The value of German automotive exports to China has fallen by more than half since 2022, dropping from nearly €30 billion ($35.3 billion) to under €14 billion in 2025, according to a study released on Tuesday by the German Economic Institute (IW).
Last year alone, exports of cars and auto parts to China plunged 33% compared to 2024.
Jürgen Matthes, IW’s head of international economics, said the decline reflects deeper structural issues rather than a cyclical downturn.
“The sharp export declines combined with rising imports are not a normal cyclical effect, but also the result of significant competitive distortions,” Matthes said in a statement.
The study was published as Chancellor Friedrich Merz traveled to China for the first time since taking office, seeking to recalibrate ties with what was, until recently, Germany’s largest trading partner.
China has fallen from that position to seventh among German export destinations, according to an estimate by Germany Trade & Invest.
The IW urged Merz to raise the export imbalance directly with Chinese officials, warning that the EU may need to impose countervailing duties if “unfair practices do not change.”
Matthes said China’s weakening domestic economy gives Europe negotiating leverage. “Due to its weakening economy, China depends on the European market and generates high profits here. That is leverage — also in negotiations over reliable supplies of critical raw materials and rare earths,” he stated.
Broader Export Declines
The automotive collapse has pushed mechanical engineering into position as Germany’s largest export sector to China, with a market share of less than 21%.
But that sector’s exports also fell 9.8% year over year, with its trade surplus shrinking from a record €10.5 billion ($12.4 billion) in 2018 to below €3 billion last year.
Metal product exports to China dropped 12.9% in 2025 and roughly 25% over three years, while imports of metal goods from China to Germany rose nearly 13%. Pharmaceuticals, chemicals, and electrical products all declined between 9% and 10%.
Chinese Brands Fill the Gap
The export collapse coincides with a surge of Chinese vehicles moving in the opposite direction. BYD (SZE: 002594), SAIC, and Chery have collectively doubled their European market share within a year, according to Dataforce.
BYD sold roughly 250,000 vehicles in Europe through November 2025, a more than 200% increase, while MG, owned by SAIC, moved over 264,000 units.
BYD registered approximately 23,000 vehicles in Germany alone in 2025 and is targeting more than 50,000 in 2026.
Volkswagen, BMW, and Mercedes-Benz, which together account for roughly 73% of EU car exports to the United States, are now facing intensifying competition in their home market as well.
Domestic EV Push
To accelerate the transition at home, the German government announced in January that it would launch a new subsidies program worth €3 billion running until 2029, targeting 800,000 new energy vehicles.
The initiative will allow low- and middle-income families to purchase battery-electric vehicles, fuel-cell vehicles, and select plug-in hybrids with state support of between €1,500 and €6,000 ($1,800 to $7,100).
Applications are expected to open in May through a designated online portal.
January Registrations
Data released by the Federal Motor Transport Authority (KBA) showed that 193,981 passenger cars were registered in Germany in January 2026, down 6.6% from 207,640 in the same month a year earlier.
Electric vehicles accounted for 64,484 registrations, a 23.5% increase that lifted their market share to 33.2% — meaning one in three new cars registered in Germany is now electric.
Battery-electric vehicles alone rose 23.8% to 42,692 units, representing 22% of all registrations.
The domestic EV momentum stands in sharp contrast to the country’s deteriorating export position: Germany produced 1.67 million electric passenger cars in 2025, up 23%, making it the world’s second-largest EV production hub behind China.
But its ability to sell those vehicles to what was once its most important growth market is eroding rapidly.
