Welcome to Issue #110 of The German Autopreneur.

German automakers are scrambling to find skilled workers. But: Last year, the industry cut 50,000 jobs.

How do those two things go together?

The automotive industry faces its biggest transformation ever. Powertrains, software, autonomous driving. Everything's changing at once. And now AI is here.

Everyone's talking about it. But most departments haven't changed much yet. Something's coming. But when? And for whom?

A new study analyzed 2 million real AI interactions. Not surveys. Not forecasts. Actual usage data. The result flips a common assumption: AI doesn't automate simple jobs first. It automates the most demanding ones.

Today we'll look at what the data shows. Which jobs and departments in automotive are next. And why most people aren't feeling the real impact yet.

What the Data Shows

The study didn't ask what AI can theoretically do. It measured what people actually use AI for.

The pattern: AI replaces higher-skilled tasks first. Not simple ones.

4 examples:

• Travel Agents: Complex trip planning disappears. Ticket sales remain

• Technical Writers: Analysis and review disappear. Sketching and on-site observation remain

• Teachers: Grading and research disappear. In-person teaching remains

• Property Managers: Bookkeeping disappears. Negotiations remain

AI replaces knowledge work first. What stays: Everything requiring personal contact and relationships.

Here's what matters. AI doesn't need to replace the entire job. Every position exists because of 1 or 2 core tasks. When AI handles exactly those, the job is gone.

But how much is actually in use?

For each job category, 2 numbers. How much AI could theoretically handle. And how much is actually deployed today:

• Computer & Math: 96% possible. 32% used

• Business & Finance: 94% possible. 28% used

• Management: 92% possible. 25% used

The pattern is the same everywhere. 60-80% of all office tasks are theoretically automatable. Companies currently use AI for 10-20%.

The gap is massive. But it's closing fast. AI is spreading 10x faster than the internet or smartphones did.

What AI could do vs. what it does (Anthropic)

What This Means for Automotive

Everyone pictures robots replacing factory workers. The data shows the opposite. Production, assembly, logistics, and service shops are barely affected for now.

The disruption is happening in white-collar work.

Where it's already visible: IT and software development use AI intensively.

Where it's coming next:

• Simulation and calculation

• Finance

• Legal and compliance

• Strategy planning

AI could handle a lot here. But doesn't yet.

And even where AI doesn't fully replace the job, it transforms it. There's already a term for this. De-skilling. AI handles the demanding part. The analysis. The strategy. The evaluation. What remains: Review results and approve them. The job still exists. But it's different.

For demanding tasks, AI speeds things up by a factor of 12. The more complex the task, the bigger the leverage. And these are exactly the tasks companies pay the most for.

Automotive AI Exposure Map: Which departments are affected?

Who's Still Hiring Juniors?

AI doesn't just change which tasks disappear. It changes who companies hire at all.

With AI, juniors are 26-39% more productive. Seniors only 8-13%. Yet companies hire fewer and fewer juniors.

In European tech companies, junior hiring collapsed by 73% within one year. Not because there are no applicants. But because the positions are vanishing.

The reason: 1 senior with AI can now handle what used to require an entire team. Including the juniors.

So companies aren't just cutting positions. They're replacing old roles with new ones. Especially those who can work with AI.

Which raises a question. If nobody hires entry-level people anymore, where do tomorrow's experts come from?

What We're Not Seeing

So much for the data. But reality is more complicated than headlines.

The headlines say AI destroys jobs. AI replaces people. We're not there yet.

59% of HR leaders admit they highlight AI as a reason for layoffs because it plays better with investors. The real reasons are usually financial: costs, demand, restructuring.

Nearly 90% of surveyed executives say AI had no impact on employment over the past 3 years. Of 1.2 million jobs cut in the US in 2025, only 4.5% were actually AI-related.

There's now a term for it. AI-washing. Companies use AI to explain job cuts that have other causes.

That's the real danger. The narrative is everywhere: AI destroys jobs. But it's not really happening yet. And when the real impact arrives, nobody takes it seriously anymore.

My Take

At Mercedes, we built strategy decks for the board. Entire teams. Weeks of work. For one deck. Today, one person with AI can deliver that in an afternoon. These are exactly the jobs AI is changing now.

And we know this pattern. Digital transformation was the same. Digitize processes, connect data, break down silos. German automakers have known for years this is necessary. And still struggle with it today. Too many entrenched structures. Too many people protecting the status quo. Too little appetite for change.

I'm afraid AI will follow the same path. AI targets exactly where resistance is strongest. It affects the people with the most influence first. And they'll slow it down. Because nobody likes introducing the tool that makes them obsolete.

And that repeats another pattern. Newcomers don't have this problem. Young companies build with AI from day one. Fewer people, faster decisions, no legacy structures. We know this from EVs and software. When you don't need to transform an organization, you move faster.

The problem: AI widens the gap between the fast and the slow. For German automakers, that's an additional risk. On top of everything else already happening.

Jeff Bezos just put $6.2 billion into a fund. It targets industrial companies before AI displaces them. Automotive is explicitly included. His bet: These companies have substance. But won't make the AI transformation alone. So he's coming from outside to force the change.

But the data shows something else too.

The industry seeks skilled workers while cutting jobs. Both are true. Because tasks are changing faster than the people doing them. The good news: The deeper your expertise, the more AI helps. Deep domain experts won't be replaced by AI. They get better. German automakers have plenty of those.

But that only becomes an advantage if these people actually use AI. Not on the side. But at the core of their work. The gap between what's possible and what's used is closing. Faster than any technology before. The question isn't whether AI will change these jobs. But whether we move fast enough.

🔗 anth | wsj | bl | nyt | li

That's all for today.

Feel free to reply to this email with your thoughts.

Until next week,
Philipp

PS: If you find value here, share it with someone who should read it too.

I’m Philipp Raasch.
Ex-Mercedes. Now I help 80,000+ automotive professionals make sense of the industry's biggest transformation.

Welcome to Issue #109 of The German Autopreneur.

VW reported earnings last week. Profits more than halved. Revenue stayed flat. So it's not about demand. It's about costs.

Operating margin: 2.8%. The last time it was this low? Dieselgate. Except now there's no scandal.

50,000 German jobs gone by 2030.

But we all know the numbers by now. What's more interesting is what VW CEO Oliver Blume said about them:

"The business model of past decades no longer works. Not for Volkswagen. Not for the German automotive industry. Not for Germany as a whole."

That's either a brutally honest diagnosis. Or Blume is turning a VW problem into a Germany problem.

Today I'm figuring out which one it is.

What was this business model? Why did it break? What's VW doing about it? And why that won't save Germany.

The Key Numbers

Group

• Revenue: €321.9 billion (-0.8%)

• Sales volume: 8.98 million vehicles (-0.5%)

• Operating profit: €8.9 billion (-53%)

• Operating margin: 2.8% (prior year: 5.9%)

• One-time charges: ~€9 billion (Porsche ~€5B, tariffs ~€3B, restructuring ~€1B)

Porsche & Audi

• Porsche operating profit: €90 million (prior year: €5.3 billion)

• Audi operating profit: -13.6%

• Porsche sales in China: -26%

So much for the numbers. Now for the question behind them.

What Was This Business Model?

The German business model in automotive worked like this for decades: Build highly complex machines at expensive locations and sell them worldwide at a premium.

A combustion engine has over 2,000 moving parts. Transmission, injection, exhaust treatment. This complexity was the moat. Master it, and you could charge more. Germany mastered it better than anyone.

Add cheap energy. Russian gas kept electricity prices low. Germany had high wages but stayed competitive overall.

Then China. For decades, THE growth market. Economic boom, rising middle class, more cars on the road every year. And no strong domestic auto industry. The jackpot for German automakers.

VW held over 40% market share there at times. The joint ventures printed billions.

These profits didn't just fund European investments. They kept the entire apparatus running. Overhead, bureaucracy, inefficient structures in Wolfsburg.

The formula: Complexity as moat × cheap energy × China profits = Made in Germany.

This formula worked for decades. Until all 3 variables collapsed at once.

