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Welcome to Issue #136 of The German Autopreneur.

In Germany, there's a story we like to tell ourselves: China is to blame for the crisis in our car industry. Subsidies let Chinese carmakers build cheaper cars. And German carmakers can't keep up with those prices anymore.

And it's true: China builds cheaper cars. But the real problem for Germany's car industry is somewhere else.

What this crisis is really about: the old car industry against the new one. Not the West against China.

Over the past 20 years, a new car industry has emerged in China and the US. But not in Europe.

Here's what I'll cover today:

• What the new car industry is and how it emerged

• Why Europe's car startups really failed

• Why Europe will lose its old car industry if it doesn't build a new one

And at the end, I'll tell you how Europe can save its car industry.

The New Car Industry Is Already Worth More Than the Old One

First, what do I mean by old and new?

The old car industry emerged in the 19th and 20th centuries. It was built on mechanical engineering and the combustion engine. Everyone knows the names: VW, Toyota, GM and Bosch.

The new car industry emerged over the past 20 years. It's built on batteries, software and AI. Legacy carmakers have a really hard time with these technologies. Yet soon, up to 80% of a car's value will come from them. I've written about this many times.

The new car industry is made up of a whole new generation of companies:

1. New carmakers like Tesla or Nio

2. New suppliers like battery manufacturer CATL

3. A new type of tech company like Momenta or Wayve. They supply software and AI for cars, not parts

4. And big tech companies entering the car business: Google with Waymo, Nvidia, Huawei, Xiaomi, Baidu and Alibaba

The clearest place to see both generations side by side is the US:

• Detroit is home to the old car industry: GM, Ford and Stellantis

• The new one is on the West Coast: Tesla, Rivian and Waymo

And on the stock market? The gap between old and new is huge:

• Tesla is worth around 12x as much as GM, Ford and Stellantis combined

• Waymo is worth about as much as all 3 together

Europe has 5 of the 10 most valuable companies in the old car industry. In the new one, there's just 1: Wayve in London.

How did this new car industry come about?

How Tesla Invented the New Car Industry

For decades, hardly any startups entered the car industry. Combustion engines were so complex that they acted as a wall around the industry. They kept new competitors out.

In 2003, 2 engineers in California founded Tesla. Back then, almost nobody believed in EVs. Elon Musk did. In 2004, he joined Tesla as its biggest investor.

With EVs, Tesla tore down that wall. That's because an EV is much simpler to build than a combustion car. Suddenly, the market was open to startups.

Over the next few years, Elon bet on all 3 technologies of the new car industry:

1. Batteries: They're at the heart of Tesla. The car is built around a large battery

2. Software: Tesla treats the car as a software platform rather than a machine

3. AI: Tesla believes cars will soon drive themselves. That's why Tesla has spent around 10 years developing an AI that drives the car. In 2025, their robotaxis launched in Austin

That made Tesla a kind of blueprint for the new car industry. And hundreds of startups followed Tesla's example.

These included new carmakers, suppliers and tech companies:

• In the US, there were new carmakers like Lucid (2007) and Rivian (2009). Plus autonomous driving companies like Zoox, Aurora and Nuro. And in 2009, Google launched the self-driving car project that later became Waymo

• In China, hundreds of EV companies were founded, including Nio, Xpeng, Li Auto and Leapmotor. Plus new suppliers: CATL for batteries, Horizon Robotics for chips, Momenta and Pony(.ai) for autonomous driving. And from 2013, the big tech companies got into cars too: Baidu, Alibaba, Huawei and Xiaomi

• In Europe, there were new carmakers like Rimac (2009), e.Go (2015), Sono and Lightyear (both 2016). Plus Northvolt for battery cells and Wayve in London for autonomous driving

That's how a whole new generation of car companies emerged in 20 years.

What happened to these companies?

Car Startups Only Grow Big in the US and China

It's normal for startups to fail. What matters is whether a few eventually become very big. And that's where the regions differ.

US:

• EV startups like Fisker and Lordstown went bankrupt. So did electric truck startup Nikola

• The ones that got big are mainly Tesla and Waymo. Waymo is now at over 500,000 paid rides a week with driverless robotaxis

• Rivian and Lucid have survived, but they're still much smaller than Tesla

China:

• More than 400 EV brands have disappeared since 2018. Even big names like Neta and HiPhi went bankrupt

• But Leapmotor, Xpeng, Xiaomi, Li Auto and Nio have grown big. In 2025, each of them delivered between roughly 330,000 and 600,000 cars

• China also produced the world leaders in batteries and EVs: CATL and BYD

• Several startups already run driverless robotaxis there, like Pony(.ai) and WeRide

Europe:

Europe had plenty of startups too. But almost none of them made it. No EV startup in the EU has ever sold 10,000 cars in a single year. Many failed:

• Electric van startup Arrival went bankrupt. So did Sono and Lightyear with their solar cars

• e.Go even went bankrupt 2 times

• Germany's postal service Deutsche Post bought the startup StreetScooter and later shut down production

• And even Europe's biggest new supplier went bankrupt: the battery maker Northvolt

Only a few survived: Croatia's Rimac with its sports cars and London's Wayve in autonomous driving.

So startups were founded everywhere. But only the US and China ended up with a new car industry. Why not Europe?

Why Europe Has No New Car Industry

Here's what we usually hear:

• Too much bureaucracy and regulation

• A fragmented market

• And costs are too high

That may all be true. But Silicon Valley is expensive too. Salaries there are even higher than in Europe. And yet that's where startups grow big. I think the main reason is something else.

For startups to grow big, they need 4 things:

1. Experienced people

2. Research

3. A large market

4. And money for risky bets

Europe has the first 3, at least to some extent. What's missing most is the money: venture capital.

Here's where the world's venture capital goes:

• 52% in the US

• 40% in China

• Just 5% in the EU

Why does Europe raise so little?

With venture capital, everyone knows from day one: most of the money will be lost. Investors don't get their money back in 3 of 4 startups. But a few grow huge and make up for all the losses.

And that just doesn't fit Europe's culture. Especially in Germany, we value security and want to avoid risk. I'm sure that also comes from our history in mechanical engineering. In that field, the whole point is to rule out mistakes. So in Germany, failure isn't seen as normal.

Of course, some European startups do grow big. But when they do, it's usually with money from abroad.

In 82% of large EU funding rounds, the lead investor is based outside the EU. In San Francisco, it's the reverse: only 14% of rounds have a lead investor from outside the US.

And some startups even move abroad with the money. Between 2008 and 2021, just over 1 in 4 EU startups worth more than $1 billion relocated to another country.

Where does that lead? Mario Draghi used to run the European Central Bank. In his 2024 report to the EU, he wrote: in the past 50 years, no newly founded EU company has become worth more than €100 billion.

Since Draghi's report, only Spotify has barely made it past that mark.

But it's an even bigger problem in the car industry.

Why Car Startups Need Money for So Long

Developing batteries, software and AI for cars means doing work nobody has done before. It can take decades of funding before anyone makes money:

• Tesla took 17 years to make its first annual profit

• Waymo still isn't profitable after 17 years

In the US, that money mainly comes from Big Tech and investors like Elon Musk. Sometimes the government helps too:

• For over 10 years, Google funded Waymo on its own

• Amazon gave Rivian money and ordered 100,000 delivery vans

• When Tesla nearly ran out of money in 2008, Elon put in more of his own money. In 2010, the US government also gave Tesla a loan

In China, there's private money too. And when that's not enough, the government steps in:

• Tencent, Baidu and Alibaba funded Nio and Xpeng early on

• Many founders got rich in tech first and now invest their own money, like the founders of Xpeng and Li Auto

• When Nio ran out of money in 2020, Hefei's city government and 2 state funds invested around $1 billion

There's been government funding in Europe too. But when startups ran into trouble, nobody stepped in:

• Northvolt got around €1 billion from the EU and Germany. But when Northvolt ran out of money in 2024, nobody helped

• Sono and e.Go each lost an investor

So Europe did have startups. But they didn't survive the years without profits. Because nobody was there to keep funding them.

And I think it's also because Europe's faith in the free market is a bit naive.

In China and the US, governments and Big Tech spend decades building key technologies, even when they don't pay off for a long time. China does this to become independent of the US. And the US does it to become independent of China.

In Europe, there are no big tech companies like Google or Amazon. So the free market doesn't provide that much money for that long. That really only leaves governments. They have to build up these technologies until the market can take over. And in Europe, they haven't.

That's why Europe now depends on China and the US for batteries, software and AI.

And that's exactly what's turning into a problem for Europe's old car industry.

Legacy Carmakers Can't Make the Shift Alone

So let's sum up: no new car industry has grown big in Europe.

And where does that leave VW, BMW and Mercedes?

They're part of the old car industry. And the new one is replacing it right now. Only those legacy carmakers that make the jump to the new car industry will survive.

But almost none of them can do it on their own:

• VW was counting on its software subsidiary CARIAD. But CARIAD failed, even though a huge amount of money went into it

• Ford and VW shut down their joint robotaxi company Argo AI in 2022

• GM shut down its robotaxi company Cruise in 2024 after spending over $10 billion

• And in 2025, Ford cancelled its own new software platform for cars

Here's what does work: partnerships with companies in the new car industry. These partners already know how to do what legacy carmakers still need to learn:

• Mercedes gets its autonomous driving software from Nvidia

• Stellantis bought a stake in Leapmotor and sells Leapmotor's EVs in Europe

• BMW and Mercedes buy their driver assistance systems for China from Momenta

And here's something many people miss: China also has an old car industry.

These are mainly the big state-owned carmakers like SAIC, GAC and Dongfeng. They're struggling with the change just as much as European carmakers.

In China too, carmakers are using the same strategy: partnerships with companies from the new car industry. Often, the partner is Huawei:

• Seres used to mainly build cheap minivans. With Huawei, Seres sold over 420,000 cars under its Aito brand in 2025

• Changan, Chery and SAIC are also building their own brands with Huawei

VW has copied exactly this strategy, with Rivian in the US and Xpeng in China. The hope is that these partners will pull VW into the new car industry.

And that makes Europe's problem clear: VW's new partners aren't European. Because Europe never built a new car industry of its own. VW's biggest new partner in Europe was Northvolt. And Northvolt is bankrupt.

So legacy carmakers in Europe only have 2 options:

• Stay in Europe, find no partners and probably not survive

• Or move development to wherever they can find partners: the US and China

In other words: without a new car industry of its own, Europe will eventually lose the old one too.

My Take

So Europe's problem isn't China. It's that Europe never built a new car industry.

The winner is already clear: the new car industry. Many legacy carmakers will die. The big question is which of them will make the jump.

My impression: politicians in Europe mainly want to save legacy carmakers and their jobs. The plan: subsidies, so the carmakers can keep up again on their own.

But as we've just seen, they almost never manage that on their own. And they only find partners in the US and China.

That leaves Europe with a dilemma:

• European taxpayers fund legacy carmakers

• Those carmakers invest in partnerships abroad because there are no partners in Europe

• Rivian alone is getting up to $5.8 billion from VW

• In the end, taxpayer money flows to the US and China. And development, expertise and jobs go with it

People often ask me how to save Germany's car industry. And some say: All you ever do is describe the problems.

Fair enough. Here's my answer: not by giving the old carmakers more taxpayer money. But by making sure that startups in batteries, software and AI can grow big in Europe.

And VW, BMW and Mercedes would benefit too. They'd find their partners in Europe instead of moving abroad. They'd buy their technology from European startups. Those startups would grow, supply even more and become big tech companies themselves. And that would bring value chains, jobs and prosperity to Europe.

The catch: it'll take a lot of money over a very long time. In Europe, hardly anyone but the government can provide that.

So if you want to save Europe's car industry, you'll have to build a new one.

🔗 cmc | wy | row | el | dr | eib | cs | mb

PS: Reading this in Promotions or spam? Add autopreneur@substack.com to your contacts, or just hit reply. That tells your email provider to deliver it to your inbox.

PPS: Know someone in the car industry who wants to understand why Europe has no Tesla? Send them this issue.

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Welcome to Issue #135 of The German Autopreneur.

May 2007. China's new research minister is giving an interview on German TV. And he's speaking German.

The reporter asks: Does Germany now have a new friend in the Chinese government?

His answer: Not a new friend. An old one.

In just a few years, China's car industry has pulled off an incredible sprint. Now the country is on the verge of becoming an automotive superpower.

We've looked at the reasons many times here. But there's still a missing piece: Wan Gang.

He spent 11 years as an engineer at Audi in the German city of Ingolstadt. Then he returned to China and became research minister. And there, he laid the foundations for China's rise.

Today we'll look at:

• Who Wan Gang is and how he got China to switch to EVs

• Which German car CEO did his PhD under Wan in Shanghai

• And why China is only just getting started

The Chinese Engineer at Audi

The story starts in Shanghai in 1984. Wan Gang is 32. He teaches mechanics at Tongji University.

In October, VW signs the deal for its 1st joint venture in China. 3 days later, VW's then-CEO Carl Hahn visits Wan's university. He wants to help set up an automotive engineering department.

Carl Hahn predicts:

• First, many German engineers will come to China

• In 20 to 40 years, most engineers in China will be Chinese

So, roughly now.

Wan is excited about the new department. He's interested in cars. And China is just opening up to the West.

He wants to make the most of this chance. In 1985, he moves to Germany to do his PhD.

Right at the start, his professor sends him hitchhiking around Germany for a month. Everywhere he goes, the first question is: Are you Japanese or Chinese? Then people ask where China is heading and whether he wants to go back.

But for now, he stays. After his PhD, 6 companies want to hire him, from VW to Mercedes. He picks Audi.

Back then, Audi is the smallest of Germany's major carmakers. Wan's thinking: That's where he can move up fastest.

He starts in development. After 5 years, he moves into production and soon heads a department with more than 2,000 people. When someone on his team has a birthday, he brings 2 bottles of beer onto the shop floor.

In the paint shop, he works with a young German colleague on a new production line. They'll meet again later in Shanghai.

But what Wan really dreams of is something else: a car that runs on electricity or hydrogen. Alongside his Audi job, he supervises PhD students who research fuel cells.

Later, he says this about German carmakers: New powertrains have a hard time there. Sometimes they're even held back.

But China urgently needs a different way to power cars. Wan travels there often for Audi and sees the smog grow along with the number of cars. China also has to import more and more oil.

Wan thinks it through: If car ownership in China ever reaches German levels, there won't be enough oil. And the air will be unbearable. So China needs cars that don't run on gasoline.

Back in Ingolstadt, he often gives Chinese visitors tours of the plant. On one of these tours, his guest is China's research minister Zhu Lilan. He has a proposal for her.

At Audi, he has seen how far ahead the West is on combustion engines. He's convinced: China will never catch up. So China should skip combustion engines and move straight to a new powertrain.

In 2000, he sends China's government a written proposal. China's premier wants to back him. The research ministry and his old university want him to return to China.

At the end of 2000, Wan quits. By then, he has spent 15 years in Germany, 11 of them at Audi.

Back to China With a Plan

At his old university, his job is to set up an EV research center.

His German colleague from the paint shop also comes to Shanghai. He wants to do his PhD with Wan.

Back then, China looks very different from the China we know today:

• Hundreds of cyclists wait at every red light

• Very few people own a car

• The taxis are VW Santanas

In 2000, China builds around 2 million vehicles. Germany builds 5.5 million.

In Wan's institute, there are VW Santanas and Passats. But they're not ordinary cars anymore: Wan has taken out the gasoline engines and put in batteries and electric motors.

His student asks what he's doing. Wan replies: The future of the car is electric.

That German colleague is Oliver Blume. Just over 20 years later, he'll become Volkswagen's CEO.

But a few converted cars aren't enough for Wan. He wants all of China to switch to EVs. For that, he needs the state.

He writes a study on fuel-cell cars. It ends up with Zhu Lilan's successor at the research ministry.

In 2001, the new minister calls Wan in. After a long talk, the minister decides: China will get a government EV program. And Wan will plan it. He also promises Wan: I'll support you, whatever it costs.

The program starts in September 2001. Wan becomes its chief scientist. At the launch, he lays out how far China is behind other countries:

• Around 20 years on combustion engines

• Just 4 to 5 years on EVs

The program supports 3 powertrains: fuel cells, hybrids and battery-only EVs. It's still unclear which will win. Wan's own research focuses mainly on fuel cells.

In 2004, Wan becomes president of Tongji University. At the same time, China's government is specifically looking for experts for its ministries who aren't Communist Party members. Wan is a good fit: He's a professor who runs a large university.

In April 2007, the government appoints him research minister. He's the 1st minister since 1972 who isn't a Communist Party member.

From now on, he has a say in what the state funds. His dream is finally in his own hands.

China Bets on EVs

3 weeks after his appointment, Tongji celebrates its 100th anniversary. It's Wan's final appearance as university president. Former German Chancellor Gerhard Schroeder is among the guests.

That's also where the TV interview from the start was filmed. In the same report, Schroeder says: Wan's appointment is a sign of China's growing openness. It's a pleasure to spend time with him.

And Wan stays close to Germany in other ways too. Even his official car is an Audi.

As minister, Wan now sets the order: First, buses and taxis go electric. Then private cars.

He knows it'll take time. In the interview, he says: It's definitely a long road. You can't do it in 5 years. But step by step.

In 2009, his ministry sends electric buses and taxis to 13 cities. From 2010, private buyers in some cities also get purchase subsidies.

In 2012, Wan's ministry settles on a powertrain. China now fully backs 1 of the 3 options: battery-electric cars.

Wan doesn't back regular hybrids, because in a hybrid the combustion engine is still the main source of power. And China puts fuel cells on hold for now.

3 months later, the whole government follows.

The problem: People in China still buy very few EVs. In 2015, only 1 of 100 new cars in China is electric.

China sticks with it anyway. In May 2015, the government adopts its big industrial plan: Made in China 2025. With it, China wants to be among the leaders in 10 industries of the future. EVs are one of them.

Soon after, the industry ministry sets the targets:

• Chinese brands should sell 3 million EVs a year by 2025

• That would be around 1 of 10 new cars in China

• And 8 of 10 EVs in China should come from Chinese brands

It was Wan who laid the groundwork for this: with his 2001 program and his push for battery-electric cars.

Wan steps down as minister in March 2018. His dream has become a goal for all of China.

But the big breakthrough is still to come.

Chinese Brands Overtake German Brands

A month later, Wan is at the Beijing Auto Show. He leans over an electric Nio sports car and smiles like a proud father.

His plan continues without him: From 2019, every large carmaker in China must meet a fixed EV production quota. That includes VW, BMW and Mercedes. Carmakers that build too few EVs must pay carmakers that build more.

Then COVID hits in 2020. China closes its borders. In Germany, everyone's busy dealing with the pandemic. Many don't notice what happens in China over the next few years.

But that's exactly when EVs really take off in China. From mid-2020, the first EVs in China become as cheap as comparable combustion cars. Government purchase subsidies end in late 2022, but people in China still buy more and more EVs.

China reopens its borders in early 2023 after 3 years with almost no foreign visitors. In April, many German auto executives travel to the Shanghai Auto Show. It's their 1st car show in China since the pandemic.

Chinese brands show plenty of new models there. Many foreign visitors are shocked by how much has changed in 3 years.

Oliver Blume is there too. By now, he's VW's CEO.

Soon after, Audi's then-CEO Markus Duesmann says: Germany's car industry has underestimated the strength of its Chinese competitors.

VW was number 1 in China for decades. In 2023, BYD sells more cars in China than VW for the 1st time.

