in favor. Stellantis then moved Leapmotor production to Spain. Spain had abstained.

For the Chinese, local production has a positive side effect. It bypasses tariffs. And creates local jobs. That reduces political resistance and builds acceptance with customers.

2) They’re selling their technology to European brands

In China, European manufacturers already use Chinese partners’ technology to catch up. VW builds on Xpeng’s platform. Audi on SAIC’s. Mercedes and BMW use technology from Momenta.

Until recently, the rule was: What happens in China stays in China.

That’s changing. Chinese technology is now inside cars sold in Europe:

• The Volvo EX30 runs on Geely’s platform

• The Smart #1 and #3 also run on Geely’s platform

• The Dacia Spring is essentially a Dongfeng. Just with a Dacia badge

Most buyers probably think these are European cars.

European manufacturers are buying Chinese technology instead of developing their own. That has never happened before.

For 40 years, the direction was clear. Cars were developed in Europe and assembled in China. China was the manufacturing base. Now that’s reversing.

• VW CEO Oliver Blume is now considering offering China-developed models in Europe too. Until now, those only went to Southeast Asia, the Middle East, and South America. He’s also looking at opening European factories for Chinese partners

• And the next Opel electric SUV will run entirely on a Leapmotor platform. More on that in a moment

3) They’re hiring European talent

Xiaomi hasn’t sold a single car in Europe. But they’re already here. In 2025, they opened a research center in Munich.

Xiaomi watched other Chinese automakers fail in Europe. Their answer: Get the people first. Then bring the cars. They’re actively recruiting BMW, Porsche, and Mercedes employees. The packages are well above what their previous employers offered. Everyone who switches isn’t building German cars anymore. They’re building Xiaomis for the European expansion.

What Xiaomi does well: publicity. Their first car was a Porsche clone with seriously good software. Everyone laughed at first. Then the entire world started talking about Xiaomi as a carmaker. Marketing: A+.

In China, the concept worked. Last year they sold over 400,000 cars. After 16 months, the car division was profitable. Now they want to bring that to Europe. Launch is planned for 2027.

4) They’re starting joint ventures with European manufacturers

Selling cars the Chinese way doesn’t work in Europe. NIO proved that. And building a brand from scratch takes years. BYD hasn’t had its big breakthrough despite its Euro championship sponsorship. So what do you do? You find a partner who already has everything you need.

This model is familiar. In China, the deal was clear for decades: If you wanted market access, you had to enter a joint venture with a local partner. Market access in exchange for technology transfer.

In Europe, the exact same thing is now happening. Just in reverse. And voluntarily. The first example: Stellantis and Leapmotor.

A Chinese automaker partners with a European group. They share factories, distribution, and service networks.

Let’s take a closer look.

Stellantis Is the Junior Partner of a Chinese Startup

October 2023. Then-Stellantis CEO Carlos Tavares signed a deal with Chinese automaker Leapmotor. Stellantis bought 21% of the company. They also created a joint venture for production and distribution of Leapmotor cars outside China. Stellantis holds 51%. Leapmotor 49%.

June 2024: The first Leapmotor cars rolled off the line in Poland. 2024: 1,300 units sold in Europe. In 2025, Stellantis opened its sales network. Over 800 retail locations across more than 10 countries. Result: 40,000 units sold. 30x in 12 months. In Q1 2026: another +706%.

A Chinese automaker that almost no one in Europe knew 2 years ago is taking off. Thanks to European infrastructure.

May 2026: Stellantis wants to build the next Opel electric model on a Leapmotor platform. At the same time, Stellantis is cutting 650 engineering jobs in Rüsselsheim, Opel’s development headquarters near Frankfurt. That expertise isn’t coming back. Development now happens in China. What stays at Opel: body design and chassis tuning. Platform, powertrain, and software come from China.

On paper, it looks like the perfect deal. Stellantis gets technology. Leapmotor gets market access.

In China, the formula was clear for decades: market access in exchange for technology transfer. This time, the Chinese want market access. And Stellantis opens the door. But Leapmotor isn’t sharing technology. Stellantis assembles and sells. Development stays entirely in China.

Carlos Tavares himself brokered the deal. After leaving Stellantis, he said about Leapmotor: “They want to swallow us eventually. I’m aware of that.”

What does he mean? Geely founder Li Shufu once put it bluntly: “You can’t buy core technology. The more you rely on someone else’s technology, the more dependent you become.”

My Take

On the surface, things actually look pretty good. The Chinese tsunami never arrived. The tariffs worked. Chinese brands aren’t flooding Europe with cheap imports. They’re building factories. Creating jobs. Investing in Europe. There’s even a first joint venture modeled on the Chinese approach.

The catch: The technology doesn’t come with it.

What the Chinese are bringing to Europe is production. What stays in China? Everything that actually makes a car valuable today.

And that’s the irony. 2 years ago, the EU wanted to protect European industry from Chinese competition with tariffs. Today, it’s European industry itself that’s voluntarily inviting the Chinese in through partnerships.

On paper, Stellantis holds 51%. In reality, Stellantis is the junior partner. Leapmotor has been building cars for 7 years. Stellantis for over 100. And still: Leapmotor develops the product. Stellantis helps with assembly and sales.

The Stellantis-Leapmotor joint venture is the prototype for Europe as China’s extended assembly line.

The European auto industry is cutting tens of thousands of jobs right now. And yes, Chinese companies are building factories in Europe. And yes, that creates jobs. But most of them are basic production jobs. Not engineering. Not development. And if we’re honest: these are exactly the jobs that will be automated away within 10 years. We already know that.

But it doesn’t have to go this way.

Because right now, Europe has the strongest negotiating position in years. China has over 100 automakers. Far too many. Only a fraction will survive. They all need to expand abroad. The pressure to break into Europe is enormous.

Europe has something they desperately need: market access.

The conditions for a good deal have never been better.

And China spent 40 years teaching us how that deal works: market access in exchange for technology transfer.

Europe could use the same lever today. But it’s not.

Instead, Europe is entering joint ventures where it handles distribution. And China keeps the technology.

Don’t get me wrong. Joint ventures with Chinese automakers are exactly the right path. I’m all for it. But only on terms that build real technological competence in Europe.

Without that, Europe isn’t a partner. It’s just China’s assembly line.

🔗 re | re2 | car | scmp | bl | eco | ace

That’s all for today.

Until next week,

Philipp

PS: If you find value here, share it with someone who should read it too.

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I help global B2B companies connect with 80,000+ automotive decision makers in Germany.

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Welcome to Issue #117 of The German Autopreneur.

“Unless things change, we will not survive.”

That’s a direct quote from the CEO of the world’s largest automaker. Larger than Volkswagen. Larger than BYD. Larger than Mercedes, BMW, and Audi combined.

Toyota. 11.3 million vehicles sold last year. Global number 1 for the 6th year running. Record revenue. The highest operating margin among major volume manufacturers.

You hear this a lot in Germany: Toyota never went all-in on EVs. And now they’re sitting back, watching VW and Mercedes flail.

Toyota is doing everything right. At least that’s the story.

In late March, CEO Koji Sato stood before 700 of Toyota’s most important suppliers. It should have been a moment for good news. Sato thanked the suppliers. Then he said:

“Unless things change, we will not survive. Right now, we in the automotive industry are battling for our very survival.”

Toyota just posted record numbers. And says: we’re fighting to survive. How does that add up?

Today we’ll look at:

• What the numbers actually say

• Where Toyota stands on transformation

• What legacy automakers can learn from Toyota

Record Revenue, Crashing Profit

Toyota’s fiscal year runs April to March. FY26 just ended. The numbers came out on Friday. All yen figures converted to US dollars (approx. $1 = ¥150, Toyota’s own FY27 planning rate).

• $338 billion in revenue (+5.5%). Record. First Japanese company to cross 50 trillion yen.

• 11.3 million vehicles sold (+2.5%). Also a record.

Now the other side:

• $25 billion in operating profit (-21.5%). That’s 7.4 cents per dollar of revenue. Still more than any other major volume manufacturer.

• FY27 outlook: $20 billion operating profit (-20.3%). Margin drops to 5.9%.

• Profit peak in FY24: roughly $33 billion. From peak to FY27 outlook: -39%.

• Last quarter alone: operating profit -49%.

Revenue is breaking records. Profit is breaking down.

Toyota Has a Trump Problem

When revenue rises and profit crashes, it’s either price or cost. For Toyota, it’s cost.

The causes are external:

• US tariffs hit Toyota with $9.2 billion in additional costs.

• The Iran crisis is driving up aluminum prices. Toyota’s outlook includes $4.5 billion in extra costs tied to the Middle East. Japan’s auto industry imports roughly 70% of its aluminum from the region.

• In North America, Toyota posted an operating loss: $1.3 billion.

Toyota has a Trump problem.

And yet, at 7.4% operating margin, Toyota is in better shape than the German manufacturers. VW came in at 2.8% in 2025. Mercedes at 5.0%.

Will next year be better? No.

Toyota’s own FY27 outlook: 5.9%.

Since April, Toyota has a new CEO: Kenta Kon. On Friday’s earnings call, he didn’t sound optimistic either:

“It is impossible to predict what the market will look like.”

His CFO: “Our measures are only effective in the short term.”

In plain English: Nobody knows what happens next.

Toyota is still making money. But the cash that should flow into technology is being eaten up by tariffs and raw materials.

Toyota Missed Its Own EV Targets

In the West, there’s a popular take: Toyota was smart not to lock itself into one powertrain technology. That’s only partly true.

In 2021, then-CEO Akio Toyoda announced 3.5 million EV sales by 2030. His successor Koji Sato raised the bar in 2023: 1.5 million per year by 2026.

Actual result: roughly 243,000. 84% below their own target. By comparison, VW sold close to 1 million EVs in 2025. 4 times as many as Toyota.

Toyota didn’t strategically hold back. Toyota missed its own EV targets by a wide margin.

This year, Toyota is aiming for 600,000 EVs. 40% of the original 1.5 million target.

Hybrids are keeping Toyota afloat. Toyota expects over 5 million hybrid sales this year. Nearly every other Toyota sold is a hybrid.

China shows how Toyota plans to catch up. Toyota’s entry-level EV is the bZ3X. But the platform isn’t Toyota’s. It comes from GAC, their Chinese joint venture partner.

Toyota develops almost everything in-house. Its own technology, tight supplier relationships, full control. But on future technologies, they can’t keep up alone. So they’re getting help from outside. From Chinese partners.

Toyota’s Software Stack Is Just Getting Started

For software, Toyota built a dedicated unit: Woven. Comparable to VW’s CARIAD. The result: Arene. An operating system for the car.

The vision: software and hardware fully decoupled. Over-the-air updates. New features without a new car.

The first model running Arene launched in May 2025.

The reality so far: Arene only handles infotainment and driver assistance. Everything else still runs on traditional control units from suppliers. When does the full software stack arrive? “For the next EV generation.” No date.

In the Gartner Digital Automaker Index 2025, Toyota ranks 21st out of 24. Behind all German manufacturers.

A Woven engineer describes the current state: “Horrendous, full of bugs.”

The problem is familiar. Traditional vehicle development runs on zero-defect tolerance. A brake can’t be buggy. Software development works the opposite way: ship fast, fix later, iterate.

Toyota has perfected hardware logic like no one else. And that’s what makes the leap to software so hard.

VW gave up building its own stack and now buys it from partners. Toyota is still trying to do it alone.

Toyota Builds AI for the Factory. Not for the Car

Toyota’s cars can do what most new cars can do today. Lane keeping, adaptive cruise control, emergency braking. Driver assistance at Level 2.

For true autonomous driving, Toyota has no in-house solution. They’re working with a Chinese partner. Since February 2026, self-driving Toyotas have been running in Guangzhou with Level 4 technology from Pony(.ai). Toyota provides the vehicle. Pony(.ai) provides the brain. Same pattern as with EVs.

But Toyota’s own AI work happens elsewhere. At the foot of Mount Fuji, Toyota is building a test city: Woven City.

The first residents moved in during fall 2025. There, Toyota is testing AI models that predict traffic accidents. Estimated investment: roughly $10 billion.

Last week, Toyota announced its own AI platform for manufacturing. Toyota’s goal: “To protect jobs, not replace workers.”

The rest of the industry is betting that AI inside the car will become a competitive advantage. Toyota’s own AI investments flow less into the car and more into production. The technology for the car? Toyota buys it from Chinese partners.

Three times the same pattern. Powertrain, software, AI. Wherever the future matters, Toyota is either struggling or buying from outside what it used to build itself.

And the core business keeps humming. 11 million cars. Record revenue. It’s never been better.

But that’s the problem. Why change something that still works this well?

My Take

I first visited Japan in 2019. In a small bar in Asakusa, Tokyo, I met this nice old Japanese guy. He had spent his entire career at the company that runs Tokyo’s subway system.

One job. One company. He never left Japan. When he got older, he started learning English. He wanted to talk to tourists. He told me it was his way of getting to know the world.

I’ve been back to Japan several times since. A career like his is the standard there. You don’t switch jobs. You get better within your system.

Toyota turned this culture into a management model. The business world knows it as the Toyota Way. Optimize every process over decades. Keep key technologies within your ecosystem. Make everything fit together perfectly.

This system made Toyota the world’s largest and most profitable automaker. When the game is optimization, Toyota is unbeatable.

But the game isn’t just about optimization anymore. Wherever the challenge is reinvention, Toyota struggles.

The problem: today’s business has an expiration date. A big chunk of Toyota’s profit doesn’t come from new cars. It comes from servicing roughly 150 million Toyotas worldwide. Maintenance, spare parts, service visits. EVs need 30-40% less maintenance. When cars update themselves, they often don’t need a service center. And Toyota won’t sell hybrids forever.

Toyota lives off a business model that won’t work in 10 years. And the better it works today, the harder it is to let go.

Toyota knows this. That’s how to read the March statement: “Unless things change, we will not survive.”

Toyota’s system was built over decades for stability and perfection. A system like that doesn’t change from within. It takes harsh words. Saying “we will not survive” in front of 700 suppliers was exactly that. A wake-up call. The first step toward making change possible at all.

This pattern isn’t unique to Japan. In the German auto industry, I’ve seen the same thing. Companies don’t fail because of technology. They fail because of organization and culture.

For Japan, that might be even more true than for Germany. Stability and perfection aren’t just embedded in the organization. They’re embedded in the culture itself.

Toyota is doing a lot of things right. But “right” isn’t enough anymore.

🔗 to | an | bl | ft | wsj | cnbc | re

That’s all for today.

Until next week,

Philipp

PS: If you find value here, share it with someone who should read it too.

Want to work with me?

I help global B2B companies connect with 80,000+ automotive decision makers in Germany.

Learn how we can work together →

For today’s newsletter, I spoke with Alexander Timmer and Fritz Metzger from Berylls by AlixPartners. Both spent 5 days on the ground at Auto China 2026 in Beijing. Their observations and analysis shaped this issue.

Disclaimer: Berylls by AlixPartners had no influence on the content of this newsletter.

Welcome to Issue #116 of The German Autopreneur.

Mercedes CEO Ola Källenius: “I am Chinese.”
VW’s China chief: Young customers see us as their parents’ brand.
And an analyst from Shanghai: “German brands are being ‘murdered’ by their own legacy and a resistance to rapid change.”

3 quotes from Auto China 2026. The largest auto show in the world. And the entire German automotive industry was there.

The numbers explain why people are saying things like this:

In 2019, German manufacturers held 26% market share in China. Today: 16%. More than a third gone in 6 years.

For pure EVs, the German share sits at 1.6%. And that’s the segment where everything is at stake right now.

Today we’ll look at:

• Why the powertrain no longer decides the winner in China

• Why “Made in Germany” is becoming a liability in China

• And why German automakers are going Chinese

One Foot in the Old World

The first thing you notice walking through Auto China:

The German stands are split in two. One side for combustion cars. The other for EVs.

Fritz from Berylls calls the two sides the “old world” and the “new world.” The old world is combustion. The new world is what the Chinese call the “Smart Car.”

