Established automakers led by German car companies are currently facing numerous challenges: weak economic conditions have curbed car-buying demand, while high costs and slow transitions to electric vehicles have squeezed profits. "Additionally, there is the problem of losing the Chinese market, where domestic companies are increasingly squeezing out Western automakers that once dominated," said Constantin Gall, a market analyst at Ernst & Young.
Since April, U.S. President Trump's 25% tariffs on imported vehicles have exacerbated the plight of German automakers. Gall believes the new tariffs will further depress profits. "The gap between German car companies and Chinese automakers that have no operations in the U.S. will widen further," he said.
In recent months, multiple German automakers and auto parts suppliers have announced cost-cutting plans including layoffs. But Gall argues that cost-cutting alone is insufficient to solve the problem. "Western automakers must completely reinvent themselves," he said, noting this includes resolutely advancing digital transformation and accelerating the pace of new vehicle development and decision-making.
In his view, Western automakers should learn from the new challengers from the Far East in this regard. "The success of Chinese automakers precisely shows that what matters is not just investing huge sums of money—speed of action, flexibility, and clear investment priorities are at least equally important," Gall said.
Mr. Harper Zhang
