German Carmakers Hit by Tariffs, China Rivalry in 1H25

German automakers reported sharp profit declines in the first half of 2025 as US tariffs and rising Chinese competition disrupted their American strategies—despite a tariff rollback from 27.5% to 15% under a new EU–US agreement.

Volkswagen Group posted a 36.6% year-over-year drop in net profits to €4 billion (US$4.35 billion), with Porsche and Audi particularly affected. Porsche’s net profit plunged 66.4% to €724 million, due to weakening luxury car sales in China and US tariffs imposed by the Trump administration. “In the United States, import tariffs are also placing heavy pressure on our business,” said Porsche CEO Oliver Blume.

Audi, which manufactures in Mexico for export to the U.S., faced a 25% tariff—well above the 15% negotiated with the EU—and sustained an estimated €600 million in financial impact during 1H25. Its net profit dropped 37.5% to €1.346 billion. “Like BMW, Audi today has a plant in Mexico. It was built because costs were believed to be better, but now tariffs could reach 50%,” noted Ferdinand Dudenhöffer of the Centre for Automotive Research.

BMW and Mercedes-Benz fared better thanks to their US manufacturing capacity. BMW reported a net profit of €4.015 billion, a 29% decline, while Mercedes-Benz posted €2.688 billion, down 55.8%. Both companies benefit from US-based production that helps them avoid import duties. “Mercedes has a large factory in the United States and exports SUVs to Europe and China, placing it in a strong position,” Dudenhöffer added.

Despite the reduction in tariffs to 15%, German automakers continue to face strong headwinds. Industry groups warn that even reduced levies impose significant burdens on global operations. The EU–US agreement is seen as a “significant step,” but only a partial relief, as geopolitical tensions and trade uncertainties persist.