Foreign brands dominated the world's biggest car market for a long time. Not anymore:

German brands have lost half their market share in China over this period:

• In 2020, around 1 of 4 new cars sold in China came from a German brand

• Today, it's around 1 of 8

And Wan's plan has worked:

• In 2020, 1 of 20 new cars sold in China was electric

• In 2025, it was almost 1 of 2

China has also far exceeded the targets set in 2015:

• The target was 3 million EVs a year from Chinese brands. BYD alone sold around 3.5 million in China in 2025

• Chinese brands were meant to sell 8 of 10 EVs in China. By the end of 2025, it was almost 9 of 10

What China Plans Next

Wan is 74 today. In 2023, he received the Nicolaus August Otto Award in the German city of Aachen. It's named after the gasoline engine's inventor, but Wan received it for his work on EVs and hydrogen. In his speech, he thanked the small German university where he did his PhD: That's where he learned how to create something new.

He also said: Former VW CEO Carl Hahn was right in 1984. Most engineers in China are now Chinese. But China hasn't reached its goal yet.

China's government agrees. In September 2026, it presents a new plan for the car industry. The goal: Make China an automotive superpower by 2030.

China has conquered its home market. But an automotive superpower sells cars around the world.

And that's exactly what's happening right now. China's carmakers are expanding abroad:

• In 2023, China exported more cars than any other country for the 1st time

• From January through September 2026, China has already exported more than 8 million cars

• And in Europe, more than 1 of 10 new cars has come from a Chinese brand since this summer

But China is also thinking ahead about the car itself. Former Chinese industry minister Miao Wei talks about 2 halves of the game:

• The 1st half is the powertrain: EVs. China leads here

• The 2nd half is the intelligent car, with software, AI and autonomous driving

And he says: The game won't be decided until the 2nd half.

China is shifting its funding to exactly that. There's already less money for powertrains.

The funding now goes to what makes cars intelligent:

• By 2030, cars should drive themselves on highways

• A separate program aims to bring AI into cars

• And China wants to catch up on automotive chips and operating systems

My Take

In Germany, I often hear: China copied us. Wan Gang's story shows something else. China got to know us very, very well.

Wan spent 15 years learning from us. Then he turned what he learned into something new in China.

And China even does this systematically. Back in 2006, the government wrote the steps into a plan:

1. Adopt technology from abroad

2. Understand how it works

3. Use it to create something new

So copying is only China's 1st step.

China saw where our strengths were. But also our weaknesses. And China found a way around our strengths. That's the real lesson for me.

VW and Audi together still lead China's combustion-car market. It's just that people in China buy fewer and fewer combustion cars.

And then there's the other thing I often hear in Germany: We missed the shift. I don't think that's right either. German carmakers focused on their strengths. And that was completely rational too.

They had a successful business model and kept perfecting it. It kept getting better, more efficient and more profitable. So there was no pressure at all to change. Nobody had to think about life after combustion engines.

VW CEO Oliver Blume now says so too: In Germany, VW lived off its past success for too long.

Today, Wan says: Europe was China's role model. China will keep learning a lot from Europe.

And I think that's what we can take from this story. Germany should be just as open and curious as Wan was. And learn from China the way China learned from us.

That means going to China to see how people work there. Where the companies are strong. And where they're weak.

And these days, you can do that without leaving Germany. Chinese companies are coming to Europe. And they're hiring skilled people. But in Germany, people who join them often get called traitors. Yet that's exactly what Germany should encourage. Because at some point, these people bring their knowledge back. Just like Wan Gang did.

Then we can do exactly what China did: Find a way around China's strengths instead of fighting them head-on.

The 2nd half of the game is about to start. So above all, we in Germany should ask ourselves: Who here actually knows China as well as Wan knows us?

🔗 zdf | zt | tj | gov | xh | am

PS: Reading this in Promotions or spam? Add autopreneur@substack.com to your contacts, or just hit reply. That tells your email provider to deliver it to your inbox.

PPS: Know someone in the car industry who wants to understand how China really caught up? Send them this issue.

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Welcome to Issue #134 of The German Autopreneur.

Last week Porsche unveiled its new strategy: Sportwagenschmiede '35 (German for "sports car forge").

The direction: back to its roots. More sports cars and combustion engines again.

In 2022 the goal was different: more than 80% of all new Porsches would be fully electric by 2030.

In between came a crash: profit dropped 93% in 2025. And then a new boss arrived.

So Porsche is going back to what they do best. That sounds reasonable at first.

But will that save Porsche? Can they recover this way?

Today we'll look at:

• How Porsche once nearly went bankrupt, then grew by doing something very different

• Why the bet on EVs didn't pay off

• And how much of the new strategy actually takes Porsche back to its roots

Porsche nearly went bankrupt in 1993

To understand the new strategy, we need to go back a bit.

Most people think of the 911 first when they hear Porsche. Porsche has been building it since 1963.

Well into the 1980s, Porsche was still a small company that only built sports cars. And business was good: 1986 was the 5th record year in a row. Porsche sold more than 53,000 cars that year.

But that success depended on a single market. Back then, more than 1 in 2 Porsches went to the US.

And that's where things went wrong. The stock market crashed in 1987, and US sales collapsed.

The success had covered up Porsche's problems. Now they became visible: in the good years, Porsche had developed hardly any new models. And production was far too expensive.

That's why Porsche didn't recover for years. In the early 1990s, a recession made things worse. By 1993, Porsche was selling only around 12,000 cars a year.

Most experts expected Porsche to be sold soon: to Mercedes or VW.

In the middle of the crisis, Porsche appointed a little-known executive as CEO: Wendelin Wiedeking. Almost nobody thought he could save Porsche.

But he rebuilt the company. In the end, Porsche could build a 911 in half the time.

And in 1996, Wiedeking launched the Boxster: a cheaper sports car meant to bring new customers to Porsche.

The plan worked. By the early 2000s, Porsche was back to selling as many cars as in the 1980s.

And Wiedeking went further: Porsche built an SUV together with VW. The Cayenne arrived in late 2002.

For the sports car company, that was the start of a new era. In the years that followed, all the growth came from the Cayenne. Later, Porsche added a smaller SUV: the Macan.

And the SUVs had another effect: they turned China into a huge market for Porsche. In 2020, 1 in 3 Porsches went to China.

Wiedeking had saved Porsche. And he'd reinvented the company along the way.

The small sports car company had become a major carmaker. For over 10 years now, more than 1 in 2 Porsches sold has been an SUV.

Then came the EV.

Porsche went all in on EVs in 2022

By the late 2010s, the whole auto industry was facing a major shift. Tesla showed that expensive EVs could sell, while governments kept tightening the rules for combustion engines. Almost everyone expected EVs to take over quickly.

So did Porsche. The Taycan arrived in 2019: the 1st electric Porsche. Oliver Blume was CEO at the time, and he called it the “beginning of a new era.”

At first, it looked like a success, with around 30,000 reservations before the car's debut. In 2021, Porsche sold over 41,000 Taycans. The Taycan outsold the 911.

A year later, Porsche made EVs its strategy. The target announced in March 2022: more than 80% EVs by 2030.

Back then, that made sense.

To understand why, let's take a quick look at a concept called the “messy middle”:

It describes the painful transition from combustion cars to EVs. During this phase, carmakers have to do everything twice.

They have to keep developing combustion cars, because those are the cars that make the money. And they have to develop EVs, which make hardly any money yet. Often they even have to run 2 production lines side by side.

That means double the costs. And carmakers have to keep up with the best in combustion cars and the best in EVs. On the EV side, that means competing with companies like Tesla, which build nothing but EVs.

For a single company, that's almost too much to handle.

So almost every carmaker wanted to get through this phase as quickly as possible. As early as 2021, Volvo, Mercedes and Audi announced plans to build only EVs.

Porsche did the same. Switch fast, and you skip the messy middle. That was the bet.

And at first, everything went well. In September 2022, Porsche's shares started trading on the stock market. A few days later, Porsche was worth more than its parent company VW.

A record year followed in 2023: more than 320,000 cars sold. Porsche kept €18 in profit for every €100 in revenue.

Porsche was at its peak. Then things went wrong.

By 2025, profit had almost disappeared

It all started in China. In 2023, Porsche still sold around 79,000 cars there. In 2025, the number was down to around 42,000. Sales in China had fallen by almost half.

All German carmakers are losing sales in China. But none of them has been hit as hard as Porsche.

In 2024, Taycan sales collapsed too. Porsche had built its future around this car, but global sales halved to around 21,000 in just 1 year. By 2025, they were down to around 16,000.

That hit profit, which fell by almost 1/4 in 2024.

In 2025, Porsche had to cut its forecast 3 times.

CEO Oliver Blume wrote to all employees: “Our business model, which has served us well for many decades, no longer works in its current form.”

Then Porsche changed course:

• The 80% EV target: scrapped

• New EVs: delayed

• Its own battery production: abandoned

The total cost for Porsche: more than €3 billion.

By the end of the year, profit had almost disappeared: -93%.

Porsche kept just €1.10 of every €100 in revenue. Only 2 years earlier, Porsche had kept €18.

Then Porsche did exactly what had saved the company back in 1993: they brought in a new boss.

Oliver Blume stepped down, and Michael Leiters took over in January 2026. Before that, he was CEO of McLaren. And before McLaren, he spent over 8 years as Ferrari's chief technology officer.

So Porsche went from a record year to a crisis in 2 years. How did that happen?

An electric Porsche is just another car

Let's look at the reasons:

Reason 1: Porsche is losing China

In 2025, Porsche sold over 40,000 fewer cars worldwide than in its record year of 2023. Almost the entire drop came from China.

China's car market went electric in just a few years. But the engine isn't the only thing that changed. These EVs are a new kind of car. People in China call them “smart cars”: the famous smartphone on wheels.

People choose smart cars for different reasons than combustion cars. For combustion cars, the brand is the most important reason to buy. For smart cars, it ranks only 5th.

But the brand is Porsche's most valuable asset. In this new market, it barely matters anymore.

What matters instead are things like range and charging time. And for expensive EVs, it's mostly autonomous driving and the cockpit. This is exactly where Chinese carmakers are often better. That's why many people in China would rather buy a Chinese brand.

This hurts Porsche more than most. The reason: what makes a Porsche feel like a Porsche comes from the combustion engine and its sound. In an EV, both are gone. And Porsche can't stand out on performance anymore either, because almost every EV is fast anyway.

Take the phone maker Xiaomi. In 2025, a Xiaomi EV was faster around the Nürburgring Nordschleife than the fastest Taycan. And in China, that Xiaomi cost only around 1/4 as much.

That's why Porsche has such a hard time in China. With a combustion engine, a Porsche is an icon. As a smart car, a Porsche is just another car, only much more expensive.

Reason 2: Everywhere else, the bet on EVs came too early

In Europe and the US, most people who buy a very expensive car still choose a combustion engine.

But Porsche had committed to 80% EVs by 2030.

Even Porsche's new boss Michael Leiters now says: for a long time, Porsche invested almost nothing in combustion engines.

So Porsche doesn't have the right cars for either market. In China, Porsche doesn't have the EVs customers want. And everywhere else, Porsche lacks new combustion cars.

Reason 3: Porsche has grown too big

This reason follows from the first 2. In recent years, Porsche had built up the capacity for 350,000 cars a year. They expanded the plants. And since 2016, the workforce has grown by around 14,000 people. But in 2025, Porsche sold only 280,000 cars.

That's a gap of 70,000 cars. But the costs stay the same.

The new boss now has to fix all of this.

Porsche's new plan is to go back to its roots

Last week, Michael Leiters presented his strategy. It's meant to get Porsche out of this crisis:

1) Higher-priced sports cars

Porsche wants its 10,000 most expensive cars to cost even more: from €270,000 on average to €330,000. Porsche also plans an even more expensive sports car above the 911.

2) Combustion engines stay

Michael Leiters says: “The 911 will never be electric.” Porsche will also add a new combustion-powered SUV. The target: 2/3 combustion cars and 1/3 EVs.

3) Less China

Porsche expects things in China to get even worse. In 2025, 15% of all Porsches went to China. In the future, Porsche is planning for less than 10%.

4) Lower costs

Porsche wants to stay profitable even if they sell only 200,000 cars a year. In 2025, Porsche sold around 280,000. To be profitable at 200,000 cars, Porsche plans to cut 25% of jobs in administration and in the plants. In management, the cut is even bigger: 40%.

The big goal:

• Sell fewer cars and still bring in more revenue

• Revenue: €41-45 billion (2025: €36 billion)

• Profit: keep €10-15 of every €100 in revenue again (2025: €1.10)

• When: reach both targets by 2030 or 2031

In the 1st half of 2026, Porsche was already back to keeping €7.80 of every €100 in revenue. But profit won't simply keep going up from here. First, things will get worse again: at the current pace, Porsche will sell around 240,000 cars in 2026. And for 2027, Porsche expects even fewer cars and less profit.

So that's the plan.

An insider described it to me like this: the EV plan didn't work out. Now it's back to what Porsche is good at: sports cars and combustion engines.

But it's less of a return to Porsche's roots than it sounds.

Will Porsche become the next Ferrari?

A real return to Porsche's roots would mean going back to 2002. That was Porsche before the Cayenne: a small company that only built sports cars. Back then, Porsche sold around 54,000 cars and had around 10,000 employees.

Porsche is a long way from that today. In 2025, Porsche sold around 280,000 cars and had almost 42,000 employees. And 6 in 10 Porsches are SUVs rather than sports cars.

Still, the direction is clear: fewer cars at higher prices.

And there's a company that works exactly like that. Porsche's new boss spent over 8 years there: Ferrari.

Let's think this through. What if Porsche followed Ferrari's path all the way? That would mean only expensive sports cars with combustion engines.

The 1st question: will there still be a market for very expensive combustion cars?

Today, 6 luxury brands compete in this market: Ferrari, Lamborghini, Bentley, Rolls-Royce, Aston Martin and McLaren. Their cars start at around €200,000, and many cost much more.

Anyone who buys a car like this doesn't need a car. A Lamborghini customer already owns 5 cars on average. For these buyers, cars are a hobby. And they don't mind if a liter of gasoline costs €5.

That's why the combustion engine will survive in this niche. And that protects the niche from Chinese competitors: their way into the car market is the EV.

So yes, this niche would be the perfect place for Porsche to retreat to.

The 2nd question: does Porsche even fit into this market?

This is where it gets tricky: the market is tiny. All 6 luxury brands together sell fewer than 50,000 cars a year. Ferrari sells 13,640.

Porsche sells 20x as many cars as Ferrari. The 911 alone reached around 52,000 sales in 2025. That's more than all 6 luxury brands combined.

Even after shrinking to 200,000 cars, Porsche would still be 4x the size of this entire market.

So Porsche will never be Ferrari. They're far too big for that.

Porsche can't go all the way back to its roots. And they can't go all the way up to Ferrari either.

So what is the new strategy, really?

Where Porsche actually wants to go

The new strategy only goes halfway back to Porsche's roots. On every point, Porsche stays in the middle:

1. Powertrains: still combustion engines and EVs. Porsche even wants the EV share to grow from around 1/5 today to 1/3

2. Volume: fewer cars than before, but still far more than Ferrari

3. Price: more expensive than BMW and Mercedes, cheaper than Ferrari. Porsche calls this its sweet spot

For powertrains, that's exactly the messy middle Porsche wanted to skip in 2022. Now Porsche is stuck right in it. And that will last well into the 2030s.

The only way this can work is through higher prices.

Here's the rough math:

• Today: across all models, a Porsche costs around €130,000 on average

• The target: at least €41 billion in revenue

• The assumption: around 240,000 cars a year, roughly as many as in 2026

• The result: a Porsche would need to cost around €170,000 on average. That's about €40,000 more

If the number of cars keeps falling, the price will have to go even higher.

So now the bet is that Porsche customers will pay these prices.

My Take

To be honest, this strategy is no masterpiece. Porsche simply has no other choice.

In 2022, Porsche went all in and committed to EVs. That didn't work.

But going all the way back to combustion engines won't work either. The market for combustion cars is slowly shrinking. What's left is the niche for very expensive combustion cars. And that niche is far too small.

So Porsche is moving back to the middle and doing both.

For China, that won't be enough anymore, and Porsche knows it. But for the rest of the world, it's enough for now: customers there still want combustion cars.

But China shows what comes next. People there buy a car the way they'd buy a phone. What made the old brands valuable barely matters there anymore: the name, the engine, the sound.

So the real task is to make these brands just as valuable in the new market. Because they have something no new brand from China can buy: a history. In Germany, we're so focused on the crisis that we sometimes forget this.

Customers still pay a lot extra for that history when they buy a combustion car. And nobody can copy it.

The problem: in the new market, the brands can't just keep telling their story the same way. They have to translate it for the new market. So far, nobody has managed that.

But Porsche has reinvented itself before. In 1993, a new boss came in and completely rebuilt the company.

Now Porsche is in the same situation again. A new boss has to reinvent the company.

This time, the task is even bigger. It's not about a new car.

It all comes down to 1 question: what makes a Porsche a Porsche when the combustion engine is gone?

The new strategy doesn't answer that.

But it gives Porsche a bit more time to find an answer.

🔗 por | re | nzz | mk | nr | sp | ov

PS: Know someone who works at Porsche or another legacy car brand? Send this issue to them.

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Philipp

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Welcome to Issue #133 of The German Autopreneur.

It's been another busy week:

• VW is canceling 10 of its 13 wage agreements with the union

• Mercedes is ending its remote work agreement and launching a new severance program

• BMW wants to replace 1 in 5 top managers with AI

• And VW's software subsidiary CARIAD is cutting jobs again: 1,000 of the 4,300 it still has

We know Germany's auto industry is in crisis. But this feels like a new phase.

What's happening here? And where's this heading?

Today I'm looking at 3 questions:

• How many more jobs will go? And will they come back?

• Why does Mercedes pay some employees half a million euros each to leave?

• And should you take a severance package if you get the chance?

How many jobs is Germany's auto industry losing?

In 2019, around 834,000 people worked directly for automakers and suppliers in Germany.

Today, that number is down to 691,500. That's over 140,000 fewer jobs.

And the pace is accelerating:

• 2019 to 2024: around 12,000 fewer jobs a year

• 2024 to 2026: around 41,000 fewer jobs a year

So is the worst over? There are 2 forecasts:

1. Germany's auto industry association VDA expects another 125,000 jobs to disappear between 2025 and 2035. That's an average of around 13,000 a year

2. Roland Berger expects 200,000 jobs to disappear over the next 5 years. That's 40,000 a year

So the VDA thinks the worst is over. I think Roland Berger's forecast is more realistic.

If this goes on, here's what Germany's auto industry will have lost compared with 2019:

• 4 in 10 jobs by 2030

• More than half of its jobs by 2035

Either way, everyone agrees Germany's auto industry will keep shrinking. The only question is how much and how fast.

But first: why are these jobs disappearing?

Why the jobs are disappearing

Roland Berger broke down those roughly 200,000 job losses by cause.

There are 4 reasons:

• Around 70,000: More people work in administration and engineering than are needed

• Around 60,000: Factories and offices are becoming more productive. They need fewer people to do the same work

• Around 50,000: Germany is building fewer cars

• Around 25,000: Building an EV takes less work than building a combustion car

Job cuts are nothing new in the auto industry. It has always moved in cycles: in bad years, companies cut jobs, and in good years, they hire again.

Back when I worked at Mercedes, some of my colleagues took a severance package and left. 3 years later, they were back.

So is it the same this time?

Will the jobs come back this time?

There are 2 kinds of crisis. One ends. The other doesn't.

1) An economic downturn:

The economy struggles, and people buy fewer cars for a while. Companies need to save money, so they cut jobs.

Then the economy recovers. Buyers come back, and so do the jobs.

