German automakers took a hit in early 2026 as tariffs and technology-related challenges weighed on sales, with little near-term relief in sight, according to EY.
The details: An analysis by the London-based consulting firm found that revenue among major global automakers rose 2% in the first quarter, led by Japanese and U.S. manufacturers, while German automakers posted a 4% decline, Reuters reported—a trend that was reflected in their U.S. sales performance.
Mercedes-Benz U.S. passenger-car sales fell 3% year over year to 70,000 units in Q1.
Volkswagen's U.S. sales dropped 16% to 73,803 units, down from 87,915 in Q1 2025.
Audi's U.S. sales plunged 30% to 29,886 units, compared with 42,710 a year earlier.
What they’re saying: "The entire German automotive industry is undergoing a profound structural transformation," EY sector specialist Constantin Gall said, citing costly overcapacity, high software investments, and the slow ramp-up of electric mobility, per Reuters.
Why it matters: The sales declines underscore the growing challenges facing German automakers, signaling sustained weakness that could affect dealer inventory strategies, pricing dynamics, and showroom traffic, particularly in the luxury segment.
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Between the lines: German automakers avoided President Donald Trump's threatened 25% tariff on European Union imports, but the existing 15% tariffs are still taking a toll on profitability and operations.
Volkswagen said in October that tariffs could cost the company as much as €5 billion ($5.8 billion U.S.) in 2025, with Porsche among the brands most affected.
Mercedes-Benz said last July that tariffs could reduce adjusted operating profit (EBIT) by €362 million ($418 million U.S.) in 2025.
Bottom line: The struggles facing German automakers extend beyond tariffs, reflecting broader challenges related to electrification, software development, and profitability that could weigh on showroom traffic in the years ahead, particularly for brands such as Mercedes-Benz, Volkswagen, and Audi.
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