And the focus in Beijing is clearly on the new world.

At Chinese manufacturer stands, there is no such split. For them, only the new world exists.

That’s the vibe of Auto China 2026.

The German industry stands with one foot in the old world and one in the new. And nowhere is that more visible than here. At the center of the new world.

Software Is the New Battery

What really separates the two worlds isn’t the powertrain.

Back in Germany, we still love to debate which powertrain has a future.

In China, that question is settled. Fritz puts it plainly: “EV is a done deal from a Chinese perspective.”

But when the powertrain is no longer a selling point, competition shifts. The question is no longer: How does the car drive? It’s: What can it do?

In the past, you differentiated on quality and powertrain.

That’s changed. Chinese manufacturers have reached a comparable level on quality. Same on powertrains. Range, charging speed, efficiency: in everyday use, there’s no meaningful difference anymore.

What counts now: software. AI. Speed. Software and electronics alone account for 30-40% of a car’s total cost. Alexander puts it this way: “What used to be the battery is now the software stack.”

Premium in China now means AI in the cockpit. Autonomous driving. How naturally the car fits into a digital life.

Local players are setting the standards. Whoever builds the smartest car defines what premium means. And right now, that’s not the Germans.

This is exactly why the old logic has flipped. “Made in Germany” is no longer a seal of quality. It’s becoming a problem. In China, it’s increasingly read as “not smart enough.”

But this isn’t just about the premium segment. The industry is seeing a kind of democratization of technology.

Here’s how it used to work: new technology arrived first in the S-Class, then the C-Class, then the A-Class. Premium buyers subsidized the development.

That mechanism no longer works in China.

There, high-tech goes straight into the mass market. BYD already puts LiDAR sensors and advanced driver assistance into the Seagull. For under $16,000.

The tech race runs in every price segment. And to stay in it, you have to move fast.

German manufacturers traditionally developed a new car in 4 years. The problem: by the time it hits the market, the technology is already 4 years old.

VW unveiled the ID. UNYX 09 in Beijing. Built on an Xpeng platform. In just 24 months. A real milestone. VW has cut its development time in half.

The absurd part: even that makes VW twice as slow as the Chinese benchmark. Some manufacturers now develop on an existing platform in 8 to 12 months.

How do you get to that speed? And why can’t German companies?

Market analyst Chris Liu says: “The real gap is software execution. A talent problem, above all.”

Not money. Not manufacturing. Talent and capabilities.

And if you don’t have those, you need partners.

In China, You Can’t Do It Without Chinese Partners

German manufacturers work with Chinese partners in China. Not occasionally. Systematically.

Berylls estimates that between a quarter and a third of all vehicles at the show were co-developed with a tech partner. Huawei, Xpeng, and others.

And the Germans aren’t the only ones. Hyundai is doing the same: “Designed in China, by China, for China.”

This plays out on 3 levels. 2 are already visible. The third is taking shape:

1. Buying components: Mercedes and BMW are using Momenta for autonomous driving. BMW integrates DeepSeek in the cockpit and relies on Huawei and Alibaba for the new iX3. Here, the OEM buys a specific tech capability from a partner.

2. Buying the platform: Here, the partner no longer provides a single module but the complete technical foundation of the car. A platform is the underlying hardware and software architecture everything is built on. VW uses Xpeng’s platform. Audi went further with SAIC and launched its own sub-brand. “AUDI” in capital letters. Without the 4 rings.

3. Licensing the brand: That hasn’t happened yet. But at level 2, the partner is already providing nearly everything. The next step: the Chinese manufacturer builds the car entirely and slaps your logo on it. In exchange, they pay you licensing fees for the brand. From a German perspective, that would obviously be the worst case.

The question: Are these partnerships a transition phase while German manufacturers build their own capabilities? Or is this the new normal?

Berylls has a clear answer: it’s permanent. Alexander says: “If this step had been taken 2 or 3 years earlier, we’d be talking about a balance of power today. Now the gap is too wide.”

What he means: the gap in software and AI has grown too wide. German manufacturers can no longer close it on their own.

The danger: the longer a platform sits with a partner, the more knowledge accumulates there. Whether that knowledge ever flows back into German organizations is an open question.

Which raises another one: what does the German manufacturer actually do anymore? If partners supply most of the product?

Alexander puts it bluntly: “You could reduce it to assembly and systems integration.”

Meaning: the individual components come from the partner. The German manufacturer assembles them into a car.

My Take

VW CEO Oliver Blume describes the China partnerships as “unavoidable, because you can’t do everything yourself and don’t want to.”

Sounds plausible. A modern car requires software, driver-assistance systems, chips, AI, cloud backend. All far from the core competency of a traditional automaker.

But there’s another way. Some automakers do all of this themselves. Tesla, Xpeng, Nio, and a handful of others. The industry calls this vertically integrated. Or full-stack.

So it’s possible. Why can’t the Germans do it?

The short answer: they tried. Twice.

Attempt 1: Build products for the new world using the existing organization. Didn’t work.

The lesson: you can’t build new-world products inside an old-world organization.

So attempt 2: Transform the old organization. Or build a new one alongside it. VW built a dedicated software unit for this: CARIAD. Also didn’t work.

The next lesson: you can’t build a new-world organization close to the old one. The old suffocates the new. Institutional inertia, entrenched power structures, the famous “this is how we’ve always done it.”

And that’s exactly what brought us here.

That’s the reason for the partnerships. And why more and more development is moving to China.

In Germany, we tend to explain this with 2 standard answers:

1. The global car no longer works. Meaning: developing one product in Germany that works everywhere. But that’s not really accurate. Tesla develops centrally in the US. One product. For the whole world. The issue isn’t location. It’s how technologically innovative the product is.

2. Bureaucracy and site costs. Both true. But if cost were the only factor, nobody would still develop in Silicon Valley. Development jobs are the most valuable jobs. You don’t offshore them because of cost. So this doesn’t explain why development specifically is moving to China.

The real reason goes deeper. And once again, it’s the organization.

You can’t rebuild the old organization into the new world. So you build a new one. Far away from the old one.

That’s exactly what’s happening right now.

“In China for China” doesn’t just mean: develop closer to the customer. Above all, it means: build a new organization. One that can actually deliver products for the new world.

That’s what we saw at Auto China 2026. German manufacturers building new organizations in China. With new partners, new processes. And a new speed.

Fritz says: in not a single conversation at the show did anyone write off the Chinese market as lost.

And that’s the good news:

What they’re building there isn’t just new products. It’s a new way of working. Exactly what the home organization failed to deliver.

The hope: what they’re building in China eventually comes back to Germany. Not the products. But the way they develop them.

🔗 berylls | re | ft | hb | re2 | zdf

That’s all for today.

Until next week,

Philipp

PS: If you find value here, share it with someone who should read it too.

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The Vehicle Tech Week Europe brings 3 worlds under one roof: Testing, Autonomous Driving, and Interior. From June 23 to 25.

3 events, 1 ticket. 10,000+ attendees. 400+ exhibitors. Companies like Mercedes, BMW, Ford, and Volvo will be there.

If you work in the auto industry, Vehicle Tech Week is a no-brainer.

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Welcome to Issue #115 of The German Autopreneur.

Bosch is the world’s largest automotive supplier. Number 1 for over a decade. €91 billion in revenue. 412,000 employees.

And yet Bosch flies under the radar. The reason: no stock listing, no quarterly earnings, no investor calls. Bosch is enormous. And almost invisible.

Bosch released its 2025 annual results. For the first time since 2009, the company slipped into the red.

And CEO Stefan Hartung calls 2026 the “year of progress.”

Bosch posts its first loss in 16 years. The CEO talks about progress. How does that add up?

Today we’ll look at:

• Why Bosch is now losing money

• How Bosch is using the crisis to restructure

• And what China has to do with it

Suppliers Are Getting Hit Harder Than Carmakers

We talk a lot here about the crisis at VW, Mercedes, and BMW. Less about the suppliers. But they’re getting hit harder:

• Mahle closed 6 plants in Europe and North America in 2024. 4 more are on the way.

• According to EY, around 73,000 jobs have disappeared at German suppliers since 2019. Nearly 1 in 4.

Bosch is the biggest of them. And Bosch isn’t immune.

Here are the 2025 numbers:

• −€400 million net loss (first loss since 2009)

• €1.8 billion operating profit

• €300 million cash flow (a third of the prior year)

• 22,000 jobs cut in the Mobility division in Germany

• €2.7 billion set aside for workforce reductions

• €15 billion China revenue in Mobility (more than 50% from Chinese manufacturers)

In 2023, operating profit was €4.8 billion. In 2024, €3.1 billion. Today, €1.8 billion. Down 62% in two years. For every euro of revenue, 2 cents remain. Bosch pushed its 7% return target from 2026 to 2027.

Why Are the Numbers This Bad?

The CFO’s official explanation: “One-off effects, separate from the underlying business performance.” Translation: everything under control, the core business is fine.

The numbers tell a different story.

Bosch’s core business is the powertrain. Injection systems, sensors, control units. A combustion engine has over 1,200 mechanical parts. Bosch supplies a large share of them. That’s how Bosch became the world’s largest automotive supplier.

Electric mobility is shrinking this business. An electric powertrain needs far fewer parts.

Inside Bosch, they’ve turned this into a rule of thumb. Where diesel manufacturing needed 10 people, gasoline engines need 3. Electric powertrains need 1.

That’s the math behind the 22,000 jobs.

So: the core business is shrinking. Bosch needs something to replace it.

The obvious answer would have been battery cells. The most expensive component in an EV.

But Bosch decided against it. And the reasons go back further than you’d think.

In the mid-2000s, Bosch made a big bet on solar energy. The bet: photovoltaics would be the next billion-dollar market. They bought companies, built plants, and launched a dedicated Solar Energy division.

Then Chinese manufacturers entered the market at far lower prices. Solar cell prices collapsed between 2008 and 2012. Bosch couldn’t compete. The final tab: €3.7 billion in losses. In 2014, Bosch exited the solar business entirely.

That left a mark. Since then, one simple rule has taken hold in the boardroom: never again compete against China in mass manufacturing.

In 2018, Bosch made the decision that locked everything in. It exited battery cell production before it had even properly started.

The official reason: it would take €20 billion just to be a meaningful player. Too expensive. Too risky. Unofficially? After the solar disaster, nobody on the board wanted to go up against the Chinese again.

Today, CATL, BYD, and LG control the global battery market.

Bosch supplies components. But not cells.

German automotive analyst Stefan Bratzel sums it up: “Suppliers fundamentally misjudged the industry’s direction.”

Bosch has full exposure in a shrinking combustion market. And insufficient exposure in the markets growing to replace it. That gap is now visible in the balance sheet.

Restructuring Has a Price

The result: 22,000 jobs cut in Bosch’s Mobility division in Germany. €2.7 billion set aside to cover it.

At the same time, Bosch is looking for new ground beyond the auto business. In 2025, they acquired Johnson Controls’ climate-control business for around €7.4 billion. The largest acquisition in company history. A visible step away from Mobility dependence.

Bosch is financing the restructuring through bonds. €8.5 billion over 2.5 years. That’s unusual. Historically, the company has avoided debt. The bonds fund the acquisition. And the job cuts.

How Can Bosch Pull All This Off Simultaneously?

Bosch has no shareholders. No quarterly reports. No capital market pressure.

• 94% of shares belong to the Robert Bosch Foundation. A nonprofit foundation has no owners. Profits don’t flow to investors but to projects in health, education, and science.

• 93% of voting rights sit with the Robert Bosch Industrial Trust. A small body made up of family members of founder Robert Bosch and long-serving Bosch managers. They make the strategic decisions and appoint their own successors.

The common criticism of German corporations: they only think as far as the next quarter. Bosch doesn’t have that problem. They can plan their transformation over 5 or 10 years.

And they’re using that. €7.9 billion is going into R&D in 2025, in new fields like sensors, AI, and robotics.

Just not where most people are looking.

The Future Is Being Built in China

The logical assumption would be: new technologies emerge where the old ones fade. Same plants. Same people. Different product.

That’s not how it works.

The next wave of automotive technology isn’t coming from Europe. It’s coming from China. The world’s largest car market. That’s where new systems get developed, go into production, and reach customers. Europe gets them later.

One example: The XPeng GX has been in production since March 2026. With Bosch’s latest steer-by-wire system. That’s steering with no mechanical connection between the steering wheel and the wheels. A prerequisite for autonomous driving. Mercedes is also bringing steer-by-wire. But later. After the Chinese.

A Chinese car is running Bosch’s newest technology before it arrives in a German one.

And this is not a one-off.

In February 2026, during German Chancellor Merz’s state visit to Beijing, Bosch signed a major contract with Nio. Chassis, steering, drivetrain, battery management, sensors.

With Nio, Bosch moves from component supplier to system partner. Across all 3 of Nio’s brands: Nio, Onvo, and Firefly.

More than 50% of Bosch’s China revenue already comes from Chinese manufacturers. Rising.

The reason is straightforward: Chinese manufacturers decide faster, integrate faster, and bring new technology to production earlier. Bosch keeps moving more of its value chain to China. Its own development, its own production. In China, for China.

What shrinks in Germany grows in China. Not necessarily because Bosch wants it that way. But because that’s where the markets of the future are forming.

The fear of China didn’t keep Bosch away from China. It pushed Bosch toward it.

My Take

I’m from a small town called Leonberg, just outside Stuttgart. Bosch had plans to build a tech campus there for 2,500 people. The foundation pit had already been dug. Then Bosch scaled back the plan. The result: half a campus. And a foundation pit that got filled in again.

The jobs are going somewhere else now.

A few kilometers away is Feuerbach. Bosch’s historic home base. For over 100 years. Generations of engineers walked in every morning and walked out every evening feeling like they were part of something big. Bosch developed and built injection systems here for decades. Now 2,500 jobs are disappearing from that site alone.

The losses give Bosch the justification. Without a crisis, Bosch probably couldn’t push this through.

But this restructuring has a price that Bosch isn’t paying. The southwest of Germany is.

Where I’m from, there’s a local saying: “I schaff beim Bosch und halt mei Gosch.” I work at Bosch and keep my mouth shut. Swabians (the people from this region) love to complain. But at Bosch, there was nothing to complain about. Secure job, good money, pride in the product. That was the deal.

Around Stuttgart, a unique ecosystem grew over decades. Bosch in Feuerbach. Mercedes in Sindelfingen. Porsche in Zuffenhausen. Mahle in Stuttgart. A large part of Germany’s automotive success story was written here. This is where Made in Germany was forged. Suppliers and manufacturers side by side. When Mercedes needed a new component, the Bosch engineer was sitting in the meeting an hour later. Short distances, shared knowledge, fast iteration. That was the secret behind the technological lead.

The problem: this ecosystem depended on one technology. The combustion engine. And it was never reinvented for what came after. It never got an update. The model still works. Just not here anymore.

Today, the most advanced automotive ecosystem in the world is in China. Essentially the same playbook as the southwest of Germany. Just 8,000 kilometers further east. And the companies from Stuttgart are helping build it.

Around 235,000 jobs across Germany depend directly on the combustion engine. 55,000 of them in this region alone.

CEO Stefan Hartung calls it the “year of progress.” For this part of Germany, it feels more like a farewell. The region lived off the combustion engine for decades. It’s losing more than jobs. It’s losing a piece of its identity.

If Bosch’s transformation works, what emerges is a global tech company. But one that has left its home behind.

Bosch isn’t officially giving up on Germany. But structurally, it is.

The foundation pit in Leonberg is filled in. The foundation pits in Beijing are being dug right now. Bosch will survive this. Just somewhere else.

🔗 hb1 | hb2 | wiwo1 | wiwo2 | faz

That’s all for today.

Until next week,

Philipp

PS: If you find value here, share it with someone who should read it too.

Want to reach European automotive decision makers?

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Welcome to Issue #114 of The German Autopreneur.

“Real AI adoption will reduce management layers. And that’s exactly what no one inside these companies actually wants.”

That’s what an insider at a German automaker told me. One of many.