That's what happened in 2009: car sales collapsed in many countries during the financial crisis. Many companies cut working hours through Germany's short-time work scheme rather than laying people off. The auto industry then grew again, adding over 100,000 jobs by 2018.

2) A structural change:

The industry itself changes permanently. Jobs disappear, and they don't come back.

So which one is it now?

This time, a weak economy can't explain the job losses. Around the world, people are buying more cars again: more than 90 million in 2025. And sales are expected to hit around 100 million for the first time in the early 2030s.

So the world is buying more cars. Yet Germany's auto industry is shrinking.

It's the industry itself that's changing.

And that's happening in 3 ways:

1) More competition:

German automakers are losing market share, with the biggest losses in China. That's the world's biggest car market. They sell 1/4 fewer cars there than they did 5 years ago. And that decline is accelerating.

Unfortunately, the trend doesn't stay in China. In August, Chinese brands already accounted for more than 1 in 10 new cars sold in Europe.

Selling fewer cars means less work for automakers and the suppliers that depend on them.

2) The value in a car is shifting:

Until now, engineering was the most valuable part of making a car. And that work was done in Germany. That's where the industry made most of its money.

The value is now shifting to batteries, software and AI. Those aren't developed in Germany. They mostly come from China and the US.

German carmakers are buying more and more of this technology from other companies. So they need fewer engineers of their own.

What Germany was best at is worth less and less.

3) It takes fewer people:

An EV is easier to build than a combustion car. On top of that, AI and automation are taking over more and more work, in factories and in offices. At BMW, AI is now even set to replace top managers.

So companies can do the same work with fewer people.

An economic recovery won't reverse any of these 3 changes.

Germany's auto industry is going through a structural change. Not an economic downturn. The jobs it's losing won't come back. At least not in their current form.

That leaves automakers with more people than they need, so they want to cut jobs. The problem: they can't simply fire people.

Why automakers can't just lay people off

German companies can generally lay people off when the work they do disappears permanently.

But the big automakers have promised they won't do that:

• VW until the end of 2030

• Audi until the end of 2033

• Mercedes until the end of 2034

• Porsche until the end of 2035

That's called a job guarantee.

Why would a company promise that?

Because management doesn't decide everything at a German automaker. Employees have a say through 2 channels:

1) The union:

In the auto industry, the union is IG Metall. It negotiates pay and working hours with management, and the result is a wage agreement. And IG Metall can strike.

2) The works council:

Employees elect their works council. It has a say on issues such as remote work and the rules for cutting jobs.

It's hard to cut jobs without agreement from these 2 groups. So management has to negotiate with them.

This is where today's job guarantees come from. The companies wanted to cut costs and jobs. In the end, they made a deal:

• Employees give up some pay

• The companies can cut jobs

• In return, the companies promise not to lay anyone off

Jobs only disappear when people leave voluntarily.

And these guarantees are less than 2 years old. VW signed its agreement in late 2024, Mercedes and Audi in early 2025, and Porsche this July.

So the companies want to cut jobs, but they can't lay anyone off. What can they do?

How management cuts jobs without layoffs

Management does 2 things:

1) Pay people to leave:

Anyone who leaves voluntarily gets a severance package. At Mercedes, long-serving employees could get more than €500,000.

Mercedes still saves money overall. It expects salary savings to cover the severance payments within 2 years.

VW and BMW are doing the same.

2) Make working conditions worse:

Mercedes is ending its remote work agreement and wants 4 days in the office to become standard. It also wants more work for the same pay. VW CEO Oliver Blume is talking about longer working hours without more pay too.

That makes employees unhappy. So they're more likely to leave on their own.

Another effect: those who stay cost the company less.

So how do the works council and the union respond?

How employee representatives respond to the cuts

The works council and IG Metall are doing exactly what they're there to do: protect employees.

They have 2 ways to do that. You can see both at VW right now:

1) Negotiate:

In late 2024, IG Metall and the works council agreed to over 35,000 job cuts by 2030. In return, they got the job guarantee.

So the guarantee doesn't stop jobs disappearing. Since the deal, over 16,300 people have already left VW. That's almost half the planned cuts through 2030.

2) Say no:

Now VW has given notice to end its wage agreements. It wants to negotiate wages and working hours again. The job guarantee still applies.

The works council is fighting back, and its chair calls this blackmail. But IG Metall can't strike there until January. Those agreements still apply until then.

In the end, the works council and IG Metall can't prevent job cuts. They can slow them down and make them more expensive. And they make sure nobody has to leave against their will.

But that leaves a bigger question:

Should Germany save these jobs at all?

Management and the works council are both doing their jobs.

They agree the jobs will go. They're only arguing about when and how fast.

So everyone's arguing about how to manage the decline.

The problem: nobody's debating where new growth and new work will come from.

A job guarantee is a tool for an economic downturn: keep people until the work returns. That's what Germany's short-time work scheme did in 2009.

But this is a structural change, and the work isn't coming back. These guarantees keep people in jobs that otherwise wouldn't exist anymore.

And those are exactly the people that companies building something new are missing.

Meanwhile, management keeps making these jobs worse. Everyone I speak to at VW, Mercedes or Porsche says morale is terrible. And that bad mood spreads from these companies to the rest of Germany. Of course, none of this makes German carmakers any more competitive.

It's a downward spiral.

So for me, the real question is whether Germany should save these jobs at all.

My Take

In short: I don't think Germany should save these jobs.

Works councils and unions defend the status quo. That's their job. But right now, Germany needs change. It can't have both.

And management? It's cutting jobs, but only to save money.

I can even understand that. Managers are judged on next quarter's numbers, and those numbers also determine their bonuses. Not on whether their company leads the industry again in 10 years.

But cutting costs doesn't solve the problem.

German cars have always been more expensive. That worked because their technology was better. Today, it isn't.

So the real problem is the product, not the costs.

If you only focus on costs now, you've given up on winning the technology race.

To me, that's the management of German carmakers admitting defeat. They've accepted that they've fallen behind and won't catch up.

Management and works councils are both fighting over what's left. Neither is building anything new.

Germany's auto industry is busy arguing with itself while its business disappears.

But both sides agree that Germany's auto industry will keep shrinking. So it can no longer be Germany's engine of growth.

That means growth has to come from somewhere else: from other industries and new companies.

That's what Germany should be debating: where will tomorrow's jobs come from?

To create those jobs, Germany needs the people now stuck at the big automakers. In jobs that aren't really needed anymore.

In 2019, I quit my job at Mercedes and started my own business.

The first few years were hard. But I've never regretted it. It was the best decision I could have made.

That's why I want to encourage you: if you get the chance to leave, take it. Especially if it comes with a severance package.

Because morale and working conditions at the big carmakers won't improve anytime soon. Meanwhile, a lot of new things are being built elsewhere.

You can start your own business or join a company that's building something new. And help write a new growth story for Germany.

So let's stop trying to save yesterday's jobs and start building tomorrow's.

🔗 dst1 | dst2 | zdf | fn | wiwo1 | re | vw | por | ah1 | ah2 | audi | wiwo2

PS: Know someone in the car industry who's thinking about taking a severance package? Send this issue to them.

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See you next Wednesday,
Philipp

Everything else I’m working on is here →

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Welcome to Issue #132 of The German Autopreneur.

When people outside China think of Huawei, they probably picture smartphones, spying, or the US-China trade war.

Hardly anyone thinks of cars.

But today, Huawei is one of the most important players in China's car industry. 25 car brands use its driver assistance systems. And in Huawei's own stores, cars are parked right next to smartphones and smartwatches.

Huawei also leads its own alliance with 5 Chinese carmakers. In 2025, that alliance sold almost as many cars in China as Tesla.

Yet Huawei doesn't build a single car of its own.

It supplies the technology that goes into other companies' cars. Even Audi uses it in China these days. And now reports say Huawei is going to rescue a historic European car brand.

That's reason enough to take a closer look at this company. Who is Huawei, and how did it pull all this off?

Today we'll look at:

• How a startup became a global tech giant in less than 40 years

• Why Donald Trump almost destroyed Huawei. And how it rose from the ashes

• And how Huawei quietly became a power in the car industry

Huawei is much more than a phone maker

Last October I was in Shenzhen. Huawei showed me around for a whole day.

What stuck with me: everything was perfectly staged. It was a level of perfection and professionalism I haven't come across in Europe.

That's when I realized: Huawei is a tech conglomerate. Think of it as Apple, Siemens and Nvidia rolled into one.

In 2025, Huawei made around $126 billion in revenue (for comparison: Bosch made $107 billion).

Here's where that revenue came from:

• Mobile and internet networks: 42.6%

• Smartphones and other devices: 39.1%

• Energy (solar, battery storage and charging): 8.8%

• Cloud: 3.7%

• And cars: 5.1%

On top of that, Huawei puts 21.8% of its revenue into research and development. That's around $27.5 billion (for comparison: VW spends $22.8 billion).

And Huawei built all of this in less than 40 years. How does a company get this big this fast?

From startup to world leader

In 1987, Ren Zhengfei founded Huawei in Shenzhen. He was in his early 40s and had spent years as an engineer in the army. His starting capital: 21,000 yuan. At today's exchange rate, that's a little over $3,000.

At first, Huawei resold telephone switches. Those were the boxes that connected phone calls back then. In the early 90s, the company started building them itself.

In the big cities, foreign companies like Ericsson and Siemens ruled the market. So Huawei started in the countryside. And from there, it slowly worked its way into the cities. By 1998, it was China's number 1 in telephone switches.

Then mobile phones took off, and Huawei grew with them. It went from telephone switches to the equipment behind mobile networks. Cell towers, for example.

That's what took Huawei to Europe. In 2005, British Telecom and Vodafone bought equipment from Huawei. That same year, more orders came from abroad than from China for the first time.

And then came the product we know Huawei for today: the smartphone.

In 2007, Apple unveiled the iPhone. Huawei was already making phones at the time. But mostly cheap white-label devices that mobile carriers sold under their own name.

In 2011, that changed. From then on, Huawei built high-end smartphones under its own brand. But how do you compete with Apple and Samsung?

One answer came from Germany: the camera maker Leica. From 2016, Huawei and Leica developed the cameras together. And the phones carried the Leica name.

The plan worked. By 2018, Huawei was the third-largest smartphone maker in the world, behind Samsung and Apple. And in network equipment, it was the world leader.

Everything seemed perfect.

Trump vs. Huawei

Huawei's success had one weak spot: the US.

Almost every Huawei product needed chips. Huawei designed some of them itself. But it bought many from US companies like Qualcomm and Intel. And its smartphones ran Google's Android.

As long as the US and China got along, that wasn't a problem. But the US government had distrusted Huawei for a long time. It feared China could spy through Huawei's networks. The company has always denied that.

In 2018, Donald Trump started a trade war with China, and Huawei got caught in the middle. In August, a new law banned US federal agencies from buying Huawei technology.

Then things escalated.

On December 1, 2018, a woman landed in Vancouver. She was supposed to fly on to Mexico. But Canadian police arrested her right at the airport, at the request of the US.

Her name is Meng Wanzhou. She's Huawei's CFO and the founder's daughter. The US accused the company of doing business in Iran despite US sanctions. And it accused Meng of hiding that from banks.

She was released on bail. But she had to stay in Vancouver for almost 3 years, wearing an ankle monitor.

In May 2019, the US put Huawei on a blacklist.

That had 2 consequences:

• US companies needed government permission to supply Huawei

• New Huawei smartphones no longer came with Google services (Play Store, Maps, YouTube)

The business collapsed.

A month later, Huawei was selling 40% fewer smartphones outside China. Europe was hit especially hard. Huawei was number 2 there at the time, behind Samsung. But without Google, it didn't stand a chance.

And it didn't stop at phones. More and more European countries shut Huawei out of their 5G networks.

For Huawei, this was a black swan moment: a rare event that nobody sees coming and that changes everything.

Nobody sees it coming? Not quite.

The comeback without the US

What many people don't know: at Huawei, the black swan is part of the company culture. Huawei keeps real black swans on its campus. The message: always expect the unexpected.

And in a way, Huawei was prepared.

For years, its own chip unit had been working on replacements for the US chips. Internally, these chips were called "spare tires."

The night after the blacklisting, the head of the chip unit wrote to all employees. Her order: put on the spare tires, starting now.

Huawei had a replacement for Android too. In August 2019, it unveiled its own operating system: HarmonyOS.

But despite all that preparation, the blow hit Huawei hard.

In 2020, the US tightened the rules. Huawei designed its chips itself, but it had them made in other companies' factories. Now any chip factory that used US machines was banned from making chips for Huawei. And almost all of them relied on US machines.

Huawei had no chips left. Not even its own.

That also sank the smartphone business in China. Suddenly, the stores had no phones to sell. In 2021, the whole company's revenue fell by 28.5%.

It wasn't until 2023 that Huawei launched a phone with its own chip again. This time, the chip was made in China. By 2025, revenue was almost back to where it had been before the collapse.

But in the middle of the crisis, something else happened.

Why Huawei went into the car business

In May 2019, Huawei set up a car unit. That was less than 2 weeks after the blacklisting.

At first glance, that makes no sense. Huawei was fighting for survival. Why move into a whole new industry?

Because back then, a new kind of car industry was emerging in China. Buyers wanted more and more software, connectivity and driver assistance. And the traditional carmakers in particular couldn't keep up.

But that was exactly Huawei's core business:

• Software and artificial intelligence

• Connectivity

• The electronics for electric drive and charging

So the move makes more sense than it first seems. The only question: how do you get into the car business?

In theory, there are 2 ways:

1. Build your own cars, like Xiaomi

2. Become a supplier, like Bosch

Huawei didn't want to build its own cars. That would have meant competing with every other carmaker. As a supplier, it could work with all of them. And that would get its technology into far more cars.

Back then, Huawei summed up its strategy like this:

• We don't build cars. We help carmakers build good cars

• The car industry needs Huawei. It doesn't need the Huawei brand

So Huawei set out to become a supplier.

There was just one problem: carmakers were afraid of Huawei.

The reason: Huawei would be supplying software, chips and driver assistance. That's the part that increasingly decides what a car is worth and what it's like to drive.

SAIC is one of China's biggest carmakers. In 2021, its chairman was asked whether SAIC would rely on Huawei for automated driving. His answer: that would make Huawei the soul of the car. And SAIC would only be the body. He wasn't going to accept that.

So Huawei had to find another way to get its technology into as many cars as possible.

The birth of Huawei's car alliance

And it found one. Together with Chinese carmakers, Huawei set up completely new car brands. But the name on the front isn't Huawei.

Here's how it works:

• Huawei co-develops the car, sells it and supplies most of the technology

• The carmaker builds the car. If it sells badly, the carmaker takes the loss

So Huawei took neither of the 2 classic paths. It didn't become a carmaker or a supplier. It somehow became both at once.

And Huawei has something no supplier has: its own stores. There are more than 5,000 of them in China. After the US ban, many of them had no smartphones left to sell. So Huawei started selling cars there instead.

The first joint brand launched at the end of 2021: Aito, together with the carmaker Seres.

The approach worked. So Huawei did the same with 4 more carmakers:

• Luxeed with Chery

• Stelato with BAIC

• Maextro with JAC

• And Shangjie with SAIC

Yes, the same SAIC that was afraid of Huawei at the start.

Huawei calls the alliance HIMA. It stands for Harmony Intelligent Mobility Alliance. Harmony is the name of Huawei's own operating system.

Almost everything Huawei can do goes into these cars:

• The driver assistance systems, including the chips that run them

• The cockpit with Huawei's own operating system

• The electric drive from its energy business

Where Huawei stands today

• In 2024, Huawei's car unit made a profit for the first time

• In 2025, its revenue grew 72% to around $6.4 billion

• That same year, the alliance sold around 589,000 cars in China (for comparison: Tesla sold 626,000 there, Xiaomi around 412,000)

So things are going well. In China, at least. The problem is that the alliance sells almost nowhere else. And China's market is consolidating right now. Many car brands are already vanishing.

To survive, you have to expand.

And that's exactly what could happen next. For the first time, a European brand is reportedly going to sell cars with Huawei's technology in Europe.

Maserati sold fewer than 8,000 cars worldwide in 2025. The Huawei alliance sells that many in China in less than 5 days. Now Maserati's parent company Stellantis wants to rescue the brand with Huawei's technology. That's the rumor, at least.

The plan reportedly calls for 2 joint models. The technology would come from Huawei, and JAC would build them. In Europe, they'd be sold as Maseratis.

The irony: after the blacklisting, Huawei was practically shut out of Europe. Now cars could be its way back in.

My Take

Whatever you think of Huawei, it's a fascinating case study. Above all, it's a story about dependence.

Huawei depended on technology from the US. And that dependence is exactly what nearly ruined it.

The shock forced Huawei to develop everything important itself.

Today, it's probably more independent than ever.

And that's now paying off in the car business. Because Huawei has mastered the technologies that are growing more important in cars.

That's why many people call Huawei the Bosch of China. But I don't think that quite fits.

Bosch is a classic supplier. It sells parts to carmakers. And if need be, a carmaker can always replace Bosch with another supplier.

That's the clever part of Huawei's business model: the company found a way to be a supplier that can't be swapped out. Because it co-founded the brands it supplies.

So what can we take away from this?

Let's look at Europe.

Stellantis sells Chinese cars from Leapmotor there. A new Opel (a German brand that belongs to Stellantis) is set to be built on Leapmotor's technology. In China, VW builds models on Xpeng's technology. And sooner or later, I'm sure it'll bring them to Europe too.

In other words, European carmakers are making themselves more and more dependent on technology from China.

And that's where I see the parallel to Huawei. Because its story shows how dangerous that kind of dependence can be.

If the Maserati deal works out, it definitely won't stop at Maserati. Then Europe ends up where SAIC's chairman refused to go in 2021: the soul comes from China. And all Europe gets to build is the body.

Huawei spent years preparing for its black swan moment. And when it came, Huawei moved fast.

I think that's what we can take away from this: recognize the risk of depending on someone else's technology. And be prepared.

Even though that moment will hopefully never come.

🔗 hw | sina | tc | cnev1 | cnev2 | cnev3 | cnev4 | el

PS: Know someone in the car industry who should read this? Send it to them. That helps me a lot.

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See you next Wednesday,
Philipp

Everything else I’m working on is here →

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Welcome to Issue #131 of The German Autopreneur.

Our industry is going through probably the biggest transformation in its history. And at the same time, it's in a crisis. Plants are closing, jobs are going, suppliers are going bust. The new competitors are faster and cheaper. And here in Europe, we've got the EU on top of that. Probably the most heavily regulated market in the world.

In short: the house is on fire.

And then suddenly Catena-X shows up. An association that wants to do something with data. Sounds like even more regulation. And like another project nobody asked for.

I'd heard the name dozens of times. But I never quite understood what they actually do.

So I talked to Hanno Focken. He's the managing director of Catena-X.

After 2 hours, it finally clicked. And I realized this story is much bigger than it looks. It leads straight to the core conflict in our industry: the old carmakers against the new ones. And to the question of what role Europe can play between China and the US.

Today we'll look at:

• What Catena-X actually is

• Why so much of our industry still works like it's the last century

• And what the new carmakers do differently

The car industry built Catena-X itself

The basics first:

• Catena-X is an association. BMW, Mercedes and VW were among its founders in 2021

• It sets a common standard for how companies exchange data directly with each other

• That creates a network between all the companies involved. The industry calls this a data space

• Today more than 1,000 companies from over 40 countries are part of it. Including 8 of the world's 10 largest suppliers

• More and more carmakers now make Catena-X a requirement for their suppliers

It all sounds pretty technical. But the idea behind it is simple: a common language for data.

So why does that matter? To answer that, I need to take a step back. How do our companies actually work?