Why Germany's Formula No Longer Works

1) The moat is dissolving An electric motor has about 20 moving parts. No transmission. No injection. No exhaust treatment. The complexity German automakers mastered better than anyone? Now irrelevant. Value creation is shifting to software and batteries.

2) The energy foundation is gone Russian gas is gone. Industrial electricity in Germany costs roughly twice as much as in China.

3) China isn't coming back VW was once number 1 in China. Today, number 3. Sales only fell 6% in 2025. But profit from joint ventures nearly halved: from €1.7 billion to €0.96 billion. At the peak, €5 billion per year from China alone. For 2026, VW expects only €200 to 600 million.

VW sales in China vs. local competitors 2022–2025 (Reuters)

China now has its own auto industry. One that barely existed 10 years ago. Local manufacturers like BYD and Geely understand the Chinese market better, build faster and cheaper.

For VW, the China curve pointed up for decades. Now it points down. And there's no bottom in sight.

How Did China Pull This Off?

This wasn't an accident. China's government recognized EVs as a strategic opportunity. The starting advantage: the world's largest car market as home turf. Demand was there. What was missing was domestic supply. So they built it. Around $230 billion in government subsidies flowed into the entire value chain. From raw materials through battery production to finished cars.

Europe reacted too. Just differently. Instead of building supply, they subsidized consumption. Germany offered €9,000 purchase incentives for EVs. When those ended in late 2023, the market collapsed. The irony: these incentives helped finance exactly the industry China was building. Because batteries in European EVs nearly all come from China.

Europe promoted a market. China built an industry.

This also explains why tariffs won't solve the problem. Tariffs protect existing structures. When the existing structure is the problem, you're protecting the problem.

Is Blume Right?

Back to Oliver Blume. He says this isn't a VW problem. Is that true?

The evidence supports it:

• Mercedes: operating profit -57% in 2025

• BMW: -11.5%

• German automotive has cut over 100,000 jobs since 2019

Premium segment margins, 2022–2025 (Reuters)

So it's not just VW. But Toyota achieved 8.6% operating margin in the same environment. The Hyundai/Kia Group: 6.8%.

What separates German automakers from Toyota comes down to 2 things:

1. Disproportionate dependence on China

2. Strategic back-and-forth

And we see this at VW too:

• First all-in on EVs. Then back to combustion

• Build software ourselves with CARIAD. Then buy it instead

• Develop platforms ourselves. Then partner with China and the US

So both are true. The formula no longer works. But VW also has a VW problem.

Can the Business Model Work Again?

Yes. But not with the old formula.

VW sold almost as many cars in 2025 as the prior year. 8.98 million, only -0.5%. In Europe, up 5%. In South America, up 10%.

And the powertrain mix tells a story that often gets lost. VW sold roughly 55% more pure EVs in 2025 than the year before. EV market share in Europe: 27%. More than combustion.

This isn't a dying company. This is an expensive company.

But the most important change: VW fundamentally flipped its strategy. Away from "do everything ourselves." Toward partnerships. With Rivian in the US. And with Xpeng in China.

VW is moving development away from Germany. Into regional hubs. Cheaper, faster, and closer to customers.

So VW is finding its answer.

But the answer is: somewhere else. The VW of the future isn't a German company anymore. It's a company with German roots.

But then what about the 'German business model' Blume talked about?

My Take

Oliver Blume built the perfect narrative. VW isn't the problem. Germany is the problem. And he's partly right. But he's leaving out the punchline. VW is solving its own problem. And leaving Germany to deal with its own.

There's no answer for that yet. Right now everyone's pointing at everyone else.

Automakers point at politics: expensive electricity, too much bureaucracy, no stable framework. Politicians point at companies: slept through transformation, clung too long to combustion. Unions point at management. And all of them point at China and Trump.

Every accusation probably has some truth to it. But that's exactly the problem. While everyone's busy pointing fingers, no one's working on an answer.

In the 1970s, British Leyland was the UK's biggest automaker. Dozens of brands under one roof: Jaguar, Rover, MG, Land Rover, Mini. Basically the VW of Britain.

But there were structural problems. Costs too high. Too much bureaucracy. Too little innovation. Instead of acting together, management, unions, and government blocked each other for years.

And while they fought, customers simply bought other cars. From Japan. And from Germany. Today, Britain has no mass-market manufacturer left.

Germany isn't there yet. But the beginning looks similar.

VW found an answer. But not for Germany.

Which means the last hope is gone. Legacy automakers won't reinvent Germany's business model.

That takes new players. Companies that don't exist yet. But for them to emerge, the whole system needs to work. Industry, politics, society. Together.

China keeps proving it can be done. But it doesn't happen on its own. It has to be orchestrated.

If it doesn't, companies will figure it out alone. By leaving. Just like VW is doing right now.

The question isn't whether Germany's business model can still work. The question is whether anyone will build a new one.

🔗 re | re | hb | cnbc | ft | hei

That's all for today.

Feel free to reply to this email with your thoughts.

Until next week,
Philipp

PS: If you find value here, share it with someone who should read it too.

I’m Philipp Raasch.
Ex-Mercedes. Now I help 80,000+ automotive professionals make sense of the industry's biggest transformation.

Welcome to Issue #108 of The German Autopreneur.

January 2026. Detroit. Donald Trump talks about Chinese automakers. And says: "Let China come in."

He means they should build factories in the US. Hire Americans.

For context:

• The US has 100%+ tariffs on Chinese EVs

• A ban on Chinese software and hardware in cars

• And a president who made the trade war with China his trademark

The idea comes from Ford CEO Jim Farley. And a playbook the auto industry knows all too well.

Today we'll look at why the US might open its auto market to China right now. And what it means for Europe.

Jim Farley Is Scared

January 2026. Ford CEO Jim Farley meets with senior Trump administration officials.

His pitch: Let Chinese manufacturers produce in the US. In joint ventures with American companies. The US firm holds the majority. They share profits and technology.

Why does he want this?

In December 2025, Ford buried its EV strategy:

• Multiple electric models canceled

• $19.5 billion written off

The EV division alone has lost over $16 billion since 2022.

On China, Farley says: "They have enough capacity in China with existing factories to serve the entire North America market. Put us all out of business."

And: "If we lose this, we do not have a future at Ford."

He means the global technology race with China. Not just EVs. Software, batteries, connected vehicles too.

BYD overtook Ford in global sales. Farley privately drives a Xiaomi SU7 he imported from China. He calls Xiaomi "the Apple of China." The man knows what's coming.

Farley's logic: Better to bring in Chinese technology through joint ventures now. Than get overrun in 5 years.

But it's not that simple.

The 3 Walls

When Chinese automakers try to enter the US, they face 3 walls.

Wall 1: Tariffs.

100%+ on Chinese imports. Their cars can't compete.

Wall 2: The Tech Ban.

The US banned Chinese software and hardware in connected vehicles. Software starting 2027, hardware starting 2030. The rule applies not only to imports but also to cars built in the US.

The former US Commerce Secretary put it this way: "It's really important because we don't want two million Chinese cars on the road and then realize we have a threat." For the US, Chinese cars are a national security issue.

Wall 3: Trust.

And even if walls 1 and 2 fall, no American knows BYD. No dealer sells their cars. No mechanic can fix them. Chinese manufacturers would need years to establish themselves. Just like we're seeing in Europe right now.

The US market is pretty locked down for Chinese manufacturers.

And then Trump suddenly says: "If they want to come in and build the plant and hire you and hire your friends and your neighbors, that's great. I love that. Let China come in."

So what's going on?

The Playbook Reverses

For Trump, the math is simple. Factories in the US mean American jobs. For Farley, it goes deeper. Technology transfer.

There's a model the auto industry knows well.

In 1984, VW became one of the first Western automakers to form a joint venture in China. With state-owned SAIC. The deal. Market access for technology transfer.

This wasn't an isolated case. For almost 40 years, China forced Western manufacturers into joint ventures. The strategy. Learn from partners. Build your own tech.

