German Auto Industry Prepares for Global Competition Amid Tariffs, Chinese Market Surge

The Munich car show highlighted the significant challenges facing Europe's automotive industry, including U.S. tariffs, declining sales in China, and the costly transition to electric vehicles (EVs). German Chancellor Friedrich Merz emphasized the need for innovation and plans to convene a summit to address these pressures, while executives like Volkswagen's Oliver Blume acknowledged a major industry reorientation amid tough 2035 EU EV targets and intense competition from Chinese automakers such as BYD. Chinese presence at the show surged, reflecting their growing market share in Germany and ambitions to expand further. Meanwhile, European automakers are lobbying against the EU's 2035 combustion-engine ban, arguing for emissions regulations that consider the full supply chain, but critics urge focusing on competing with Chinese manufacturers on cost and quality. The auto sector's struggles are compounded by weak demand in Europe and tariffs that threaten profitability, prompting concerns about maintaining production in Germany amid rising costs. Overall, the industry faces a critical period of transformation as it navigates geopolitical tensions, regulatory shifts, and evolving global competition.