Every department speaks its own language

In Germany, we hear it all the time: our car industry is too slow and too expensive. But where does that come from? And why are the new competitors so much faster?

To understand that, we need to look at where these companies come from.

Europe's big carmakers and suppliers were founded in the 19th and 20th centuries. Many are more than 100 years old. And so are their organizations.

Over the decades, they added new markets, new models and new technologies. And for almost every new task: a new department.

Today the big ones employ hundreds of thousands of people. And all of them have to coordinate and work toward the same goal.

When an organization gets that big, things start happening that nobody planned:

1. Every department develops its own way of working, with its own processes, terms and abbreviations. The same part has one name in engineering and another in purchasing. And sales calls it something else again

2. That's how silos form: departments that work side by side but understand each other less and less

3. So you need people in between: coordinators and teams whose job is to connect departments. Plus committees, where one department tells the other what it's working on

4. Over time, those teams become departments of their own. They develop their own processes. And turn into silos themselves

But it doesn't stop with the organization.

Because every department also has its own data and its own tools. And over the years, they were built around the way that department works.

So the silos move straight into the digital world. The tools understand each other just as poorly as the departments that use them.

To get data from A to B anyway, companies have 2 options:

1. Big IT projects that try to connect the existing tools

2. Or the more common one: people. Someone pulls data out of one tool. Types it into Excel. Emails it on. At the other end, someone else uploads it into the next tool

So to bridge the silos, everyone is coordinating all the time. In committees and over email. With PDFs and Excel sheets.

Amazon founder Jeff Bezos once said: "Communication is a sign of dysfunction. It means people aren't working together in a close, organic way."

What he means: in an ideal organization, hardly anyone needs to coordinate. Everyone knows their role and what they have to deliver. And everything fits together.

In our industry, it's often the other way around.

For a long time, that was fine. Because the competition had the same problems.

Until a new generation showed up.

The new carmakers organized differently from day one

With the electric car came a whole new generation of carmakers and suppliers.

They started from scratch. So they could design their organization on a blank sheet of paper.

And they designed it for a way of working that's digital and relies more and more on AI. With no baggage from the past.

Of course, the best-known example is Tesla.

Elon Musk knew Tesla couldn't match the size of the old car giants. So his message was: Tesla has to be smarter and faster. And that means it must never copy the structures of the old carmakers.

You can see that in leaked emails from back then.

In one of them, he describes how things work at most companies:

• Someone needs something from another department

• So they ask their manager, who asks their manager, who asks the head of the other department

• And the answer takes the same route back

His verdict: "This is incredibly dumb."

The problem: silos form on their own in every growing company. Elon writes: "This is unfortunately a natural tendency and needs to be actively fought."

So he gave his companies a few rules:

• Everyone talks directly to the person they need, regardless of hierarchy

• No abbreviations or made-up terms. Otherwise the glossary grows with every new hire, and nobody can remember it

• Fewer meetings. In big companies they almost always pile up over time. If you're not contributing, walk out

• Everyone works for the whole company, never for their department

Tesla became the blueprint for a whole generation of new car companies. Hundreds of them have emerged in China and the US.

From day one, they made sure not to repeat the old giants' mistakes. That's why they have hardly any silos. Not in their organization, and not in their data and tools.

That makes them leaner, faster and cheaper.

And companies that have their data under control:

• decide faster

• catch mistakes earlier

• build better products

• and can use AI

That's often exactly what the established companies lack. It's a competitive disadvantage.

And the problem gets even bigger as soon as companies work together.

Every company speaks its own language

The car is one of the most complex products in the world. No carmaker develops and builds it alone. Each one works with thousands of suppliers and partners. A German carmaker easily has 5,000 direct suppliers.

And they don't just supply parts. They also supply data about those parts.

That's where the silo problem multiplies.

Today, each carmaker decides for itself how it wants that data. One wants PDFs by email. The next has its own supplier portal.

If a supplier delivers the same part to 4 carmakers, it enters the same data 4 times. In a different format every time.

And the amount of data keeps growing:

• In the past: a PDF test report every now and then

• Today: datasets that the carmakers' software reads directly

• From 2027: the digital battery passport for every new EV battery in the EU, with details on materials and CO2

If everyone keeps using their own format, the result is simple: even more chaos.

The big carmakers have realized that too. Their answer: common rules. One standard everyone agrees on.

And that's Catena-X's job.

Catena-X gives the industry a common language

How does it work?

Hanno explains it like this: every company in the supply chain speaks its own dialect. Some speak with a regional German accent. Others with a Japanese or Chinese one.

Catena-X writes the grammar they all agree on. That way, everyone understands each other.

In practice:

• Catena-X defines how companies describe and pass on their data

• With Catena-X, what runs on email, PDFs and Excel today flows automatically from one system to the next. You only have to set it up once

• The supplier only has to prepare its data once. Then every customer gets it directly, in the same format

• And the supplier decides which customer gets to see what

A lot of people think Catena-X is just more paperwork. That's because most companies first use it for legal requirements, like the battery passport.

But they'd have to deliver that data anyway. Catena-X doesn't add new rules. It just makes the existing ones easier to meet.

Hanno gives an example that shows where the real value is:

• A carmaker notices that the brakes are causing problems in more and more of their cars

• They need to find out quickly where the fault comes from and which cars are affected

• The cause is often buried deep in the supply chain. The brake is made of parts from different suppliers. And those suppliers buy their parts from other suppliers

• Today that means calling one supplier after another. That takes time. So to be safe, the carmaker recalls every car with that brake

With Catena-X, the request moves automatically down the supply chain, level by level. In the end, the carmaker knows exactly which cars have the faulty part. And can recall only those.

Catena-X points to a real case with an electrical part. Without Catena-X, the carmaker would've had to check 1.4 million cars. With Catena-X, it came down to just 14.

My Take

Talking to Hanno made me realize: this is about much more than a data standard.

It's a generational conflict.

On one side: corporations whose organizations have been growing for more than 100 years.

On the other: a new generation that's taking them on. Many of them are barely past the startup stage. Not even 20 years old.

That forces the established companies to reinvent themselves.

And that's where Catena-X can help. If you want to share your data through Catena-X, you have to rethink how you work. The old routines too. And the classic line: "we've always done it this way."

Right now, the established companies badly need that kind of push.

And then there's geopolitics.

What has always fascinated me about the car industry is how global it is. Its supply chains span the entire planet.

But the world is building more and more walls. Tariffs, export controls, trade wars.

So the question is: how do we keep working together across borders? And how do we keep our supply chains running?

Catena-X is one answer. What many people don't know: it's a global initiative. Catena-X is also active in North America, Japan and China. The goal is for data to fit together worldwide.

But it started in Europe. And I don't think that's a coincidence.

In tech, Europe often feels left behind. Caught between the US and China.

But I think that position in the middle can be a strength.

Whoever sets the standard sets the rules for everyone. That's why the US probably wouldn't adopt a standard from China. And China wouldn't adopt one from the US.

That's Europe's chance: to write the rules that keep our global car industry running. Even as the world drifts apart.

PS: A network like this only works if everyone takes part. Many small and mid-sized suppliers are still missing. The Data Space Accelerator helps them get on board: Watch the program walkthrough (Ad)

🔗 cx1 | dsa | fs | inc | cnbc | cnn | eur | cx2

That’s all for today.

Until next week,
Philipp

And as always: If you find value here, share it with someone who should read it too. That helps me a lot.

Everything else I’m working on is here →

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Welcome to Issue #130 of The German Autopreneur.

Why all these software gimmicks in the car anyway? And when are they going away?

I hear that a lot.

Behind those questions is an assumption, and it's especially common in Germany. Software in a car means the karaoke app. A big screen. And a voice assistant that's a little too dumb.

That's all nice. But none of it is what makes a car a car.

That's the mistake. And it's costing Germany more than people think.

So how well are carmakers really set up for what comes next? One ranking puts a number on that every year: the Gartner Digital Automaker Index. The 2026 results are out.

Today we'll look at:

• What software in a car actually is

• Why AI in cars starts with the battery

• And where that leaves the German carmakers

What the Gartner Digital Automaker Index measures

First, the basics. Gartner is one of the biggest analyst firms in the world. Once a year it scores 24 carmakers. And it scores both sides: the technology in the car and the organization behind it.

There are 9 categories in total. Among them:

• Electrification and the electronic architecture in the car

• Autonomous driving and, new this year, artificial intelligence

• Company culture, leadership and talent

What stands out:

• Tesla is far ahead in first place. And it has been every year since the index started

• Not one established carmaker made the top 8. All 8 grew up with the electric car, with the battery or with software

• Mercedes is the best European in 11th place, BMW follows in 14th, VW in 16th. In 2024 BMW was still 10th

What strikes me: almost nothing has moved at the top in 3 years. The results look a little boring. But I think that's the real news.

So my takeaways from past years still hold:

• The top performers are run by founders who built software companies before, not by hired managers

• A carmaker organized like a software company on the inside also leads on the technology of the future

Gartner sees it the same way. The carmakers with the most mature organizations already have the most advanced tech in the car. Its data has shown that for years.

So what is software in a car?

The industry has a name for this: the software-defined vehicle.

The basic idea is less technical than it sounds. It's about how a car gets developed: do you start from the software or from the hardware?

It comes down to 4 things:

1. Zonal architecture: in a classic car almost every part has its own small computer. More than 100 of these control units in one car is normal. In the software-defined car that drops to a handful, one per area of the vehicle

2. Over-the-air updates: a car used to go to the shop for a software update. Today the updates come over the internet. And they cover the whole vehicle. Not just the navigation and the screen, but the powertrain, the chassis and the driver assistance systems too

3. Software and hardware are separate: the software used to be finished when the car rolled off the line. From then on the car only got older. Today it keeps getting new features after the sale, because the software is no longer tied to the hardware

4. Functions get reused: software used to be written for a single model or series, and it couldn't be carried over. Today the same software runs across the whole portfolio

Which leaves one question: what do we need all of that for?

Why software in a car is more than a gimmick

In Germany you hear this a lot:

"I don't need all the gimmicks. I want to get from A to B."

"The Chinese are better at the apps and the toys. Karaoke in the car. But other than that, we build better cars."

That's understandable. Germans see software as an add-on, an option you tick or you don't.

Yet software runs almost every function in a car today. Adjusting your seat is software. So is automatic emergency braking.

But the bigger point comes before all that: how a car gets built.

A classic carmaker is essentially an integrator. It designs the car. Hundreds of suppliers build it. Each one delivers its part, and each part has one of those control units, running its own software.

On top of that, a single function almost never sits in just one control unit. It runs across many of them, from different suppliers.

That creates enormous product complexity. You have to coordinate every change across all those parts. Which makes software updates extremely expensive. Or close to impossible.

The software-defined car takes that complexity apart.

And that solves the problems the German car industry struggles with most:

• Cost: fewer parts means less coordination. And fewer suppliers each taking their margin along the chain

• Development time: Germany's weak spot. The new carmakers develop a car in half the time. Same reason: where there's less to coordinate, there's less that can go wrong. And everything simply moves faster

• Adapting to different markets: the most expensive problem of all

Take that last one. The story the industry tells itself: the world car doesn't work anymore. Customers in China want something different from customers in Europe. And that part is true.

But the industry often draws the wrong conclusion: that every market needs its own car. That kills the economies of scale. And nobody can afford it.

In the software-defined car the hardware stays the same. The software does the adapting instead, and that's far cheaper.

So the underlying problem is this: software is still often treated as an option. In reality it's the foundation of the product.

But the most important point comes next.

Battery, software and AI build on each other

I always describe what's happening to the industry as 3 technology waves: battery, software, artificial intelligence.

These waves aren't independent. Each builds on the one before. And each is what makes the next possible.

Wave 1: the battery

At first glance it's just a different powertrain. But the battery changes everything.

To see why, look at what it replaced. The combustion engine was the moat around the car industry. It was so complex that it worked as a barrier to entry.

Anyone who wanted into the market had to pull off 2 things at once:

• Master that complexity

• And then sell in large volumes right away, just to make the numbers work

So for decades almost no new carmakers emerged. The market was sealed off. And whoever was already inside had it easy.

The battery drained that moat. The complexity was gone, and suddenly almost anyone could build a car.

And that's exactly what happened: a whole generation of new carmakers showed up at once. They're the ones at the top of Gartner's list today.

The part that really hurts in Germany: mechanical engineering no longer sets you apart. And that was the very thing that made a car valuable.

So anyone who still wants to stand out has to do it somewhere else.

Wave 2: software

The difference now comes from the software.

That means the car is designed from the software up, the way I described above.

Tesla invented that concept, and that's no accident.

Because it means rethinking the car completely. An established market leader doesn't do that.

A company that's been winning in a stable market for decades doesn't rethink what made it win. It repeats the formula and refines it. And it won't cannibalize its own product and wreck the business it already has.

So it took a new generation of carmakers. And that generation only arrived with the electric car.

That's why almost nobody builds a software platform for a combustion car. Wave 1 is what made wave 2 possible.

And the next wave builds on that software.

Wave 3: artificial intelligence

I mean the AI that drives the car. The driver becomes a passenger.

In a few years hardly anyone will drive their own car. As a hobby at most.

And that only works with an electric car that runs on a software platform.

That's why nobody builds robotaxis with combustion engines. Or without a software platform.

So anyone who wants a part in the car of the future has to go through all 3 waves.

Where the German carmakers stand

The IAA in Munich is Germany's big auto show. The 2025 edition made one thing clear: the Germans have caught up on electric cars. Range and charging speed are on par with the competition now. They're a few years late, but they got there.

Wave 1: done ✅

So where do they stand on wave 2, the software?

Specifically: who already has a software-defined car on the road?

• Mercedes launched its first software-defined car in 2025, the CLA

• BMW followed this year with the Neue Klasse

• VW still has none in Europe or the US. In those markets it's buying the architecture from Rivian, and the first model arrives in 2027. In China it has had one since earlier this year, running on XPENG's architecture

So the first software-defined cars from German carmakers have been on the road since 2025. That's a good start.

The pattern is the same as with the battery, though. The Germans are a few years late on this wave too.

Tesla's first software-defined car launched in 2017. That was 9 years ago.

Tesla is on its 4th generation by now. The Germans are on their first.

After 4 generations you don't just have a better product. You've also built an organization that knows what matters. The early bugs are ironed out and the processes work. And of course, you're ahead.

So how do you close a gap like that?

What the legacy carmakers are doing now

The answer is almost always the same: they buy the skills and the technology from outside.

I covered that for VW in the last issue. Stellantis is doing much the same.

Gartner scores that too, by the way: whether a carmaker develops its technology itself or buys it. Buying counts for less.

Buying isn't wrong in itself. It works as long as the carmaker understands the technology. Ideally better than its supplier does.

Because only then does it know what it's actually buying. And only then does it keep control over its own product.

And that's exactly where the risk lies. You can't buy your way through a shift like this.

A company that doesn't build a product generation itself never learns what goes wrong along the way. It builds no skills of its own. And no organization that can deliver products like that.

So the learning gets outsourced to the supplier. The supplier gets better with every generation. The carmaker doesn't.

And then the whole thing feeds on itself:

• The old organization slows the technology down

• You fall behind and have to buy from outside

• Which makes it harder to attract good people and investment

• And the organization stays the way it is

A downward spiral.

My Take

I think the problem is bigger than the car industry.

In Germany, we never really made it into the information age. There are plenty of reasons for that. I'll focus on 2:

1. We simply never needed to. Our industries from the last century were strong enough to carry us for decades. When you're winning, you don't have to think about the future

2. We're a society that distrusts new technology. We don't try new things. We wait until the risk is gone. That's actually sensible. It just means we always come last

That worked for a long time. A very long time. And somehow we always got through.

Until now.

Because suddenly the old business models don't carry us anymore. And not just in one place. It feels like everywhere at once.

The world now stands at the threshold between the information age and the AI age. And we still have one foot in the industrial age.

That goes far beyond cars, of course. But the car industry is right in the middle of it.

Carmakers are mechanical engineering companies at heart. And the people making the decisions there today built their careers in the old world.

We talk about software a lot. But when it really counts, the money goes somewhere else.

Gartner's own verdict: the car is now the most technologically complex consumer product in the world. And yet most carmakers are still not run like technology companies.

And today, a technology company is simply a software company.

So, back to the question we started with: when is all this software in the car going away?

It's not going anywhere. It was always more than the karaoke app. We just still haven't fully understood that.

Take that lightly and you don't lose a feature. You lose the industry.

🔗 gar | ane | ait | ev | li | bmw

That’s all for today.

Until next week,
Philipp

And as always: If you find value here, share it with someone who should read it too. That helps me a lot.

Everything else I’m working on is here →

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Welcome to Issue #129 of The German Autopreneur.

I'm back from the summer break. And we start with the story all of Germany has been talking about for weeks: Volkswagen.

Plant closures, job cuts, and since last Thursday a cost-cutting plan the supervisory board has approved. In 2 weeks VW also drops out of the Euro Stoxx 50, the index of the 50 biggest listed companies in the eurozone. And ironically, it's Nokia that's taking its place.

VW has become the face of the crisis in the German car industry. And a little bit the face of the whole country.

So everyone has an opinion on it. And I think most of that debate misses the point.

So today we'll look at:

• What's actually happening at Volkswagen right now

• The biggest myth in the current debate

• What it means for Germany, and whether VW survives it

What the fight at VW is about

First, who wants what. At Volkswagen, 2 sides are up against each other.

One thing about German companies before that, because the whole fight runs on it. A company this size has 2 boards. A management board runs the business. And a separate supervisory board has to approve the big decisions. Half the seats on that supervisory board belong to the workers.

1) The management board wants the biggest restructuring in the company's history. Its plan leaked this week. It wants to:

• Wind down car production at 4 German plants: Emden and Zwickau in 2031, Hanover in 2032, the Audi plant in Neckarsulm in 2034

• Move that production to the Czech Republic, Slovakia and Poland

• Cut 50,000 jobs worldwide (together with the 50,000 agreed since 2024, that's almost 1 in 6 jobs)

• Kill half of the group's models, from around 150 down to 75

• Shut down the SEAT brand

• Spin off the core VW brand and the components division, so they sit legally outside the parent group. That would give the workers and the state less say over them

• Sell, close or merge 700 of the group's more than 2,000 companies

• Target: €30.9 billion in operating profit in 2030. More than 3x what VW made in 2025 (€8.9 billion)

2) The workforce and the state of Lower Saxony are against it. What they want:

• The workforce wants to keep its jobs. When CEO Oliver Blume pitched the plan at the headquarters in Wolfsburg, he got booed

• Lower Saxony owns 20% of VW and wants to save every site. One detail stands out: state premier Olaf Lies no longer talks about cars. He talks about industrial jobs. The plants have to stay, and what gets built in them matters less

So in the end the supervisory board had to decide. And for a long time it couldn't:

• The supervisory board has 20 seats. 10 belong to the workers, 2 to the state of Lower Saxony. And the state almost always votes with the workers

• Moving production out of a VW plant needs a 2/3 majority. That's written into the Volkswagen Act, a law made for this one company

• So the management board can't get its plan through without the workers. It tried in July and failed

The short version: the management board wants out of Germany. That's how it wants to save VW. The workforce and the state want to keep Volkswagen in Germany at any price. That's the conflict. And there's something absurd about it.

Then came the deal. Not one vote against it.

What was actually decided

What they agreed on is the plan from the leak. And now both sides are celebrating:

• The management board got it in writing: car production in those 4 plants ends between 2031 and 2034

• The works council and IG Metall (Germany's metalworkers' union) got it in writing that no plant will be closed. And that the spin-off is cancelled

Both of those are true:

• Winding a plant down isn't a closure. And the management board doesn't need anyone's approval for that

• And the spin-off is only postponed. The supervisory board and the shareholder meeting decide in 2027 at the earliest

This is how the restructuring at VW has worked for years. Never one big move. Always one more piece of it.