It started with a newsletter where I made a case: AI will replace the highest-paid jobs in the auto industry first. I ended it with a survey. 293 people responded. Since then, I’ve had dozens of background conversations with insiders.

I wanted to understand: where does the German auto industry actually stand on AI?

Officially, everything looks fine. Budgets approved. Copilot rolled out. Strategy on the slides.

The reality inside these companies is something else.

Today we’ll look at:

• What 293 insiders said anonymously about AI

• Why, once again, the problem isn’t the technology. It’s the system

• Why the pressure is coming from China and the US

The Data

Who responded?

• 48% from OEMs and suppliers

• 37% decision-makers from executive management, boards, and division leadership

• Plus individual conversations with insiders from OEMs, suppliers, and tech companies

The key findings:

• 85% use AI regularly or daily

• 91% have already introduced AI or have concrete plans to do so

• 57% say: this needs to happen this year

• And yet: 45% say they don’t know where to start

Why the System Is the Problem

91% want to adopt AI. Yet almost half don’t know where to start. How?

Once again, the answer isn’t the technology. It’s the system.

Many want to use AI. But the system doesn’t give them what they need:

• No time to learn

• No budget for tools or training

• No approval for what actually works

• No environment where experimentation is allowed

• No guidance on which use cases are worth the effort

Then there’s a second dynamic. People inside organizations adopt new technology at very different speeds:

• 20% are the frontrunners. They try tools, build workflows, bring others along

• 60% wait. They need a clear signal from above before they start

• 20% are the resisters. They reject AI entirely

One executive told me: “More than half our team needs active persuasion. That only works top-down.” The main fear: losing their job.

And that’s exactly why two things happen:

1) People use their own tools.

50% of respondents introduced AI tools on their own in the last 12 months. Often bypassing IT entirely. Personal accounts with company data. Unapproved models. Internal documents in external tools.

There’s even a word for it: shadow AI.

The irony: many companies ban AI tools for data protection reasons. And in doing so, create exactly the risk they were trying to avoid.

2) The organization turns AI into an Office feature.

Where AI is officially permitted, organizations try to shrink it down until it fits existing processes and mental models. Until it feels like a new Office feature.

Instead of rethinking processes, AI gets layered on top.

“We’re papering AI over old, entrenched processes. Without taking the chance to rethink them from scratch with AI.”

Why doesn’t anyone do it differently?

1) Nobody likes sawing off the branch they’re sitting on.

Who willingly introduces a tool that makes them redundant? Or cuts their own management scope?

2) AI isn’t even on the agenda.

No budget, no plan, no priority. Among suppliers, 12% say their company blocks AI entirely.

Nobody Wants Microsoft Copilot

When companies respond to AI, they almost always roll out Microsoft Copilot. That came up in nearly every conversation. Usually with frustrated undertones.

What most people get: a chatbot with no access to company data, no context for their actual work. The Pro license with company data access costs around $30 per user per month. But most companies don’t roll that out broadly. Everything else gets blocked.

Privately, those same people use Claude, ChatGPT, or Gemini. And they all say the same thing: Copilot delivers far worse results.

Even those with the Pro license are frustrated:

“We have the Pro license. And Copilot can’t even handle a simple Excel table comparing 4 quotes. $380 a year. I’d be twice as fast without it.”

Here’s what happens next. Copilot gets rolled out, tried for a few weeks. Many are disappointed. Usage drops off. And the topic is now radioactive internally. For the 60% in the middle, this is the confirmation they were waiting for: “AI just isn’t there yet.”

Some frontrunners keep pushing. Others give up. Others quit. They know what’s possible. They just don’t get the chance to act on it.

And in management? AI is now checked off. Tool introduced. Done.

That’s the real misconception. Rolling out Copilot doesn’t mean introducing AI. It means providing a stripped-down version of ChatGPT. While believing that’s a sufficient response.

Putting a chatbot in Office is a feature update. Not a new way of working.

The Pressure Is Coming from Outside

In every conversation, I asked the same question: what happens if your company doesn’t keep up with AI?

The answers:

• “Revenue in our core business will fall off a cliff.”

• “In 2 years we won’t have market-viable prices anymore.”

• “Without AI, we’re out of business in a few years.”

Almost everyone agrees.

The good news: There’s no awareness problem.

Even better: There’s probably still time. Organizations are slow by nature. Technological change always moves faster than adoption in large companies. That was true for the internet, mobile, and cloud.

If AI follows the same pattern, there’s still time to adapt.

The bad news: AI might not follow that pattern.

The pressure is coming from 2 directions:

1) The barriers to entry for new competitors are falling.

With AI, it’s suddenly much cheaper to:

bring a product to market

copy an existing business model

attack an entire industry from the outside

AI-native startups don’t need to transform. They build with AI from day one. What takes 100+ people in an established organization, they do with a handful of people and AI agents.

2) Early movers build a lead that’s nearly impossible to make up.

AI users achieve the same results with a fraction of the resources. Start early, develop faster, sell cheaper. That gap is almost impossible to close later.

This is where competitors from China and the US have a potential advantage. Their organizations are younger. More digitally native. And if you can’t keep up, you’re out. That pressure forces faster change. And that’s how the lead gets built.

My Take

What’s forming right now is a disconnect. Between what’s possible with AI on the outside. And what’s actually happening inside these organizations. And it keeps widening.

The established players get hit hardest. Their size makes them slow. We know this.

One example: German OEMs are currently offshoring large parts of software development to India. Mercedes is in the middle of it. The decision came from a time when software developers were scarce and expensive.

But that world is shifting. AI is changing exactly this kind of work.

Code is becoming a commodity. AI handles it. What companies actually need are veterans who understand both product and code. A small number of highly skilled people working close to the core organization. Not offshore.

Yet the offshoring continues. Because organizations today are acting on decisions from a world that no longer exists. And the larger the organization, the longer it takes to correct course.

Where is this heading? Toward companies that run with a fraction of today’s knowledge workers. The successful companies of the future will likely consist almost entirely of frontrunners.

But what shocked me most in these conversations: there are companies in Germany that still haven’t prioritized AI. No budget. No signal from the top.

To me, that’s leadership failure.

AI isn’t the next tool. AI changes the operating system of a company.

If you don’t treat this as a leadership priority, you’re driving your company off a cliff.

So back to the original question: where does the German auto industry stand on AI?

The honest answer from these conversations: behind.

Some companies won’t survive this.

But it doesn’t have to end that way.

Companies can course-correct. Just not with the standard playbook.

And here’s the good news:

The answer is already inside the company.

It’s the 20%. The frontrunners.

They’ve already started. With their own tools. Their own projects. At their own expense.

These are the most valuable people a company can have right now. Don’t slow them down. Give them everything they need to move fast.

That’s the bet. Not on the technology. On the people already using it.

🔗gh | en | mo

That’s all for today.

Feel free to reply to this email with your thoughts.

Until next week,
Philipp

PS: If you find value here, share it with someone who should read it too.

Want to reach European automotive decision makers?

I help global B2B companies connect with 80,000+ automotive decision makers in Germany.

Learn how →

What do car buyers actually want from their next car?

Berylls just surveyed 8,000 car buyers across 11 countries for their new study, CONFIGURED: What will car buyers drive next?

I got early access to the data and spoke with the authors, Theresa Stütz and Jonas Wagner. Today’s newsletter is my analysis from a German auto industry perspective.

Download the study for free

Berylls by AlixPartners had no influence on the content of this newsletter.

Welcome to Issue #113 of The German Autopreneur.

No label in the auto industry means quality like Made in Germany. Nothing commands more trust worldwide. But with EVs, that promise is breaking.

Berylls by AlixPartners surveyed 8,000 car buyers in 11 countries for their new CONFIGURED study. I got early access and spoke with the authors.

At first glance, the results look good for German manufacturers. Look closer, and there’s a problem. Owners of German EVs are far less satisfied than owners of Chinese EVs. The brand delivers. The product doesn’t.

Today we’ll look at why Made in Germany no longer delivers on EVs. And why this follows a pattern that has destroyed entire industries before.

No Country Disappoints More EV Customers

Berylls asked the question differently than you’d expect.

Not: Which car brands do you prefer? But: Cars from which country would you explicitly avoid?

Only 12% of respondents globally say a German car is off the table. That’s the lowest rejection rate of any country. American brands hit 25%. Chinese brands 44%.

Made in Germany is the industry’s strongest label. Stronger than Japan. Stronger than the US.

But that’s for combustion cars. Not EVs.

23% of German EV drivers wouldn’t buy German again. Among Chinese EV drivers, only 13%.

No country has more buyer trust globally. And no country has more disappointed EV customers.

Repurchase rate is the hardest metric. It doesn’t measure image. It measures experience. And the experience says: With EVs, the product doesn’t deliver what the brand promises.

Theresa Stütz is one of the study’s authors. She says German EVs don’t meet Made in Germany expectations. Not just on quality. On trust in the tech, too.

And it’s getting worse. The next generation of Chinese buyers knows German brands mainly as their parents’ cars. The average new car buyer there is 35. For this generation, Li Auto, Huawei, or Xiaomi mean innovation. Not Mercedes and BMW.

German manufacturers are losing customers on two fronts. Customers who try a German EV are disappointed. And the next generation doesn’t have German brands on their radar at all.

Where German EVs Actually Fail

The obvious explanation: They’re too expensive. Customers switch to cheaper alternatives.

The study proves otherwise.

Globally, 37% cite price as the biggest barrier to buying an EV. In China, it’s 8%. Price isn’t the problem.

China isn’t a budget market. China is a quality market. Or as Jonas Wagner from Berylls puts it: “China is high tech and high quality.”

Globally, 77% of EV buyers say material quality matters to them. For combustion buyers, it’s 63%.

German manufacturers aren’t competing against cheap cars. They’re competing against cars that offer more at the same quality level. More range. Better software. A better digital experience.

German Automakers Are Losing Autonomous Driving Before It Starts

1 in 4 Chinese buyers expects Level 4 or 5 autonomous driving in their next car. In Germany and the US, it’s 6%. And this is about a technology no private vehicle delivers today.

But the real difference isn’t demand. It’s motivation.

69% of Chinese customers want autonomous driving to reduce daily stress. There, the technology means freedom.

Western customers see autonomous driving mainly as a safety feature. Nice to have. But not a purchase driver. Only 10% of Germans would pay extra for it. In the US, 7%.

In China, it’s a purchase driver. Only 1% of Chinese buyers have no interest in autonomous driving. Globally, it’s 17%.

The dilemma: Where autonomous driving matters most, customers already buy from competitors. Where German manufacturers are still strong, almost nobody wants to pay for it.

Made in Germany was never just about quality. It meant technology leadership. The best engines. The latest innovations. That justified the premium.

But today, different things define a modern car. Electric drivetrains. Software. Autonomous driving. And German manufacturers? Others are leading in all three.

My Take

There’s a book from the 90s. The Innovator’s Dilemma by Clayton Christensen. The idea is simple:

Successful companies don’t fail because they make bad decisions. They fail because they do the right thing. They listen to their customers. Optimize what works.

And while they do that, someone else builds something new. A product that’s worse at first. In everything that mattered before. But it can do something the old product can’t. And suddenly the standards shift.

When Steve Jobs introduced the iPhone in 2007, he didn’t say: This is a better phone. He said: “An iPod, a phone, and an internet communicator.” He invented a new product category.

That’s exactly what happened in automotive. German manufacturers built the world’s best combustion cars. For decades. Better engines. Better build quality. Better chassis. But the car always remained a car. The way it had always been.

Then new players arrived. First from America. Then from China. They didn’t improve the car. They rethought it.

German manufacturers kept building better combustion cars. The Innovator’s Dilemma.

Eventually they reacted. But by then, the others were generations ahead. The result: The first generation of German EVs disappointed customers. The data proves it.

Now they know they’re no longer technology leaders. So they invest billions to catch up. But those billions have to come from somewhere.

That’s exactly the downward spiral:

1. The technology is no longer competitive

2. Customers are disappointed

3. So they invest billions to catch up

4. They cut corners on quality and materials to fund it. On the very thing that makes Made in Germany Made in Germany

5. Even more customers are disappointed

They end up losing on both sides. Behind on technology. No longer Made in Germany on quality.

But it’s not over. Made in Germany still commands the highest trust globally. The data showed that.

And the second generation of German EVs is arriving now. In a different technological league than the first. These are the make-or-break models. They’ll decide what Made in Germany is worth 10 years from now.

PS: Want to see the full data behind today’s analysis? Berylls’ CONFIGURED study surveyed 8,000 car buyers across 11 countries.

👉 Download the study for free

That’s all for today.

Until next week,

Philipp

PS: If you find value here, share it with someone who should read it too.

Want to reach European automotive decision makers?

I help global B2B companies connect with 80,000+ automotive decision makers in Germany.

Learn how we can work together →

Last year, everyone here in Germany felt it: BYD is just taking over.

4.6 million cars sold. More than BMW and Mercedes combined. Tesla overtaken. It felt like they were steamrolling every market at once.

Now the 2025 numbers are in. And the first data for 2026. They tell a different story. Profit down 19%. Strip out subsidies and it’s closer to 50%. In China, BYD has dropped from first to fourth.

So which is it? Is BYD still on the rise? Or is the shooting star crashing?

The answer is neither. And what’s actually happening affects European automakers more directly than most people realize.

What the Numbers Actually Say

• Sales: 4.6 million vehicles (+7.7%)

• Revenue: +3.5% (weakest growth in 6 years)

• Net profit: 32.6 billion yuan (approx. $4.5 billion), -19%

• Q4 profit: -38%

• Auto gross margin: 20.5% (down from 22.3%)

• Net margin: 4.1% (down from 5.2%)

• State subsidies: 12.47 billion yuan (approx. $1.7 billion) = 38.2% of net profit (2024: 25.9%)

• Profit without subsidies: approx. 20.1 billion yuan / $2.8 billion (-50%)

+7.7% more cars, but only +3.5% more revenue. BYD is selling more vehicles at lower prices.

The profit decline accelerated through 2025. In Q1, profit nearly doubled. By Q3: -33%. By Q4: -38%.

BYD founder Wang Chuanfu says competition has peaked. China is in a “brutal elimination phase.”

Why BYD Dropped to Fourth in China

In early 2026, BYD sits behind VW, Geely, and Toyota. Sales have been declining for 7 months. In Q1 2026 alone: -30% year over year. Market share has collapsed from 33% to 24.6% in a single year.

Three factors are hitting BYD at the same time:

1) The price war:

Since mid-2025, all major manufacturers have been cutting prices at once. BYD’s margins have fallen faster than its competitors’. The reason: BYD is most exposed in the volume segment. That’s exactly where the price war is fiercest. This triggered the profit collapse in the second half of 2025.

2) New competitors:

This is the biggest irony of the whole story. BYD spent years as the newcomer rolling over incumbents. Now they are the incumbent. And the next wave is rolling over them.

Smartphone maker Xiaomi collected nearly 290,000 pre-orders for the YU7 in a single hour in June 2025. Huawei’s automotive alliance HIMA is rapidly gaining EV market share. These competitors come from the tech sector. They bring their own ecosystems, software mindset, and brand loyalty.

BYD comes from the battery business. Software was never their home turf. But software is where China’s market war is being won right now.

3) The policy reset starting in 2026:

This is probably the most important factor. China changed the rules for EV buyers. Two changes at once.

First, the trade-in bonus. Until now, the government paid anyone who scrapped an old car and bought a new EV a flat rate of roughly $2,800. No matter whether the new car cost $10,000 or $45,000. This meant cheap cars benefited the most. That’s BYD’s core business.

Now, the bonus is 12% of the car’s price. For BYD’s entry model, the Seagull (around $10,000), that means roughly $1,350 instead of $2,800. More expensive models now benefit more than before.

Second, the purchase tax. In China, car buyers pay a 10% tax on the purchase price. EV buyers were fully exempt for over 10 years. Since 2026, they pay 5%. Still half of what combustion buyers pay. But after a decade at zero, it’s a real increase.