It worked. Chinese manufacturers caught up in the software era. Then overtook them.

Farley now faces the same problem. Ford has a massive gap in software and batteries. They tried catching up alone. Ford spent 4 years building its own software platform. Following Tesla's model. In 2025, the project was scrapped. Just like the EV strategy now.

So he's reversing the logic. Bring in Chinese technology through joint ventures. With American majority ownership. Under American control. Learn from Chinese technology.

Same playbook. Just in the other direction.

But there's a catch.

The Commerce Department's software ban applies not only to imports. It also covers cars built in the US. If a joint venture uses Chinese software or hardware in connected vehicles, those vehicles won't be sellable starting 2027. No matter who holds the majority stake.

A joint venture doesn't solve the core problem. Unless the rules change. And there's a sign the rules might change. In January 2026, the Trump administration fired the Commerce Department official who led the software ban.

And the US isn't alone in making moves.

Canada Opened the Door

On March 1, 2026, a deal between Canada and China took effect. Canada cut tariffs on Chinese EVs from 100% to 6.1%. Up to 49,000 vehicles per year can be imported.

In return, Canada expects Chinese manufacturers to form joint ventures with Canadian companies within 3 years. Build factories. Create jobs. This isn't legally binding. But the message is clear: those who want long-term market access should invest locally.

Trump isn't thrilled. He warned Canada against becoming a "drop off port" for Chinese cars.

Something similar happened at the southern border.

BYD wanted to build a large plant in Mexico. The plan failed. China itself delayed approval. The fear. Technology could flow to the US through Mexico.

And Trump pressured Mexico. Anyone cooperating with China risks US market access. Mexico took the opposite approach. In December 2025, the government raised tariffs on Chinese cars from 20% to 50%.

Still, roughly one in five cars sold in Mexico already comes from China.

And something is happening in the US too.

At CES 2026, Geely announced plans for Zeekr and Lynk & Co to enter the US market within 24 to 36 months. Geely also owns Volvo. Volvo already has a factory in South Carolina. It's currently running at only 13% capacity. The infrastructure for a US market entry already exists.

My Take

China benefited from Western technology for 40 years. Through forced joint ventures. And it worked.

Now the US might flip the model.

Late March, Trump travels to Beijing to meet Xi Jinping. Access to the US auto market could be part of the negotiations. And Farley already put the model on the table.

We know Trump's pattern:

• First, shut out the other side. High tariffs. A software ban. Pressure

• Take away something they want: access to one of the world's largest markets

• Then negotiate. Offer exactly that back. But not for free

What does this mean for European automakers?

If such a joint venture model actually comes to the US, it would naturally favor US companies.

Ford would get access to Chinese technology. European manufacturers probably wouldn't. They're not US companies.

But that's not the only problem.

In the US market, they'd suddenly compete against the same Chinese manufacturers they're already fighting in China and Europe.

And there's one more irony.

While the US considers a joint venture model, China is phasing it out. Toyota is building a fully owned factory for Lexus in Shanghai. Without a joint venture partner. The second plant after Tesla to produce in China without a Chinese partner.

China no longer forces joint ventures. It doesn't need them anymore.

This brings us to Europe. Compared to the US, our walls are much lower.

The 3 walls. USA and Europe in Comparison

Europe has tariffs of up to 45% on Chinese EVs. But they can be circumvented. Either through local production. Or through minimum prices and quotas, which the EU is negotiating with individual manufacturers. There's no tech ban. And Chinese manufacturers are already active in Europe building trust.

Does Europe need a joint venture requirement too?

I think yes. Urgently.

Tariffs alone don't solve the problem. When Chinese manufacturers build factories in Europe, they create jobs. But only in production. Exactly the kind of jobs automation will replace anyway.

The real value stays in China. The software, battery technology, platforms. The intellectual property. That's what needs to come to Europe. Not just assembly.

The problem. Enforcing something like this is a matter of negotiation. And in this negotiation, we're in a weaker position than the US.

The US can negotiate from strength. China has strategic dependencies on the US in many areas.

Europe is different. Sure, China wants access to the European market. That's our bargaining chip. But we want access to the Chinese market just as much. VW, Mercedes, and BMW do a huge share of their business there. And not just cars. Also rare earths, chips, raw materials. Europe has strategic dependencies on China in many areas.

Bottom line. Europe probably needs China more than China needs Europe. Not a great position when you need something from the other side.

But Europe won't close the technological gap without controlled cooperation. Late March, Trump negotiates in Beijing. Canada already has its deal. It's time for a European initiative.

🔗 dp | bl | re | ft | cnn | li

That's all for today.

Feel free to reply to this email with your thoughts.

Until next week,
Philipp

PS: If you find value here, share it with someone who should read it too.

I’m Philipp Raasch.
Ex-Mercedes. Now I help 80,000+ automotive professionals make sense of the industry's biggest transformation.

Welcome to Issue #107 of The German Autopreneur.

It's 2035.

You're in the back of a BMW in Munich. No one's behind the wheel. The car drives itself. You booked the ride on Uber a few minutes ago.

You look out the window. The city looks different. Driverless cars are everywhere. Next to you at the light: a white vehicle with a logo you don't recognize. Chinese. Coming the other way: a Tesla Cybercab.

You pull out your phone, curious about what's actually driving you. The software in your taxi: developed in San Francisco. The AI chip: designed in California, built in Taiwan. The car itself: made in China. The driving data you're generating right now: stored on servers in the US.

The BMW? At least that was still designed by engineers in Munich. Everything else comes from outside Europe.

This isn't science fiction. This is where we're headed. Robotaxis are about to go mainstream. Hundreds of thousands of autonomous vehicles will fill our streets. But the technology behind them isn't European. It's American and Chinese.

I spoke with Malte Broxtermann about this. He works at AlixPartners and advises automakers and suppliers on autonomous driving. A few weeks ago, he briefed the European Commission in Brussels on why Europe is falling behind. Unless we act now.

Today we'll look at where Europe stands in autonomous driving. The two critical gaps we face. And what it means when the vehicles on our streets run on software we don't control.

The Moonshot That Overtook Volkswagen and BMW

2009: Google launches a secret project for autonomous driving. Today, we know it as Waymo. Over $27 billion has flowed into the company since then.

A lot of money. But that's exactly how the model works. Alphabet runs a dedicated division for radical bets: the Moonshot Factory. On its books, these projects fall under 'Other Bets'. Most fail. But when one hits, it's massive.

And Waymo looks like it's paying off.

Waymo just closed a new funding round. Size: $16 billion. At a valuation of $126 billion. That 2009 moonshot is now worth more than VW and BMW combined. Without building a single car.

Waymo completes 400,000 rides per week. 15 million rides in 2025. Over 200 million autonomous kilometers. And 90% fewer serious accidents than human drivers.

This year, Waymo is expanding to over 20 cities. Including London and Tokyo.

4 of the world's 11 most valuable companies are investing in robotaxis: Alphabet, Amazon, Tesla, and NVIDIA.

The Same Thing Is Happening in China

Robotaxis are already part of daily life there. The biggest player: Baidu with its Apollo Go service. Operating in over 20 cities. Over 20 million rides so far. In Wuhan alone, Baidu runs hundreds of robotaxis.

But Baidu isn't alone. Dozens of Chinese companies are in the race. And they're already expanding abroad. WeRide runs autonomous fleets in 11 markets worldwide, covering 70% of downtown Abu Dhabi. Pony AI is testing robotaxis with Stellantis in Luxembourg and expanding to more EU cities in 2026. Baidu is partnering with Swiss Post on autonomous shuttles.

China's robotaxis are already in Europe.

And Europe? A Strategy Problem

Quick context. Autonomous driving has levels:

• Level 2: Your car assists. But you must keep hands on the wheel. If something happens, you're liable

• Level 3: Your car drives autonomously in certain situations. You can text. But you must take over within seconds when the car asks

• Level 4: Your car drives completely autonomously in certain areas. You're just a passenger

China and the US are building robotaxi platforms at Level 4.

