German Carmakers’ Comeback Amid Chinese Competition: What It Means for Global Auto Investors and Entrepreneurs
MUNICH — German automakers are leveraging their home advantage at Europe’s largest auto show this week to unveil new models aimed at competing with Chinese manufacturers and appealing to American consumers, despite added costs from the Trump administration’s trade war.
At the biennial IAA Mobility event in Munich, BMW, Mercedes-Benz, and Volkswagen introduced their latest electric vehicles (EVs) with renewed enthusiasm and confidence, a marked change from recent years.
This optimism follows a challenging period during which Chinese startups surged ahead in the EV sector by rapidly developing and scaling electric and hybrid technologies faster than their European rivals. German manufacturers also faced significant financial setbacks after U.S. tariffs of 27.5% were imposed on European automakers in April, though these tariffs have since been reduced to 15% but are yet to be enforced.
Having invested hundreds of billions in new technology and software, German carmakers are now showcasing EVs boasting competitive charging speeds, extended driving ranges, and advanced, user-focused entertainment systems.
Volkswagen CEO Oliver Blume declared, “We are going on the offensive,” while Mercedes-Benz CEO Ola Källenius described a pervasive "spirit of optimism" in the German auto industry, which is “investing like never before, with an eye to the future.”
However, this progress comes amid significant restructuring, with more than 50,000 jobs lost in the past year as companies streamline operations to better compete with Chinese rivals.
Chinese EVs remain priced more competitively despite European Union tariffs, allowing Chinese brands to more than double their market share in Europe over the past year.
BYD, the global EV sales leader, announced its commitment to Europe by unveiling its first station wagon for the region—a plug-in hybrid version of its popular Seal model to be manufactured in Hungary. Leapmotor, another Chinese startup collaborating with Stellantis, presented a new hatchback targeting younger buyers. Xpeng introduced its AI-powered Next P7 and announced plans for a research and development center in Munich.
Two years ago, such advanced technology was unique to Chinese automakers. Now, German models emphasize AI, software, longer battery life, faster charging, and personalized driver recognition features that adjust lighting, dashboards, and entertainment.
According to JATO Dynamics, Chinese brands accounted for 5.9% of car sales in Europe this May, up from 2.9% the previous year. Meanwhile, Volkswagen, Renault, and Stellantis—which produces Fiat, Peugeot, and Jeep in Europe—remain the top sellers, demonstrating strong brand loyalty.
BMW, Mercedes, and Volkswagen are drawing on their heritage in design and technology. BMW’s fully electric Neue Klasse iX3 SUV combines 1960s-inspired design elements with modern features such as a panoramic dashboard, lithium-ion battery efficiency, and advanced computing. The iX3, launching next year, delivers up to 497 miles of range and can add 229 miles of range in just 10 minutes of charging.
Mercedes’ fully electric GLC model features an illuminated grille reminiscent of the original Maybach’s radiator. Set for release next year, its lithium-ion battery offers a 443-mile range and can regain 25% of its charge within 10 minutes.
Innovative touches include the VW iX3’s automatic hitch, which extends or retracts with a button, and Mercedes’ GLC front storage compartment, accessible by pressing the iconic hood star, fitting two carry-on bags.
Volkswagen is also reviving its traditional naming convention with the electric iD. Polo, a small car set for early next-year production and priced under €25,000 (approximately $29,000).
Volkswagen faces challenges from losses in China and the roughly “several billion euros” cost due to U.S. tariffs on European cars, affecting brands like Audi and Porsche, which are imported into the U.S.
The company, which employs 5,500 workers at its Chattanooga, Tennessee, plant, is exploring further large-scale investments in the U.S., contingent on negotiations with the Trump administration. Blume stated, “We are not expecting that the tariffs will be lowered for Volkswagen, but the United States must give something before we will make such investments,” without providing further details.
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The resurgence of German automakers in the electric vehicle sector, marked by heavy investments in AI-driven technology and competitive EV models, signals a renewed global race in automotive innovation. For Omani businesses, this underscores the importance of diversifying into advanced tech sectors and strategic partnerships to tap into evolving EV supply chains. Smart investors should consider early engagement with emerging EV markets and technologies, while remaining cautious of trade tensions and market shifts influenced by geopolitical factors.
