German auto industry faces economic crisis

Germany's once-dominant automotive industry is in the midst of an existential crisis, a stark departure from its historical role as a pillar of European economic prosperity. The familiar hum of engines has been replaced by alarm bells as the sector grapples with a perfect storm of challenges.

Key issues include a sluggish transition to electric mobility, high domestic production costs, and intense competition from affordable Chinese electric vehicles flooding the European market. Compounding these problems are declining sales in the United States and the crucial Chinese market, once a significant growth engine.

Volkswagen, the industry giant, is particularly affected. CEO Oliver Blume and CFO Arno Antlitz are reportedly planning radical cost-cutting measures by 2030, which could impact up to 100,000 jobs, many in Germany, and put four plants at risk of closure. An internal survey revealed that six out of nine board members consider the company existentially threatened.

Even Porsche, traditionally a reliable source of profit for the Volkswagen Group, is experiencing significant financial downturns. Its operating profit has plummeted from 5.6 billion euros in 2024 to just 410 million euros in 2025. New CEO Michael Leiters has initiated a savings package that includes eliminating around 4,000 jobs, and even Porsche's development center in Weissach is set to reduce its capacity by a third.

The Volkswagen supervisory board is set to discuss these future plans, likely leading to heated debates between major shareholders, including the Porsche and Piëch families, and employee representatives. The latter, along with representatives from the state of Lower Saxony, hold a majority on the board, potentially blocking overly aggressive cost-saving measures.