Electric BMW cars charging in the parking lot of the BMW factory near San Luis Potosi, Mexico. The threat by Trump to impose tariffs on imports from China, Mexico and Canada could pose a challenge to automakers with plants in Mexico like BMW and Volkswagen. — ©2025 The New York Times Company
A FEW years ago, automakers celebrated record profits as pandemic-induced shortages allowed them to raise prices. Now, the hangover is setting in.
Nissan is laying off 9,000 employees, Volkswagen may close factories in Germany, and Stellantis, the maker of Jeep, Peugeot and Fiat, lost its CEO as sales tumbled.
Even luxury brands like BMW and Mercedes-Benz are struggling.
The challenges vary for each company, but common threads include expensive technological transitions, rising protectionism, political uncertainty and the rapid rise of Chinese carmakers.
Together, these issues cast doubt over the future of an industry that employs millions globally and drives major economies.
During the pandemic, automakers profited from limited inventories. Supply chain issues, especially semiconductor shortages, gave them leverage to raise prices.
But that era has ended.
Now, carmakers face oversupply, as too many manufacturers chase too few buyers.
“When factories run under capacity, it has a massive effect on profitability,” said Simon Croom, a supply chain professor at the University of San Diego.
Chinese competition
Chinese carmakers like BYD, Chery and SAIC, barely global players before the pandemic, are now formidable competitors, matching Japanese, European and US cars in quality but offering lower prices.
While trade barriers limit their access to markets like the United States, they are aggressively expanding in places such as Australia, Brazil and Thailand, threatening established players like Toyota, GM and Fiat.
“Chinese competition is starting to hit Western carmakers’ safe spaces,” said Felipe Munoz, an analyst at Jato Dynamics.
In China – the world’s largest car market – domestic brands are dominating.
Volkswagen, which once led the Chinese market, saw a 10% drop in deliveries during the first nine months of 2024. BMW and Mercedes-Benz have reported similar declines, blaming reduced Chinese demand for lower profits.
Even GM, once a strong player in China, expects a hit to its profits as it restructures its Chinese operations.
Chinese brands also stand out for their innovative offerings.
BYD’s Yangwang U8, for example, can float for 30 minutes in a flood and rotate 360° in place – features unimaginable from most legacy carmakers.
Costly transition to EVs
The shift to electric vehicles (EVs) has been expensive and uneven.
While Toyota’s hybrid-focused strategy is paying off for now, other carmakers are struggling.
Volkswagen’s early EV efforts have stumbled, with its ID.4 SUV suffering plummeting US sales due to buggy software.
“The Chinese are winning market share, and the Germans are losing,” said Ferdinand Dudenhoffer, director at Germany’s Centre for Automotive Research.
Government policy shifts are adding to the uncertainty.
In Germany, EV sales plunged after the government scrapped purchase incentives. In the US, Republicans have vowed to repeal Biden-era EV tax credits, jeopardising billions invested in new factories by companies like GM, Volkswagen and Hyundai.
“The auto industry has dished out a lot of capital for an underwhelming EV market, one that could change dramatically in the next six months,” said Erin Keating, an analyst at Cox Automotive.
Meanwhile, tariffs loom.
US President-elect Donald Trump has threatened to impose new duties on imports from China, Mexico and Canada – countries critical to auto supply chains.
Mexico, for example, produced two million vehicles for the US market in the first nine months of last year.
Job cuts and factory closures
Job losses have been significant.
Nissan, with factories in Mississippi and Tennessee, has yet to specify where its 9,000 layoffs will hit.
Ford recently announced 4,000 cuts across Britain and Germany, citing “economic headwinds”.
Factories operating below capacity remain a major issue.
This trend extends to Volkswagen, which is considering closing German plants, and Stellantis, whose CEO Carlos Tavares resigned following a steep sales drop. The company’s troubles include delayed model updates and rising inventory at dealerships.
In a virtual meeting after Tavares’ resignation, Stellantis chairman John Elkann reassured US dealers, who expressed optimism that “2025 will mark a turning point”.
Winners and adaptations
Not all automakers are faltering.
GM’s shares have surged 40% this year as Wall Street rewards its promising EV models, such as the Cadillac Lyriq and Chevrolet Equinox.
CEO Mary Barra claims GM is close to making EVs profitable, a milestone most competitors have yet to reach.
Still, GM recently halted its robotaxi programme, raising doubts about carmakers’ ability to compete in emerging technologies against tech-driven rivals like Tesla and Google’s Waymo.
Toyota’s hybrid success reflects a preference among cost-conscious buyers who aren’t ready to fully transition to EVs.
But analysts warn the automaker risks falling behind if EV adoption accelerates.
In China, where more than half of new cars sold are electric or plug-in hybrids, EVs are already cheaper than petrol cars.
To adapt, carmakers are increasingly partnering to share costs.
Nissan is accelerating collaboration with Renault, Mitsubishi and Honda to shorten development cycles. Volkswagen, meanwhile, is investing in Rivian to resolve software challenges.
Even deals with Chinese automakers are emerging.
Stellantis recently bought a 20% stake in Leapmotor and is selling Leapmotor EVs in Europe.
Volkswagen, too, is collaborating with China’s Xpeng to regain footing in the Chinese market.
“If you can’t beat’ ’em, join ’em,” said Dudenhoffer.
For legacy automakers, survival will depend on cutting costs, speeding up innovation and adapting to a fast-changing market where Chinese manufacturers are proving tough to beat. — ©2025 The New York Times Company