Both changes hit BYD from two sides at once. BYD only makes EVs and plug-in hybrids. Every subsidy cut and every new tax hits the entire business. Geely, by contrast, still sells around 146,000 combustion cars per month that are unaffected. And BYD is most exposed in the affordable volume segment. Exactly where the trade-in bonus change hurts most.

BYD’s Subsidies Help in China. And Hurt in Europe

BYD is trapped.

In China, BYD needs state subsidies to compete on price. In 2025 alone, BYD received around $1.7 billion in subsidies. Nearly 40% of profit. Without that support, profit wouldn’t have fallen 19%. It would have fallen around 50%.

In Europe, the EU uses exactly these subsidies to justify tariffs. BYD pays 17% in penalty tariffs on every imported car, plus 10% standard import duty. 27% total. The justification: unfair state support. The $1.7 billion in BYD’s annual report is all the proof the EU needs.

The irony: the subsidies help BYD survive in China’s price war. And make its exports to Europe more expensive at the same time. The more subsidies, the stronger the argument for European tariffs.

Wang Chuanfu’s response: BYD paid around $7.5 billion in taxes in China in 2025. Net, they contributed $5.7 billion more than they received back in subsidies.

Fair point. But it doesn’t change the fact that nearly 40% of profit came from state support. And that’s the basis for EU tariffs.

Under this pressure, what does BYD do? Flee China.

The Flight to Europe

1.05 million exports in 2025. Up 150% year over year. In Europe, BYD overtook Tesla on new registrations in early 2026.

The math is straightforward. BYD earns around $700 per car in China. In export markets, it’s around $2,800. One export car generates as much margin as 4 domestic cars.

That’s why BYD raised its 2026 export target from 1.3 to 1.5 million vehicles. In February, over 50% of BYD’s sales came from exports for the first time.

The logic is simple: BYD goes where the money is.

And they’re not stopping at exports. BYD is building a global production network at speed. Thailand and Uzbekistan are already producing. Plants are under construction in Brazil, Indonesia, and Turkey. And then there’s Europe.

The plant in Szeged, Hungary, has already started pilot production. Full-scale production begins in Q2 2026. Capacity: up to 300,000 vehicles per year. Built in the EU. The 27% tariffs? Gone.

The pattern isn’t new. In the 1980s, Toyota did exactly this. The Japanese home market was under pressure. Toyota flooded the US with affordable exports. Then built local factories. And never left. The exporter became the world’s largest automaker.

BYD is running the same playbook. Just faster. China Speed. Toyota needed over 10 years. BYD is building a global production network in 18 months.

My Take

Both narratives about BYD are wrong.

“BYD is unstoppable” ignores: profit -19%, stripped of subsidies -50%, crashed to fourth in China, growing dependence on state support.

“BYD is crashing” ignores: +150% exports, world’s largest EV manufacturer, factories on 3 continents, market leader in Thailand, Singapore, and Brazil.

To understand what’s actually happening, you need to know China’s industrial playbook. China ran the same strategy in solar. In batteries. In steel.

Today, over 80% of solar panels sold in Europe come from China. The European solar industry has practically disappeared. That took less than 10 years. With EVs, China is running the same playbook:

1. Pour money into an industry. Hundreds of companies emerge

2. Brutal domestic competition. Too many players, too little margin. A price war to the death

3. Pull back subsidies. Survival of the fittest. The weak die

4. The survivors are globally unbeatable. Because they survived the world’s toughest competition. With the lowest costs. The most efficient processes

That’s what we’re watching with EVs right now. Around 50 EV manufacturers are fighting for market share in China. Only a handful are profitable. Now subsidies are being cut. And the price war is escalating.

BYD isn’t crashing. BYD is doing exactly what China’s system designed it to do.

Soon, the first BYDs will roll off the line in Hungary. No tariffs. European production. BYD is no longer an import problem. It’s a local competitor.

So is BYD rising or crashing? Wrong question. BYD is transforming. From local champion to global powerhouse. The rise was never the real threat to European automakers. What’s about to hit world markets is.

🔗 bl | re | wsj | ev | cnp | el

That’s all for today.

Feel free to reply to this email with your thoughts.

Until next week,
Philipp

PS: If you find value here, share it with someone who should read it too.

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You know your product. But do you know your buyers?

You sell software, consulting, or technology to German and European OEMs and suppliers. You know how hard it is to get real insights. What keeps decision-makers in Europe’s largest automotive market up at night? What are they planning internally?

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Welcome to Issue #111 of The German Autopreneur.

Over the past few weeks, I’ve looked at the annual results from Mercedes and VW. Today it’s BMW’s turn. And upfront: this is by far the most boring story.

No drama. No radical pivots. No shocking numbers.

But that’s exactly what makes it interesting.

2025 was the worst year for German automakers since 2020. Net profits collapsed across the board:

• Mercedes: -49%

• VW: -44%

And then there’s BMW at -3%.

That looks like BMW won. But they didn’t.

BMW just got through 2025 better than the others. And the more interesting question is: why?

Today I’ll look at why BMW’s numbers look better than they actually are. What really helped BMW in 2025. And why BMW is taking on more risk in 2026.

BMW’s Key Numbers for 2025

• Revenue: $153.9 billion (-6.3%)

• Net profit: $8.6 billion (-3%)

• EBIT margin, automotive segment: 5.3%

• Sales volume: 2.46 million vehicles (+0.5%)

• EVs: 642,000 units (+8.3%), of which 442,000 fully electric

Sales by region:

• Europe: +7.3%

• US: +5.0%

• China: -12.5%

Unlike VW and Mercedes, BMW cut costs in 2025. And sold more cars.

What the Numbers Don’t Show

2025 looks better than it is. The reason is 2024.

Net profits had already collapsed in 2024:

• Mercedes: -28%

• VW: -31%

• BMW: -37%

BMW fell hardest in 2024. The reason: a faulty braking system from Continental forced BMW to recall 1.5 million vehicles. In Q3 alone, that cost around $1.15 billion.

That skews the comparison. BMW’s 2025 looks good because 2024 was already bad.

So is BMW structurally in better shape? Yes. But not for the reasons most people assume.

BMW’s 3 Structural Advantages

All three kicked in at the same time in 2025.

1. Platform flexibility

BMW builds combustion, hybrid, and electric cars on the same production line. That sounds like a footnote. It isn’t.

VW and Mercedes went a different way. They produce separately. Put simply: one plant for combustion, one for EVs. That’s more efficient, but only if you can keep the lines running at capacity. And that requires you to predict almost exactly how many EVs will sell in which region. Then ramp production in sync.

And in today’s market, that’s nearly impossible to time.

And in 2025, that got even harder. Trump changed the rules overnight, and billions in automaker investments became worthless.

BMW could work around it. When fewer EVs are ordered, they simply build more combustion cars on the same line.

2. BMW was America-first before Trump

BMW is the largest automotive exporter from the US, ahead of Ford. The BMW plant in Spartanburg employs 11,000 people. It produces 1,500 cars a day. The plant has been running since 1994. That’s where the SUV lineup is built, from the X3 to the X7.

BMW was America-first decades before Donald Trump. When high import tariffs hit in 2025, Trump’s message was clear: build in America. BMW had already been doing that for 30 years.

3. Cost management

BMW cut $2.9 billion in costs in 2025. Without the headlines. Without mass layoffs or plant closure debates.

Lower development costs, reduced material costs, leaner administration. That’s where the $2.9 billion came from. The most boring number in this story. And the most important one.

These 3 advantages protected BMW in 2025. All at once, at the right time.

But was this a deliberate strategy?

Every automaker faces the same question right now: go all-in on EVs, or keep building combustion cars alongside? BMW’s answer is flexibility. CEO Oliver Zipse made “Power of Choice” his mantra: all powertrains, all markets.

It sounds bold. Even principled. But BMW had no better read on the market than anyone else. They just sold the story better.

And BMW isn’t as committed to keeping all options open as it sounds. Their future strategy is a clear bet on EVs. And it has a name.

The Neue Klasse

In 1959, BMW was on the verge of bankruptcy. Daimler wanted to acquire it. A guy named Herbert Quandt rescued the company with a private investment. His family still controls BMW today.

Two years later, BMW unveiled the 1500 at the IAA. Germany’s flagship auto show. It was the first model of the Neue Klasse. That car became the foundation for everything BMW is today.

65 years later, the answer is Neue Klasse again. This time, fully electric.

Mercedes tried going all-in on EVs and walked it back. BMW chose a different path. The Neue Klasse runs alongside the existing combustion platform, not instead of it.

The old flexible combustion architecture continues for another 8-10 years. But by 2030, more than 50% of all BMWs sold should be fully electric.

The first models on the new platform: the iX3 and a new i3.

Here’s the catch. BMW’s advantage in 2025 was that everything ran on one line: all powertrains, maximum flexibility. That’s over now. The Neue Klasse plants build EVs only. BMW is moving toward the same situation as VW and Mercedes: two parallel worlds, double the infrastructure.

And BMW is tying its future to this platform. If the Neue Klasse doesn’t work, BMW has a serious problem. No matter how well the combustion cars still sell.

Where BMW Actually Stands

The disruption reshaping the auto industry hits BMW just as hard as everyone else. Software, AI, autonomous driving, cost pressure from new competitors. BMW has no structural advantage over Mercedes or VW on any of these.

In Q4 2025, the EBIT margin was just 3.7%. BMW’s own forecast for 2026: 4-6%.

In China, BMW faces the same problems as the rest. In the last 2 years, BMW has lost nearly 200,000 units of annual volume. The trend is still pointing down.

And the US advantage? More than half of the cars produced in Spartanburg are exported. If the trade war escalates, that advantage becomes a liability.

In May, Milan Nedeljkovic takes over as the new CEO. 33 years at the company. He won’t reinvent BMW. His job is to deliver what his predecessor promised.

My Take

Mercedes has changed course 4 times in 18 months. VW is fighting for its survival. And BMW? Just keeps going like nothing happened.

That’s boring. But it describes BMW as a company pretty well.

But did BMW actually have the better strategy? No.

This wasn’t foresight. It was a bet. A more risk-averse one. VW and Mercedes bet on 2 platforms: one for combustion, one for EVs. BMW bet on one platform for everything.

Not necessarily the smarter bet. But in a year where everything changed, keeping your options open paid off.

Flexibility is a crisis strategy. It works as long as the world stays volatile. As long as no one knows which technology wins where and when. As long as political decisions can change everything overnight. In that world, optionality isn’t a weakness. It’s a capability.

BMW’s approach wasn’t necessarily cheaper. A single platform that has to handle combustion engines, hybrids, and EVs at the same time means enormous complexity. And with it, cost.

Why could BMW pull it off? At VW, the German state of Lower Saxony holds 20% of shares. Politics literally has a seat at the table. At Mercedes, major shareholders from China and Kuwait shape the agenda. BMW is backed by the Quandt family. They’ve held half the shares for over 60 years. Of the German automakers, BMW can plan furthest ahead. In generations, not quarters. That is BMW’s real structural advantage.

2025 was a year where the best plan was having no plan. BMW benefited from that. The Neue Klasse is the opposite: a clear bet. And clear bets can be lost.

🔗 bmw-pr | el1 | hb-oem | re1 | hb1 | cio1

That’s all for today.

Until next week,
Philipp

PS: If you find value here, share it with someone who should read it too.

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I can help. I get to know your product. Build your positioning and story. And bring it to 80,000 automotive decision-makers.

One partner turned that into 60 qualified leads at OEMs. Another got 250 webinar registrations.

I work with a maximum of 3 companies long-term. Currently 1 spot available.

How partnerships work

Welcome to Issue #110 of The German Autopreneur.

German automakers are scrambling to find skilled workers. But: Last year, the industry cut 50,000 jobs.

How do those two things go together?

The automotive industry faces its biggest transformation ever. Powertrains, software, autonomous driving. Everything's changing at once. And now AI is here.

Everyone's talking about it. But most departments haven't changed much yet. Something's coming. But when? And for whom?

A new study analyzed 2 million real AI interactions. Not surveys. Not forecasts. Actual usage data. The result flips a common assumption: AI doesn't automate simple jobs first. It automates the most demanding ones.

Today we'll look at what the data shows. Which jobs and departments in automotive are next. And why most people aren't feeling the real impact yet.

What the Data Shows

The study didn't ask what AI can theoretically do. It measured what people actually use AI for.

The pattern: AI replaces higher-skilled tasks first. Not simple ones.

4 examples:

• Travel Agents: Complex trip planning disappears. Ticket sales remain

• Technical Writers: Analysis and review disappear. Sketching and on-site observation remain

• Teachers: Grading and research disappear. In-person teaching remains

• Property Managers: Bookkeeping disappears. Negotiations remain

AI replaces knowledge work first. What stays: Everything requiring personal contact and relationships.

Here's what matters. AI doesn't need to replace the entire job. Every position exists because of 1 or 2 core tasks. When AI handles exactly those, the job is gone.

But how much is actually in use?

For each job category, 2 numbers. How much AI could theoretically handle. And how much is actually deployed today:

• Computer & Math: 96% possible. 32% used

• Business & Finance: 94% possible. 28% used

• Management: 92% possible. 25% used

The pattern is the same everywhere. 60-80% of all office tasks are theoretically automatable. Companies currently use AI for 10-20%.

The gap is massive. But it's closing fast. AI is spreading 10x faster than the internet or smartphones did.

What AI could do vs. what it does (Anthropic)

What This Means for Automotive

Everyone pictures robots replacing factory workers. The data shows the opposite. Production, assembly, logistics, and service shops are barely affected for now.

The disruption is happening in white-collar work.

Where it's already visible: IT and software development use AI intensively.

Where it's coming next:

• Simulation and calculation

• Finance

• Legal and compliance

• Strategy planning

AI could handle a lot here. But doesn't yet.

And even where AI doesn't fully replace the job, it transforms it. There's already a term for this. De-skilling. AI handles the demanding part. The analysis. The strategy. The evaluation. What remains: Review results and approve them. The job still exists. But it's different.

For demanding tasks, AI speeds things up by a factor of 12. The more complex the task, the bigger the leverage. And these are exactly the tasks companies pay the most for.

Automotive AI Exposure Map: Which departments are affected?

Who's Still Hiring Juniors?

AI doesn't just change which tasks disappear. It changes who companies hire at all.

With AI, juniors are 26-39% more productive. Seniors only 8-13%. Yet companies hire fewer and fewer juniors.

In European tech companies, junior hiring collapsed by 73% within one year. Not because there are no applicants. But because the positions are vanishing.

The reason: 1 senior with AI can now handle what used to require an entire team. Including the juniors.

So companies aren't just cutting positions. They're replacing old roles with new ones. Especially those who can work with AI.

Which raises a question. If nobody hires entry-level people anymore, where do tomorrow's experts come from?

What We're Not Seeing

So much for the data. But reality is more complicated than headlines.

The headlines say AI destroys jobs. AI replaces people. We're not there yet.

59% of HR leaders admit they highlight AI as a reason for layoffs because it plays better with investors. The real reasons are usually financial: costs, demand, restructuring.

Nearly 90% of surveyed executives say AI had no impact on employment over the past 3 years. Of 1.2 million jobs cut in the US in 2025, only 4.5% were actually AI-related.

There's now a term for it. AI-washing. Companies use AI to explain job cuts that have other causes.

That's the real danger. The narrative is everywhere: AI destroys jobs. But it's not really happening yet. And when the real impact arrives, nobody takes it seriously anymore.

My Take

At Mercedes, we built strategy decks for the board. Entire teams. Weeks of work. For one deck. Today, one person with AI can deliver that in an afternoon. These are exactly the jobs AI is changing now.

And we know this pattern. Digital transformation was the same. Digitize processes, connect data, break down silos. German automakers have known for years this is necessary. And still struggle with it today. Too many entrenched structures. Too many people protecting the status quo. Too little appetite for change.

I'm afraid AI will follow the same path. AI targets exactly where resistance is strongest. It affects the people with the most influence first. And they'll slow it down. Because nobody likes introducing the tool that makes them obsolete.

