Munich Auto Show Highlights Europe’s Struggles Amid China, EV, and Tariff Pressures

Munich, September 10, 2025: The European automotive industry is staring at a grim picture, as evident from the recently concluded car show in Munich. Multiple factors have led to the decline of enthusiasm, and the most noteworthy reasons are fresh tariff pressures from the United States, a slipping demand in Europe and falling profits in China. Suddenly, the focus is shifting towards electric mobility.  

Pressures from China and the US 

China, considered to be the largest automaker in the world, is giving a tough fight to the popular European brands. For instance, luxury carmaker Porsche reported a 27.9% drop in Chinese deliveries in the first half of 2025. Add to that the mounting pressure of US tariffs. Automakers like Volkswagen are now looking to rebalance and shift their geographic focus to the United States. 

Electric Vehicles Take Center Stage 

There was a display of a huge variety of electric vehicles (EVs), right from affordable entry-level models to high-end SUVs at the Munich car show. To counter the low-cost entries from China, all the major European brands like Volkswagen, Mercedes-Benz, BMW, Porsche, and Renault revealed new launches. In the wake of the EU’s 2035 ban on combustion engines, European manufacturers are gearing up to roll out 350 new EV models by 2032, as per the latest report by McKinsey. However, it remains a challenge for these automakers to address the need for faster product development and greater cost efficiencies. 

Shifting Margins and Strategies 

One has to accept the fact that the era of high profit margins is slowly disappearing. Volkswagen and Porsche CEO Oliver Blume noted that the auto sector is undergoing “reorientation” after decades of steady growth. Porsche has already scaled back its long-term margin targets, citing weakness in China’s luxury market. There is also major restructuring taking place in the Asian dealership network keeping in mind the expected incentives in the US. 

All said and done, the environment is nonetheless a ‘brutal price war’. It remains to be seen how the European auto sector attempts to balance global trade tensions and competitiveness in its core export markets.  

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