Europe has early efforts. VW subsidiary MOIA tests autonomous shuttles in Hamburg and Berlin. But these are pilot projects. Not commercial service. Yet even this project is set to expand to the US this year.

Beyond these pilots, Europe has focused on autonomous driving features for private cars.

Mercedes and BMW were the only automakers seriously trying to scale L3. The promise: legally take your hands off the wheel on the highway.

But both just pulled the plug. They're going back to L2.

The reason: Too expensive. Not enough demand.

An L3 system costs almost as much as L4. But feels barely different from L2 to customers. And then there's liability. With L2, the driver is liable. With L4, the manufacturer is liable. With L3, liability shifts back and forth. A legal nightmare.

Tesla and Chinese players recognized this early. Their strategy: Get L2 to the masses. As cheap as possible, as many vehicles as possible. Collect billions of kilometers of driving data. Then use that data to train AI models that leap straight to L4. That's exactly what Tesla is doing with the Cybercab.

German automakers approached the problem sequentially. First perfect L2. Then develop L3. Then L4. How engineers think.

Tesla and Chinese players understood it as a data problem. Not an engineering problem.

What Europe Is Missing

But it's not just strategy. Europe has 2 critical gaps.

Gap 1: The software.

The intelligence in the vehicle. Software that drives a car on its own. Recognizes objects. Understands traffic rules. Gets from A to B. No one in the EU has a platform like this. The closest thing: Wayve, a London startup piloting with Uber this year. But post-Brexit, Wayve isn't in the EU.

Gap 2: The chips.

NVIDIA has a near-monopoly. Its chips train the AI that powers autonomous cars. And NVIDIA chips go into the vehicles so they can actually drive. Mercedes, Waymo, Baidu. Nearly everyone runs on NVIDIA. Alternatives: Qualcomm, Ambarella, Tesla with its own chips. In Europe: nothing.

Think smartphones. Countless manufacturers. But only 2 operating systems that matter: iOS and Android. Whoever controls the operating system controls the platform. Whoever controls the platform controls the data. Whoever controls the data improves the system faster than everyone else.

Autonomous driving will likely follow the same pattern. 2 to 3 platforms will dominate. If none of them is European, history repeats itself. Europe becomes dependent on technology from the US and China.

Why This Is Dangerous

Let's be real: robotaxi fleets are rolling surveillance platforms. They map every street in real time. They capture everything around them. Whoever controls these fleets owns the data of entire cities. And whoever owns the software can shut it all down.

The US and China get this. The US bans all Chinese software and hardware in connected vehicles. China bans driving data from leaving the country. Both are locking down their markets.

And Europe? Still wide open.

This is exactly what Malte told the European Commission. Autonomous driving is one of the world's biggest future markets. Europe needs to be in the game. But that means setting fair rules for everyone.

My Take

The question isn't whether autonomous driving is coming. It's whether it comes from Europe. Or just to Europe.

Europe has the hardware. The sensors. The vehicles. But not the intelligence that holds everything together. Not the software. Not the chips.

Everyone's talking about sovereignty right now. About semiconductors. About gas. About defense. About big US tech platforms. But autonomous driving barely comes up.

Yet no one's asking whose technology will be inside these vehicles.

Robotaxis bring together everything we've been talking about for years. AI, chips, software, sensors, cloud, data. Autonomous driving is where it all converges. And in most of these areas, we're dependent.

If you're serious about technological sovereignty, you have to talk about robotaxis.

The problem: Autonomous driving is too big for a single automaker or supplier. Too many disciplines need to come together. It takes billions in investment over decades. Bets like that rarely get funded in Europe.

But Europe has something others need: one of the world's largest mobility markets. Anyone who wants to scale robotaxis has to come here. That's leverage. But only if we use it.

Right now, it looks like we're giving that up without a fight.

That's all for today.

Feel free to reply to this email with your thoughts.

Until next week,
Philipp

PS: If you find value here, share it with someone who should read it too.

I’m Philipp Raasch.
Ex-Mercedes. Now I help 80,000+ automotive professionals make sense of the industry's biggest transformation.

Welcome to Issue #106 of The German Autopreneur.

Mercedes released its 2025 annual numbers last week. Profits are down by half. Margins sit at 5%. Three years ago, they were close to 15%.

But the numbers are only part of the story.

In the last 18 months, CEO Ola Källenius has changed course 4 times:

1. Abandoned the luxury strategy

2. Brought back the A-Class

3. Dropped Level 3 autonomous driving

4. Completely reversed their EV design direction

The problem? Every one of these strategies was his own idea. And he killed every single one himself.

Källenius is correcting Källenius.

Today we'll look at what these numbers really mean. Why Mercedes' largest shareholders are also direct competitors. And why Mercedes is losing something no amount of money can buy back.

The 2025 Numbers

Let's get everyone on the same page.

Financials

• Revenue: €132.2B (-9%)

• EBIT: €5.82B (-57%)

• Passenger Car Division margin: 5.0%

• Dividend: €3.50/share (down from €4.30)

Adjusted for one-time items, the result is €8.2B. Still -40%.

Sales by region (total: 1.8M cars, -9.2%)

• China: 551,900 (-19%). The overall market grew. Mercedes isn't shrinking because the market is shrinking. Mercedes is losing customers.

• USA: 284,650 (-12%)

• Europe: 635,000 (-1%). The only stable market.

• Rest of World: 98,700 (+17%). Strong, but not enough volume to offset China and the US.

Sales by segment

• Top-End (S-Class, G-Class, Maybach, AMG): 268,000 (-5%)

• Core (C-Class, E-Class): 1,050,000 (-10%)

• Entry (compact): 483,000 (-10%)

The luxury segment held up best. The G-Class had its best sales year ever in 2025. The problem? Top-End alone can't carry the company. It's only 15% of total sales.

Powertrain mix

• Combustion/mild hybrid: ~1.43M (~79%)

• PHEV: 200,000 (+9%)

• BEV: 169,000 (-8.8%). 9% share. At BMW, it's ~18%.

Those are the numbers.

But the real question isn't how bad 2025 was. It's why.

4 Strategy Reversals in 18 Months

#1 The End of the Luxury Strategy

To understand what's happening at Mercedes, we need to go back to the COVID era.

Semiconductors were scarce. Demand exceeded supply. So automakers focused on high-margin models. Customers bought anyway. Margins exploded. Around €20B in operating profit. More than Mercedes had ever earned.

For Mercedes, this felt like validation. They'd been working on a luxury strategy for years. I saw the early stages myself. We called it "Modern Luxury" back then. The idea was to make Mercedes aspirational and exclusive.

Honestly, it felt a bit off even then. Turning a down-to-earth Swabian engineering company into a luxury house like Hermès? That never quite fit.

But the exploding margins seemed to prove the strategy right. Källenius made "Value over Volume" the official mantra. Higher prices. Fewer cars.

That's over now.

The luxury strategy has been quietly abandoned. The new direction is "Profitable Growth." Volume turns out to matter after all.

#2 The Return of the A-Class

I joined Mercedes in 2011. The new A-Class was in development. The strategy: make the brand younger. Internally, we half-jokingly described the typical Mercedes buyer as: male, over 50, probably wearing a hat. It wasn't entirely a joke.

The A-Class was supposed to win over younger customers early. Because everyone knew the core audience was aging out.

And it worked. The A-Class and the compact generation that followed (CLA, GLA, and the rest) made the brand younger. The problem? Margins were bad. These were cars to gain more customers, not money-makers. And entry-level models don't exactly strengthen a luxury image.

So in 2021, Källenius decided to focus on the premium end. The A-Class got killed.

But it’s coming back in 2027.

Källenius now calls the new A-Class "hot as hell."

The reason is simple. If you only build expensive cars, your factories aren't fully utilized. Plants have to close. Jobs disappear. That’s why the entry model is returning.

#3 Level 3 Is Done

In 2022, Mercedes became the first manufacturer in the world to receive approval for Level 3 autonomous driving on German highways. The Drive Pilot.

By 2026, it's history.

The replacement is MB Drive Assist Pro. Level 2 with extended features. The CTO says: "We're still proud of it." But the range of use cases needs to be broader.

