German car industry sees tough 2025 ahead, especially in electric

Germany's struggling car industry, long a symbol of German manufacturing prowess and export dominance, may face further difficulties in the coming year as EU emissions limits get stricter and new US President Donald Trump threatens tariffs.

Car industry leaders in Germany are calling on the next government, set to be formed after February 23 elections, to cut taxes and bureaucracy for the sector and take steps to reduce energy prices.

"2025 must be a year of new beginnings in order to become the year of the turnaround," said Hildegard Müller, president of the German Association of the Automotive Industry (VDA), the leading industry lobby group. "We don't need small steps, we need a big leap."

Weak electric vehicle sales will need to be revamped as tighter EU fleet limits for CO2 emissions are set to take effect, which could bring stiff fines for German carmakers.

Manuel Kallweit, chief economist from the VDA, said on Tuesday that sales of battery-powered vehicles alone would have to increase by around 75% compared to the previous year for German carmakers to comply with the rules.

The increase would work out to sales of around 666,000 additional all-electric vehicles.

Partially electric vehicles, such as plug-in hybrids, would also need to see year-on-year growth of around 53%, Kallweit said.

VDA forecasts, however, actually indicate that sales of electric vehicles fell by 9% in 2024, Kallweit said.

New registration figures for December compiled by the European Automobile Manufacturers' Association (ACEA) and released on Tuesday showed that a major drop in Germany helped pull down the segment.

Across the EU, new registrations of electric vehicles dropped by 10.2% in December, a drop driven by a plunge in registrations in Germany (-38.6%) and France (-20.7%), according to ACEA.

Overall, the electric share of newly registered vehicles in the EU fell to 13.6% in 2024 as a whole, down one percentage point from 2023. Hybrid cars increased by around five percentage points to a share of 30.9%.

Müller said the country's electric vehicle charging infrastructure must be expanded in order to boost sales.

The VDA expects a total of around 2.8 million new cars to be produced in Germany in 2025, roughly the same as in 2024 but around a quarter less than in 2019, the last year before the coronavirus pandemic massively disrupted the automotive industry.

As a result of the industry's transformation towards electromobility, the VDA expects job losses to continue.

By 2035, the shift could cost the industry a total of around 190,000 jobs, said Kallweit, with 46,000 of those jobs already gone.

"The location conditions and the overall economic situation we find ourselves in could lead to this figure increasing significantly," he said.

In a newspaper interview published on Tuesday, German Chancellor Olaf Scholz called for direct subsidies for electric cars manufactured in Germany as a way to boost the industry, which has struggled to switch over from internal-combustion engines.

"This requires the go-ahead from the European Commission - a Europe-wide solution would be best," Scholz told the Freie Presse newspaper in the eastern German city of Chemnitz.

"The purchase of electric cars cannot simply be decreed," Scholz said.

Instead, electric models would have to convince consumers, he said, but added that car manufacturers are now offering a growing range of vehicles that are more developed and cheaper.

"That makes me confident about the future of the electric car," he said.