Back in 2021, then-CEO Herbert Diess already wanted to make deep job cuts. Shortly after, he was gone. At the end of 2024 came the first big deal. Now the next piece. And in 2027 there will be more.

So everybody is arguing about the German plants. The real problem is somewhere else.

The mother of all VW problems

For decades the German car industry ran on a simple model:

• Develop high-tech cars at home

• Sell them all over the world

The core of it was Germany's technological lead. German cars were better. So customers around the world paid extra for them. And that extra paid for expensive factories at home.

The most important market was China. For every German carmaker it was the biggest and the most profitable, and for VW most of all.

This is what 2019 looked like:

• Almost 4 of 10 VW cars were sold in China, 4.23 million of them

• €4.4 billion in profit came out of China alone. No other market delivered that much

And this is 2025:

• 2.69 million cars sold in China, down by more than 1/3

• Profit from China fell to just under €1 billion, down by almost 4/5

So between 2019 and 2025 the China business collapsed. In the rest of the world, sales fell by only around 7% over the same period.

Think of VW's business model as a house of cards. China was the card holding it up. It got pulled out over the last 5 years, and now the whole thing is coming down.

Which means VW's problems started in China. Without China there would be no crisis today. And yet Germany tells itself a different story.

The myth that Germany is too expensive

Germany has settled on one answer. The country is too expensive. Wages too high, energy too expensive. Get those down, and the car industry is saved.

That's the mistake.

Because sales collapsed in China, not in Europe. And VW builds its Chinese cars in China. At Chinese wages and with Chinese energy prices.

Don't get me wrong: Germany does have high costs. They just have nothing to do with the collapse in China.

So German plants can cut wages and energy costs as much as they like. It won't make the products any more competitive in China.

The problem is the product. Products come out of engineering, and VW's engineering sat in Germany. It stopped delivering what the market wants.

So there are 2 different fights, and they keep getting mixed up.

1) The fight over production

In production, Germany is not competing with China. It is competing with Slovakia, Hungary and the rest of the EU.

Industrial labor costs in 2025:

• Germany: €49.50 per hour

• Slovakia: €19.30 per hour

That's a fight Germany can't win. It's one of the richest countries in Europe, and the wages come with that.

And it shouldn't want to win it either. A race with the poorest EU countries over who builds cars cheapest can't be the goal. Germany was never competitive in production. It could only afford production because it had the engineering.

2) The fight over engineering

That was the business model. That's what made German carmakers strong. In engineering, Germany does compete with China and the US. But the playing field has moved:

• It used to be about engines and mechanics. Mechanical engineering, the German core skill

• Today the most valuable technology in a car sits in the battery, in software and in AI. And that's exactly where Germany is weak

So Germany is losing more than production jobs. It's losing the engineering. That work moves to where the new technology is built, and that's China and the US.

But the debate is about production costs. About the part Germany was never strong in.

And there's a reason for that. Until the end of 2030, VW can't lay anyone off in Germany at all. That's the deal with the union.

So if VW wants to cut jobs anyway, people have to leave on their own. And people leave more easily when the mood is bad. Which gives VW its own reason to keep the too-expensive story running.

But none of that changes the real problem: the product. So how does VW plan to fix it?

This is Volkswagen's rescue plan

Cut out the noise and the plan does 3 things.

1. Shrink production and move it

In China production really is shrinking. VW simply sells far fewer cars there than it used to. It has already taken out capacity for more than 1 million vehicles.

In Europe VW wants to take out capacity for around 500,000 vehicles.

At the same time, production moves to cheaper sites. That's the part Germany argues about.

And this is the part that always gets mixed up. The assumption is that the German plants are sitting half empty. In fact they run at 81% capacity. That's a good number. They're just more expensive than the plants abroad:

• €6,490 in factory cost per car in Germany

• €2,832 elsewhere in Europe

That gap is too wide to close. The fight is lost before it starts, so production moves to where it's cheaper.

2. Sell off the side businesses

VW is more than a carmaker. The group also includes brands, plants, a finance arm, trucks, motorcycles, consultancies and stakes in football clubs. Around 700 of those companies are supposed to go.

Already sold: the consultancy MHP went to Tata. The majority of Italdesign went to UST, and the majority of Everllence to Bain Capital.

Also on the list: Ducati, Moia, Europcar, part of Traton, the football stakes. And IAV (which develops cars for other manufacturers) is set to go to Accenture.

The goal is a smaller group that focuses on its core business: building cars.

3. Buy the engineering instead of doing it in-house

This is the most important part of the plan. Vehicle engineering is the heart of a carmaker. At VW it sat in Wolfsburg, Ingolstadt and Weissach (the towns where the group develops its cars). And a large part of it now goes to partners.

According to the leak, VW is cutting technical development by 35-50%. Investment and research drop by €50 billion over 5 years.

What VW still does itself: body, chassis, interior, design and final assembly.

What VW buys in:

• Software and electronics: from Rivian in the West, from XPENG in China

• Autonomous driving (the AI in the car): from XPENG in China, and in the West likely from Nvidia, Wayve or Mobileye

• Battery: the cells come mostly from suppliers

So VW is giving away the one thing the German model was built on. Its engineering. The question is why.

Why VW is outsourcing its engineering

The usual explanation: VW slept through the shift. That's only half true. Yes, VW should have reacted earlier. But by 2020 at the latest it did react. With a lot of money.

Almost no company in the world spends more on research than VW. €21 billion in 2024 alone. That's 8th place worldwide, across all industries. More than Mercedes and Tesla together.

So the money was never the problem. The problem is what came out of it:

• Software: VW's own software unit CARIAD lost more than €10 billion in 5 years. The software came late and was never competitive

• Autonomous driving: first Argo AI with Ford, shut down in 2022. Then the alliance with Bosch, ended this year

• Battery: VW bet on Northvolt and was its biggest shareholder. Northvolt went bankrupt. The stakes in QuantumScape and Gotion are up for sale. And PowerCo (VW's own battery company) is supposed to find outside investors

So VW spent a lot of money. It just never turned that money into results. It burned it.

And at some point VW made up its mind: we give up. What we can't build ourselves, we buy.

My Take

I think we in Germany are talking about the wrong thing. We argue about plants and jobs. About the part we're going to lose anyway. And we look past the engineering. That's what made those plants and those jobs possible in the first place.

I understand both sides.

For the management board, the only way out is leaving Germany. And honestly, from where it sits there's no logical reason left to stay.

Germany was a great place to build cars around the combustion engine. Everything that went with it sat here: the suppliers, and the deep knowledge of the powertrain. That's what made it work.

The car has moved on since then. What matters now is batteries, software and AI. And for those Germany has nothing to build on.

What's left is the highest labor costs in the European car industry. The only thing still keeping VW here is its own history. Nothing else.

The workforce and the state want to keep their jobs and their share of the value chain. That makes complete sense too. The 2 things just don't fit together.

Which leaves 2 questions. What does all this mean for Germany? And will VW survive it?

The German model was simple: our cars are better, so they cost more. That's exactly what's gone now. Because if VW buys its technology, a Volkswagen is no longer better than the competition. At best it's level with it. Rivian and XPENG sell that same technology to other carmakers too. Or build it into their own cars.

So VW can't afford to be more expensive than the competition anymore. Then the price gets set by whichever company sells the same technology cheapest. And that's the Chinese carmakers. That means: VW has to come down to their price level, or it has no chance.

And that decides the future of the German plants. We could only afford them because customers paid extra for German technology. But nobody pays that extra anymore. Which means we can't afford them.

And that brings us back to Nokia.

15 years ago Nokia was the biggest phone maker in the world. The phones were well built. Nokia lost anyway, because Apple and Google had the better software.

Then Nokia bought its software from Microsoft. But it wasn't enough. Eventually Nokia stopped building phones.

Today Nokia builds network technology: mobile networks, fiber, the connections between data centers. That business is growing because of AI. And on the stock market Nokia is now worth more than VW again.

Volkswagen is where Nokia was 15 years ago. The cars are well built. Just not with VW's own technology.

Buying the software didn't save Nokia. VW thinks it can pull off what Nokia couldn't. That's the bet. It could work, or it might not.

The sad part: for Germany it doesn't matter how it ends. We lose the engineering. And sooner or later, production too.

Which is exactly why I want to end on something positive.

20 years ago China was where Germany feels it is today. Behind on the technologies that would matter. No market leaders of its own.

Then they made a plan. And they stuck to it for 20 years.

What I'm saying is this: we in Germany can do the same. It's in our own hands. And I'm sure it will get better again.

PS: I spoke to CNBC about these job cuts back in July. Here is the clip

🔗 wiwo1 | wiwo2 | hb | ai | eu | mm | bl | vw | jrc | riv | sp

That’s all for today.

Until next week,
Philipp

And as always: If you find value here, share it with someone who should read it too. That helps me a lot.

Everything else I’m working on is here →

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This issue is supported by Berylls by AlixPartners

For today's newsletter I spoke to Dr. Andreas Collet. He co-authored the Battery Electric Truck series at Berylls by AlixPartners. His analysis and his numbers went into this issue.

Read the Battery Electric Truck series

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

Welcome to Issue #128 of The German Autopreneur.

We talk about China and electric cars a lot. But it's almost always about passenger cars.

Not today. Today it's about trucks.

And this is a completely unemotional market. Nobody drives down the highway thinking: what a beautiful Mercedes Actros. A truck is a tool.

But that tool carries 3/4 of everything moved on land in Europe. Your parcel, the shelf in the supermarket, all of it.

And right now this invisible market is going through the same 3 shifts as the car market: electric, software, autonomous driving. With the same challenger: China.

We've seen this film before. With cars, we're watching the ending play out right now.

So the question today: does the same thing happen with trucks?

To find out, I spoke to Dr. Andreas Collet. He's a commercial vehicle expert at Berylls by AlixPartners.

Today we'll look at:

• Why buying a truck comes down to the numbers and nothing else

• Why the electric truck gets cheaper than diesel before 2030

• And whether the Chinese are about to take over the European truck market too

A Market Without a Champion

So who is the Volkswagen or Toyota of the truck market?

The answer: there isn't one. What you get instead are 2 truths, and both of them hold:

1) By revenue, Europe leads:

• The biggest truck group in the world is Daimler Truck: around €49 billion in revenue and 420,000 vehicles sold in 2025. Mercedes still owns 1/3 of it

• Behind it: Traton (Volkswagen's truck arm, with MAN and Scania), the Volvo Group (the truck company, not the car brand) and the US group PACCAR

2) By units, China leads:

• Chinese manufacturers sell more than 1.1 million heavy trucks a year, around 70% of them at home

• Market leader Sinotruk alone accounts for around 300,000 of them

There is no global champion: the 7 biggest groups together hold less than 30% of the world market by revenue.

The market splits into separate worlds:

• Europe: Daimler Truck, Traton and the Volvo Group together hold around 2/3 of the market, and the Volvo brand leads with around 19%

• China: a world of its own. More heavy trucks are sold in China every year than the biggest Western manufacturer sells worldwide

Nobody builds a world truck. And the reason is simple: a truck for European highways is a completely different vehicle from one built for Indian roads.

That's the structure. But the part that really matters comes next.

Who Actually Buys a Truck?

We buy a car with our gut: brand, design, status. With a truck, none of that counts.

And the person who buys it isn't even the one who drives it: the trucking company orders, the driver drives. And the trucking company wants exactly one thing: for the truck to make money.

The calculation behind that is called TCO (total cost of ownership): the full cost over the truck's lifetime, usually around 10 years. And it splits roughly into 3 blocks:

• 1/4 purchase price

• 1/4 driver

• 1/2 operating costs: diesel or electricity, maintenance, tolls

These days the biggest block is operating costs. The purchase price is only 1/4 of the truth. Andreas puts it like this: whether a truck costs €50,000 more "doesn't really matter in the end." What matters is what it earns over 10 years.

And a truck only makes money when it's moving. One that stands still costs money. Which is why something else hangs on this calculation: trust.

The trucking company has to trust that its manufacturer keeps that truck running for 10 years. A workshop nearby, spare parts, someone who turns up when something breaks.

Nobody pays extra for the logo on a truck. But everybody pays for that trust. It's the real moat in this market.

But that whole calculation is about to change. In 3 places at once.

Trucks Face the Same 3 Shifts as Cars

With cars, we always talk about 3 big technology shifts:

• from combustion to electric

• from hardware to software

• from driving yourself to autonomous driving

So let's apply the same 3 to trucks.

1. Electric

For trucks, electric is a done deal too. And the reasons are the same as for cars: regulation and cost.

The regulation: trucks are only 2-3% of the vehicles in Europe, but they cause around 25% of road emissions. Which is why the EU set fleet targets for trucks as well: -45% CO2 by 2030, -90% by 2040.

The cost: Berylls by AlixPartners worked it out per kilometer for European long-haul:

• 2025: diesel €1.35/km, electric €1.42/km

• 2030: diesel €1.42/km, electric €1.28/km

• 2035: diesel €1.49/km, electric €1.13/km

So before 2030 the electric truck becomes cheaper than diesel in long-haul. And as we know: this market runs the numbers ruthlessly.

But what about range? That's exactly what I asked Andreas.

His answer: a modern electric truck does 400 to 500 km in real conditions. The top models manage 700 to 800. A driver hardly ever needs more: after 4.5 hours at the wheel, EU rules force a break. Andreas: "Usually I don't need the 800 kilometers of range, because I'm not allowed to drive them."

And the truck charges during that break anyway. So the real bottleneck is the charging infrastructure, not the range.

2. Software

With cars, the car itself becomes a software product. We know the game: updates over the air, and the car gets better after you buy it.

With trucks, software counts where it saves money: fleet management and remote maintenance. Both keep the truck on the road. And software is the ticket into the biggest shift of all:

3. Autonomous driving

1/4 of the cost is the driver, and autonomous driving wipes out that quarter.

And then there's the driver shortage. Europe and the US are already short of drivers today. And by now it's gotten so bad that good drivers pick their trucking company. Not the other way around.

Autonomous driving solves both at once: the cost and the missing drivers. Which is why for trucks it's a business model from day 1.

And it's already happening. The 2 most important players are in the US: Aurora and Kodiak. Both run real freight with nobody in the cab. Aurora on public highways, between Dallas and Houston. Kodiak off the public road network, in the oil fields of Texas. In other words, where the conditions are easier.

So with trucks we're at the same point as with cars: the technology is right at the edge of scaling.

China is testing at scale too, but mostly still with a safety driver on board. In Europe there are only a handful of pilot projects.

Is China Taking Europe's Truck Market Too?

With cars, China is the disruptor. In just a few years the Chinese built an entire car industry from scratch. They overtook the established players on cost and technology. And now they're pushing out into the world market.

With trucks, they're running the same playbook.

So let's start by looking at the Chinese truck market:

• 29% of new heavy trucks in China run on electric or plug-in hybrid (most of them fully electric). In December 2025 it was even 53.9%, just before a subsidy ran out

• More than 400,000 electric trucks were sold in China in 2025, across all size classes. That's more than 90% of the global volume

• But you don't see much of it on the road yet: only around 4% of all trucks in China run on electric. And the switch is only just starting

• By 2030, 40% of new heavy trucks are meant to be electric. That's what China's current plan says

What drives all of this is the battery: the biggest cost block in an electric truck. And no country controls it the way China does. Around 80% of the global battery supply chain is in Chinese hands.

And you can see it in the price: a Chinese electric truck comes in around 30% below a comparable European model. At an average of around €320,000, that's roughly €100,000 less.

My first reaction: but they can't match the quality of a European truck. Right?

Andreas on that: "That's a bit of the old arrogance talking."

The Actros was the benchmark for decades. Andreas says that gap is basically gone today: "One to one, just like in passenger cars."

We can see how that plays out with buses. Technically a bus is almost a truck. And Chinese electric buses have been running through Europe for more than 10 years, including in German cities. But they still haven't taken over the market.

And the next step is already under way. The Chinese are building in Europe:

• BYD is massively expanding its commercial vehicle plant in Hungary

• At the former MAN plant in Steyr (Austria), Steyr Automotive now assembles trucks for Chinese manufacturers. One of them looks almost exactly like a MAN. Deliberately, of course

None of this is about dodging tariffs, by the way. The EU tariffs on Chinese electric cars only apply to passenger cars. On trucks there's just the normal import duty of around 10%.

So why build in Europe if they don't have to?

Because they're building the one thing you can't export: trust. The service network, being close to the customer. Someone who's there when the truck breaks down.

With cars they learned one thing: the best price is worth nothing if the customer doesn't trust you.

So with trucks they're turning it around: trust first, volume second.

And you can see it in 2 numbers:

• So far the Chinese have sold almost nothing in Europe: Steyr Automotive assembles around 800 trucks a year, MAN builds more than 60,000

• But the service network is already there: through partnerships they have around 700 service points. Daimler Truck has around 3,000

And if they want it to go faster, they might simply buy that trust. With cars it went exactly the same way: Geely bought Volvo Cars, SAIC bought MG.

And Andreas says the Chinese attack on Europe doesn't even show up in the big market forecasts. Not yet.

But everyone knows by now that they're coming. Daimler Truck CEO Karin Rådström says: "I expect an offensive in trucks as well." And: "It's up to us to be prepared."

At the end I asked Andreas one last thing. The Chinese build the cheaper product, at the same technology and the same quality. So won't they simply run Europe over?

My Take

So: with trucks, the same thing is happening as with cars. Only faster. Probably much faster. You barely notice it yet. But that's most likely just the calm before the storm.

Why faster?

With cars, the brand was a shield. Even when the Chinese had the better technology AND the lower price, customers stayed with the brands they knew. The reason was the brand. The status. The habit. The trust.

That shield bought the carmakers time to catch up on price and technology.

With trucks, that shield doesn't exist. Here only the numbers decide. Whoever makes the better offer gets the order. Which is why the truck market is probably far more open to attack than the car market.

And there's something much bigger behind all of this. Talking to Andreas really drove that home for me.

More than 15 years ago, China started building the complete battery supply chain. From the mine to the finished cell. With enormous amounts of money, years without profit. But with a goal that was bigger than the car.

Because the battery reaches far beyond the car. It's the basis for almost everything that's going electric right now. Cars need batteries. Buses need batteries. Trucks need batteries. And the charging hubs that are supposed to charge all of it? They need huge energy storage. Which again means batteries.

In the end it all comes down to the same thing: everything needs batteries. And the batteries come from China.

And that was the brilliant move. China was never only after the car market. It was after everything that hangs off the battery. And that plan is working out right now.

And yet Andreas ends up surprisingly optimistic.

His argument: this time we know the script. With cars, we didn't take China seriously. With trucks, we know exactly how it runs. Through price. Through local production. Through bought trust.

And we know where our lead is. In trust. The service network, being close to the customer, 10 years of reliability. Exactly what China still has to build up or buy.

And there's one more thing: a Chinese truck still has to prove it's worth something after 10 years. As long as that residual value is unclear, it stays a risk in the TCO calculation.

That gives Europe a lead. But of course only for a while. We had one with cars too. And we didn't make the most of it.

This time we know better. We've seen this film before. Now it's running again. Only now we know the ending. And we can prepare.

PS: This is the last issue before the summer break. See you in September 🏝️

🔗 be | iea | ic | eu | he | el | ma | au | cv

That’s all for today.

Until next week,
Philipp

And as always: If you find value here, share it with someone who should read it too. That helps me a lot.

Everything else I’m working on is here →

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Welcome to Issue #127 of The German Autopreneur.

