The “China Effect” Sinks BMW and Mercedes on the Stock Market

The German automotive sector is struggling, further highlighting the slowdown in Germany’s industrial sector. Production fell by 4.3% in August — the worst figure since 2022 — with an 18.5% drop in the automotive industry. Data released by Destatis once again reflect the challenges faced by Europe’s largest economy: deep stagnation driven by U.S. tariffs, high energy costs, and Chinese competition.

The BMW case is emblematic in this context, plunging on the stock market with a drop of around -9%, after the company cut its 2025 profit forecast due to weak demand in China and delays in U.S. customs reimbursements related to tariffs. But the most worrying sign comes from Beijing, where after years of growth, the market is slowing, and BMW's sales came in below expectations (-0.4% in the third quarter). JPMorgan notes that “more than tariffs, what’s concerning is the ability to maintain pricing power and competitiveness in China in 2026.”

But BMW is not the only one in trouble: the China effect and U.S. tariffs have also hit Mercedes-Benz (-3%) and the Stoxx 600 Automobiles & Parts index (-1.7%). The impact has spread broadly, with a 27% drop in China and a 17% decline in the United States. Mercedes is trying to respond by shifting electric vehicle production to Hungary, while other plants will be downsized. Even though Mercedes is aiming to cut costs and adopt a more complex industrial strategy, the challenge remains the same: to protect profitability in an uncertain demand environment — and above all — in the face of increasingly disruptive and aggressive Asian competition.

The backbone of the European continent is under mounting pressure when it comes to the automotive sector. BMW, which will release its financial results on November 5, has revised its guidance downward, signaling not only a warning to investors but also a structural issue. The electric strategy is progressing; however, margins remain under pressure, especially in China, where local price competition is eroding profitability. The situation reflects a competitiveness crisis affecting the entire German premium car segment, now challenged by the electric transition and geopolitical tensions.