And that repeats another pattern. Newcomers don't have this problem. Young companies build with AI from day one. Fewer people, faster decisions, no legacy structures. We know this from EVs and software. When you don't need to transform an organization, you move faster.

The problem: AI widens the gap between the fast and the slow. For German automakers, that's an additional risk. On top of everything else already happening.

Jeff Bezos just put $6.2 billion into a fund. It targets industrial companies before AI displaces them. Automotive is explicitly included. His bet: These companies have substance. But won't make the AI transformation alone. So he's coming from outside to force the change.

But the data shows something else too.

The industry seeks skilled workers while cutting jobs. Both are true. Because tasks are changing faster than the people doing them. The good news: The deeper your expertise, the more AI helps. Deep domain experts won't be replaced by AI. They get better. German automakers have plenty of those.

But that only becomes an advantage if these people actually use AI. Not on the side. But at the core of their work. The gap between what's possible and what's used is closing. Faster than any technology before. The question isn't whether AI will change these jobs. But whether we move fast enough.

🔗 anth | wsj | bl | nyt | li

That's all for today.

Feel free to reply to this email with your thoughts.

Until next week,
Philipp

PS: If you find value here, share it with someone who should read it too.

Want to reach European automotive decision makers?

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Learn how we can work together →

Uwe Dreher is Head of Marketing Europe at BMW. He completely transformed the division in 3 years.

In an interview with Jonas Wagner from Berylls by AlixPartners, he explains exactly what he changed.

• How a unified KPI set makes performance across 25 countries manageable.

• Why BMW had to restructure its own organization to keep pace with its own agency.

• Where BMW already uses AI in marketing. And what it delivers.

👉 Watch the interview on YouTube now

Welcome to Issue #109 of The German Autopreneur.

VW reported earnings last week. Profits more than halved. Revenue stayed flat. So it's not about demand. It's about costs.

Operating margin: 2.8%. The last time it was this low? Dieselgate. Except now there's no scandal.

50,000 German jobs gone by 2030.

But we all know the numbers by now. What's more interesting is what VW CEO Oliver Blume said about them:

"The business model of past decades no longer works. Not for Volkswagen. Not for the German automotive industry. Not for Germany as a whole."

That's either a brutally honest diagnosis. Or Blume is turning a VW problem into a Germany problem.

Today I'm figuring out which one it is.

What was this business model? Why did it break? What's VW doing about it? And why that won't save Germany.

The Key Numbers

Group

• Revenue: €321.9 billion (-0.8%)

• Sales volume: 8.98 million vehicles (-0.5%)

• Operating profit: €8.9 billion (-53%)

• Operating margin: 2.8% (prior year: 5.9%)

• One-time charges: ~€9 billion (Porsche ~€5B, tariffs ~€3B, restructuring ~€1B)

Porsche & Audi

• Porsche operating profit: €90 million (prior year: €5.3 billion)

• Audi operating profit: -13.6%

• Porsche sales in China: -26%

So much for the numbers. Now for the question behind them.

What Was This Business Model?

The German business model in automotive worked like this for decades: Build highly complex machines at expensive locations and sell them worldwide at a premium.

A combustion engine has over 2,000 moving parts. Transmission, injection, exhaust treatment. This complexity was the moat. Master it, and you could charge more. Germany mastered it better than anyone.

Add cheap energy. Russian gas kept electricity prices low. Germany had high wages but stayed competitive overall.

Then China. For decades, THE growth market. Economic boom, rising middle class, more cars on the road every year. And no strong domestic auto industry. The jackpot for German automakers.

VW held over 40% market share there at times. The joint ventures printed billions.

These profits didn't just fund European investments. They kept the entire apparatus running. Overhead, bureaucracy, inefficient structures in Wolfsburg.

The formula: Complexity as moat × cheap energy × China profits = Made in Germany.

This formula worked for decades. Until all 3 variables collapsed at once.

Why Germany's Formula No Longer Works

1) The moat is dissolving An electric motor has about 20 moving parts. No transmission. No injection. No exhaust treatment. The complexity German automakers mastered better than anyone? Now irrelevant. Value creation is shifting to software and batteries.

2) The energy foundation is gone Russian gas is gone. Industrial electricity in Germany costs roughly twice as much as in China.

3) China isn't coming back VW was once number 1 in China. Today, number 3. Sales only fell 6% in 2025. But profit from joint ventures nearly halved: from €1.7 billion to €0.96 billion. At the peak, €5 billion per year from China alone. For 2026, VW expects only €200 to 600 million.

China now has its own auto industry. One that barely existed 10 years ago. Local manufacturers like BYD and Geely understand the Chinese market better, build faster and cheaper.

For VW, the China curve pointed up for decades. Now it points down. And there's no bottom in sight.

How Did China Pull This Off?

This wasn't an accident. China's government recognized EVs as a strategic opportunity. The starting advantage: the world's largest car market as home turf. Demand was there. What was missing was domestic supply. So they built it. Around $230 billion in government subsidies flowed into the entire value chain. From raw materials through battery production to finished cars.

Europe reacted too. Just differently. Instead of building supply, they subsidized consumption. Germany offered €9,000 purchase incentives for EVs. When those ended in late 2023, the market collapsed. The irony: these incentives helped finance exactly the industry China was building. Because batteries in European EVs nearly all come from China.

Europe promoted a market. China built an industry.

This also explains why tariffs won't solve the problem. Tariffs protect existing structures. When the existing structure is the problem, you're protecting the problem.

Is Blume Right?

Back to Oliver Blume. He says this isn't a VW problem. Is that true?

The evidence supports it:

• Mercedes: operating profit -57% in 2025

• BMW: -11.5%

• German automotive has cut over 100,000 jobs since 2019

So it's not just VW. But Toyota achieved 8.6% operating margin in the same environment. The Hyundai/Kia Group: 6.8%.

What separates German automakers from Toyota comes down to 2 things:

1. Disproportionate dependence on China

2. Strategic back-and-forth

And we see this at VW too:

• First all-in on EVs. Then back to combustion

• Build software ourselves with CARIAD. Then buy it instead

• Develop platforms ourselves. Then partner with China and the US

So both are true. The formula no longer works. But VW also has a VW problem.

Can the Business Model Work Again?

Yes. But not with the old formula.

VW sold almost as many cars in 2025 as the prior year. 8.98 million, only -0.5%. In Europe, up 5%. In South America, up 10%.

And the powertrain mix tells a story that often gets lost. VW sold roughly 55% more pure EVs in 2025 than the year before. EV market share in Europe: 27%. More than combustion.

This isn't a dying company. This is an expensive company.

But the most important change: VW fundamentally flipped its strategy. Away from "do everything ourselves." Toward partnerships. With Rivian in the US. And with Xpeng in China.

VW is moving development away from Germany. Into regional hubs. Cheaper, faster, and closer to customers.

So VW is finding its answer.

But the answer is: somewhere else. The VW of the future isn't a German company anymore. It's a company with German roots.

But then what about the 'German business model' Blume talked about?

My Take

Oliver Blume built the perfect narrative. VW isn't the problem. Germany is the problem. And he's partly right. But he's leaving out the punchline. VW is solving its own problem. And leaving Germany to deal with its own.

There's no answer for that yet. Right now everyone's pointing at everyone else.

Automakers point at politics: expensive electricity, too much bureaucracy, no stable framework. Politicians point at companies: slept through transformation, clung too long to combustion. Unions point at management. And all of them point at China and Trump.

Every accusation probably has some truth to it. But that's exactly the problem. While everyone's busy pointing fingers, no one's working on an answer.

In the 1970s, British Leyland was the UK's biggest automaker. Dozens of brands under one roof: Jaguar, Rover, MG, Land Rover, Mini. Basically the VW of Britain.

But there were structural problems. Costs too high. Too much bureaucracy. Too little innovation. Instead of acting together, management, unions, and government blocked each other for years.

And while they fought, customers simply bought other cars. From Japan. And from Germany. Today, Britain has no mass-market manufacturer left.

Germany isn't there yet. But the beginning looks similar.

VW found an answer. But not for Germany.

Which means the last hope is gone. Legacy automakers won't reinvent Germany's business model.

That takes new players. Companies that don't exist yet. But for them to emerge, the whole system needs to work. Industry, politics, society. Together.

China keeps proving it can be done. But it doesn't happen on its own. It has to be orchestrated.

If it doesn't, companies will figure it out alone. By leaving. Just like VW is doing right now.

The question isn't whether Germany's business model can still work. The question is whether anyone will build a new one.

🔗 re | re | hb | cnbc | ft | hei

That's all for today.

Until next week,
Philipp

PS: If you find value here, share it with someone who should read it too.

Want to reach European automotive decision makers?

I help global B2B companies connect with 80,000+ automotive decision makers in Germany.

Learn how we can work together →

The strategy is set. The roadmap is there. But you don't have the people to get it done. And hiring takes 6 months.

The solution: Interim management. An experienced executive, brought in for the mission. As COO, CFO, or plant manager. Someone who's solved this before.

That's what Atreus does. For OEMs, suppliers, and tech companies in automotive.

Martin Hunglinger from Atreus will tell you if interim management is the right move. No strings attached.

👉 Book a free call

Welcome to Issue #108 of The German Autopreneur.

January 2026. Detroit. Donald Trump talks about Chinese automakers. And says: "Let China come in."

He means they should build factories in the US. Hire Americans.

For context:

• The US has 100%+ tariffs on Chinese EVs

• A ban on Chinese software and hardware in cars

• And a president who made the trade war with China his trademark

The idea comes from Ford CEO Jim Farley. And a playbook the auto industry knows all too well.

Today we'll look at why the US might open its auto market to China right now. And what it means for Europe.

Jim Farley Is Scared

January 2026. Ford CEO Jim Farley meets with senior Trump administration officials.

His pitch: Let Chinese manufacturers produce in the US. In joint ventures with American companies. The US firm holds the majority. They share profits and technology.

Why does he want this?

In December 2025, Ford buried its EV strategy:

• Multiple electric models canceled

• $19.5 billion written off

The EV division alone has lost over $16 billion since 2022.

On China, Farley says: "They have enough capacity in China with existing factories to serve the entire North America market. Put us all out of business."

And: "If we lose this, we do not have a future at Ford."

He means the global technology race with China. Not just EVs. Software, batteries, connected vehicles too.

BYD overtook Ford in global sales. Farley privately drives a Xiaomi SU7 he imported from China. He calls Xiaomi "the Apple of China." The man knows what's coming.

Farley's logic: Better to bring in Chinese technology through joint ventures now. Than get overrun in 5 years.

But it's not that simple.

The 3 Walls

When Chinese automakers try to enter the US, they face 3 walls.

Wall 1: Tariffs.

100%+ on Chinese imports. Their cars can't compete.

Wall 2: The Tech Ban.

The US banned Chinese software and hardware in connected vehicles. Software starting 2027, hardware starting 2030. The rule applies not only to imports but also to cars built in the US.

The former US Commerce Secretary put it this way: "It's really important because we don't want two million Chinese cars on the road and then realize we have a threat." For the US, Chinese cars are a national security issue.

Wall 3: Trust.

And even if walls 1 and 2 fall, no American knows BYD. No dealer sells their cars. No mechanic can fix them. Chinese manufacturers would need years to establish themselves. Just like we're seeing in Europe right now.

The US market is pretty locked down for Chinese manufacturers.

And then Trump suddenly says: "If they want to come in and build the plant and hire you and hire your friends and your neighbors, that's great. I love that. Let China come in."

So what's going on?

The Playbook Reverses

For Trump, the math is simple. Factories in the US mean American jobs. For Farley, it goes deeper. Technology transfer.

There's a model the auto industry knows well.

In 1984, VW became one of the first Western automakers to form a joint venture in China. With state-owned SAIC. The deal. Market access for technology transfer.

This wasn't an isolated case. For almost 40 years, China forced Western manufacturers into joint ventures. The strategy. Learn from partners. Build your own tech.

It worked. Chinese manufacturers caught up in the software era. Then overtook them.

Farley now faces the same problem. Ford has a massive gap in software and batteries. They tried catching up alone. Ford spent 4 years building its own software platform. Following Tesla's model. In 2025, the project was scrapped. Just like the EV strategy now.

So he's reversing the logic. Bring in Chinese technology through joint ventures. With American majority ownership. Under American control. Learn from Chinese technology.

Same playbook. Just in the other direction.

But there's a catch.

The Commerce Department's software ban applies not only to imports. It also covers cars built in the US. If a joint venture uses Chinese software or hardware in connected vehicles, those vehicles won't be sellable starting 2027. No matter who holds the majority stake.

A joint venture doesn't solve the core problem. Unless the rules change. And there's a sign the rules might change. In January 2026, the Trump administration fired the Commerce Department official who led the software ban.

And the US isn't alone in making moves.

Canada Opened the Door

On March 1, 2026, a deal between Canada and China took effect. Canada cut tariffs on Chinese EVs from 100% to 6.1%. Up to 49,000 vehicles per year can be imported.

In return, Canada expects Chinese manufacturers to form joint ventures with Canadian companies within 3 years. Build factories. Create jobs. This isn't legally binding. But the message is clear: those who want long-term market access should invest locally.

Trump isn't thrilled. He warned Canada against becoming a "drop off port" for Chinese cars.

Something similar happened at the southern border.

BYD wanted to build a large plant in Mexico. The plan failed. China itself delayed approval. The fear. Technology could flow to the US through Mexico.

And Trump pressured Mexico. Anyone cooperating with China risks US market access. Mexico took the opposite approach. In December 2025, the government raised tariffs on Chinese cars from 20% to 50%.

Still, roughly one in five cars sold in Mexico already comes from China.

And something is happening in the US too.

At CES 2026, Geely announced plans for Zeekr and Lynk & Co to enter the US market within 24 to 36 months. Geely also owns Volvo. Volvo already has a factory in South Carolina. It's currently running at only 13% capacity. The infrastructure for a US market entry already exists.

My Take

China benefited from Western technology for 40 years. Through forced joint ventures. And it worked.

Now the US might flip the model.

Late March, Trump travels to Beijing to meet Xi Jinping. Access to the US auto market could be part of the negotiations. And Farley already put the model on the table.

We know Trump's pattern:

• First, shut out the other side. High tariffs. A software ban. Pressure

• Take away something they want: access to one of the world's largest markets

• Then negotiate. Offer exactly that back. But not for free

What does this mean for European automakers?

If such a joint venture model actually comes to the US, it would naturally favor US companies.

Ford would get access to Chinese technology. European manufacturers probably wouldn't. They're not US companies.

But that's not the only problem.

In the US market, they'd suddenly compete against the same Chinese manufacturers they're already fighting in China and Europe.

And there's one more irony.

While the US considers a joint venture model, China is phasing it out. Toyota is building a fully owned factory for Lexus in Shanghai. Without a joint venture partner. The second plant after Tesla to produce in China without a Chinese partner.

China no longer forces joint ventures. It doesn't need them anymore.

This brings us to Europe. Compared to the US, our walls are much lower.

Europe has tariffs of up to 45% on Chinese EVs. But they can be circumvented. Either through local production. Or through minimum prices and quotas, which the EU is negotiating with individual manufacturers. There's no tech ban. And Chinese manufacturers are already active in Europe building trust.

Does Europe need a joint venture requirement too?

I think yes. Urgently.

Tariffs alone don't solve the problem. When Chinese manufacturers build factories in Europe, they create jobs. But only in production. Exactly the kind of jobs automation will replace anyway.

The real value stays in China. The software, battery technology, platforms. The intellectual property. That's what needs to come to Europe. Not just assembly.

The problem. Enforcing something like this is a matter of negotiation. And in this negotiation, we're in a weaker position than the US.

The US can negotiate from strength. China has strategic dependencies on the US in many areas.

Europe is different. Sure, China wants access to the European market. That's our bargaining chip. But we want access to the Chinese market just as much. VW, Mercedes, and BMW do a huge share of their business there. And not just cars. Also rare earths, chips, raw materials. Europe has strategic dependencies on China in many areas.