Translation: Level 3 was too expensive. And almost nobody bought it.

The problem is that Level 2 and Level 3 feel nearly identical to the driver. But development costs are multiples higher. The industry has largely concluded that Level 3 is a dead end. Most manufacturers want to skip the step entirely.

#4 The EQ Sub-Brand

Mercedes has one of the most recognized brands on Earth. The star is universal. Whether you're in Stuttgart, Shanghai, or São Paulo. The universal status symbol for "I've made it." And a Mercedes is instantly recognizable by its design.

But what happens when Mercedes goes electric? You build cars that no longer look like a Mercedes.

Instead of an electric E-Class or S-Class, Mercedes created the EQ sub-brand. With its own design language. The idea: combustion cars keep the Mercedes look. EVs look like futuristic spacecraft.

The assumption: EV buyers want to stand out. Show the world they're ahead of the curve.

We now know that was a strategic mistake.

Mercedes had its strongest asset and chose not to use it. The brand. The design everyone knows.

With an unknown sub-brand, they went up against hundreds of newcomers. In the EV market, Mercedes was suddenly just as new as everyone else.

The scale of the mistake is clear in one example. The GLC and the EQC were built on the same platform. The GLC was a bestseller. The EQC flopped.

Källenius now admits the futuristic design didn't work. New electric Mercedes cars will look like Mercedes again. The EQ sub-brand is being dissolved.

Mercedes had the strongest brand name in the car market and voluntarily chose not to use it.

Is This a Mercedes Problem or an Industry Problem?

2025 was tough for the entire industry. Trump tariffs, price wars in China, high costs from the EV ramp-up. Everyone felt it.

For context, Mercedes landed at 5% margin in 2025.

But not everyone landed in the same place:

• Toyota: ~9%

• Kia: 8%

• Hyundai: 6.2%

• BMW: 5.9% (9M)

• Mercedes: 5%

• Tesla: 4.6%

• VW: 2.3%

Mercedes is in the middle of the pack. But with one key difference. Mercedes sold significantly fewer cars. BMW and Hyundai held steady. Toyota grew.

And in China, sales dropped 19% in a growing market.

So it's both. An industry problem. And a Mercedes problem.

The difference between Mercedes and the winners? Toyota, Kia, and Hyundai didn't change course 4 times in 18 months. Same storm. But whoever holds their course comes out better on the other side.

The Shareholder Problem

Mercedes doesn't just have a strategy problem. Its largest shareholders all want different things.

Shareholder Structure of Mercedes (Mercedes-Benz)

About 20% of Mercedes is owned by Chinese investors. BAIC holds 9.98%. Geely founder Li Shufu holds 9.69%.

BAIC is building the Stelato S9 together with Huawei. A direct competitor to the S-Class. Mercedes' largest individual shareholder is funding a direct rival in the company's most important segment.

Li Shufu founded Geely. Through Zeekr, Polestar, and Lynk & Co, he's building multiple competing premium brands. And through the Horse-Powertrain joint venture with Renault, he's also supplying the engine for the new CLA.

Kuwait's sovereign wealth fund holds 5.57%. Since 1974. The longest-standing shareholder with direct access to the CEO. They want one thing above all: stable returns and no risk.

That explains why Mercedes is paying out billions in dividends despite profits being halved. Long-term investments in the future? Hard to make when major shareholders expect reliable payouts.

So: partner, shareholder, competitor, supplier, sovereign wealth fund. All at the same table. All with different interests.

Imagine being CEO. Trying to find a common direction with these people. You're not running a company anymore. You're doing politics.

My Take

This isn't just about finances. Mercedes is stuck in an identity crisis.

The outlook for 2026: sales at 2025 levels. Margin between 3 and 5%. A few years ago, Källenius defined 8% as the minimum target for "very unfavorable market conditions."

"Profitable Growth" is not a strategy. It's the absence of one. Every company in the world wants to grow profitably. It's the lowest common denominator. The thing everyone can agree on when no one can agree on anything else.

But here's what it doesn't answer:

What does Mercedes stand for? What makes a Mercedes a Mercedes?

A software company would put MB.OS at the center. A luxury brand would lean into scarcity. A volume manufacturer would bring back the A-Class. Mercedes is doing all three at once.

On top of that: 40 new models in 3 years. Licensing 14,000 Mercedes luxury apartments. Sponsoring women's tennis. Making a Chinese table tennis player a brand ambassador. Throwing everything at the wall, hoping something sticks.

Mercedes has the best hand to play. The inventor of the automobile. The brand, the history, the engineering culture.

But when you struggle this hard with change, you eventually lose yourself. And with that, the people who make a Mercedes a Mercedes.

Lost in Transformation.

Recently I read a LinkedIn post from a former mentor of mine. He's been at Mercedes for 25 years. He wrote that Mercedes isn't just a job to him. It's a conviction.

I read it twice.

Because people like him are Mercedes' greatest asset. Not the platforms. Not the models. Not the strategy. The people who burn for the star.

Some of them I never thought would leave.

Many of them are gone now. They took the severance package.

Not because they wanted to. But because nobody could tell them anymore why they should stay.

The problem isn't financial. It's narrative. Mercedes no longer has a story it can tell its own people. No story that 160,000+ employees can rally behind. And you need that story not just for your own people. You need it for the financial markets too. And for your customers.

Until that story exists, "Profitable Growth" is exactly what it sounds like. Organized hope.

🔗 bi1 | bl1 | ean1 | ft1 | hb1 | mb1 | mb2 | re1 | wi1 | wsj1

That's all for today.

Feel free to reply to this email with your thoughts.

Until next week,
Philipp

PS: If you find value here, share it with someone who should read it too.

I’m Philipp Raasch.
Ex-Mercedes. Now I help 80,000+ automotive professionals make sense of the industry's biggest transformation.

Welcome to Issue #105 of The German Autopreneur.

Recently, I was in Vietnam.

More and more German auto suppliers are expanding into Vietnam. The reason is simple: Great food. But more importantly: Well-trained workers. Low costs. And most crucial: Moving production out of China to reduce risk.

A fellow entrepreneur invited me to speak at a business summit there. My topic: The automotive market. Specifically focused on German suppliers. Where they stand. Where the market is heading. What this means for mid-sized companies.

The central question: You're the CEO of a traditional German supplier. Order books look terrible. What do you do?

For everyone who wasn't there, here's my answer. Spoiler: It's not about transformation. It's about returning to what made these companies successful in the first place.

The Situation

German auto suppliers are the backbone of Europe's largest industry. Thousands of specialized, family-owned manufacturers. What Germans call the Mittelstand. Hundreds of thousands of jobs. World market leaders in their niches.

And they're in their worst crisis in decades.

European suppliers have cut over 100,000 jobs in the past two years.

Bosch makes only half the profit it used to. Over 20,000 automotive jobs will be eliminated by 2030. ZF sits on over €10 billion in debt. Continental is dismantling itself.

One in four companies in the industry expects a wave of insolvencies within the next 12 to 24 months.

Why?

1. Many suppliers are directly tied to combustion engines. They make parts electric cars don't need. Injection systems. Exhaust components. Transmission parts. Result: Their addressable market shrinks year by year.

2. Pressure from China keeps growing. Chinese parts are 20-30% cheaper. At comparable quality. Transmission part imports from China have tripled in recent years.

3. Plus: New automakers have much higher vertical integration. BYD produces 70-75% in-house. They need fewer suppliers.

The result: European suppliers have EBIT margins of 3.6%. In China, it's 5.7%.

At the same time, these companies should be investing heavily. In new products. New markets. Their transformation.

But that's becoming harder. 40% of the world's largest suppliers now have credit ratings so poor that banks barely lend them money for transformation. And cash flow is shrinking too. A vicious cycle.

I analyzed supplier problems in detail in last summer's newsletter.

Today, we look at how they get out.

The Key Insight

We constantly talk about transformation. About how these companies must completely reinvent themselves.

I think that's too narrow.

German suppliers have built competencies over decades that are still needed.

