The German car bosses opened their books this week and suddenly everyone can see how much the business model has changed. The corporations still earn billions. But the industry’s old certainties are dissolving like watercolors in a rain shower.

Just a few years ago, the German premium industry was an almost perfect system: high prices, rising margins, China as a growth engine. German engineering, Chinese demand – that was the formula. Today it has become a war on three fronts: geopolitical risks, aggressive Chinese competitors and a transformation that costs billions.

The numbers tell a new story

The Volkswagen-Group, still the largest car manufacturer in Europe with sales of around 322 billion euros, had to accept a slump for 2025 that hurts: Net profit fell from 12.4 billion to 6.9 billion euros – a decrease of 44 percent. Management is reacting with drastic measures: around 50,000 jobs in the group are expected to be eliminated by 2030. When presenting the figures, VW boss Oliver Blume said that the industry’s business model had “fundamentally changed”.

The translation is simple: the system with which German car manufacturers have reliably made money for decades no longer works as it used to. Size, once Volkswagen’s greatest strength, is increasingly becoming a strategic burden. The company is a tanker, and tankers cannot simply change course.

Porsche: from margin miracle to problem child

The change is particularly visible Porschefor a long time the margin miracle in the Volkswagen empire. The sports car manufacturer reported one for 2025 Profits fell by more than 90 percent to around 310 million euros, while sales fell to around 36 billion euros.

Porsche is now trying to rebalance its strategy between electric models and an extended combustion strategy. The problem: Financing both at the same time costs billions. And no one knows for sure at the moment whether this balancing act will work. Of all people, the most profitable car manufacturer in the world is suffering the most.

Mercedes: The U-turn in Stuttgart

Also Mercedes Benz feels the market shifting. Although the group continued to have sales of more than 150 billion euros last year, operating profit fell significantly and the Car margins have shrunk noticeably. Business in China in particular is losing momentum. In Stuttgart, management also had to recognize that a big strategy is not automatically a good strategy. Just a few years ago, Mercedes wanted to dare a radical experiment: build fewer cars and sell more luxury. “Value over Volume” was CEO Ola Källenius’ formula. Mercedes was supposed to become the automotive version of a luxury brand.

There is now significantly less of this idea left. The group is opening up its model range again because too much luxury also costs market share. The dream of transforming Stuttgart into a kind of automotive Louis Vuitton has been dashed for the time being.

BMW: the most stable player in the relegation battle

Against this background, the figures from Munich seem almost conservative. BMW reported an operating result of 10.2 billion euros, a decrease of 11.5 percent, while net profit was around 7.5 billion euros. Sales reached 133.5 billion euros.

BMW boss Oliver Zipse put it dryly at the balance sheet conference: “We have once again shown how robust and viable our business model is.” That sounds unspectacular, but it is strategically interesting. BMW has consciously decided against a radical change in technology and continues to produce electric, hybrid and combustion cars on the same platforms. In an industry that is investing billions in an uncertain future, this flexibility suddenly becomes a competitive advantage. Now, however, the next big step must be successful: the electric platform, the new “new class”.

Looking outside: Who actually earns the most?

In an international comparison, German self-criticism is put into perspective. While Volkswagen, BMW and Mercedes complain about falling margins, many new competitors are still struggling to become profitable at all. The large Chinese electric car manufacturers are growing rapidly and gaining market share, but they are earning comparatively little money. Manufacturers like Nio or Xpeng operate with very thin margins or continue to make losses.

A personnel change from this week shows how difficult the European market is: Nio has fired its German boss. The reality is almost comical. According to registration statistics, Nio has so far registered exactly one car in Germany in 2026. A single one. Statistically, it’s not a market, more of a parking lot. But anyone who believes that the Chinese manufacturers are harmless is wrong. They are strategically attacking exactly where German car manufacturers were unassailable for decades: in the premium segment.

Radical changes in the Chinese market

A look at international margins reveals an interesting picture. Toyota is currently the most efficient large car manufacturer in the world and achieves operating margins of around eight to nine percent. Teslafor a long time the profit king of the electrical world, has lost significant margins due to price wars and is now around five to six percent – roughly at the level of German premium manufacturers. The Germans appear to be struggling, but globally they remain in the most profitable league in the industry.

The real pressure comes from the world’s most important market. The Chinese market, for years the biggest profit driver for German premium manufacturers, is currently changing radically. At BMW, for example, sales there recently fell by more than twelve percent. At the same time, Chinese manufacturers are excelling technologically, especially in electric cars and software. German car manufacturers are falling behind.

Are family businesses the better strategists?

BMW has a structural advantage that hardly anyone in Wolfsburg or Stuttgart talks about out loud: its ownership structure. The Quandt and Klatten families continue to control the majority of voting rights. This changes the strategic horizon. Family businesses often think in terms of decades, while many listed companies operate more on a quarterly basis. While other manufacturers are hectically correcting their strategies – sometimes moving more quickly towards electric, sometimes back to the combustion engine – BMW appears surprisingly controlled in its transformation.

The German car manufacturers’ balance sheet week therefore provides a clear ranking. Volkswagen is struggling with its size and declining margins. Porsche is wrestling with the costs of a strategic turnaround. Mercedes is correcting its luxury strategy. BMW, on the other hand, continues to earn solid money. Or, to put it a little more pointedly: Many car manufacturers are currently accelerating and cranking the wheel like crazy. BMW may not drive faster, but it does have the steadiest hand on the steering wheel at the moment.