Bottom line. Europe probably needs China more than China needs Europe. Not a great position when you need something from the other side.

But Europe won't close the technological gap without controlled cooperation. Late March, Trump negotiates in Beijing. Canada already has its deal. It's time for a European initiative.

🔗 dp | bl | re | ft | cnn | li

That's all for today.

Until next week,
Philipp

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I spoke with Malte Broxtermann for this issue. Malte advises automakers and suppliers on autonomous driving at Berylls by AlixPartners.

He recently briefed the European Commission in Brussels. His question: What does Europe need to do to stay in the race?

His insights shaped today's issue.

Berylls by AlixPartners advises the automotive industry on autonomous driving strategy. From technology assessment to go-to-market.

👉 Connect with Malte on LinkedIn

Welcome to Issue #107 of The German Autopreneur.

It's 2035.

You're in the back of a BMW in Munich. No one's behind the wheel. The car drives itself. You booked the ride on Uber a few minutes ago.

You look out the window. The city looks different. Driverless cars are everywhere. Next to you at the light: a white vehicle with a logo you don't recognize. Chinese. Coming the other way: a Tesla Cybercab.

You pull out your phone, curious about what's actually driving you. The software in your taxi: developed in San Francisco. The AI chip: designed in California, built in Taiwan. The car itself: made in China. The driving data you're generating right now: stored on servers in the US.

The BMW? At least that was still designed by engineers in Munich. Everything else comes from outside Europe.

This isn't science fiction. This is where we're headed. Robotaxis are about to go mainstream. Hundreds of thousands of autonomous vehicles will fill our streets. But the technology behind them isn't European. It's American and Chinese.

I spoke with Malte Broxtermann about this. He works at AlixPartners and advises automakers and suppliers on autonomous driving. A few weeks ago, he briefed the European Commission in Brussels on why Europe is falling behind. Unless we act now.

Today we'll look at where Europe stands in autonomous driving. The two critical gaps we face. And what it means when the vehicles on our streets run on software we don't control.

The Moonshot That Overtook Volkswagen and BMW

2009: Google launches a secret project for autonomous driving. Today, we know it as Waymo. Over $27 billion has flowed into the company since then.

A lot of money. But that's exactly how the model works. Alphabet runs a dedicated division for radical bets: the Moonshot Factory. On its books, these projects fall under 'Other Bets'. Most fail. But when one hits, it's massive.

And Waymo looks like it's paying off.

Waymo just closed a new funding round. Size: $16 billion. At a valuation of $126 billion. That 2009 moonshot is now worth more than VW and BMW combined. Without building a single car.

Waymo completes 400,000 rides per week. 15 million rides in 2025. Over 200 million autonomous kilometers. And 90% fewer serious accidents than human drivers.

This year, Waymo is expanding to over 20 cities. Including London and Tokyo.

4 of the world's 11 most valuable companies are investing in robotaxis: Alphabet, Amazon, Tesla, and NVIDIA.

The Same Thing Is Happening in China

Robotaxis are already part of daily life there. The biggest player: Baidu with its Apollo Go service. Operating in over 20 cities. Over 20 million rides so far. In Wuhan alone, Baidu runs hundreds of robotaxis.

But Baidu isn't alone. Dozens of Chinese companies are in the race. And they're already expanding abroad. WeRide runs autonomous fleets in 11 markets worldwide, covering 70% of downtown Abu Dhabi. Pony AI is testing robotaxis with Stellantis in Luxembourg and expanding to more EU cities in 2026. Baidu is partnering with Swiss Post on autonomous shuttles.

China's robotaxis are already in Europe.

And Europe? A Strategy Problem

Quick context. Autonomous driving has levels:

• Level 2: Your car assists. But you must keep hands on the wheel. If something happens, you're liable

• Level 3: Your car drives autonomously in certain situations. You can text. But you must take over within seconds when the car asks

• Level 4: Your car drives completely autonomously in certain areas. You're just a passenger

China and the US are building robotaxi platforms at Level 4.

Europe has early efforts. VW subsidiary MOIA tests autonomous shuttles in Hamburg and Berlin. But these are pilot projects. Not commercial service. Yet even this project is set to expand to the US this year.

Beyond these pilots, Europe has focused on autonomous driving features for private cars.

Mercedes and BMW were the only automakers seriously trying to scale L3. The promise: legally take your hands off the wheel on the highway.

But both just pulled the plug. They're going back to L2.

The reason: Too expensive. Not enough demand.

An L3 system costs almost as much as L4. But feels barely different from L2 to customers. And then there's liability. With L2, the driver is liable. With L4, the manufacturer is liable. With L3, liability shifts back and forth. A legal nightmare.

Tesla and Chinese players recognized this early. Their strategy: Get L2 to the masses. As cheap as possible, as many vehicles as possible. Collect billions of kilometers of driving data. Then use that data to train AI models that leap straight to L4. That's exactly what Tesla is doing with the Cybercab.

German automakers approached the problem sequentially. First perfect L2. Then develop L3. Then L4. How engineers think.

Tesla and Chinese players understood it as a data problem. Not an engineering problem.

What Europe Is Missing

But it's not just strategy. Europe has 2 critical gaps.

Gap 1: The software.

The intelligence in the vehicle. Software that drives a car on its own. Recognizes objects. Understands traffic rules. Gets from A to B. No one in the EU has a platform like this. The closest thing: Wayve, a London startup piloting with Uber this year. But post-Brexit, Wayve isn't in the EU.

Gap 2: The chips.

NVIDIA has a near-monopoly. Its chips train the AI that powers autonomous cars. And NVIDIA chips go into the vehicles so they can actually drive. Mercedes, Waymo, Baidu. Nearly everyone runs on NVIDIA. Alternatives: Qualcomm, Ambarella, Tesla with its own chips. In Europe: nothing.

Think smartphones. Countless manufacturers. But only 2 operating systems that matter: iOS and Android. Whoever controls the operating system controls the platform. Whoever controls the platform controls the data. Whoever controls the data improves the system faster than everyone else.

Autonomous driving will likely follow the same pattern. 2 to 3 platforms will dominate. If none of them is European, history repeats itself. Europe becomes dependent on technology from the US and China.

Why This Is Dangerous

Let's be real: robotaxi fleets are rolling surveillance platforms. They map every street in real time. They capture everything around them. Whoever controls these fleets owns the data of entire cities. And whoever owns the software can shut it all down.

The US and China get this. The US bans all Chinese software and hardware in connected vehicles. China bans driving data from leaving the country. Both are locking down their markets.

And Europe? Still wide open.

This is exactly what Malte told the European Commission. Autonomous driving is one of the world's biggest future markets. Europe needs to be in the game. But that means setting fair rules for everyone.

My Take

The question isn't whether autonomous driving is coming. It's whether it comes from Europe. Or just to Europe.

Europe has the hardware. The sensors. The vehicles. But not the intelligence that holds everything together. Not the software. Not the chips.

Everyone's talking about sovereignty right now. About semiconductors. About gas. About defense. About big US tech platforms. But autonomous driving barely comes up.

Yet no one's asking whose technology will be inside these vehicles.

Robotaxis bring together everything we've been talking about for years. AI, chips, software, sensors, cloud, data. Autonomous driving is where it all converges. And in most of these areas, we're dependent.

If you're serious about technological sovereignty, you have to talk about robotaxis.

The problem: Autonomous driving is too big for a single automaker or supplier. Too many disciplines need to come together. It takes billions in investment over decades. Bets like that rarely get funded in Europe.

But Europe has something others need: one of the world's largest mobility markets. Anyone who wants to scale robotaxis has to come here. That's leverage. But only if we use it.

Right now, it looks like we're giving that up without a fight.

That’s all for today.

Until next week,
Philipp

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Mercedes released its 2025 annual numbers last week. Profits are down by half. Margins sit at 5%. Three years ago, they were close to 15%.

But the numbers are only part of the story.

In the last 18 months, CEO Ola Källenius has changed course 4 times:

1. Abandoned the luxury strategy

2. Brought back the A-Class

3. Dropped Level 3 autonomous driving

4. Completely reversed their EV design direction

The problem? Every one of these strategies was his own idea. And he killed every single one himself.

Källenius is correcting Källenius.

Today we'll look at what these numbers really mean. Why Mercedes' largest shareholders are also direct competitors. And why Mercedes is losing something no amount of money can buy back.

The 2025 Numbers

Let's get everyone on the same page.

Financials

• Revenue: €132.2B (-9%)

• EBIT: €5.82B (-57%)

• Passenger Car Division margin: 5.0%

• Dividend: €3.50/share (down from €4.30)

Adjusted for one-time items, the result is €8.2B. Still -40%.

Sales by region (total: 1.8M cars, -9.2%)

• China: 551,900 (-19%). The overall market grew. Mercedes isn't shrinking because the market is shrinking. Mercedes is losing customers.

• USA: 284,650 (-12%)

• Europe: 635,000 (-1%). The only stable market.

• Rest of World: 98,700 (+17%). Strong, but not enough volume to offset China and the US.

Sales by segment

• Top-End (S-Class, G-Class, Maybach, AMG): 268,000 (-5%)

• Core (C-Class, E-Class): 1,050,000 (-10%)

• Entry (compact): 483,000 (-10%)

The luxury segment held up best. The G-Class had its best sales year ever in 2025. The problem? Top-End alone can't carry the company. It's only 15% of total sales.

Powertrain mix

• Combustion/mild hybrid: ~1.43M (~79%)

• PHEV: 200,000 (+9%)

• BEV: 169,000 (-8.8%). 9% share. At BMW, it's ~18%.

Those are the numbers.

But the real question isn't how bad 2025 was. It's why.

4 Strategy Reversals in 18 Months

#1 The End of the Luxury Strategy

To understand what's happening at Mercedes, we need to go back to the COVID era.

Semiconductors were scarce. Demand exceeded supply. So automakers focused on high-margin models. Customers bought anyway. Margins exploded. Around €20B in operating profit. More than Mercedes had ever earned.

For Mercedes, this felt like validation. They'd been working on a luxury strategy for years. I saw the early stages myself. We called it "Modern Luxury" back then. The idea was to make Mercedes aspirational and exclusive.

Honestly, it felt a bit off even then. Turning a down-to-earth Swabian engineering company into a luxury house like Hermès? That never quite fit.

But the exploding margins seemed to prove the strategy right. Källenius made "Value over Volume" the official mantra. Higher prices. Fewer cars.

That's over now.

The luxury strategy has been quietly abandoned. The new direction is "Profitable Growth." Volume turns out to matter after all.

#2 The Return of the A-Class

I joined Mercedes in 2011. The new A-Class was in development. The strategy: make the brand younger. Internally, we half-jokingly described the typical Mercedes buyer as: male, over 50, probably wearing a hat. It wasn't entirely a joke.

The A-Class was supposed to win over younger customers early. Because everyone knew the core audience was aging out.

And it worked. The A-Class and the compact generation that followed (CLA, GLA, and the rest) made the brand younger. The problem? Margins were bad. These were cars to gain more customers, not money-makers. And entry-level models don't exactly strengthen a luxury image.

So in 2021, Källenius decided to focus on the premium end. The A-Class got killed.

But it’s coming back in 2027.

Källenius now calls the new A-Class "hot as hell."

The reason is simple. If you only build expensive cars, your factories aren't fully utilized. Plants have to close. Jobs disappear. That’s why the entry model is returning.

#3 Level 3 Is Done

In 2022, Mercedes became the first manufacturer in the world to receive approval for Level 3 autonomous driving on German highways. The Drive Pilot.

By 2026, it's history.

The replacement is MB Drive Assist Pro. Level 2 with extended features. The CTO says: "We're still proud of it." But the range of use cases needs to be broader.

Translation: Level 3 was too expensive. And almost nobody bought it.

The problem is that Level 2 and Level 3 feel nearly identical to the driver. But development costs are multiples higher. The industry has largely concluded that Level 3 is a dead end. Most manufacturers want to skip the step entirely.

#4 The EQ Sub-Brand

Mercedes has one of the most recognized brands on Earth. The star is universal. Whether you're in Stuttgart, Shanghai, or São Paulo. The universal status symbol for "I've made it." And a Mercedes is instantly recognizable by its design.

But what happens when Mercedes goes electric? You build cars that no longer look like a Mercedes.

Instead of an electric E-Class or S-Class, Mercedes created the EQ sub-brand. With its own design language. The idea: combustion cars keep the Mercedes look. EVs look like futuristic spacecraft.

The assumption: EV buyers want to stand out. Show the world they're ahead of the curve.

We now know that was a strategic mistake.

Mercedes had its strongest asset and chose not to use it. The brand. The design everyone knows.

With an unknown sub-brand, they went up against hundreds of newcomers. In the EV market, Mercedes was suddenly just as new as everyone else.

The scale of the mistake is clear in one example. The GLC and the EQC were built on the same platform. The GLC was a bestseller. The EQC flopped.

Källenius now admits the futuristic design didn't work. New electric Mercedes cars will look like Mercedes again. The EQ sub-brand is being dissolved.

Mercedes had the strongest brand name in the car market and voluntarily chose not to use it.

Is This a Mercedes Problem or an Industry Problem?

2025 was tough for the entire industry. Trump tariffs, price wars in China, high costs from the EV ramp-up. Everyone felt it.

For context, Mercedes landed at 5% margin in 2025.

But not everyone landed in the same place:

• Toyota: ~9%

• Kia: 8%

• Hyundai: 6.2%

• BMW: 5.9% (9M)

• Mercedes: 5%

• Tesla: 4.6%

• VW: 2.3%

Mercedes is in the middle of the pack. But with one key difference. Mercedes sold significantly fewer cars. BMW and Hyundai held steady. Toyota grew.

And in China, sales dropped 19% in a growing market.

So it's both. An industry problem. And a Mercedes problem.

The difference between Mercedes and the winners? Toyota, Kia, and Hyundai didn't change course 4 times in 18 months. Same storm. But whoever holds their course comes out better on the other side.

The Shareholder Problem

Mercedes doesn't just have a strategy problem. Its largest shareholders all want different things.

About 20% of Mercedes is owned by Chinese investors. BAIC holds 9.98%. Geely founder Li Shufu holds 9.69%.

BAIC is building the Stelato S9 together with Huawei. A direct competitor to the S-Class. Mercedes' largest individual shareholder is funding a direct rival in the company's most important segment.

Li Shufu founded Geely. Through Zeekr, Polestar, and Lynk & Co, he's building multiple competing premium brands. And through the Horse-Powertrain joint venture with Renault, he's also supplying the engine for the new CLA.

Kuwait's sovereign wealth fund holds 5.57%. Since 1974. The longest-standing shareholder with direct access to the CEO. They want one thing above all: stable returns and no risk.

That explains why Mercedes is paying out billions in dividends despite profits being halved. Long-term investments in the future? Hard to make when major shareholders expect reliable payouts.

So: partner, shareholder, competitor, supplier, sovereign wealth fund. All at the same table. All with different interests.

Imagine being CEO. Trying to find a common direction with these people. You're not running a company anymore. You're doing politics.

My Take

This isn't just about finances. Mercedes is stuck in an identity crisis.

The outlook for 2026: sales at 2025 levels. Margin between 3 and 5%. A few years ago, Källenius defined 8% as the minimum target for "very unfavorable market conditions."

"Profitable Growth" is not a strategy. It's the absence of one. Every company in the world wants to grow profitably. It's the lowest common denominator. The thing everyone can agree on when no one can agree on anything else.

But here's what it doesn't answer:

What does Mercedes stand for? What makes a Mercedes a Mercedes?

A software company would put MB.OS at the center. A luxury brand would lean into scarcity. A volume manufacturer would bring back the A-Class. Mercedes is doing all three at once.

On top of that: 40 new models in 3 years. Licensing 14,000 Mercedes luxury apartments. Sponsoring women's tennis. Making a Chinese table tennis player a brand ambassador. Throwing everything at the wall, hoping something sticks.

Mercedes has the best hand to play. The inventor of the automobile. The brand, the history, the engineering culture.