It's not always about complete reinvention. It's about using existing strengths strategically. In core business or in new markets.

Maybe it's less about transforming. More about transferring.

I see two paths.

Scenario 1: Last Man Standing

The big picture: The combustion market is shrinking. Electric mobility is growing.

If your business model depends on combustion engines, your addressable market shrinks.

The question: How do you respond?

The obvious answer: Expand into other markets. We'll talk about that later.

But there's another strategy. Consolidate. Defend your niche. Grow in a shrinking market.

According to KPMG, 63.9% of all vehicle subsystems are powertrain-agnostic. Over half of all parts are needed regardless of the powertrain. Chassis springs. Seating systems. Brakes. Door systems.

These markets aren't shrinking. They're just shifting.

This strategy has three advantages:

1. Cash cow. The technology is mature. No massive investments in new development needed. Margins stay stable.

2. Pricing power. Competitors leave the market. Whoever remains gains market share and negotiating power.

3. Aftermarket. Over one billion combustion vehicles are on the road today. They need spare parts. For decades to come. Schaeffler achieves EBIT margins over 15% in the spare parts business. Four times more than new business. A huge market that won't disappear quickly.

This includes active consolidation. Buying competitors.

According to Roland Berger, the most successful suppliers make three times more acquisitions than weak ones. If you want to grow in a shrinking market, you buy your competitors.

By 2030, an estimated 20-30% of smaller suppliers will disappear through bankruptcy or acquisition. Whoever's still standing wins.

And there's another dimension: New customers.

The global auto market isn't shrinking. It holds steady at around 90 million vehicles per year. What's shrinking is Germany's share.

So why not supply the new winners?

Brose produces over 25 million door and closure systems annually in China. For major Chinese manufacturers. ZF supplies steer-by-wire systems to NIO.

BYD is building its plant in Hungary. And working with European suppliers there.

But let's be real: this won't happen by itself. BYD has 70-75% vertical integration. Chinese suppliers have 20-30% cost advantages.

And new manufacturers operate on completely different timelines. European development cycles run about 48 months. Chinese manufacturers launch new models in 18-24 months.

If you want to supply these customers, you must adapt to their speed.

This door is only slightly open.

Scenario 2: New Markets

So: Scenario 1 is defending core business. Dominating niches. Getting stronger while others give up.

But that's not enough for everyone. Some suppliers need new markets.

But not just any markets. Markets where existing competencies give a head start. An unfair advantage.

You want a new market where you have an advantage over any startup with the same capital.

What markets are these? Let's look at two examples: Defense and robotics.

Defense

Europe's defense spending rose from €218 billion in 2021 to €343 billion in 2024. +57% in three years.

Germany plans to double spending to about €162 billion by 2029. For a country that has historically been one of NATO's most reluctant defense spenders, this is a seismic shift. The EU wants to mobilize hundreds of billions more by 2030.

In 2024 alone, over €100 billion flowed into new equipment and development.

Conservatively estimated, 30-40% lands with suppliers.

But the interesting part isn't just volumes. It's margins.

Rheinmetall achieves 19% EBIT margins in defense. Automotive is only 4%.

Why? Many defense contracts run as cost-plus models. The client reimburses costs and pays a guaranteed margin on top. The exact opposite of automotive price pressure.

And the competency overlap is real. If you can manufacture precision parts for cars, you can do it for defense technology. Same machines. Similar quality requirements.

Plus: Europe's biggest defense contractors are at capacity. Rheinmetall. Franco-German tank builder KNDS. Defense electronics maker Hensoldt. All booked solid for years. They must outsource. And they're looking for suppliers with free capacity.

And the automotive industry has exactly that right now.

Schaeffler is partnering with European defense AI startup Helsing on drone components. The goal? €1 billion in defense revenue within five years. Deutz supplies engines for military vehicles and is expanding into drone propulsion. Mid-sized companies are signing their first defense contracts. Even talent is moving across. Rheinmetall actively offers Continental employees the chance to switch.

But there are hurdles. Security clearances take months. Procurement cycles run 2-5 years. And you often need special certifications.

The most realistic entry for mid-sized companies: As Tier-2 suppliers under major defense contractors.

This is all just beginning. But given the geopolitical situation, the market will likely stay lucrative long-term.

Robotics

But defense isn't the only option. I wrote extensively about humanoid robots in Issue 100.

Short version: A humanoid robot's supply chain significantly overlaps with a car's. Motors. Transmissions. Sensors. Control electronics. Precision mechanics. Goldman Sachs estimates the market at $38 billion by 2035. According to McKinsey, 40-60% of costs go to drives and mechanics.

That's exactly what auto suppliers do best.

And this market is gaining momentum. Automakers like Tesla, Hyundai, and Xpeng are developing their own humanoid robots. Meanwhile, dedicated robotics companies like Figure and Neura Robotics are emerging. Many analysts expect the robotics market to become larger than automotive.

This is an opportunity for suppliers. All these players need someone who can mass-produce high-precision components. Some suppliers already see this. Schaeffler, for example, is betting big on humanoid robots.

The advantage over defense: Shorter cycles. No security clearances. No multi-year procurement processes.

The disadvantage: The market is still early. Volumes are small so far.

But those who start now build an edge. When the market scales, it needs suppliers. That's the opportunity.

What About Software?

There's another trend we must address.

The software-defined vehicle. Manufacturers increasingly expect their suppliers to deliver software. Not just metal parts. But software. Or complete hardware-software systems.

Sounds like an opportunity? Probably not.

Traditional hardware suppliers have no unfair advantage here. On the contrary. They have a structural disadvantage.

Their organization and culture usually aren't designed for software development. They don't have the right competencies, resources, and talent.

And there are almost no examples of traditional industrial companies successfully becoming software companies. The playbook simply doesn't exist.

So software isn't another path. But it's a reality you need to understand. The market is shifting. But real opportunities for traditional suppliers lie elsewhere.

My Take

Back to the Vietnam question: You're the CEO of a traditional German supplier. Order books look terrible. What do you do?

Yes, the situation is serious. But this isn't the end of the world. It's entrepreneurship.

What we're seeing is fundamentally simple: The market is changing. And as an entrepreneur, you must make strategic decisions. Where does my market stand? Where is it going? Where do I stand? And where do I want to go?

Nothing new. Entrepreneurs have been doing this for centuries.

It only feels dramatic because the automotive industry was extremely stable for decades. Predictable cycles. Reliable customers. Growing markets. Many companies simply aren't used to making such fundamental decisions anymore.

But that's exactly what's needed now.

Do I stay in my niche and bet on coming out stronger? Or do I enter a new business field?

It doesn't have to be either-or. You can do both simultaneously. Secure core business AND open new markets. But consciously. As a strategic bet.

What doesn't work: Waiting.

And almost as important as the right strategy: Start learning again.

This industry was successful for so long that many forgot how to be curious. To learn from other industries, countries, companies.

In China, we see speed and efficiency we rarely achieve in Europe. You can laugh it off and make excuses for why it "won't work here." Or you simply fly there. Let them show you how they do it. And bring the lessons back to Europe.

That's the real difference between those who survive. And those who don't.

Not transformation. But the willingness to be entrepreneurs again.

🔗 al1 | ane1 | de1 | ftia1 | gs1 | hb1 | mck1 | rb1 | re1 | sp1 | sp2 | ts1

That's all for today.

Feel free to reply to this email with your thoughts.

Until next week,
Philipp

PS: If you find value here, share it with someone who should read it too.

I’m Philipp Raasch.
Ex-Mercedes. Now I help 80,000+ automotive professionals make sense of the industry's biggest transformation.

Welcome to Issue #104 of The German Autopreneur.

Imagine Porsche killing the 911. That's exactly what Tesla did.

The Model S is being discontinued. The car that changed the industry in 2012. The car that started the Tesla legend.

But this is just the beginning.

Tesla isn't just losing a model. It's losing its entire car business. And Elon Musk? He has a plan.

Today we'll look at what's really happening. Is Tesla reinventing itself? Or is this the beginning of the end?

