VW Pummeled in China

Investment Analysis Clubs Macro Economic Trends and Risks
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Part of the reason for VW restructuring.

I believe the number VW employees cashiered will be 50,000. PLus many more job losses in NW suppliers. 100,000+ jobs poofed.

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The EV Revolution is wreaking havoc in the car industry, not just VW. Mercedes among others…

GoogleAI:

Mercedes-Benz has been heavily impacted by the compounding pressures of the EV market transition, reporting a massive 49% drop in profits as it battles plunging margins, overcapacity, and a crushing tech war in its most vital market. [1, 2, 3, 4]

The structural crisis hitting the luxury automaker is unfolding on several key fronts:

1. The Collapse in China

For years, China served as Mercedes’ ultimate profit center, especially for ultra-luxury models like the S-Class and Maybach. However, domestic Chinese EV brands—such as BYD and Nio—have captured the market with superior software, fast-improving autonomous features, and aggressive pricing. As a result, Mercedes’ sales in China plummeted by roughly 30%, making its traditional luxury fleet look overpriced and technologically dated to younger buyers. [1, 2, 3]

2. Deep Profit and Margin Squeezes

The heavy investments required to scale up dedicated electric platforms have violently collided with slowing consumer demand in Western markets. [1, 2]

  • Earnings Drop: Core automotive margins plummeted to a thin 3% to 5% target range, a severe drop from the double-digit profitability the brand enjoyed previously. [1, 2, 3]
  • Desperate Pricing Tactics: In a panic to move slow-selling EV inventory like the premium EQS, Mercedes slashed prices by up to €30,000 overnight in China, severely bruising its premium brand equity. [1]

3. Backtracking on “All-Electric” Goals

In response to the market realities, CEO Ola Källenius has formally abandoned the company’s previous aggressive targets. [1]

  • The Policy Reversal: Mercedes walked back its plan to go completely electric by 2030 where market conditions allowed. It has delayed its goal of reaching a 50% share of electrified vehicle sales (including plug-in hybrids). [1, 2, 3]
  • The New Flexibility: The company is aggressively retooling its factories to maintain manufacturing flexibility, confirming it will continue developing and selling high-tech gas-powered and hybrid engines well into the 2030s. [1, 2]

The broader European auto ecosystem is undergoing a “hard reset”. Like Volkswagen, Mercedes misjudged how quickly Western consumers would embrace EVs without heavy subsidies and underestimated the sheer velocity of Chinese tech disruption. [1, 2, 3, 4, 5, 6]

The Captain

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