But when you struggle this hard with change, you eventually lose yourself. And with that, the people who make a Mercedes a Mercedes.

Lost in Transformation.

Recently I read a LinkedIn post from a former mentor of mine. He's been at Mercedes for 25 years. He wrote that Mercedes isn't just a job to him. It's a conviction.

I read it twice.

Because people like him are Mercedes' greatest asset. Not the platforms. Not the models. Not the strategy. The people who burn for the star.

Some of them I never thought would leave.

Many of them are gone now. They took the severance package.

Not because they wanted to. But because nobody could tell them anymore why they should stay.

The problem isn't financial. It's narrative. Mercedes no longer has a story it can tell its own people. No story that 160,000+ employees can rally behind. And you need that story not just for your own people. You need it for the financial markets too. And for your customers.

Until that story exists, "Profitable Growth" is exactly what it sounds like. Organized hope.

🔗 bi1 | bl1 | ean1 | ft1 | hb1 | mb1 | mb2 | re1 | wi1 | wsj1

That's all for today.

Until next week,
Philipp

PS: If you find value here, share it with someone who should read it too.

Want to reach European automotive decision makers?

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Recently, I was in Vietnam.

More and more German auto suppliers are expanding into Vietnam. The reason is simple: Great food. But more importantly: Well-trained workers. Low costs. And most crucial: Moving production out of China to reduce risk.

A fellow entrepreneur invited me to speak at a business summit there. My topic: The automotive market. Specifically focused on German suppliers. Where they stand. Where the market is heading. What this means for mid-sized companies.

The central question: You're the CEO of a traditional German supplier. Order books look terrible. What do you do?

For everyone who wasn't there, here's my answer. Spoiler: It's not about transformation. It's about returning to what made these companies successful in the first place.

The Situation

German auto suppliers are the backbone of Europe's largest industry. Thousands of specialized, family-owned manufacturers. What Germans call the Mittelstand. Hundreds of thousands of jobs. World market leaders in their niches.

And they're in their worst crisis in decades.

European suppliers have cut over 100,000 jobs in the past two years.

Bosch makes only half the profit it used to. Over 20,000 automotive jobs will be eliminated by 2030. ZF sits on over €10 billion in debt. Continental is dismantling itself.

One in four companies in the industry expects a wave of insolvencies within the next 12 to 24 months.

Why?

1. Many suppliers are directly tied to combustion engines. They make parts electric cars don't need. Injection systems. Exhaust components. Transmission parts. Result: Their addressable market shrinks year by year.

2. Pressure from China keeps growing. Chinese parts are 20-30% cheaper. At comparable quality. Transmission part imports from China have tripled in recent years.

3. Plus: New automakers have much higher vertical integration. BYD produces 70-75% in-house. They need fewer suppliers.

The result: European suppliers have EBIT margins of 3.6%. In China, it's 5.7%.

At the same time, these companies should be investing heavily. In new products. New markets. Their transformation.

But that's becoming harder. 40% of the world's largest suppliers now have credit ratings so poor that banks barely lend them money for transformation. And cash flow is shrinking too. A vicious cycle.

I analyzed supplier problems in detail in last summer's newsletter.

Today, we look at how they get out.

The Key Insight

We constantly talk about transformation. About how these companies must completely reinvent themselves.

I think that's too narrow.

German suppliers have built competencies over decades that are still needed.

It's not always about complete reinvention. It's about using existing strengths strategically. In core business or in new markets.

Maybe it's less about transforming. More about transferring.

I see two paths.

Scenario 1: Last Man Standing

The big picture: The combustion market is shrinking. Electric mobility is growing.

If your business model depends on combustion engines, your addressable market shrinks.

The question: How do you respond?

The obvious answer: Expand into other markets. We'll talk about that later.

But there's another strategy. Consolidate. Defend your niche. Grow in a shrinking market.

According to KPMG, 63.9% of all vehicle subsystems are powertrain-agnostic. Over half of all parts are needed regardless of the powertrain. Chassis springs. Seating systems. Brakes. Door systems.

These markets aren't shrinking. They're just shifting.

This strategy has three advantages:

1. Cash cow. The technology is mature. No massive investments in new development needed. Margins stay stable.

2. Pricing power. Competitors leave the market. Whoever remains gains market share and negotiating power.

3. Aftermarket. Over one billion combustion vehicles are on the road today. They need spare parts. For decades to come. Schaeffler achieves EBIT margins over 15% in the spare parts business. Four times more than new business. A huge market that won't disappear quickly.

This includes active consolidation. Buying competitors.

According to Roland Berger, the most successful suppliers make three times more acquisitions than weak ones. If you want to grow in a shrinking market, you buy your competitors.

By 2030, an estimated 20-30% of smaller suppliers will disappear through bankruptcy or acquisition. Whoever's still standing wins.

And there's another dimension: New customers.

The global auto market isn't shrinking. It holds steady at around 90 million vehicles per year. What's shrinking is Germany's share.

So why not supply the new winners?

Brose produces over 25 million door and closure systems annually in China. For major Chinese manufacturers. ZF supplies steer-by-wire systems to NIO.

BYD is building its plant in Hungary. And working with European suppliers there.

But let's be real: this won't happen by itself. BYD has 70-75% vertical integration. Chinese suppliers have 20-30% cost advantages.

And new manufacturers operate on completely different timelines. European development cycles run about 48 months. Chinese manufacturers launch new models in 18-24 months.

If you want to supply these customers, you must adapt to their speed.

This door is only slightly open.

Scenario 2: New Markets

So: Scenario 1 is defending core business. Dominating niches. Getting stronger while others give up.

But that's not enough for everyone. Some suppliers need new markets.

But not just any markets. Markets where existing competencies give a head start. An unfair advantage.

You want a new market where you have an advantage over any startup with the same capital.

What markets are these? Let's look at two examples: Defense and robotics.

Defense

Europe's defense spending rose from €218 billion in 2021 to €343 billion in 2024. +57% in three years.

Germany plans to double spending to about €162 billion by 2029. For a country that has historically been one of NATO's most reluctant defense spenders, this is a seismic shift. The EU wants to mobilize hundreds of billions more by 2030.

In 2024 alone, over €100 billion flowed into new equipment and development.

Conservatively estimated, 30-40% lands with suppliers.

But the interesting part isn't just volumes. It's margins.

Rheinmetall achieves 19% EBIT margins in defense. Automotive is only 4%.

Why? Many defense contracts run as cost-plus models. The client reimburses costs and pays a guaranteed margin on top. The exact opposite of automotive price pressure.

And the competency overlap is real. If you can manufacture precision parts for cars, you can do it for defense technology. Same machines. Similar quality requirements.

Plus: Europe's biggest defense contractors are at capacity. Rheinmetall. Franco-German tank builder KNDS. Defense electronics maker Hensoldt. All booked solid for years. They must outsource. And they're looking for suppliers with free capacity.

And the automotive industry has exactly that right now.

Schaeffler is partnering with European defense AI startup Helsing on drone components. The goal? €1 billion in defense revenue within five years. Deutz supplies engines for military vehicles and is expanding into drone propulsion. Mid-sized companies are signing their first defense contracts. Even talent is moving across. Rheinmetall actively offers Continental employees the chance to switch.

But there are hurdles. Security clearances take months. Procurement cycles run 2-5 years. And you often need special certifications.

The most realistic entry for mid-sized companies: As Tier-2 suppliers under major defense contractors.

This is all just beginning. But given the geopolitical situation, the market will likely stay lucrative long-term.

Robotics

But defense isn't the only option. I wrote extensively about humanoid robots in Issue 100.

Short version: A humanoid robot's supply chain significantly overlaps with a car's. Motors. Transmissions. Sensors. Control electronics. Precision mechanics. Goldman Sachs estimates the market at $38 billion by 2035. According to McKinsey, 40-60% of costs go to drives and mechanics.

That's exactly what auto suppliers do best.

And this market is gaining momentum. Automakers like Tesla, Hyundai, and Xpeng are developing their own humanoid robots. Meanwhile, dedicated robotics companies like Figure and Neura Robotics are emerging. Many analysts expect the robotics market to become larger than automotive.

This is an opportunity for suppliers. All these players need someone who can mass-produce high-precision components. Some suppliers already see this. Schaeffler, for example, is betting big on humanoid robots.

The advantage over defense: Shorter cycles. No security clearances. No multi-year procurement processes.

The disadvantage: The market is still early. Volumes are small so far.

But those who start now build an edge. When the market scales, it needs suppliers. That's the opportunity.

What About Software?

There's another trend we must address.

The software-defined vehicle. Manufacturers increasingly expect their suppliers to deliver software. Not just metal parts. But software. Or complete hardware-software systems.

Sounds like an opportunity? Probably not.

Traditional hardware suppliers have no unfair advantage here. On the contrary. They have a structural disadvantage.

Their organization and culture usually aren't designed for software development. They don't have the right competencies, resources, and talent.

And there are almost no examples of traditional industrial companies successfully becoming software companies. The playbook simply doesn't exist.

So software isn't another path. But it's a reality you need to understand. The market is shifting. But real opportunities for traditional suppliers lie elsewhere.

My Take

Back to the Vietnam question: You're the CEO of a traditional German supplier. Order books look terrible. What do you do?

Yes, the situation is serious. But this isn't the end of the world. It's entrepreneurship.

What we're seeing is fundamentally simple: The market is changing. And as an entrepreneur, you must make strategic decisions. Where does my market stand? Where is it going? Where do I stand? And where do I want to go?

Nothing new. Entrepreneurs have been doing this for centuries.

It only feels dramatic because the automotive industry was extremely stable for decades. Predictable cycles. Reliable customers. Growing markets. Many companies simply aren't used to making such fundamental decisions anymore.

But that's exactly what's needed now.

Do I stay in my niche and bet on coming out stronger? Or do I enter a new business field?

It doesn't have to be either-or. You can do both simultaneously. Secure core business AND open new markets. But consciously. As a strategic bet.

What doesn't work: Waiting.

And almost as important as the right strategy: Start learning again.

This industry was successful for so long that many forgot how to be curious. To learn from other industries, countries, companies.

In China, we see speed and efficiency we rarely achieve in Europe. You can laugh it off and make excuses for why it "won't work here." Or you simply fly there. Let them show you how they do it. And bring the lessons back to Europe.

That's the real difference between those who survive. And those who don't.

Not transformation. But the willingness to be entrepreneurs again.

🔗 al1 | ane1 | de1 | ftia1 | gs1 | hb1 | mck1 | rb1 | re1 | sp1 | sp2 | ts1

That’s all for today.

Until next week,
Philipp

PS: If you find value here, share it with someone who should read it too.

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Selling to BMW, Bosch, or Continental from outside Germany? Good luck.

German automotive is a closed club. Built on trust, relationships, and decades of doing business face to face. Cold outreach doesn't work. Trade fairs cost €20,000 for maybe 3 real conversations. And nobody takes meetings with companies they've never heard of.

I spent 10 years inside Mercedes-Benz. Today, 80,000 European automotive decision-makers follow me. From team leads to board level. They trust me. Because I speak their language. Literally.

One partner generated 250 webinar signups. Another got 60 qualified leads at OEMs.

I'm your bridge into the German automotive ecosystem.

👉 All partnership details here

Welcome to Issue #104 of The German Autopreneur.

Imagine Porsche killing the 911. That's exactly what Tesla did.

The Model S is being discontinued. The car that changed the industry in 2012. The car that started the Tesla legend.

But this is just the beginning.

Tesla isn't just losing a model. It's losing its entire car business. And Elon Musk? He has a plan.

Today we'll look at what's really happening. Is Tesla reinventing itself? Or is this the beginning of the end?

The Underdog Story

To understand what's happening, we need to look back briefly.

In 2012, Tesla launches the Model S.

The industry laughs. An electric car from a startup? That'll never work.

Remember former VW CEO Matthias Müller? In 2017, he dismissed Tesla as a niche player. No serious competition for VW.

Three years later, Tesla was worth more than VW, BMW, and Mercedes combined.

The Model S made EVs cool. No longer a niche eco-statement. But a desirable product for the tech-savvy elite.

And something else: The idea that a car could get better overnight. Through software updates. Like a smartphone. Tesla invented the software-defined vehicle.

They became the symbol for everything traditional automakers couldn't achieve. The outsider who pulled off the impossible.

Elon became the richest person on Earth. And in 2020, Tesla became the most valuable automaker. The Model S turned the automotive industry upside down. And kicked off a new era.

This exact car is now being discontinued.

What Happened?

The 2025 numbers tell the story:

• Revenue: $94.8 billion (-3%)

• Profit: $3.8 billion (-46%)

• Deliveries: 1.6 million vehicles (-9%)

Q4 is even worse: Profits collapsed 61% to $840 million. For comparison: In 2022, Tesla made around $3.7 billion in a single quarter.

It's the first time in company history that revenue has declined.

The biggest blow: BYD overtakes Tesla as the world's largest EV manufacturer. In 2011, Elon Musk laughed at BYD. Years later he admitted their cars are "very competitive."

Model S and Model X? Together with Cybertruck, they now make up just 3% of sales. 50,000 units compared to 1.6 million Model 3 and Y.

Elon himself admitted years ago: Model S and X are now only built for "sentimental reasons."

And that's over.

Why Are the Numbers So Bad?

1. The Product: The model lineup is outdated. Since Model Y in 2020, no new mass-market model has followed. The long-promised $25,000 car? Cancelled in favor of the robotaxi. The only new model was the Cybertruck. And that flopped.

2. The Competition: The first-mover advantage is gone. In 2012, Tesla was alone. Today, every automaker builds EVs. If you want an EV today, you've got options. And the biggest competition comes from China. They're cheaper and have much newer models.

3. Musk Himself: Whether you agree with his politics or not: His involvement has damaged the brand. In Europe alone, Tesla sold around 28% less in 2025 even though the market grew.

4. The Politics: The Trump administration is doing everything to suppress EV adoption. This particularly hurts Tesla. EV purchase subsidies were eliminated. Plus, revenue from selling CO₂ credits is collapsing. Tesla made billions from that for years.

Tesla's Response?

Away from cars. Toward what Tesla calls "Physical AI."

This isn't the AI that writes emails or generates images. This is AI that operates in the real world. That sees, moves, interacts with things. Robotaxis. Humanoid robots.

And Tesla is serious. Three projects are the focus:

1. Optimus: Tesla is converting its plant in Fremont, California. They used to build Model S and X there. Now they're switching production lines to the humanoid robot Optimus. Long-term goal: 1 million robots per year.

2. Robotaxis: Tesla's robotaxi service already runs in Austin, still with safety drivers. In San Francisco, Tesla offers a ride service with drivers. 7 more US cities are planned for the first half of the year. Plus, the Cybercab should enter production in April. A car designed to work without a steering wheel or pedals.

3. xAI: Tesla is investing $2 billion in Musk's AI startup xAI. The reasoning? Synergies in autonomous driving.

To finance all this, Tesla is investing over $20 billion in 2026. More than double what it spent in 2025.

Analysts sum it up: "Forget the Tesla you knew. The Tesla of yesterday is gone." They call it a "point of no return." There's no going back.

What's Really Happening

The official story: Tesla is transforming from automaker to AI company.

Analysts have another name for it: "The Great Decoupling." Tech analyst Scott Galloway calls it a distraction from the shrinking car business.

Let's take a closer look.

Robotaxi:

• Elon has promised Full Self Driving for years. With the robotaxi, he doubled down

• Waymo does 400,000 rides per week. In 6 cities. With 2,500 vehicles

• Tesla? The last known numbers put it at 34 vehicles. A fan documented 54 rides in Austin. None were truly driverless. Every ride had an escort vehicle. In California, Tesla has no permit for driverless robotaxis

• And the Cybercab? US regulations allow a maximum of 2,500 such vehicles per year. Tesla wants to build millions

Optimus:

• In 2024, Elon claimed the robot could make Tesla a $25 trillion company

• Today he says Optimus isn't deployed in Tesla's factories yet. It's an R&D project

• And unlike EVs, Tesla isn't the first mover here. Boston Dynamics, Unitree, Xpeng, and many others are in the race

• Just like with EVs, whoever produces cheapest wins in the end. So China is well positioned

xAI:

• Elon's AI startup burns around $1 billion per month. With only $500 million annual revenue

• For comparison: OpenAI expects $13 billion revenue for 2025

That's the reality check.