The Underdog Story

To understand what's happening, we need to look back briefly.

In 2012, Tesla launches the Model S.

The industry laughs. An electric car from a startup? That'll never work.

Remember former VW CEO Matthias Müller? In 2017, he dismissed Tesla as a niche player. No serious competition for VW.

Three years later, Tesla was worth more than VW, BMW, and Mercedes combined.

The Model S made EVs cool. No longer a niche eco-statement. But a desirable product for the tech-savvy elite.

And something else: The idea that a car could get better overnight. Through software updates. Like a smartphone. Tesla invented the software-defined vehicle.

They became the symbol for everything traditional automakers couldn't achieve. The outsider who pulled off the impossible.

Elon became the richest person on Earth. And in 2020, Tesla became the most valuable automaker. The Model S turned the automotive industry upside down. And kicked off a new era.

This exact car is now being discontinued.

What Happened?

The 2025 numbers tell the story:

• Revenue: $94.8 billion (-3%)

• Profit: $3.8 billion (-46%)

• Deliveries: 1.6 million vehicles (-9%)

Q4 is even worse: Profits collapsed 61% to $840 million. For comparison: In 2022, Tesla made around $3.7 billion in a single quarter.

It's the first time in company history that revenue has declined.

The biggest blow: BYD overtakes Tesla as the world's largest EV manufacturer. In 2011, Elon Musk laughed at BYD. Years later he admitted their cars are "very competitive."

Model S and Model X? Together with Cybertruck, they now make up just 3% of sales. 50,000 units compared to 1.6 million Model 3 and Y.

Model S/X/Cybertruck sales marginal (bi1)

Elon himself admitted years ago: Model S and X are now only built for "sentimental reasons."

And that's over.

Why Are the Numbers So Bad?

1. The Product: The model lineup is outdated. Since Model Y in 2020, no new mass-market model has followed. The long-promised $25,000 car? Cancelled in favor of the robotaxi. The only new model was the Cybertruck. And that flopped.

2. The Competition: The first-mover advantage is gone. In 2012, Tesla was alone. Today, every automaker builds EVs. If you want an EV today, you've got options. And the biggest competition comes from China. They're cheaper and have much newer models.

3. Musk Himself: Whether you agree with his politics or not: His involvement has damaged the brand. In Europe alone, Tesla sold around 28% less in 2025 even though the market grew.

4. The Politics: The Trump administration is doing everything to suppress EV adoption. This particularly hurts Tesla. EV purchase subsidies were eliminated. Plus, revenue from selling CO₂ credits is collapsing. Tesla made billions from that for years.

Tesla's Response?

Away from cars. Toward what Tesla calls "Physical AI."

This isn't the AI that writes emails or generates images. This is AI that operates in the real world. That sees, moves, interacts with things. Robotaxis. Humanoid robots.

And Tesla is serious. Three projects are the focus:

1. Optimus: Tesla is converting its plant in Fremont, California. They used to build Model S and X there. Now they're switching production lines to the humanoid robot Optimus. Long-term goal: 1 million robots per year.

2. Robotaxis: Tesla's robotaxi service already runs in Austin, still with safety drivers. In San Francisco, Tesla offers a ride service with drivers. 7 more US cities are planned for the first half of the year. Plus, the Cybercab should enter production in April. A car designed to work without a steering wheel or pedals.

3. xAI: Tesla is investing $2 billion in Musk's AI startup xAI. The reasoning? Synergies in autonomous driving.

To finance all this, Tesla is investing over $20 billion in 2026. More than double what it spent in 2025.

Analysts sum it up: "Forget the Tesla you knew. The Tesla of yesterday is gone." They call it a "point of no return." There's no going back.

What's Really Happening

The official story: Tesla is transforming from automaker to AI company.

Analysts have another name for it: "The Great Decoupling." Tech analyst Scott Galloway calls it a distraction from the shrinking car business.

Let's take a closer look.

Robotaxi:

• Elon has promised Full Self Driving for years. With the robotaxi, he doubled down

• Waymo does 400,000 rides per week. In 6 cities. With 2,500 vehicles

• Tesla? The last known numbers put it at 34 vehicles. A fan documented 54 rides in Austin. None were truly driverless. Every ride had an escort vehicle. In California, Tesla has no permit for driverless robotaxis

• And the Cybercab? US regulations allow a maximum of 2,500 such vehicles per year. Tesla wants to build millions

Optimus:

• In 2024, Elon claimed the robot could make Tesla a $25 trillion company

• Today he says Optimus isn't deployed in Tesla's factories yet. It's an R&D project

• And unlike EVs, Tesla isn't the first mover here. Boston Dynamics, Unitree, Xpeng, and many others are in the race

• Just like with EVs, whoever produces cheapest wins in the end. So China is well positioned

xAI:

• Elon's AI startup burns around $1 billion per month. With only $500 million annual revenue

• For comparison: OpenAI expects $13 billion revenue for 2025

That's the reality check.

Still: Tesla is worth more than the 25 largest automakers combined.

How does this make sense?

Tesla has always been valued like a tech company. Not like an automaker. You see this in the price-to-earnings ratio:

• VW is around 5

• Ford around 8

• Apple and Amazon 30 to 40

• Tesla? 250+

This worked as long as the car business carried the growth story. It doesn't anymore. So it needs new narratives.

That's why more and more analysts call Tesla a "meme stock." The valuation has decoupled from reality. The price isn't driven by revenue and profit anymore. But by hype, hope, and a loyal fanbase.

And there's something else Tesla shareholders should understand.

Elon doesn't just own Tesla. He controls SpaceX and xAI too. And money flows between these companies.

An example:

• Elon buys Twitter for $44 billion

• The value crashes to $9 billion

• Then xAI buys Twitter and suddenly values it at $33 billion again

• The Twitter investors? Saved. Who paid? The xAI investors

And who finances xAI? Among others Tesla and SpaceX. Both invested $2 billion.

This leaves a bad taste. Tesla shareholders already sued Elon in 2024. The accusation: He diverted employees and resources from Tesla to xAI. The lawsuit is ongoing.

Still, SpaceX is now taking over xAI completely. And a merger of Tesla and SpaceX is also on the table.

The pattern: When one of Elon's companies gets in trouble, another bails it out. That's financial engineering. And nobody does it better than Elon.

But there's a problem.

Elon Musk holds around 15% of Tesla. Significantly more of SpaceX and xAI. When he negotiates a merger, he sits on both sides of the table. He negotiates with himself. And because he owns more of SpaceX, he probably won't negotiate in Tesla shareholders' interests.

My Take

To be fair: Not everything's going badly. The energy division grew 27% to $12.8 billion. Battery storage and solar systems.

But the real story is different. It's not that Tesla is abandoning cars. It's that Elon has lost focus.

The car business is shrinking. In robotics and robotaxis, they have no real moat. But the stock valuation says Tesla will dominate these markets. That's anything but certain. And then there's the question of whose interests Elon actually represents.

The paradox: Elon Musk identified the right topics early. EVs. Software. Autonomous driving. AI. Robotics. The problem: At some point, the car business became too boring for him.

And so Tesla gradually lost its lead. In EVs, they're now one of many. In the markets of tomorrow, they're no longer the first mover.

Whether these bets pay off remains to be seen. But there's one indicator: If Tesla actually merges with SpaceX someday, that's a sign. Then we'll know: Things don't look good.

Until then, there's one counterargument. And that's Elon Musk himself.

He's been underestimated too many times. And managed to turn it around in the end.

Matthias Müller had to learn that too.

🔗 Sources

That's all for today.

Feel free to reply to this email with your thoughts.

Until next week,
Philipp

PS: If you find value here, share it with someone who should read it too.

I’m Philipp Raasch.
Ex-Mercedes. Now I help 80,000+ automotive professionals make sense of the industry's biggest transformation.

Welcome to Issue #103 of The German Autopreneur.

Picture this: You're in a meeting. Someone puts a new Deloitte study on the table. 29,000 car buyers across 27 countries.

