Rising popularity of EV models is squeezing German carmakers’ profits

The surge in demand for electric vehicles (EVs) is turning into a challenge for Germany’s carmakers because combustion models are more profitable and EV production cannot keep up with orders, causing them to lose customers to foreign competitors, the business daily Handelsblatt reported. “For many years, German manufacturers’ EVs were shunned by customers. Now sales of a new EV generation significantly exceed expectations. For their profitability, this is bad news,” the newspaper said.

The rapid shift in demand is partly driven by customers seeking alternatives to combustion engine cars as fuel prices have skyrocketed in the wake of the US-Israeli-led war on Iran. The accelerating uptake of electric cars has led to a rise of cheaper Chinese competitors, spurring concerns about a wave of job losses among carmakers and industry suppliers in Europe.  

Changing attitudes towards EVs are posing a predicament for the carmakers: if they fail to satisfy demand, customer will switch to Chinese brands. If they sell more EVs themselves, their financial woes will deepen, the newspaper concluded.

The share of EVs in the sales of the three major carmakers, Volkswagen, Mercedes-Benz and BMW, climbed from 19.5 percent in the third quarter of 2025 to 26 percent one year later. In October, 37 percent of newly registered models in Europe had an electric drivetrain, according to figures by consultancy EY. Because EVs carry much lower profit margins than combustion engine vehicles, largely due to battery costs, the rising EV share is weighing on the producers’ balance sheets: “The success of our EVs on the market is putting pressure on our results,” said Volkswagen CFO Arno Antlitz. “At the same time, demand for combustion engine cars in the core markets Europe and China is falling.” 

According to Handelsblatt, the rapid transition is confounding the carmakers’ planning, and customers currently may have to wait up to a year for their EV orders to arrive, while ending combustion engine production lines earlier than planned leads to write-offs. While the profitability of EVs relative to combustion engine cars is catching up for most car models, Volkswagen and Mercedes only expect the two to reach parity by about 2030. “EV buyers are letting go of their prejudices. Even if the oil price falls again, the sales of EVs are going to increase in the long run,” said Horst Schneider, car market analyst at Bank of America. 

Employment in Germany's car industry fell to its lowest level since 2005 in the first half of 2026 to less than 700,000, with 42,300 fewer people working in the sector than a year earlier. Germany’s car industry association VDA warned of a potential collapse of employment in the sector in Europe unless society and workers accept that “bold decisions” are needed to address competition from China and other rivals.

One in four newly registered cars was an EV in the first eight months of 2026, with the share climbing to about one third in August and up from about a fifth in 2025. Critics from opposition parties and environmental groups said that a deal between France and Germany to weaken European Union car emissions rules and effectively abolish a ban on new combustion engine cars agreed in October risks leaving the EU behind on key mobility technologies such as batteries or bidirectional charging.