German car manufacturers report lowest quarterly profit since 2009

German car manufacturers faced pressure not seen since the financial crisis in the quarter from July to September.

While sales and revenue for Volkswagen, BMW and Mercedes-Benz remained largely stable, earnings before interest and taxes (EBIT) of the manufacturers plummeted by nearly 76%.

Together, they reached just over €1.7 billion ($2 billion), the lowest value since the third quarter of 2009, according to an analysis by the auditing and consulting firm EY released on Monday.

No other major car-producing country performed as weakly as Germany in terms of revenue and profit growth, according to the report.

However, the industry as a whole is also in a profitability crisis.

The world's 19 largest car companies, whose financial figures EY expanded, slightly increased their revenue in the third quarter to around €531 billion. But profit before interest and taxes shrank by 37% to around €18.9 billion. This is the lowest value since 2018.

Car manufacturers caught in "perfect storm"

EY automotive expert Constantin Gall said: "The global automotive industry is in a deep crisis; However, it is currently the German car companies that are suffering particularly badly."

He attributed this to the general weakness of the premium segment, US tariff policies, negative exchange rate effects, high investments in electric cars that have not yet paid off and high expenses for restructuring the companies.

"All this is currently creating a perfect storm, especially for the German car manufacturers," he said.

The upheaval is particularly noticeable in the world's largest car market, China, where sales of German manufacturers fell by 9% in the third quarter.

The Chinese share of global sales dropped to 29%, down from 39% in 2020. Gall said the market is extremely competitive. Due to the weak economy, premium cars sold worse than in previous years. However, the sales of electric vehicles are growing strongly.

"And here, the Chinese clearly prefer domestic brands over established Western companies," Gall said. Western manufacturers are trying to counteract this, but an end to the downward trend is not in sight.

Suzuki is most profitable car company

The most profitable manufacturer in the third quarter was the Japanese company Suzuki. Its profit margin, which relates operating profit to revenue, was 9.2%. This was followed by BMW with 7%, and Toyota with 6.8%.

From July to September, most companies retained less profit from the revenue generated. The average profit margin of the analysed companies was 3.9%, the lowest level in at least 10 years. Since 2023, the value has more than halved.

In the German automotive industry, a number of companies have recently announced job reduction programmes that will continue for some time.

These include industry giants like Bosch, ZF Friedrichshafen, as well as Mercedes-Benz and the Volkswagen Group with its various brands.

According to the Federal Statistical Office, suppliers have recently been more affected by job cuts than car manufacturers.

Do job cuts have positive effects?

"There is hope that the financial clean-up will soon be completed and that cost-cutting measures will quickly bear fruit and contribute to an improved margin," Gall said.

The job cuts, especially in Germany, are associated with high costs but are likely to increase competitiveness in the medium term, he said.

According to Gall, this also applies to the longer retention of combustion engines: "Because the hopes for a rapid ramp-up of electromobility have not been nearly fulfilled, at least in Western sales markets, sales figures are only slightly increasing," the expert said.

The vast majority of buyers still opt for combustion engines, mostly as hybrids, he added.