A recent study by the German Economic Institute shows that German car exports to China will plunge by roughly a third in 2025. The value of automotive and parts exports fell below 14 billion euros ($16.5 billion) last year, whereas three years ago that figure was close to 30 billion euros.
This isn't just a statistical decline; it signals the end of an era.
German automakers are facing their toughest test in decades, squeezed by a perfect storm of rising U.S. import tariffs, sluggish demand in Europe, the soaring costs of electrification, and intensifying competition from Chinese rivals.
As the "Made in Germany" halo fades among Chinese consumers, this industrial giant—long accustomed to extracting massive profits from the country—must confront a brutal reality: its foothold in the world's most critical auto market is unraveling at an unprecedented pace.
Structural Collapse: More Than Just a Trade War
On the surface, the precipitous drop in German auto exports to China can be blamed on a pile-up of external pressures.
U.S. tariff barriers have scrambled global supply chains, while domestic European demand remains depressed by economic weakness, and the massive investment required for electrification continues to erode corporate profits. Yet, when the focus shifts to the Chinese market, the causes are far more complex than simple trade figures suggest.
Hu Chunchun, executive director of the European Studies Center at the Shanghai International Studies University, told Sputnik that China has made significant strides in technical and industrial sectors where Germany once held the advantage, leading to reduced demand for German products.
That assessment rings particularly true for the auto industry.
Historically, German exports to China relied on finished vehicles and high-value components. Today, however, China is not only the world's largest exporter of new energy vehicles but also leads in traditional internal combustion engine car exports. This means the complementary nature of the Chinese and German auto industries is being replaced by direct competition.
But the deeper shifts are happening within the supply chain.
Image Source: Volkswagen
The German Association of the Automotive Industry (VDA) recently warned that Germany's status as a global automotive hub is at risk of being "hollowed out" as investment and jobs shift overseas. The association is calling on the German government and the EU to prioritize policies that foster economic growth. "Germany is experiencing a serious crisis in its business environment," said VDA President Hildegard Müller.
VDA survey data reveals that among the small and medium-sized German enterprises that make up the auto supply chain, 72% plan to reduce investment within Germany: 28% intend to shift investment abroad, 25% will delay spending, and 19% are canceling investment plans entirely.
In other words, as China rapidly boosts the localization rate for batteries, electronic controls, and chips—and as smart cockpit and autonomous driving data are processed and updated seamlessly locally—German firms are finding themselves dangerously exposed in an ecosystem that has been completely reshaped.
From Tech Leadership to Ecosystem Lag
If the shifting external environment represents "bad timing," then the core reason for German automakers' collapse in China must be attributed to their own strategic misjudgments and failure to keep pace.
This isn't about the failure of a single model; it is a systemic lag spanning technology roadmaps, product definitions, and R&D frameworks.
For decades, German engineers relied on a deep moat of expertise in internal combustion engines, transmissions, and chassis tuning to effortlessly reap massive profits in China. But that comfort zone directly bred arrogance and sluggishness during the transition to electrification.
Today, the driving force in China's auto market is a younger generation around 30 years old, far less sensitive to "century-old heritage" than they are to intelligent experiences. Chinese automakers have compressed new vehicle development cycles to 12 to 18 months, sprinting at the speed of internet iteration; meanwhile, some German manufacturers still adhere to rigorous 30-to-48-month global verification processes.
Notably, on February 23, a Foreign Ministry spokesperson announced that German Chancellor Merz will pay an official visit to China from February 25 to 26. Reports suggest the VDA has publicly called on Merz to clarify his stance before the trip. They want him to urge Beijing to curb the low-price selling of Chinese new energy vehicles, specifically citing a luxury consumption tax policy set for the second half of 2025. This tax significantly lowers the threshold for imported luxury cars, directly impacting brands like Porsche, Mercedes-Benz, BMW, and Audi. Domestically produced new energy vehicles, exempt from the tax due to local manufacturing, enjoy an even sharper price advantage.
They know full well they have fallen behind. All they can hope for now is that the Chancellor will spend his political capital to buy them a sliver of breathing room in the world's most fiercely competitive market.
The golden age of the German auto industry may soon be history. The question now is: on the track of electrification and intelligence, can this former front-runner secure its place while playing catch-up?
The answer may well be found on the streets of China over the next three to five years.
