Amid the glitz of Europe’s largest car show, there’s a quiet concern in the auto industry that their prosperous times may be ending.
Prices and profits are dropping in China, demand is weak in Europe, and US tariffs add uncertainty, shifting focus to cost-cutting as the global market evolves.
“The era we’ve celebrated in the automotive industry for decades is over in its current form,” said Oliver Blume, CEO of Volkswagen and Porsche AG. “Now, it’s about reorientation.”
The industry faces pressure to move towards EVs, with Europe’s tough 2035 targets looming, and Chinese EV companies advancing with cheaper models.
This has put Volkswagen, Mercedes-Benz, BMW, Porsche, and Renault on the defensive. At the IAA Mobility show in Munich, they showcased models from entry-level EVs to luxury SUVs.
Volkswagen Group CEO Oliver Blume meets German Chancellor Friedrich Merz at IAA Mobility 2025 in Munich.
By 2032, European automakers plan to launch 350 new electric vehicles, ahead of the EU’s 2035 combustion engine ban, opposed by Germany’s carmakers.
“The coming years will be crucial,” said McKinsey partner Patrick Schaufuss, noting European carmakers need quicker, streamlined development to compete with agile Chinese rivals.
‘Intense price competition’
Porsche, with a 27.9% sales drop in China, is adjusting its dealership network, with CEO Blume expressing skepticism about future prospects, shelving a 20% margin target.
Oliver Blume, Volkswagen CEO, arrives in the new Porsche 911 Turbo S in Munich.
“The Chinese luxury market is gone,” Blume told Reuters, adding that the Volkswagen group is investing heavily in the US, ideally with incentives.
BMW is banking on the new iX3 model for growth in China, said sales chief Jochen Goller, who is monitoring the “intense price competition” as they determine the new model’s pricing, set to launch in summer 2026.
Mercedes-Benz’s Mathias Geisen introduces their latest electric GLC model at the IAA auto show, Munich.
Mercedes-Benz plans to release around 40 new models by 2027, relying on its all-electric GLC to regain market share in China, while cutting billions in costs amid continued fierce competition, according to CEO Ola Kaellenius.
The Renault Clio presented during the IAA auto show in Munich.
Renault, having exited China five years ago, is focusing on affordable EV batteries and faster development, lessons drawn from Chinese automakers’ strategies. “Our Chinese competitors are top performers, we’ve used them as a benchmark,” said CEO Francois Provost.
