Porsche facing crisis: car maker abandons electric vehicle production
The German automotive industry is witnessing a significant shift towards electric vehicles (EVs), with EV production reaching a record 635,000 battery electric cars in the first half of 2025, accounting for about 25% of total car production in Germany[1]. This transition, however, has not been without its challenges.
The transition to EVs is causing major problems for car manufacturers, with major German players like Volkswagen, Mercedes-Benz, and BMW experiencing significant profit losses. For instance, Volkswagen’s operating profit for the first half of 2025 dropped by 32% year-on-year, Mercedes-Benz reported a 56% profit decline over the same period, and BMW’s profit fell by 26%[2].
Despite relatively stable sales and production volumes, these losses indicate a sharp weakening in profitability. The high costs and complexities of transitioning from internal combustion engine (ICE) vehicles to EVs are a significant factor. These costs include expensive factory retooling, investment in new technologies and supply chains, and challenges in scaling up EV production profitably[2][4].
Moreover, European automakers prioritized short-term profits for years, resulting in a loss of competitive advantage during the EV transition, which now requires costly strategic adjustments[4]. Regulatory pressures and rising R&D costs to meet stricter emissions targets also put financial strain on the industry.
The crisis in the German automotive industry is not limited to EVs alone. Porsche, a subsidiary of VW, is facing strong competition in China from local manufacturer Xiaomi with its SU7 model[3]. Porsche had relied on projections for the ramp-up of electromobility that did not materialize, and as a result, reported a loss of 71 percent[2]. Porsche's CEO, Oliver Blume, stated that the internal combustion engine will play a strong role "well into the 2030s"[2].
The EU plans to ban internal combustion engines by 2035, a move that threatens the German automotive industry and is "economically unsound" for achieving emission reduction targets, according to industry experts[2]. BMW CEO Oliver Zipse described the phase-out of internal combustion engines as a "disaster", and BMW described the switch to electric cars as "discriminatory"[2].
Auto expert Frank Schwope stated that the switch to electric cars is "tearing apart" the manufacturers, while economist Oliver Holtemueller believes it's increasingly unlikely that a full transition to electric mobility in Europe will succeed within the initially planned timeframe[2]. Bosch deputy CEO Christian Fischer warned of "deep cuts in Europe" due to the ban on internal combustion engines[2].
In an attempt to navigate these challenges, Porsche plans to adjust its E-car strategy and invest "significantly" in internal combustion engines again[2]. Mercedes announced a new internal combustion engine offensive last year, and Audi abandoned the plan to stop building new cars with internal combustion engines from 2026[2].
As the German automotive industry grapples with these issues, it remains to be seen how the sector will adapt and whether the transition to EVs will proceed as planned.
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- The economic and social policy implications of the transition to electric vehicles (EVs) extend beyond the automotive industry, as casinos and gambling establishments may also experience adjustments due to changes in lifestyle and technology.
- As education and self-development continues to prioritize sustainable practices and technologies, students might find courses on the development and production of EVs particularly helpful in understanding the current economic landscape and potential job opportunities.
- General news outlets should continue to monitor governmental regulations regarding EVs and internal combustion engines, as sports events, such as auto racing, may be impacted by the EU's plan to ban internal combustion engines by 2035 and the overall shift towards EV adoption.
