German car manufacturers have started 2026 with a slump in profits, falling behind their international peers. According to a study published Friday by consultancy firm EY, earnings for the three major German groups - Volkswagen, Mercedes-Benz, and BMW - fell by 23 percent in the first quarter. Meanwhile, U.S. corporations saw their net income surge by 83 percent. In terms of revenue, German automakers were the only ones to record a decline, dropping four percent, while U.S. manufacturers grew by five percent and Japanese competitors by four percent.

Profitability across the entire sector is under pressure. The average margin of the 19 largest automotive groups fell to 3.5 percent, reaching its lowest level since the pandemic year of 2020. 'For German car groups in particular, the crisis is far from over,' said Constantin M. Gall, industry expert at EY. The German automotive industry is undergoing a profound structural transformation. 'Loss of foreign markets, costly overcapacity, high software investments, and a slow ramp-up of electromobility are weighing on results,' Gall noted.

According to the study's ranking of the most profitable automotive groups, Japanese manufacturer Suzuki takes the top spot with a margin of 10.9 percent, followed by U.S. industry leader General Motors (9.4 percent) and South Korea's Kia (7.5 percent). BMW ranks fourth at 6.5 percent, Mercedes-Benz sits in sixth place at 6.0 percent, and Volkswagen is 13th with 3.3 percent.

Business in China is increasingly proving to be a drag on performance, with sales for German groups there plunging by 16 percent. 'From cash cow to problem child: China remains one of the biggest issues for German corporations,' Gall explained. Furthermore, a challenging global environment is complicating the situation for manufacturers. 'Geopolitical tensions, nationalism, trade barriers, and shifting political preferences for various powertrain technologies are shaping the landscape,' said Gall. German groups find themselves in a very difficult position as they can no longer benefit from free global trade.

(Report by Rene Wagner, edited by Christian Götz. For inquiries, please contact our editorial team at berlin.newsroom@thomsonreuters.com)