Volkswagen, Mercedes, Audi, BMW and Porsche have been struggling with enormous profit declines and declining sales for some time. The French Stellantis, which was still profitable last year, suffered a loss of 2.3 billion euros in the first half of 2025.
But this month the free fall really took on apocalyptic proportions. Production at the Stellantis brands Opel and Fiat, and now also at VW, even had to be temporarily halted due to stagnant demand. The Japanese Nissan is also in need.
But classic European brands in particular are experiencing headwinds. That’s not solely their fault. Courageous design reforms from Mercedes and VW turned out badly; customers appeared not to like the new house styles. The market for electric cars (EVs) is not growing fast enough due to the loss of subsidy benefits, Chinese competition is steadily gaining strength, and American tariff barriers are worsening the competitive position.
Yet the malaise has only one main cause: the energy transition itself. This has reshuffled the cards in the industry, and not just for manufacturers who electrified too slowly.
The question is not who will survive the existing crisis. The question is who is still needed.
First of all, the EV was a merciless attack on the core values of German and French car manufacturers. They had to change from mechanical engineers to software companies in the time they did not have. Technological standard bearers such as Mercedes and Audi were reduced to beginners.
A German car was, in short, an indestructible diesel in a rock-solid carriage; the electric car was Silicon Valley, a digital machine. The cover devoured billions. The charging infrastructure was in its infancy and battery packs had to be purchased from suppliers. The market was too small and the software at VW was a disaster. Range and charging speeds were mediocre to slow at first.
Worse was – and is – that cars became more and more similar due to their electrification. In the past, you bought a Lexus for the silence, a Porsche for the sound, a Mercedes for the diesel engine, a Volvo for eternity. Now all plug-in cars are roughly the same: quiet and fast, low-maintenance and digital, perfect and inanimate, devices with screens.
There is nothing left of traditional motoring pleasures such as shifting gears and a tasty engine sound. A BMW still drives better than a VW, but 90 percent of customers do not notice the difference. Driving fast is no longer possible in a crowded country and in EVs, tearing is in any case fatal for the driving range. It therefore makes less and less difference to the driving experience what you buy, and certainly not whether the car has two or six hundred horsepower.
The logical conclusion: you need far fewer brands and models than there are.
The question is whether the car industry realizes this. Brands in need are fighting for their lives, while some have long since lost all urgency.
One of the causes is the technological equalization of supply. Concerns such as VW and Stellantis each have various brands in their portfolios. To save costs, they often share their technical basis. Platforms, engines, software, displays – whether you order a Skoda, Audi or Seat from VW, you buy roughly the same thing, just in the packaging of your choice. For Stellantis, it does not matter whether it is an Opel, Peugeot or Citroën. Such brands are empty shells.
There is a revenue model in that formula. The larger and more diverse your offering, the greater the chance of retaining customers. If you don’t like an Audi, you might be in for a VW. In this way, one brand can absorb the blows for the other within a group. Things are going well with VW subsidiary Skoda, because the public apparently finds the model range more attractive than the technically identical VWs or Audis. If VW appeals to a real VW audience again with the next generation of cars – which the brand’s current electric ID models apparently do not do – the panels may start to slide again and Skoda customers will probably purchase VWs again. Don’t worry: The money stays under one roof.
But whatever the economic legitimacy of the strategy, it remains absurd that various brands all supply you with the same car under that one corporate umbrella. Especially if those brands have had their day, for example manufacturers for which the sound of a combustion engine was their calling card.
That is also why Porsche and Alfa Romeo are having difficulties in the energy transition. They can no longer play to their acoustic strengths, because you cannot hear an electric motor and the artificial hum with which the manufacturers want to close that gap is a farce. You have to wonder if they do without that unique selling point can survive on the plug-in car market.
At Porsche they now know the answer. Many wealthy buyers prefer a Porsche with a combustion engine over an electric Taycan. No matter how phenomenal that car is, the absence of a roaring six or eight cylinder breaks it down. And if that one before petrolheads essential sound sensation can no longer make the difference, why wouldn’t you, as a Porsche driver, buy an equally well-built electric SUV from China for half the money that an electric Porsche must fetch? They are there, astonishingly good and just as fast.
Likewise, an Alfa Romeo without engine noise is a house without a foundation. The classic Alfa driver is on the verge of extinction and Gen Z no longer has any idea what that brand stood for. You are not going to buy a plug-in car from Alfa Romeo because the brand was your grandfather’s boyhood dream.
Finally, there are the brands that thrived in a different kind of society than ours. In the fossil era, Opel and Ford were the solid, affordable alternative to more expensive competitors, from VW to Mercedes. Nissan was in the same waters, with neat cars for reasonable prices.
The careful citizen who used to drive those brands very faithfully now buys Kia or Hyundai, and soon possibly one of the many brands from China, where companies such as BYD are completely capturing the middle class market. Ford, which is now cloning electric VWs out of necessity, is disappearing to the margins. Opel represents zero added value with non-brand Stellantis technology. Like the Stellantis brands Alfa, DS, Lancia and Jeep, it can be closed immediately without anyone missing a thing. You would also wish VW a major restructuring of its brand and model range.
Everything is impermanent. Automotive history is a coming and going of great names that rose high and fell low, from Maybach to Saab. Now the Chinese are claiming their market share with one new brand after another. China now has more than a hundred car manufacturers. There too, only the strongest will survive in the tough competition. Chinese SUVs are now barely distinguishable on the street. This may also apply to smartphones, but it still makes a difference whether you spend 1,000 or 50,000 euros on something interchangeable.
According to former Fiat CEO Sergio Marchionne (1952-2018), only six car companies would ultimately remain, because for healthy business operations you had to sell at least 5.5 to 6 million cars annually. If that is true, and smaller manufacturers have no chance of survival anyway, the number of car brands will decline drastically.
Given the current size and rate of evolution of China’s auto industry, that process could happen at a dramatic pace. Most traditional brands are too expensive, their reputation no longer means anything to the youngest generations, or, like Porsche, they can no longer capitalize on their historic qualities. An Xpeng is now just as well built as the previous cars from Mercedes, which is now well on its way to becoming Chinese itself. To save costs, it wants to equip cars intended for the Chinese market with parts from cheaper Chinese suppliers, which will reduce prices by thousands of euros.
That sell-out strategy – the new Mercedes CLA is already being sold at stunt prices in China – could be the beginning of the end. No matter how good those cars become, one day they will lose the indestructible German aura that made the brand what it is in the perception of Mercedes drivers. For wealthy buyers who never experienced the old Mercedes, the new Mercedes will not distinguish itself from the competition: all quiet and fast, low-maintenance and digital, perfect and inanimate, devices with screens.
Even without a crystal ball, it is foreseeable that the global automotive industry will have changed beyond recognition within ten years. You are particularly fond of the German top brands. Never has quality been so cheap, never has prestige been so fleeting.
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