Early July, in Sindelfingen. That's the town near Stuttgart where Mercedes runs one of its largest plants. Around 20,000 workers stood outside the gates and chanted: "Ola out." Ola Källenius is the CEO of Mercedes.

The trigger was an email. The sender: the entire board. The recipients: every employee in Germany.

The key line: "We should all work more, in every area, for the same money."

For many, that means going from 35 to 40 hours a week. 5 more hours for the same pay.

Over the past few weeks, a lot of Mercedes employees have written to me. The message was always the same. Look at what's happening here.

Mercedes calls the plan a "productivity offensive." Insiders tell me it will backfire.

Today I'll look at:

• What the board's email really says

• Whether more hours actually make Mercedes more productive

• What Mercedes actually needs

Mercedes Blames Everyone but Itself

The email opens with pride. 100 years of Mercedes-Benz: "We know how history feels."

A few lines later, the message changes. Now everyone has to work more. For the same pay. Roll up your sleeves. That's the board's answer to the crisis.

The board names 3 causes:

1. Tariffs and geopolitics

2. The price war in China

3. Germany as an expensive place to build cars

And the numbers are brutal:

• 837,200 cars sold in the first half, 7% fewer than a year earlier

• China keeps sliding: 28% fewer cars in the first half, and 30% fewer in Q2

• Auto margin of 4.1% in Q1, down from 7.3% a year earlier

• Pure EV share of 11.6% in the first half (BMW: 17.7%)

So the crisis is real. But according to the board, the causes sit mostly outside the company. Plus one inside: Germans don't work enough.

Why Germany? The board says 2 of 3 employees work here, but only 15% of its cars sell in Germany.

Germany is too expensive and the plants are too big. So Mercedes is moving work abroad. The email says it plainly. More product and admin work will go to other countries.

At the same time, Mercedes is expanding its plant in Kecskemét, Hungary. About $1.1 billion is going in. The site will more than double in size. It will become the largest Mercedes factory in Europe.

So German workers should work more. For the same pay. Does that fix the crisis?

Mercedes and Its Bullshit Culture

Productivity comes down to 1 question. How much comes out for the hours that go in?

Mercedes' plan adds hours. But nothing more comes out per hour. So this isn't a productivity offensive. It's a working-time offensive.

Mercedes never had a problem with the number of hours. The problem was what happens inside those hours. I worked there myself for almost 10 years.

In a company that size, a large share of the work creates no value. People work on the process, not the product.

Steve Jobs once put it this way: "People get confused that the process is the content." As companies grow, they build processes. The goal is to make their own success repeatable and to avoid mistakes.

But at some point they treat the process itself as the goal. And they forget what it was all about. The product.

That's exactly what happens at Mercedes. Everyone follows the process. Because it has always been done that way. Not because a better car comes out at the end.

One example. Purchasing has a fixed target: negotiate 20% off every contract. The suppliers know this. So they add 20% up front. Purchasing negotiates it back down and reports the target as met. The supplier gets the price it wanted. The final offer is the same as before. Nobody saved anything. But the metric looks good. And everyone is happy.

This pattern runs through the whole structure. A company like this has dozens of divisions and departments. Each one works for itself, in its own silo. Every silo has its own language, its own acronyms, its own routines. A newcomer needs months to understand the language.

For the silos to work together at all, you need translation. And that happens in committees. Every decision gets a PowerPoint, gets discussed in one committee, and gets passed up to the next. A single decision wanders from meeting to meeting for months.

It's work. Everyone is busy. But none of it reaches the customer.

On top of that, many people sit in roles they aren't qualified for. They slid into these positions over the years. Through reorganizations, or simply because they had been around a long time.

Often they don't really understand their own field. So they talk about what they do understand. Processes, formats, wording.

And where the expertise ends, the buzzwords begin. Suddenly everything is "data-driven," "customer-centric," "AI-powered." It sounds cool. It sounds like innovation. But it's usually an empty phrase. People fake innovation by using "innovative" words. Nothing actually happens.

This culture even has a name. Former Daimler CEO Jürgen Schrempp once called his own headquarters the "Bullshit-Castle."

The productivity offensive changes none of this. More hours on top of a broken way of working don't produce a better result. Just more of it. More meetings, more PowerPoints, more bullshit.

The way Mercedes works is the problem. Not the hours. And this offensive hits the wrong people.

The Cuts Always Land at the Bottom

The high performers pay for it.

The 35-hour week was never what employees wanted. Mercedes made it the rule. Many wanted to work more. But they weren't allowed to.

Only the best got 40 hours. As a reward. More hours, more money.

Now those are exactly the people who lose out. They keep the 40 hours. But their pay drops by 12.5%.

Everyone else is supposed to work longer. On top of that, Mercedes is pushing its annual bonus into next year. Or scrapping it altogether. And it's cutting remote work sharply.

For shareholders, it looks different. In April, Mercedes paid out about $3.6 billion in dividends. Even though its profit had just been cut in half.

Around 20% of that goes to two large Chinese shareholders: Geely and BAIC. Both are building competing brands at the same time. So it goes to the very players Mercedes blames for the crisis.

Here's what a company insider told me:

• "One savings program follows the next. Nobody takes the board's announcements seriously anymore"

• "The board asks us to give things up. But it doesn't lead by example." (Ola Källenius paid himself about $9.5 million for 2025)

• The cuts always land at the bottom. At least that's how it feels to everyone

• "The productivity offensive will lead to less productivity. That was a massive management mistake, if that was the real intention"

If. Because maybe this isn't about productivity at all. Mercedes wants to cut staff in Germany. And that's nothing new. In the last year alone, the workforce shrank by more than 10,000.

Now even more are supposed to leave. Under the savings program "Next Level Performance," Mercedes recently ran a buyout offer. Some who left voluntarily got more than $550,000. But too few took it. 5,500 out of around 40,000.

Mercedes wants to get rid of its people. But the people want to stay.

And Mercedes can't just fire them. A job guarantee runs until 2034.

That leaves one path. Make the job so uncomfortable that they leave on their own. More hours, less remote work, no bonus, no future.

Read the measures that way, and they suddenly make sense.

But whether it's more hours or fewer people, both miss what Mercedes really lacks.

The Transformation Theater

The email tells the workforce what to deliver to fix the crisis. But the workforce didn't cause it. And if you didn't cause a problem, you can't really fix it.

So let's flip the question. What would the board actually have to do?

Mercedes has 2 real problems:

1. The company has fallen behind on the future technologies: batteries, software, and AI. That's why sales are collapsing in its most important market, China

2. To catch up, Mercedes would have to turn from a hardware company into a software company. It has been failing at exactly that for 15 years

Part of the problem is that there's no vision for the future. Why should anyone still buy a Mercedes in 2030?

Mercedes made plenty of bets on the future. Then scrapped almost all of them again.

The company has no strategy and no plan.

With a brand like Mercedes, you don't just buy a car. You buy the myth. You buy what it stands for. And when Mercedes no longer knows that itself, it burns its most valuable asset.

Mercedes knows it should change. But Mercedes doesn't want to change. So it takes the middle road. It fakes change.

It talks about change, renames things, builds new buzzword slides. Then keeps working exactly as before.

Why? Fear of losing power. Real change would break up power structures. Many managers rose through the old system. Today they're the ones in charge.

An insider put it this way. Mercedes couldn't afford the really good software people even 10 years ago. They've been gone for years. And the ones still there just want out.

One fitting detail. The CIO was supposed to drive this exact transformation. She's leaving on September 1. Her own decision.

In the end, it's a leadership team that won't push change through. And an organization that only pretends to. Everyone talks transformation. And keeps working the way they always have.

My Take

No question, the pressure is real. Mercedes has to act. But this offensive is the wrong answer. To me, it's mostly one thing. Posturing. The board shows toughness and a will to act. But it changes nothing about the structural problems.

The fix is fewer meetings, fewer silos, less bullshit. That does far more than 5 extra hours a week.

But the bigger question runs deeper. How does a hardware company become a software company?

And it looks like the German carmakers have already answered that for themselves. Their answer? Not at all.

Nobody has ever turned an old industrial company into a software company. There's no precedent for it. In any industry.

If that's true, the offensive suddenly makes sense. Then it isn't about productivity. It's about shrinking the old German part as much as possible and building something new somewhere else entirely.

With new people, without the old culture. No longer in Germany. What stays here is just the cuts.

But wherever they start fresh, one question remains. Not: how do we squeeze out more hours? But: who do we want to be in 2030?

That's the email the workforce is really waiting for. But it won't come. And the reason is sad. There is no answer. Mercedes has no vision.

The world has changed. And with it the car business. Different skills matter now. Different experience.

And it's not only the regular employees struggling with that. It runs through every level. From middle management up to the board.

That's not an accusation. Many did a great job for decades. They made "Made in Germany" what it is.

But for today's challenges, many of them are no longer the right people.

In the end, only the board can solve this crisis. Not the workforce. But for that it would need the right people. And an idea of the future. Mercedes has neither right now. And 5 more hours a week won't change that.

🔗 wiwo | hb1 | hb2 | re | ts | bi | cio | mb

That’s all for today.

Until next week,
Philipp

And as always: If you find value here, share it with someone who should read it too. That helps me a lot.

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Welcome to Issue #126 of The German Autopreneur.

The world's biggest car market is crashing. In the first half of 2026, car sales fell 20%.

In Germany, the story often goes like this: The bubble has burst. China inflated it with subsidies for years. Now the money is gone. And everything is collapsing.

At the same time, China's auto industry has never been stronger: record exports, record market share at home, record EV share.

How can both be true?

Today I'll break down what's really going on. Where China's car market stands in the summer of 2026. And what's behind the headlines:

• Why the crash is no accident

• Why German brands barely exist in the market that's growing

• And why China's best-selling car isn't a Chinese brand

China's Car Market Lost 20% in 6 Months

The first half of 2026 (retail sales to end customers):

• 8.75 million cars sold. Down 20% from a year earlier

Here's what June looked like:

• -21% vs. June last year. The 9th straight month of decline

• +9% vs. May

• 1.04 million NEVs sold in June (-7%). NEV means new energy vehicle: an EV or a plug-in hybrid

• 62.8% of all cars sold in June were NEVs. The 3rd straight month above 60%

So: 1/5 of sales is gone. In one year.

Sounds dramatic. 2 things are behind it:

1. The first one is easy to forget. China is still in an economic crisis. It has been since the property bubble burst in 2021 (think Evergrande). Almost 1 in 6 young Chinese still can't find a job. If you're worried about your job, you don't buy a new car. You save. For context: the average urban salary in China is around 6,000 yuan a month. About $850

2. The second one is the immediate trigger. At the end of 2025, China cut back its car-buying incentives. One example: EV buyers were exempt from the purchase tax for over 10 years. Since the start of 2026, they pay 5%. Anyone who wanted a car anyway bought one in 2025. Those sales are missing now

But the state didn't cut that money by accident. Behind it is China's industrial playbook, a pattern I've covered here many times:

1. The state pumps subsidies into a market

2. An oversupply builds up, with far too many manufacturers

3. The state pulls the subsidies back

4. The market sorts out the weak

And there's a lot to sort out. China still counts 129 EV brands. AlixPartners expects only about 15 of them to make money by 2030.

So the crash is partly intentional. The low point was in February. Since then, the market has been recovering month by month.

But there's something else: the market didn't crash evenly.

China Has 2 Car Markets

Look at the powertrains: combustion cars fell much harder than NEVs. And that's tipping the whole market toward EVs.

Recently I read: "EVs have overtaken combustion cars in China for the first time."

That confused me for a second. Didn't that happen already?

Here's what actually happened:

• NEVs overtook combustion cars back in 2024

• Pure EVs (BEVs) only did it in April 2026. For the 1st time, more pure EVs were sold than combustion cars

• Plug-in hybrids resolve the apparent contradiction: pure EVs and pure combustion cars are each still below 40%. All NEVs together hit 63%

So: the incentives are being phased out. And the EV share keeps rising anyway. The shift to EVs is now self-sustaining.

But here's the real split: in China, combustion and electric split into 2 separate markets, with different players:

1. The combustion market: home turf of the foreign brands. VW and Toyota fight over a pie that shrinks every year

2. The NEV market: now the bigger one. And firmly in Chinese hands

At first glance, only the powertrain separates the 2 markets. In reality, it's something else. What defines an NEV in China is software and AI. The Chinese have a name for it: smart car.

That's why the real battle in China is no longer combustion versus electric. It's dumb car versus smart car.

You can see how separate the 2 worlds are in the bestseller lists. Only 3 groups appear in both the combustion top 10 and the NEV top 10: Geely, SAIC, and Chang'an. All 3 Chinese. Not a single foreign brand makes both lists.

For the German brands, that's bitter. The NEV market is growing. And they barely exist in it.

And even in the shrinking combustion market, they're losing ground: last year, Mercedes was still in the top 10. Now it's not. VW is still the number 1 there. But that's the market that's shrinking. Not a single German brand has made the jump into the growing one.

Back to the overall market. One number doesn't fit the picture: retail sales to Chinese customers fell by a good 20% from January to May. But China's factories built only 4.2% fewer cars.

Someone is buying those cars. Just not Chinese customers. So where are they going?

Every 3rd Car Leaves the Country

The answer: the rest of the world. The export numbers, January to May:

• 4 million vehicles exported (+63%)

• 930,000 of them in May. A new monthly record

• 35.4% of all deliveries now go abroad. The 2nd straight month above 35%

• 45% of exports are NEVs (2021: 15%)

China's biggest car exporter is Chery. Not BYD, as many assume.

The comparison with 2024 shows how fast this shift is moving:

The domestic combustion market shrank from 5.8 to 4.2 million vehicles (January to May, 2024 vs. 2026). More than 1/4 gone. In just 2 years. NEV exports more than tripled over the same period.

In plain terms: China's auto industry has swapped out its growth engine. From domestic sales to exports. That's why it can absorb the crash at home.

The top export destinations (January to May):

• Brazil is the new number 1 with 295,000 vehicles (+215%), overtaking Russia

• Algeria is up 380%

• Europe keeps buying despite EU tariffs: Belgium, Italy, and Spain are near the top. The UK has no tariffs and sits in 3rd place

• Only Mexico collapsed, down 37%. The country was long China's backdoor into the US market. Under US pressure, Mexico raised tariffs on Chinese cars to 50%. That door is closed for now

The crash at home is pushing China's carmakers abroad, not slowing them down.

Which leaves the question: how are the foreign brands doing in China?

Only the US Brands Are Still Growing

The honest answer: badly. 6 years ago, Chinese brands held a good 1/3 of their own market. Foreign brands held almost 2/3. Today it's the other way around: 71% is in Chinese hands.

The breakdown by brand origin (factory deliveries January to May, vs. a year earlier):

• US brands: +13.2%

• Chinese brands: -3.2%

• Japanese brands: -14.1%

• German brands: -24.9%

For context: these are deliveries from the factory, including exports.

The Germans are losing the most. The US brands are growing in the middle of the crash.

The US growth is mostly Tesla.

In Germany, you often hear: the Chinese simply don't buy foreign cars anymore. Because the state wants it that way.

That's the comfortable explanation. The catch: it's wrong.

The Model Y was China's best-selling car in June. Not the best-selling EV. The best-selling car across all powertrains. And it was the most expensive car in the entire top 10.

So Chinese buyers do buy foreign cars. As long as the product is right.

To be fair: Tesla is under pressure too. Sales to Chinese customers are down for the year. Xiaomi in particular is taking its customers. The growth comes mostly from exports out of the Shanghai plant. Around half the cars built there go abroad.

Still: no other foreign brand has an EV the Chinese actually want.

That's the view by model. Who leads the overall market? The top 3 across all powertrains:

1. Geely

2. VW

3. BYD

For years, VW was the number 1. Now Geely leads. BYD had even overtaken VW for a while. Right now, BYD is back in 3rd place, behind VW.

VW being back ahead of BYD says little about VW's strength. It says more about BYD's weakness.

No company got hit harder by the subsidy cuts. BYD builds no pure combustion cars, only EVs and plug-in hybrids. So the subsidy stop hits its entire business.

In China, BYD lost around 40% in the first half. Only exports cushioned the blow: sales abroad grew more than 70%. It's BYD's 1st half-year decline in 6 years.

The Germans Sell the Wrong Car

The German problem is structural. They sell almost nothing but combustion cars. In pure EVs, they hold around 1.6% combined.

And that's despite their EVs catching up on the basics: range and charging times are now competitive. The Achilles heel is what makes a car smart in China: software and AI. That's exactly where German EVs fall short.

The Germans now build good EVs. But for Chinese customers, they're dumb cars. And China doesn't buy dumb cars anymore.

The result: it's going downhill. And it's getting faster, not slower.

Mercedes and VW reported their half-year numbers this week. Both show the same thing: the decline in China keeps accelerating:

• Mercedes: -19% for all of 2025, -27% in Q1 2026, -30% in Q2

• VW: -36.6% in Q2 alone. More than 1/3 gone

BMW is holding up best on sales. But it's tipping there too: a few weeks ago, BMW issued a profit warning, mostly because of China.

BMW and Audi haven't reported yet. Right now, nothing suggests the downtrend is stopping.

My Take

For me, the most interesting insight here is the Model Y.

That one car destroys 2 myths we like to tell ourselves in Germany:

1) The Chinese don't buy foreign cars anymore:

Supposedly because the state wants it that way. Except China's best-selling car is a Tesla. Despite all the conflict between China and the US. That should be the end of the myth.

It survives anyway. Because it's comfortable. It shifts the blame away from the product and onto politics. Then nothing has to change.

2) In China for China:

For years, the German industry has told itself: cars for Chinese customers can only be developed in China.

Tesla disproves that too. They develop in California. And they're the number 1 in China.

So it's not about location either. It really is about the product.

The real question is: why can't Germany develop a good product anymore?

Because we've been failing at one thing for 15 years. The thing we call digital transformation. Turning a mechanical engineering organization into a software organization.

A smart car is above all a software product. And you can only build one with a software organization. We don't have one.

And why can't we build one? That's also on us.

We're attempting the rebuild with the very people who made their careers in the old system. They sit in the decision-making positions of the German car groups today.

For them, a real software organization is a threat. It means losing power and authority.

One more time: the biggest transformation of the German auto industry is a software transformation.

And the job of delivering it sits with a massive organization of mechanical engineers, controllers, and MBAs.

I keep coming back to one sentence I heard from Michael Fait, someone who builds car software for a living: "You don't even know what good looks like."

I can't get that sentence out of my head. Because it captures our problem so well.

We're supposed to build a product that's fundamentally software. With people who never really understood software.

Not because they aren't smart. Because they come from a completely different world, shaped by a different system.

And if I don't fully understand what a good software product is. Or what makes a good software organization.

How am I supposed to build one?

How am I supposed to make the right decisions?

That's the biggest problem in the German auto industry.

We have mechanical engineering companies that need to become software companies. And a whole generation of mechanical engineers flailing at it.

And yet, Tesla gives me hope.

They prove it doesn't come down to external conditions or politics. It just comes down to the product.

A good product sells in China. No matter where it comes from.

So this is completely in our own hands.

China is still buying cars. Just not dumb ones.

PS: My partner IPG Automotive just published a whitepaper on modern testing strategies in vehicle development. Read it for free (ad)

🔗 am | cp | ev | nt | rw | nk | re1 | mm | re2

That’s all for today.

Until next week,
Philipp

And as always: If you find value here, share it with someone who should read it too. That helps me a lot.

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Welcome to Issue #125 of The German Autopreneur.