Still: Tesla is worth more than the 25 largest automakers combined.

How does this make sense?

Tesla has always been valued like a tech company. Not like an automaker. You see this in the price-to-earnings ratio:

• VW is around 5

• Ford around 8

• Apple and Amazon 30 to 40

• Tesla? 250+

This worked as long as the car business carried the growth story. It doesn't anymore. So it needs new narratives.

That's why more and more analysts call Tesla a "meme stock." The valuation has decoupled from reality. The price isn't driven by revenue and profit anymore. But by hype, hope, and a loyal fanbase.

And there's something else Tesla shareholders should understand.

Elon doesn't just own Tesla. He controls SpaceX and xAI too. And money flows between these companies.

An example:

• Elon buys Twitter for $44 billion

• The value crashes to $9 billion

• Then xAI buys Twitter and suddenly values it at $33 billion again

• The Twitter investors? Saved. Who paid? The xAI investors

And who finances xAI? Among others Tesla and SpaceX. Both invested $2 billion.

This leaves a bad taste. Tesla shareholders already sued Elon in 2024. The accusation: He diverted employees and resources from Tesla to xAI. The lawsuit is ongoing.

Still, SpaceX is now taking over xAI completely. And a merger of Tesla and SpaceX is also on the table.

The pattern: When one of Elon's companies gets in trouble, another bails it out. That's financial engineering. And nobody does it better than Elon.

But there's a problem.

Elon Musk holds around 15% of Tesla. Significantly more of SpaceX and xAI. When he negotiates a merger, he sits on both sides of the table. He negotiates with himself. And because he owns more of SpaceX, he probably won't negotiate in Tesla shareholders' interests.

My Take

To be fair: Not everything's going badly. The energy division grew 27% to $12.8 billion. Battery storage and solar systems.

But the real story is different. It's not that Tesla is abandoning cars. It's that Elon has lost focus.

The car business is shrinking. In robotics and robotaxis, they have no real moat. But the stock valuation says Tesla will dominate these markets. That's anything but certain. And then there's the question of whose interests Elon actually represents.

The paradox: Elon Musk identified the right topics early. EVs. Software. Autonomous driving. AI. Robotics. The problem: At some point, the car business became too boring for him.

And so Tesla gradually lost its lead. In EVs, they're now one of many. In the markets of tomorrow, they're no longer the first mover.

Whether these bets pay off remains to be seen. But there's one indicator: If Tesla actually merges with SpaceX someday, that's a sign. Then we'll know: Things don't look good.

Until then, there's one counterargument. And that's Elon Musk himself.

He's been underestimated too many times. And managed to turn it around in the end.

Matthias Müller had to learn that too.

🔗 Sources

That’s all for today.

Until next week,
Philipp

PS: If you find value here, share it with someone who should read it too.

Want to reach European automotive decision makers?

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Picture this: You're in a meeting. Someone puts a new Deloitte study on the table. 29,000 car buyers across 27 countries.

Someone asks: "What drives purchase decisions in Germany vs. China?"

Most people guess: Chinese buyers chase low prices. Germans pay for quality.

The reality? Exactly opposite.

54% of Germans say price is their top criterion. In China? Only 20%.

In China, quality is almost twice as important as price.

Today we look at Deloitte's Global Automotive Consumer Study 2026. What really matters. Where we got it wrong. What it means.

Germans Want a Bargain

Germans buy primarily on price, not quality. In China, quality matters twice as much as price.

This year, the trend got even stronger.

62% of Germans say "getting a good deal" is critical when buying a car. They want to feel they got the better deal than others.

Getting a good deal is a top priority in Germany (Deloitte)

The UK and US are similar. In China, only 32% care about getting a good deal. In India, 40%.

And it continues. 25% of Germans want to spend max €15,000 on their next car. Last year: 22%. Willingness to spend €50,000+ dropped from 15% to 12%.

Price is the number one factor in Germany, performance and quality in China (Deloitte)

Here's what stands out. Germany and Japan are the ONLY markets where price matters more than quality.

In all other 25 markets, quality leads.

In China, quality (38%) is almost twice as important as price (20%). Even more important: vehicle performance at 40%. That primarily means efficiency and range.

The problem for German automakers: their home market grows increasingly price-sensitive. At the same time, Chinese competitors push into Europe with affordable EVs.

In China, it's reversed. Customers don't want the cheapest car. They want better technology. Better performance. Better features.

The Big EV Wave Isn't Coming

At least not how everyone expected.

In Germany, 49% want a combustion engine for their next car. 16% want a pure EV. Sounds low, but it's the second-highest globally after China.

Even in China, only 20% want a pure EV. 41% still prefer combustion engines.

Hybrids are gaining ground, the share of combustion engines is slowly declining (Deloitte)

In the US: 61% combustion preference. The highest worldwide. Only 7% want an EV.

Japan and South Korea sit at 41%, on par with China.

But where's the shift going? Not to EVs. To hybrids.

In Germany, 24% want a hybrid (14% HEV + 10% PHEV). In China: 36% (19% HEV + 17% PHEV).

Hybrids remain an important bridge technology. The compromise more customers accept.

But why don't customers want EVs?

• In Germany: Still range. 49% cite it as a problem. Then costs and charging time (both 41%)

• In China: Different concerns. How the car performs in cold weather (32%). Whether the battery is safe (32%)

Costs are the biggest EV concern in the West (Deloitte)

Then there's the infrastructure problem.

In the UK, 79% want to charge at home. But 52% have no access to a charger. In the US: 53%. In Japan: 75%.

The gap: Customers want home charging. But they can't access it.

Germany stands better on charging infrastructure. Only 20% lack home charging access. Still, as long as this gap exists, hybrids remain the pragmatic choice.

And what are the reasons for buying an EV?

Massive regional differences.

• Germany: Main reason is environment (41%). Then lower fuel costs (39%) and government subsidies (33%)

• China: Faster charging (37%), higher range (37%), driving experience (36%), or as a lifestyle asset (34%)

• US and Japan: Lower operating costs (US: 52%, Japan: 47%)

Reasons for buying an EV: Environment in Germany, Experience in China (Deloitte)

This explains why hybrids are attractive. They offer the best of both worlds. No dependency on charging infrastructure. Lower consumption. A gradual entry into electric mobility.

The Software Gap Between West and East

Here it gets interesting.

Deloitte asked: How useful do you find software-defined vehicles? The answers couldn't be more different.

India: 81% find SDVs useful. Southeast Asia: 71%. China: 68%.

At the bottom: Germany and Japan. Both at only 33%.

SDV acceptance: Asia vs. Europe diverges (Deloitte)

It's even clearer with AI features in cars.

84% of Indians would use them. In China, 76%. Southeast Asia, 70%. And Germany? 34%.

The divide becomes clear when looking at over-the-air updates and willingness to pay.

• China: 93% would pay extra for OTA capability

• India: 92%

• Germany: Only 60%

Germans expect OTAs to be free, Chinese are happy to pay (Deloitte)

Here's the counterintuitive part: In India, South East Asia and China, 72-84% would keep their car longer if it gets regular OTA updates.

This contradicts the "SDV as disposable car" thesis. Software extends lifespan. Through continuous updates, the car stays fresh longer. Feels new longer. Remains valuable.

Germans don't see it that way. Only 36% would keep their car longer because of software updates.

That's the fundamental difference.

In Asia, software is added value. Something that makes the car better. Keeps it fresh. Makes it more valuable.

Germany sees software as nice to have. Many reject it completely.

The US falls in the middle.

My Take

The study shows 3 fundamental shifts. They lead to one central problem.

1) Germany becomes a discount market. China becomes premium.

For decades, it was reversed.

Chinese brands have good prospects in Europe. They offer good quality at affordable prices. Exactly what customers want.

In China, it's opposite. Performance, technology, and features count. Brand loyalty? Barely exists. 67-72% of customers in China, India, and Southeast Asia plan to switch brands with their next purchase.

German manufacturers must convince with technology. That's exactly what Chinese competitors deliver right now.

2) The big shift to EVs isn't coming in 2026 either.

Most customers aren't convinced yet. Hybrids remain the stronger alternative.

Betting only on pure EVs means missing 50%+ of the market. Manufacturers with strong hybrid portfolios win.

3) Asia wants software. Europe doesn't.

Deloitte says growth no longer works through higher prices and more new cars. The key lies in monetizing the existing fleet. That happens primarily through software.

The problem in Europe: home markets won't pay for it. Mostly aren't even ready for it. As a German OEM, you must invest in software. But you can't monetize it at home.

This brings us to the core problem.

The German home market is almost hostile to technology.

German car buyers are conservative. They adopt innovations late. They reject new technologies at first.

This is a cultural factor. It becomes a competitive disadvantage.

In the automotive business, a strong home market was always key to global success. The home market was the lab. The breeding ground for technology leadership.

German automakers developed high-tech in Germany for decades. Then carried it to the world.

But when home market customers think completely differently than the rest of the world, that itself becomes the problem.

This is the Chinese structural advantage. They have an extremely tech-friendly home market. What works in China also works in India. In South East Asia. In many rising markets.

Germany can't do that. The home market is closed. Critical. Technology-skeptical.

The success model no longer works.

Growing alienation. Between what the global market wants and what German customers want.

This explains why more development moves away from Germany. What works there doesn't work in the rest of the world.

German customers increasingly complain that cars no longer meet their expectations. Not because automakers aren't evolving. Because they develop for a global market that wants high-tech in a home market that rejects exactly that.

The question: Can German manufacturers serve both markets? Or must they choose?

🔗 Deloitte | LinkedIn

That’s all for today.

Until next week,
Philipp

PS: If you find value here, share it with someone who should read it too.

Want to reach European automotive decision makers?

I help global B2B companies connect with 80,000+ automotive decision makers in Germany.

Learn how we can work together →

For years, we've talked about software-defined vehicles. How software increasingly defines what a car is and does.

We've watched startups from the US and China overtake European automakers. Simply because they're better at software.

To catch up, German automakers invested billions. Founded their own software companies like CARIAD. Launched massive transformation programs. And even bought technology from the very startups that once overtook them.

Now all of this may already be outdated.

Because the industry is already moving past the software-defined car.

The next stage? The AI-defined Vehicle. AIDV.

Today we'll explore what AIDV means, who's already there. And whether legacy automakers are chasing a target that's already shifted.

What's the Difference Between SDV and AIDV?

Cars used to be finished when they rolled off the production line. What you buy is what you get. Forever.

With the software-defined vehicle, your car improves after purchase. Tesla unlocks more range via updates. Or new autopilot features. Today you buy a car without lane-keeping assist. Tomorrow you can activate it through a software update.

But you still control the car. You select the driving mode. You decide when to activate lane-keeping.

The AI-defined vehicle flips this relationship.

An AI model continuously analyzes the situation. It factors in weather, traffic, time of day, your destination, even your mood. And it adapts the car accordingly. No input required.

It's the same shift happening on our phones and computers right now. We used to open apps and do things ourselves. Now we just tell an AI what we want. It figures out the rest. Apps become interfaces we no longer need.

The AIDV is the automotive version of this shift. But it goes further. Your car collects more context than you could ever process. It anticipates what you need. And acts on it.

Picture this: You're stressed after a long day. It's late, you just want to get home. The car picks up on it through biometrics. It dims the interior lights, plays calming music, and adjusts its driving style. Smoother acceleration. Gentler cornering.

The next morning you're heading to work. Well-rested, good mood. The car notices that too. It drives more dynamically. Sportier.

In an SDV, AI is a feature. In an AIDV, AI runs everything.

Who's Already at AIDV?

Short answer: China. OEMs like Geely, Li Auto, and Xpeng are going all-in. They're turning AI into the central nervous system of their cars. AI orchestrates not just driving but all vehicle domains: Powertrain, cockpit, climate, energy.

Most Western OEMs are still in the concept phase. They use AI too, but only as one feature among many.

SDV consultant Augustin Friedel came up with a simple test. If you don't meet these 4 points, you're still at the SDV:

1. Frequent AI model updates. Not just standard software updates

2. Ongoing tests of AI behavior, with the ability to roll back updates

3. AI learns independently from driving data, without needing complete retraining

4. AI is integrated across all systems. Not just a single feature

This matrix shows where each automaker stands. The further top-right, the more AI controls the car. Bottom-left means AI is just a feature.

The uncomfortable truth is that legacy OEMs often still struggle with their SDV strategies. Some Chinese players are already one step ahead.

Why Traditional Automakers Struggle So Much

Because it's not just about software updates. It's a completely new architecture.

Chip developer Arm describes 3 simultaneous disruptions:

1) Centralization

All computing power moves to one central high-performance chip. Decades of legacy code have to be ported to a new architecture. For established manufacturers, this is a gigantic transformation. For startups, an advantage.

2) AI-First

AI is no longer a feature. It's the foundation. This requires significantly more computing power, memory, and energy.

3) End-to-End AI

Until now, self-driving systems worked in sequence: one module detects objects, another plans the route, a third handles control. With end-to-end, a single AI model handles everything. It receives sensor data and directly controls steering, brakes, and throttle. No one can fully explain how each decision gets made.

And this third point is the game-changer. End-to-end doesn't just make autonomous driving better. It makes it affordable.

No more 100,000 lines of code for every traffic situation. Instead, one model that learns from data.

Once autonomous driving becomes affordable, robotaxis become reality.

Why Robotaxis Are Coming Now

The cost of autonomous vehicles has dropped dramatically.

Example: LiDAR. That's the laser sensor self-driving cars use to scan their environment. A LiDAR sensor cost $75,000 a few years ago. Today it's under $200.

Waymo's new robotaxi costs an estimated $75,000. Baidu's RT6 is at $28,000. Goldman Sachs projected $50,000 per robotaxi for 2030. They've practically hit that target already.

Goldman Sachs expects the crossover between 2036 and 2040. After that, a robotaxi will be cheaper than owning a car.

ARK Invest sees the robotaxi market at over $10 trillion. That explains why 4 of the world's 11 trillion-dollar companies are investing in robotaxis: Alphabet (Waymo), Amazon (Zoox), Tesla, and NVIDIA. Waymo is currently raising $15 billion at a valuation above $100 billion.

For comparison, Volkswagen is valued at around $60 billion. A robotaxi startup is worth almost twice as much as Europe's largest automaker.

And that's why AIDV will prevail. Billions in capital are flowing into development, with or without German automakers.

My Take

The problem isn't that legacy automakers aren't transforming. The problem is they're too slow.

While they transform, the target keeps moving.

German automakers still struggle with software. New models still get delayed because of software issues. Many still can't roll out over-the-air updates at scale.

But they're catching up.

These corporations invest billions. Hire tens of thousands of software developers. Found subsidiaries like CARIAD. And even buy into competitors like Xpeng and Rivian.

All to finally catch up to the software-defined vehicle.

The problem?

SDV is becoming a commodity.

Soon saying "We have an SDV platform" will be like "We make a phone with a touchscreen."

We used to say that software is eating the world. Nvidia CEO Jensen Huang goes further: "AI is going to eat software."

The first automakers are going all-in. They see themselves as AI-first companies.

And that changes everything. With an AI-defined vehicle, an AI model controls all vehicle functions. No more hand-coded algorithms. No modules to maintain. Updates come from training, not coding. At least in theory.

Right now, traditional automakers are hiring tens of thousands of software developers. But an AIDV might not need them. It needs AI models that learn from data.

We might be building skills that become obsolete before we're done building them.

🔗 bi1 | dd1 | ean1 | li1 | sb1 | sb2

That’s all for today.

Until next week,
Philipp

PS: If you find value here, share it with someone who should read it too.

Want to reach European automotive decision makers?

I help global B2B companies connect with 80,000+ automotive decision makers in Germany.

Learn how we can work together →