What a week for VW:

• Up to 100,000 jobs could go

• 4 plants are at risk

• VW is ending its self-driving alliance with Bosch

• And it's selling off entire parts of the group

In the middle of all this, one sentence. Moritz Schularick is one of Germany's most respected economists. His prediction: "VW will probably be bought up by a Chinese carmaker. BYD, for example."

Sounds like the end of VW. Today I'll look at whether there's anything to it:

• Why VW has to buy its future technologies instead of building them

• Why the rescue plan from China could backfire

• And the 3 scenarios for how this could end for VW

What's Actually Happening at VW

One step at a time:

1. Up to 100,000 jobs could go:

VW employs 657,000 people worldwide. That would hit almost 1 in 6 jobs. It's not confirmed yet. The supervisory board meets on July 9.

2. 4 German plants could close:

The same leak names Hannover, Zwickau, Emden, and the Audi plant in Neckarsulm.

3. VW is buying its self-driving technology instead of developing it:

In 2022, VW started an alliance with Bosch. Around $1.7 billion reportedly went into it. Now the alliance is over. VW plans to buy the technology from partners instead of developing it in-house. At least for Level 3 and up, where the car takes over the driving.

4. VW is selling off parts of the group:

VW is selling whatever can be sold: engine maker Everllence (majority stake to a financial investor), design subsidiary Italdesign (to a US company), IT consultancy MHP (buyer wanted). Even stakes in battery subsidiary PowerCo and robotaxi subsidiary MOIA are up for debate.

5. VW wants to bring cars developed in China to Europe:

Until now, the rule was: developed for China, sold in China. Reports say the board is now considering the opposite.

6. VW is restructuring into a holding company:

The Volkswagen brand is set to become its own legal entity.

That's a lot for one week. From the outside, it looks like chaos. What's behind it? And how does it all connect?

Why VW Has to Buy Its Future

As with most problems in the German auto industry, the story starts in China.

For decades, China's car market was firmly in foreign hands. Mostly German ones: VW was the number 1 there for almost 40 years.

Then China built its own auto industry and took the market back:

• In 2019, VW still delivered 4.23 million cars in China

• In 2025, it was 2.69 million. A drop of more than 1/3

• And the curve keeps pointing down

China is the epicenter of the VW crisis. There's just one problem: it doesn't stay in China. China's new auto industry is pushing into almost every market in the world. The real danger for VW: what happened in China could now repeat everywhere. Market by market.

But why are Chinese brands winning market share everywhere? Because they've overtaken the established carmakers in the technologies that will define the car.

And there's a reason for that. The product itself has changed:

• Engine, transmission, and chassis used to make up a car's value

• In the new car, it's battery, software, and AI: soon up to 80% of the value

That's what the Chinese have mastered. And where VW is behind.

Catching up on its own didn't work. That was CARIAD: VW's in-house software subsidiary swallowed billions and still didn't deliver a competitive product.

The change in strategy came 2 to 3 years ago. Stop developing. Start buying. From partners who already know how:

• In the US, VW bought into Rivian: Rivian has exactly the software architecture for the new car that VW wanted to build itself with CARIAD. VW is investing up to $5.8 billion and is now Rivian's largest shareholder with almost 16%

• In China, the partner is Xpeng: same principle as with Rivian. VW holds almost 5% and is building a platform for the Chinese market with Xpeng. The technology comes from Xpeng

Which leaves one question: why is VW buying the same technology twice? Once in the US, once in China.

The answer: VW would probably love to buy everything in China. It's cheaper. The problem: the US is locking Chinese vehicle technology out. From model year 2027, connected software from China is banned. From 2030, the hardware too.

Polestar shows how serious this is. The brand belongs to China's Geely Group. At the end of June, the US government decided: from model year 2027, Polestar can't sell new cars there anymore. Chinese technology in the car now means no US market.

So VW pays for both: 2 partners, 2 separate platforms. The industry calls them tech stacks. One for China, one for the US. So far, so smart.

The plan has one catch. A carmaker that buys its core technologies has no edge of its own anymore.

For comparison: BYD builds around 80% of its cars itself. VW has always built more like 1/3 in-house, with suppliers delivering the rest. And that share keeps shrinking, because the new core technologies now come from outside too. VW contributes less and less to its own car.

VW is becoming interchangeable.

And still, VW is going one step further: it now wants to bring that Chinese technology to Europe.

The Rescue Plan From China

Some even see this as the rescue. Olaf Lies is the premier of Lower Saxony. The state co-owns VW, and Lies sits on its supervisory board. His hope: affordable models with technology from China keep the German plants busy. And save jobs and sites.

At first glance, that sounds logical. In China, VW is already developing cars with Xpeng. They're technologically ahead of anything VW builds in Europe, and cheaper. So why not sell them here too?

Because there's a Trojan horse in this rescue plan: Chinese technology with a German logo.

Audi shows how that plays out. Audi lost massive market share in China. So it tried something new: a separate brand built on the technology of its Chinese partner SAIC. Design and logo come from Audi.

But customers quickly noticed there's a Chinese car underneath. The models are selling poorly. So far, the plan hasn't worked.

And that's the move VW now seems to be planning. Only bigger. And this time in Europe.

The timing makes it even riskier. The China business is breaking away. That makes its home market more important than ever. For VW, that market is Europe. But Chinese carmakers are expanding aggressively into Europe right now.

And with a move like this, VW would make Chinese technology mass-market overnight. Customers don't know Xpeng. But they know VW. And they trust VW.

The danger: Xpeng already sells its cars in Germany today. Once customers realize the same technology sits in both the VW and the Xpeng, at some point they'll buy the original. Just like Audi in China. VW would be opening the door for its own competitor.

And it's not just VW. Stellantis already sells cars from Chinese carmaker Leapmotor in Europe. And Leapmotor's technology is even set to appear under the Opel brand in the future.

The tragic joke: Europe's carmakers are afraid the Chinese will overtake them in Europe. So they climb into bed with "the enemy."

That's why this plan is a tightrope walk. It can keep plants busy and save sites. Or it lets Chinese technology flood into Europe and makes VW interchangeable for good.

Either way: a carmaker that buys its technology instead of developing it needs fewer people. By that logic, VW should be shrinking.

Why VW Isn't Allowed to Shrink

VW's plants can build around 12 million cars a year. VW builds around 9 million. And according to CEO Oliver Blume, that's not going to change.

Add a problem VW has been dragging around for a long time. With the profits from China, the group built up a huge, bloated organization in Germany over decades.

Too much administration, too many overlapping structures, too many people. For a long time, nobody noticed. The profits from China covered it. Now the profits are gone. That bloated organization is still there.

So VW would have to shrink. But VW isn't allowed to.

Because VW is not a normal company. Honestly, VW is partly the very thing the West likes to accuse China of: a half state-owned carmaker.

The German state of Lower Saxony holds around 20% of the votes. And since 1960, there's been the Volkswagen Act. A law written for this one company. It lets Lower Saxony block any major decision about its plants and sites.

Then there's German co-determination: the works council and the IG Metall union hold half the seats on the supervisory board. Closing a plant against your own workforce is impossible.

So VW's mandate was always bigger than pure profitability: protect jobs, even when they no longer pay for themselves.

One VW CEO already failed at this: Herbert Diess. He wanted radical cuts and lost the power struggle against these structures. In 2022, he had to go.

His successor Oliver Blume is now trying the same thing. And this time, the pain is big enough that it might work.

Because by now, everyone gets it: without hard cuts, VW won't make it out of this. But nobody can say yes openly. Their own people would tear them apart.

That's what the restructuring solves: VW is turning the Volkswagen brand and the components division into standalone companies. What's left is a holding company that just owns the shares.

Officially, this is about competitiveness and market value. But there's another hope behind it: the old protections from the Volkswagen Act and co-determination apply to the group as a whole.

Pull the brand out as its own company, and those protections lose much of their grip. The hard cuts then get decided by the new company. More independent of politics and the works council.

And because the works council and the state no longer have to approve the cuts directly, they can still back the restructuring. Only then can plants close and jobs go at scale.

And the restructuring has a 2nd effect. Remember Moritz Schularick's prediction: VW gets bought by a Chinese carmaker. A restructuring like this is what makes that possible in the first place. Because a company in pieces is a company you can buy.

And VW is showing right now that it's willing to sell: Everllence, Italdesign, MHP. Why not an entire brand at some point?

Which raises the question: will Volkswagen even exist in 5 years?

How This Can End for VW

Let's play it out: where can VW go from here? I see 3 scenarios:

Scenario 1: VW makes the comeback

VW uses the partnerships with Rivian and Xpeng to learn. It studies everything: the technology, how they work, the speed. With one goal: build these skills in-house and eventually get better than the partners.

That's the playbook China used to get big. First, they learned through joint ventures with Western companies. Then they tried it themselves. And in the end, they overtook the West technologically.

One thing is critical: the dependence on the partners can't become permanent. It has to stay a transition phase. And VW has to use it to stand on its own feet again.

Scenario 2: China buys VW

That's Moritz Schularick's scenario. A Chinese group takes over the VW brand completely. And it fits the moment: BYD wants to overtake Toyota by 2030 and become the world's largest carmaker. Buying VW would be the perfect shortcut: a global brand, the China business, South America, access to Europe.

But part of the package would instantly be worthless: the US business. A carmaker in Chinese hands has no future in the US. We saw that with Polestar.

And that's why there's a 3rd scenario.

Scenario 3: VW splits up

Nobody buys VW as a whole. Instead, the brand breaks apart along its 2 tech stacks:

• A China VW on Xpeng's technology: eventually owned by a Chinese group, running the China business

• A US VW on Rivian's technology: stays Western, takes over the US business, and maybe one day merges with Rivian completely

And the rest of the world? Either the 2 VWs split the markets between them. Or we get the absurd situation of the China VW competing against the US VW in the same market. That's what could happen in Europe.

Sounds crazy at first.

But VW built the fault line itself, with its 2 tech stacks. And the holding restructuring could be the first step in that direction.

My Take

Let's zoom out. From a German perspective, only Scenario 1 is worth rooting for. The other 2 mean losing Europe's largest car group.

And if you ask me: a complete takeover by China is unlikely. The US problem is too big for that. If VW doesn't make the comeback, a breakup is the more likely ending.

But let's hope it comes to neither.

Which leaves the question: how does VW make the comeback?

Start at the core. The car of the future needs completely different skills than the old one. Not mechanical engineers, but software developers and AI researchers.

Different skills also need a different organization. And that leaves VW with a brutal task: turning itself around 180 degrees. From an industrial manufacturer to a software company. It has to become a completely different group.

And this is where it gets uncomfortable. Some people can be retrained. But only up to a point. You can't turn every mechanical engineer into an AI researcher. And not everyone wants to change. Many just want to keep doing what they've always done.

What VW needs is a generational reset. At every level. That's one reason behind the 100,000 jobs.

Don't get me wrong. There are real people behind that number. But artificially keeping alive jobs that have no future helps no one in the end. It just kicks the problem down the road.

And here's the truly bitter part. Germany's own rules make exactly this rebuild nearly impossible.

Our employment protections. Our labor rights. They shielded German workers for decades. A real achievement, and one we Germans are rightly proud of.

But these rules were built for a stable world. And that world is gone. In a disruption, a company has to act more like a startup. Decide fast. Take risks. Try things.

That's what our rules barely allow.

What's left are expensive severance programs. And with those, the people who leave voluntarily are often exactly the ones you want to keep.

It gets worse. Hire someone in Germany, and you can't easily part ways again. For something completely new, that's too risky. So VW builds its new teams somewhere else from the start.

And that's my real fear. Our rules protect the jobs of yesterday. The jobs of tomorrow are being created in the US and in China.

The comfortable way out is familiar by now: buy someone else's technology and put your own logo on it. But that's not a future.

That leaves the hard way. Stay humble. Learn from the partners without getting played. Copy everything. And reinvent yourself along the way. Damn hard. But it's the only real chance.

In the end, VW's choice is pretty simple. Either VW reinvents itself. Or VW gets sold. In one piece, or in parts.

🔗 sz | mm | dw | hb1 | hb2 | hb3 | re | ek | ev1 | ev2 | cnn | ts | moia | pc

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Welcome to Issue #124 of The German Autopreneur.

This week I was on Markus Lanz, one of Germany's biggest prime-time talk shows. We covered a lot. One topic was the EU's 2035 combustion engine ban. Again.

So I want to step back and look at the whole picture.

It's the same debate Europe has been having for years. 2035 or 2040. Soften the rule or hold it. Ban combustion or keep the door open. And the longer I listen, the more certain I am: Europe is fighting about the wrong thing.

Today I'll cover 3 things:

• Why the 2035 date barely changes the outcome

• Why up to 80% of a car's value will soon sit in battery, software, and AI, exactly where Germany is behind

• Why German carmakers themselves are lobbying to soften the rule

Where the Debate Stands Right Now

The state of play:

• 2023: As part of the Green Deal, the EU agreed to ban the combustion engine. The rule says a new car in 2035 must emit on average 100% less CO2 than in 2021. In practice that means EVs only

• December 2025: The European Commission proposed cutting the target from 100% to 90% less CO2. Roughly 10% of new cars in 2035 could still be combustion. Credits for e-fuels, biofuels, and green steel make that possible

• Now: The debate is about softening the softening. After all the credits, a new car in 2035 would only have to emit about 73% less CO2 instead of the planned 100%

• Nothing is decided yet. The EU's environment committee votes this fall. Then the full EU parliament. Then negotiations with the member states

The Ban Has Nothing to Do With the Crisis

Here's what we know. The car industry is in a crisis right now. Especially in Germany.

In the debate it often sounds like the ban is the cause and scrapping it is the cure. That's the wrong analysis. It links 2 things that have nothing to do with each other.

The ban takes effect in 2035. That's 9 years away. The crisis is happening now. One can't have caused the other. And by the same logic, scrapping or softening the ban can't fix the crisis either.

The crisis has 2 causes. Neither has anything to do with the 2035 date:

1. The technology shift. An electric powertrain is simpler to build than a combustion one. Fewer parts, less labor, fewer jobs

2. New competition from China. German carmakers are losing market share to new rivals, mostly from China and the US. So they sell fewer cars

Neither softening nor scrapping the rule fixes those causes. The crisis has a different root. So a later ban is not the cure.

That doesn't mean softening is pointless. It can help the industry. Just not the way most people think.

Are EVs Even Coming?

First a reality check. Say Europe scraps the ban completely. Does that stop EVs? No. They win even without a ban.

For a long time EVs had real drawbacks in daily use. Mostly range and charging time. At first, mainly early adopters bought them and accepted those drawbacks.

Today those drawbacks are basically gone. The current state of the technology:

• Charging in 5 minutes

• 700 to 900 km of range

Even German models now charge in 10 minutes and reach 800 km.

That kills the practical argument against EVs. The competition shifts to price. And the mass car market always decides on price.

We just saw how fast that can happen. When the oil price jumped during the Iran crisis, demand for EVs rose sharply.

The mechanism behind it is simple. Picture two curves forming an X.

• Combustion gets more expensive. The technology is fully developed, so there's little left to gain. And fuel keeps getting more expensive over the years

• EVs get cheaper. The technology is still early and will get far more efficient. On top of that, huge economies of scale keep pushing prices down

Where the two curves cross, the market flips. And it flips fast.

In China it already happened. In 2025, more than half of all new cars there were electric or plug-in hybrids. One reason: on the total cost of ownership, an EV is already cheaper there than a combustion car. In Europe, price parity should arrive between 2026 and 2028, depending on the segment.

So the "if" is settled. Only the "when" is open.

The EU can influence how fast it happens here. But the market will flip anyway. And as an export industry, most of Germany's sales sit outside the EU in any case.

The Old Car vs the New Car

So the EV is coming. But there's one more thing to understand. An EV isn't just a car with an electric motor.

It's a new product category, invented mostly by Tesla. In China they call it the smart car. A computer on wheels.

You can see it in what makes up a car's value:

• Before: mechanics. Engine, transmission, chassis, sheet metal

• Now: battery, software, and AI

The battery alone already makes up 30% to 40% of a car's value. Add software and electronics. Their share rises to as much as 40% of the vehicle's value by 2030. Most of all, it's the AI that runs the car.

So battery, software, and AI together will soon make up as much as 80%. What classically defined a car is now only 20%. The mechanics become a commodity. And unfortunately, that's what Germany does best.

As the value shifts, so do the skills you need to build a car. And those are the skills Germany lacks.

So today there are 2 cars:

• The old car. The combustion car we know

• The new car. The software-defined EV, run by AI

On the old car, Germany leads. On technology too. On the new car, Germany is 1 to 2 product generations behind.

And that leads German carmakers to do something that looks backwards.

Why Carmakers Want to Delay the Ban

German carmakers sell in every major market in the world. And all of these markets are flipping from the old car to the new one. Just at different speeds.

If you want to hold your position everywhere, you have to do both everywhere. Build the old car and the new car at the same time. Run both tracks at once.

That's expensive.

On the new car, German carmakers are behind. So they have to do 2 things at once. Catch up, and keep the old business running. That double load eats into profits. It shows up every few months in the grim quarterly headlines.

So you'd expect carmakers to want this expensive phase to be as short as possible. They do the opposite. They want to sell combustion cars for longer. Why?

The reason is money. Catching up on battery, software, and AI costs enormous sums. And that money comes from the old business, where the margins still work. The profitable combustion car funds the future technology.

That's why they lobby in Brussels to scrap the ban.

The Dilemma for Policymakers

At first glance the answer seems obvious. If German industry is behind, and the old business funds the build-up of the new one, then policy should support exactly that.

Loosen the rules. Give the old business more time so carmakers can catch up globally. Sounds reasonable.

But there's a catch. The carmakers and the EU don't want the same thing:

• A carmaker wants to make a profit, anywhere

• The EU wants to keep high-value work and jobs at home

The problem is that this catching up doesn't happen in Europe. German carmakers build and buy their future technology mostly in China and the US. They're building their future there, not in the EU. So the high-value work and the jobs move abroad. And nothing guarantees they ever come back.

That flips an old arrangement. For decades, China was Germany's factory floor. Germany designed at home and let China build it. With the new car it's the other way around. Development now sits in China, not in Germany.

Volkswagen shows what this looks like in practice. There's no longer just 1 VW. There are 3:

• The old VW in Germany builds the old car, the one we know

• A VW in the US develops the new car for the West, together with Rivian

• And a VW in China develops the new car for China, and probably for emerging markets too, together with Xpeng

The future is taking shape in the US and in China. Europe keeps the old business.

So Germany earns its money with the car of yesterday and develops the car of tomorrow somewhere else.

The EU can help carmakers run the old business longer. But that also helps push the high-value work abroad. That's the dilemma the EU has maneuvered itself into.

The Real Mistake Is Industrial Policy

The reason the EU ends up in this dilemma at all goes back to a deeper flaw in its industrial policy. The idea of staying open to every technology.

I went out on my own in 2020. The painful lesson I learned as an entrepreneur: only focus leads to success. Try 10 things at once and you'll be good at none.

For a market, staying open to all technologies is good. For a single company with a clear strategy, less so. For a country's industrial base, it's the opposite of strategy.

Because as Europe, we can't compete with China and the US in every sector. We have to decide what to bet on, and then be better than the rest at exactly that. That's what industrial policy is. Deciding what a country builds its prosperity on.

Staying open to everything means not deciding. Jack of all trades, master of none.

And whoever doesn't decide ends up average everywhere. Average isn't enough against China and the US. Then you fall behind across the board.

The best argument for this is China itself. China didn't win the car market by staying open to every technology. The opposite. They were ruthlessly focused.

And with one goal. To take high-value work and jobs away from competing economies. From economies like ours.

And it worked. VW, Bosch, and others are moving their most valuable engineering jobs to China right now.

The One Time Europe Actually Committed

This is exactly what the EU tried with the Green Deal. It was never just climate policy. From the start it was also an industrial bet. Build a homegrown industry around green technologies. Batteries, electric powertrains, charging infrastructure.

China made the exact same bet. Just packaged differently, and a good decade earlier. As part of its five-year plans.

To build an industry like that, you first need a market trigger:

• The EU set the CO2 limit

• China used targeted subsidies

The effect is the same. Give the market a clear direction. The Chinese route uses subsidies instead of bans. That's easier to swallow, because it creates less resistance.

But after that first step, China took a second one. Because building an industry means 2 things:

1. Set the direction

2. Go in with real money, long before it pays off

The difference is in the second step:

• China set the goal and then built the road to it. Over 15 years it pumped more than $230 billion into the market, until it had a whole industry. Carmakers, suppliers, and real competition

• Europe set the goal and trusted the market to sort it out and build the road itself

The result: China built this green industry faster and bigger than Europe did. Now China is pushing into Europe's market with exactly that industry.

And it benefits from the rules Europe set for its own industry. So China threatens to choke that industry before it can even take off.

And Europe? Caught in the squeeze. Hold the target or loosen it? Protect its industry or its climate goals? Europe doesn't know either, and it reacts in contradictory ways:

• On one side it pays up to $6,500 in subsidies per EV

• On the other it softens the rule so that people buy fewer EVs

Europe hits the gas and the brake at the same time.

That's no way to build an industry. And that's exactly what staying open to every technology looks like.

My Take

What bothers me most about this debate: in Germany we turned a sober economic question into a culture war.

One side ties the combustion engine to the good old days and sees the EV as some left-green climate cult. The other side is firmly pro-EV. But they focus so narrowly on the environment that they miss the real point. China has overtaken Germany on technology.

And while both sides fight each other, someone else wins. That someone is China.

I take a deliberately neutral view, from the perspective of Germany as a place to do business. And from that angle, the real point is something completely different from the date.

The future of the car comes down to 3 things. Battery, software, and AI. Whoever doesn't master them will soon barely matter in this market. And that's exactly where Germany is behind.

Softening the ban can buy us time. But only if we use it to build exactly that. Otherwise bought time becomes lost time.

The exact date is secondary. Whether 2035 or a few years later, most markets will flip on their own by then anyway. On price, not on a ban.

What really worries me is the pattern behind it. German industrial policy is almost always reactive. We catch up on what others have already decided, instead of thinking ahead about what comes next.

You can see it in the battery. 15 years ago China started locking up the battery supply chain. Today it controls up to 90% of it. We're now paying a high price to break free of that dependence.

And while we do, the battery moment is repeating. This time it's about the AI that runs the car. The cards are being dealt right now. Nobody here has it on their radar yet. In the US and in China they do.

We're circling the engine ban date yet again.

What we should learn: the market won't sort this out anymore. Not against China and the US. There, policy decides, not the market.

We have to decide. What's our bet for the future? And then stick with it, even when it gets uncomfortable.

Today we manage the status quo. If we really want to save our car industry, we have to do the opposite. Build the future. And the future is battery, software, and AI.

🔗 ec | re | ea | iea | csis | cnbc

That’s all for today.

I’m Philipp. 10 years at Mercedes-Benz, independent since 2020. Now I cover the transformation of the auto industry from its epicenter: Germany.

P.S. If this was useful, forward it to one person in the industry who should read it. That's the kindest thing you could do for this newsletter. And a Restack helps more people find it.

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Welcome to Issue #123 of The German Autopreneur.

“China is faster.” Nobody wants to hear that sentence anymore.

Dirk Slama doesn’t either. And he would know. He’s a VP at Bosch and the head of the industry initiative digital.auto. He’s spent years working on exactly this problem.

And the sentence is still true. Unfortunately. So the real question isn’t whether China is faster. It’s why.

The usual answer: Germans just can’t do software. Dirk’s take: “That’s too easy.” The problem isn’t what German carmakers build. It’s how they build it.

Here’s what I’ll cover today:

• How a modern car gets built, and why that turns into a problem

• What this problem costs in time and money

• And the idea Dirk wants to fix it with

How a Modern Car Gets Built

A traditional carmaker is basically an integrator. It designs the car, and hundreds of suppliers build it. Bosch delivers the injection system, Continental the brakes, ZF the transmission. Each one builds its part. The carmaker’s real job is to plug it all together at the end.

That worked well for decades. Especially while a car was mostly mechanical. A brake was a brake. You installed it and it worked. Every part was self-contained.

Today almost everything in a car is connected and runs on software. The powertrain, the brakes, charging, driver assistance like automatic emergency braking, even the seat. Each of these parts has its own small computer with its own software. They’re called electronic control units, or ECUs. A modern car has more than 100 of them.

And these ECUs don’t work on their own. They talk to each other constantly. A single function in the car almost never sits in just one ECU. It runs across many, often from different suppliers.

So all those separate parts have turned into one tightly connected system. And German carmakers plug that whole system together and test it only at the very end.

Why That Becomes a Problem

First, the basics. There are roughly 2 ways to build a complex product:

1. The iterative way comes from software. You build a rough version fast, try it out, find problems early, and improve in small loops. Step by step, you work your way to a finished product

2. The sequential way is the classic way to develop a car. First you plan everything in detail. Then you build. And only at the very end do you assemble and test

That sequential approach is exactly how the auto industry works. It has a name: the V-model.

Picture a big V. To develop a vehicle, you walk through this V once. Down the left side first, then back up the right:

• You start at the top left. There’s no car yet. It exists only as an idea: what should the car do?

• From there you work down the left side and get more concrete. The idea becomes big systems like the powertrain, the brakes, and infotainment. Those systems become individual parts. For each part, you write down exactly what it has to do. Precise enough for a supplier to build it later

• At the bottom point of the V, the building happens. Each supplier makes its part

• Then you move up the right side. Now things get assembled and tested. First the single part. Then the parts get combined into bigger systems

• And at the very end, all the systems come together into the complete car

Here’s the catch. Whether it all actually fits together only becomes clear here, at the top right. At the very end.

In classic vehicle development, you walk through this V once. Not in loops.

Now back to that tightly connected system of ECUs. That’s exactly where it becomes a problem. A single function doesn’t sit in one ECU. It runs across many, and across several suppliers.

Dirk gives an example of such a function: the welcome sequence. Every modern car has one today. You get in, and the car adjusts to you. The seat moves into your position. The headrest adjusts. The display starts up. It looks like a single function. In reality, multiple ECUs from dozens of suppliers mesh together to make it work. And a modern car has hundreds of functions like this.

The more of these functions interlock, the more can go wrong when you plug them together.

An interface is missing. One ECU behaves differently than expected. A function works on its own, but not in the whole car. That often surfaces only shortly before production starts.

Dirk puts it this way: “The problem is that we integrate too late, we see dependencies too late, and we test the full system far too late.”

Then the big repair job begins. About 6 months before production starts, the head of development pulls everyone together, often twice a day. “Preferably on the factory floor, nobody gets to sit,” Dirk says. “And then everyone gets blamed, one after another,” because their part doesn’t fit cleanly.

He has a name for it: integration hell. And it doesn’t happen now and then. “It’s not the exception. It’s the rule.”

What This Costs

German carmakers find problems late and have to fix them at high cost. That eats time and money.

From idea to start of production, German carmakers take 48 to 54 months on average. Chinese competitors do it in 24 to 30. Those numbers come from a Bain analysis covering 2020 to 2024. Since then the gap has only grown. Some Chinese carmakers now bring a new model to market on an existing platform in as little as 9 to 12 months.

And they do it cheaper. For a new model, they spend around 27% of what a German carmaker spends. For the development budget of one German car, they bring almost 4 cars to market. On top of that: while German models often sit nearly unchanged for years, Chinese carmakers keep launching the next version.

No country spends as much per car as Germany.

Why? Mostly the way they work. Tesla and many Chinese carmakers build their cars more like software. Exactly the first way we saw earlier. They don’t wait until the end. They plug the parts together from the start and find problems early. The big repair job at the end almost disappears.

That’s not the only reason, of course. But it’s one of the biggest.

A Wireframe for the Car

This early integration is exactly what Dirk wants to open up to everyone.

His initiative digital.auto has a concept for it called SDV Forge. The idea sounds simple at first. You have to pull integration forward. To the start instead of the end. On the V-model, from right to left. Developers call this shift-left. Dirk says: “Shift-left simply means that things which used to happen late now happen early.”

But how do you test whether the parts fit together when the car doesn’t exist yet?

I spent years working on the Mercedes configurator, the online tool you use to build your own car. That was basically web design. And we never started coding right away. We started with a wireframe.

A wireframe is a rough skeleton of boxes and arrows. Picture the floor plan of a house that hasn’t been built yet. You slide the rooms around and see right away whether the path from the kitchen to the dining room works. With our product it was the same. We saw how the whole thing worked together long before a single line of code was written. Step by step, the skeleton turned into a real prototype.

SDV Forge now applies this principle to the car. It builds a wireframe of the whole car. A rough model on the computer that you can already try out.

Here’s how the model gets built. Not by hand. From documents every carmaker already writes anyway. At the very start, everyone records what the car should do: requirements, function descriptions, interfaces. Until now, those documents sat scattered across thousands of files.

Now you hand those documents to an AI, and it builds the model of the car. Each team can test its part and see right away whether it fits with the rest. Where something doesn’t fit, they fix it on the spot.

The missing interface between the seat and the headrest no longer surfaces just before production. It shows up on the model, right at the start. While the problem is still small and cheap.

My Take

The question isn’t whether Germany is too slow. It’s whether German carmakers are ready to work differently.

Because the real issue is bigger than a tool. German carmakers build a different product today than they used to. The car used to be a machine made of sheet metal. A mechanical masterpiece, perfected over more than 100 years. Today software mostly decides what a car can do. And a different product calls for a different way of building it.

But decades shaped these organizations around the old product. German carmakers got incredibly good at building the car they know. Again and again. And better every time. That way of working sits deep in their DNA. It was the recipe for success for a long time. And it’s exactly what makes the shift so hard today.

So the biggest job is the organization behind it. The shift from a classic industrial corporation to a software-first company. It means rethinking the product. And the organization that builds it.

This is exactly where Dirk’s initiative comes in. It’s more than a concept. You’re not just bringing in a tool. You’re bringing in a new way of thinking. Test early. Fail early. Learn before everything is set in stone.

That sounds easy. It isn’t. It’s exactly what the big carmakers have struggled with for more than 10 years. Failing early doesn’t fit an organization built to never make a mistake.

Still, let’s be honest. SDV Forge today is still just a concept with an early rollout among partners. So far there’s no finished car built this way.

And the best concept changes nothing as long as the organization behind it stays the same. The hardest work is the shift in mindset. Showing something unfinished early, instead of hiding it until it’s perfect.

Because in the end this is about much more than development speed. It’s about who rebuilds their organization so it can build the car of the future at all. That decides which of today’s big carmakers will still exist in 20 years. And which won’t.

Even better that someone here in Germany is finally building a solution, instead of just analyzing the problem. Dirk’s initiative is independent and open to the whole industry. There should be more of that.

🔗 digital.auto | Bain

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 #122 of The German Autopreneur.

Look at Germany, and the picture seems clear. Plants are closing, jobs are disappearing, and the mood is at rock bottom.

Then look at the global numbers. In 2025, the world sold around 90 million cars, almost as many as in the best years before Covid. By 2030, it should pass 100 million a year for the first time.

How does that fit together?

So it’s worth looking beyond Germany, at the whole world market. That’s what today is about:

• Why India now builds more cars than Germany

• Why 1 in 4 new cars is already electric

• Who controls tomorrow’s market

The World Buys Around 90 Million Cars a Year

After the Covid crash of 2020, the world market has fully recovered. In 2025 it reached around 90 million cars sold (passenger cars and light commercial vehicles), almost back to pre-Covid levels. And the forecasts keep pointing up, toward 100 million.

A global car crisis looks different. The pie is getting bigger. It just isn’t getting bigger everywhere. Almost all of the growth happens outside Europe and North America.

For Germany, that’s exactly the problem. German carmakers make their money in the world’s growth markets.

So where is that growth?

The 4 Big Auto Regions Are Drifting Apart

The industry splits the world market into 4 big regions. New car sales in 2025 at a glance:

• China: 26.6 million. The largest single market in the world. After 2 decades of boom, it’s now heading for a plateau

• North America (US, Canada, Mexico): 19.6 million. Barely any growth left, but stable at a high level

• Europe: around 15 million. Selling about the same for years

• Rest of World, meaning everything outside these 3 regions: around 28 million combined. As a block, even a bit bigger than China, and bigger than Europe and North America on their own. And the fastest-growing region of all

Rest of World sounds like an afterthought. That’s where the name comes from. On their own, these markets were long too small. They didn’t show up next to China, Europe, and North America.

It mainly includes (2025 sales):

• India: 4.5 million, now the third-largest single market in the world

• Japan: 3.8 million, the exception here. A mature market with barely any growth, where buyers mostly pick hybrids

• Brazil: around 2.5 million

• Plus Southeast Asia, the Middle East, Latin America, and Africa

Completely different markets. But this is exactly where the growth will come from in the coming years.

For context, Germany sold around 2.8 million cars in 2025.

So much for where cars are bought. Who builds them is just as interesting. And who sells them to the world.

China Exports Almost 2x as Many Cars as Germany Builds

Where are the most cars built? The top 5 in production in 2025:

1. China: 34.5 million, 1 in every 3 cars in the world

2. US: around 10.2 million

3. Japan: around 8.4 million

4. India: 6.5 million

5. South Korea and Germany: around 4.1 million each

China has been number 1 since 2009. India has clearly overtaken Germany.

How much of that production goes abroad? The 3 biggest car exporters in 2025:

1. China: around 7.1 million (a record)

2. Japan: around 4.2 million

3. Germany: 3.2 million

For decades, Germany was THE export champion. In 2022, China first overtook Germany, then Japan in 2023. Since then, China has been number 1. And today China exports almost 2x as many cars as Germany even builds.

But that’s only the view by volume. By value, the ranking looks different. German passenger-car exports brought in around $170 billion in 2025, more than any other country. China ships more than twice as many cars but brings in an estimated $120 billion. So there are 2 export champions. China by volume, Germany by value.

But why does China export so much in the first place? Because its factories can build far more than its own market absorbs.

• Capacity: an estimated 45 million cars a year

• Sales at home: around 27 million

This overcapacity pushes Chinese cars onto the world markets. Especially the growing ones. And these exports are getting more electric. In April 2026, more than half of them were EVs for the first time.

1 in 4 New Cars Is Electric

In 2020, 1 in 20 new cars worldwide was electric. In 2025, it’s 1 in 4. And the world’s biggest EV maker is no longer Tesla. It’s BYD (2.26 vs 1.64 million pure EVs sold).

The combustion engine is past its peak. In 2017, the world sold around 86 million pure combustion cars. In 2024, around 60 million. Down 30% in 7 years.

But every market switches at its own pace. The share of EVs and plug-in hybrids in new cars in 2025:

• Norway: around 96%

• China: around 54%

• Europe: around 27%

• Global: around 25%

• US: around 9%, and falling since the purchase subsidy ended in 2025

• Rest of World: still in the single digits, but +48% growth in 2025, faster than any other region

The driver is almost always the same. Imports from China.

4 Numbers Worth Keeping in Mind

• Almost 1 in 2 new cars worldwide is an SUV. In Europe it’s 54%

• Europe’s most popular powertrain is the hybrid without a plug, at 34.5%. Diesel comes last among the major powertrains, at 8.9%

• New cars are at record prices almost everywhere. In the US and Germany, around $49,000 on average. Only in China are they falling. A new car there costs around $23,500 on average, roughly half

• Hydrogen stays a niche. In 2025, more than 20 million EVs sold against around 16,000 hydrogen cars. 1,000 to 1

But who actually sells all these cars?

Who Controls the World Market

So far this was about markets, production, and powertrains. Now it’s about who sells them. Here, each carmaker counts under its home country, no matter where in the world it sells.

For more than 20 years, Japan was number 1 in this count. In 2025, that’s over. China has overtaken Japan.

The world market ranking for 2025, measured by share of all vehicles sold worldwide:

1. China: around 28% world share (27 million vehicles), rising fast

2. Japan: around 26% (25 million), stagnant

3. Germany: around 14% (13 million), slightly falling

4. US: around 12% (12 million), stable

5. Korea: around 7% (just over 7 million), stable

It happened fast. In 2022, China was still 8 million vehicles behind Japan. And the forecast: by 2030, 1 in every 3 cars sold worldwide will come from a Chinese brand.

The biggest single group is still Toyota. It’s the only one that sells more than 10 million cars a year.

And Germany? That always means 3 groups. VW, BMW, and Mercedes, with all their brands from Audi to Porsche. Together they hold around 14% of the world market. Put differently, about 1 in 7 cars sold worldwide comes from a German group. For EVs and plug-in hybrids, it’s still 1 in 9.

Here’s the German market share by region:

• Europe: around 36%, the strongest region

• China: around 16%, a few years ago it was still over 20%. And still falling

• US: around 8%, stable at a small level

• Rest of World: under 10%, with big differences by market

So the old growth engine stalls. In 2025, VW, BMW, and Mercedes all lost share in China. Mercedes and BMW even by double digits. And 2026 doesn’t look any better so far.

My Take

The German auto industry lives off exports. The model was always the same. Develop in Germany, sell worldwide. Especially where the market is growing.

For 20 years, that growth market was China. That’s over now. In 2025 it did grow strongly once more, driven mostly by government purchase incentives. But the boom is done. In the coming years, the market heads for a plateau. And what growth is left, Chinese brands increasingly take for themselves.

For German carmakers, that means one thing. Their business in China will get smaller in the coming years, not bigger.

That makes Europe as a home market even more important. But Europe hasn’t grown for years. At the same time, Chinese brands are attacking here. Their share of the entire European car market has almost doubled in just one year, from around 4% to over 7%. By April 2026, almost 10%.

In a market without growth, that only happens at the expense of the established players. In plain terms, German carmakers will likely sell less in Europe too, not more.

Then the US. This market isn’t growing either. For German carmakers, it’s a stable but small premium niche. And US tariffs make the business even harder. Don’t expect big jumps here.

In none of these 3 regions will German carmakers grow in the coming years. That leaves just one growth region. Rest of World. Almost all the growth in the coming years comes from these markets. That’s where carmakers will win the customers of the next 20 years.

Chinese carmakers have figured this out. They are expanding into exactly these markets. The market share of Chinese brands there:

• Southeast Asia: in the big markets, up from around 6% to over 10% in a single year

• Middle East and Africa: from 10% to more than a third by 2030

• Brazil and Thailand: recently around 85% of all EVs sold

And they change these markets in the process. Where Chinese brands move in, the market tips from combustion to electric much faster. So the same fight repeats there. First China, then Europe, now these markets. German carmakers can compete on combustion engines. On EVs, they struggle to keep up with China.

Still, there’s no way around these markets. Only there can German carmakers offset the coming losses from China and Europe. So the focus has to move to where the growth is.

But there’s a catch. Rest of World isn’t one market. It’s dozens. India isn’t Brazil. Thailand isn’t Saudi Arabia. There’s no single strategy for all of them. Whoever wants to win these markets needs a separate answer for each one.

So the growth isn’t gone. It’s just somewhere else. The next decade of the car industry won’t be decided in China or Europe. It’ll be decided in the rest of the world.

And the best part: this race has only just begun.

🔗 sp | oica | dst | cnp | acea | iea1 | iea2 | f2m | alix | nik

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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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.

Want to work with me?

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

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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.

Want to work with me?

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 →