Someone asks: "What drives purchase decisions in Germany vs. China?"

Most people guess: Chinese buyers chase low prices. Germans pay for quality.

The reality? Exactly opposite.

54% of Germans say price is their top criterion. In China? Only 20%.

In China, quality is almost twice as important as price.

Today we look at Deloitte's Global Automotive Consumer Study 2026. What really matters. Where we got it wrong. What it means.

Germans Want a Bargain

Germans buy primarily on price, not quality. In China, quality matters twice as much as price.

This year, the trend got even stronger.

62% of Germans say "getting a good deal" is critical when buying a car. They want to feel they got the better deal than others.

Getting a good deal is a top priority in Germany (Deloitte)

The UK and US are similar. In China, only 32% care about getting a good deal. In India, 40%.

And it continues. 25% of Germans want to spend max €15,000 on their next car. Last year: 22%. Willingness to spend €50,000+ dropped from 15% to 12%.

Price is the number one factor in Germany, performance and quality in China (Deloitte)

Here's what stands out. Germany and Japan are the ONLY markets where price matters more than quality.

In all other 25 markets, quality leads.

In China, quality (38%) is almost twice as important as price (20%). Even more important: vehicle performance at 40%. That primarily means efficiency and range.

The problem for German automakers: their home market grows increasingly price-sensitive. At the same time, Chinese competitors push into Europe with affordable EVs.

In China, it's reversed. Customers don't want the cheapest car. They want better technology. Better performance. Better features.

The Big EV Wave Isn't Coming

At least not how everyone expected.

In Germany, 49% want a combustion engine for their next car. 16% want a pure EV. Sounds low, but it's the second-highest globally after China.

Even in China, only 20% want a pure EV. 41% still prefer combustion engines.

Hybrids are gaining ground, the share of combustion engines is slowly declining (Deloitte)

In the US: 61% combustion preference. The highest worldwide. Only 7% want an EV.

Japan and South Korea sit at 41%, on par with China.

But where's the shift going? Not to EVs. To hybrids.

In Germany, 24% want a hybrid (14% HEV + 10% PHEV). In China: 36% (19% HEV + 17% PHEV).

Hybrids remain an important bridge technology. The compromise more customers accept.

But why don't customers want EVs?

• In Germany: Still range. 49% cite it as a problem. Then costs and charging time (both 41%)

• In China: Different concerns. How the car performs in cold weather (32%). Whether the battery is safe (32%)

Costs are the biggest EV concern in the West (Deloitte)

Then there's the infrastructure problem.

In the UK, 79% want to charge at home. But 52% have no access to a charger. In the US: 53%. In Japan: 75%.

The gap: Customers want home charging. But they can't access it.

Germany stands better on charging infrastructure. Only 20% lack home charging access. Still, as long as this gap exists, hybrids remain the pragmatic choice.

And what are the reasons for buying an EV?

Massive regional differences.

• Germany: Main reason is environment (41%). Then lower fuel costs (39%) and government subsidies (33%)

• China: Faster charging (37%), higher range (37%), driving experience (36%), or as a lifestyle asset (34%)

• US and Japan: Lower operating costs (US: 52%, Japan: 47%)

Reasons for buying an EV: Environment in Germany, Experience in China (Deloitte)

This explains why hybrids are attractive. They offer the best of both worlds. No dependency on charging infrastructure. Lower consumption. A gradual entry into electric mobility.

The Software Gap Between West and East

Here it gets interesting.

Deloitte asked: How useful do you find software-defined vehicles? The answers couldn't be more different.

India: 81% find SDVs useful. Southeast Asia: 71%. China: 68%.

At the bottom: Germany and Japan. Both at only 33%.

SDV acceptance: Asia vs. Europe diverges (Deloitte)

It's even clearer with AI features in cars.

84% of Indians would use them. In China, 76%. Southeast Asia, 70%. And Germany? 34%.

The divide becomes clear when looking at over-the-air updates and willingness to pay.

• China: 93% would pay extra for OTA capability

• India: 92%

• Germany: Only 60%

Germans expect OTAs to be free, Chinese are happy to pay (Deloitte)

Here's the counterintuitive part: In India, South East Asia and China, 72-84% would keep their car longer if it gets regular OTA updates.

This contradicts the "SDV as disposable car" thesis. Software extends lifespan. Through continuous updates, the car stays fresh longer. Feels new longer. Remains valuable.

Germans don't see it that way. Only 36% would keep their car longer because of software updates.

That's the fundamental difference.

In Asia, software is added value. Something that makes the car better. Keeps it fresh. Makes it more valuable.

Germany sees software as nice to have. Many reject it completely.

The US falls in the middle.

My Take

The study shows 3 fundamental shifts. They lead to one central problem.

1) Germany becomes a discount market. China becomes premium.

For decades, it was reversed.

Chinese brands have good prospects in Europe. They offer good quality at affordable prices. Exactly what customers want.

In China, it's opposite. Performance, technology, and features count. Brand loyalty? Barely exists. 67-72% of customers in China, India, and Southeast Asia plan to switch brands with their next purchase.

German manufacturers must convince with technology. That's exactly what Chinese competitors deliver right now.

2) The big shift to EVs isn't coming in 2026 either.

Most customers aren't convinced yet. Hybrids remain the stronger alternative.

Betting only on pure EVs means missing 50%+ of the market. Manufacturers with strong hybrid portfolios win.

3) Asia wants software. Europe doesn't.

Deloitte says growth no longer works through higher prices and more new cars. The key lies in monetizing the existing fleet. That happens primarily through software.

The problem in Europe: home markets won't pay for it. Mostly aren't even ready for it. As a German OEM, you must invest in software. But you can't monetize it at home.

This brings us to the core problem.

The German home market is almost hostile to technology.

German car buyers are conservative. They adopt innovations late. They reject new technologies at first.

This is a cultural factor. It becomes a competitive disadvantage.

In the automotive business, a strong home market was always key to global success. The home market was the lab. The breeding ground for technology leadership.

German automakers developed high-tech in Germany for decades. Then carried it to the world.

But when home market customers think completely differently than the rest of the world, that itself becomes the problem.

This is the Chinese structural advantage. They have an extremely tech-friendly home market. What works in China also works in India. In South East Asia. In many rising markets.

Germany can't do that. The home market is closed. Critical. Technology-skeptical.

The success model no longer works.

Growing alienation. Between what the global market wants and what German customers want.

This explains why more development moves away from Germany. What works there doesn't work in the rest of the world.

German customers increasingly complain that cars no longer meet their expectations. Not because automakers aren't evolving. Because they develop for a global market that wants high-tech in a home market that rejects exactly that.

The question: Can German manufacturers serve both markets? Or must they choose?

🔗 Deloitte | LinkedIn

That's all for today.

Feel free to reply to this email with your thoughts.

Until next week,
Philipp

PS: If you find value here, share it with someone who should read it too.

I’m Philipp Raasch.
Ex-Mercedes. Now I help 80,000+ automotive professionals make sense of the industry's biggest transformation.

Welcome to Issue #102 of The German Autopreneur.

For years, we've talked about software-defined vehicles. How software increasingly defines what a car is and does.

We've watched startups from the US and China overtake European automakers. Simply because they're better at software.

To catch up, German automakers invested billions. Founded their own software companies like CARIAD. Launched massive transformation programs. And even bought technology from the very startups that once overtook them.

Now all of this may already be outdated.

Because the industry is already moving past the software-defined car.

The next stage? The AI-defined Vehicle. AIDV.

Today we'll explore what AIDV means, who's already there. And whether legacy automakers are chasing a target that's already shifted.

What's the Difference Between SDV and AIDV?

Cars used to be finished when they rolled off the production line. What you buy is what you get. Forever.

With the software-defined vehicle, your car improves after purchase. Tesla unlocks more range via updates. Or new autopilot features. Today you buy a car without lane-keeping assist. Tomorrow you can activate it through a software update.

But you still control the car. You select the driving mode. You decide when to activate lane-keeping.

The AI-defined vehicle flips this relationship.

An AI model continuously analyzes the situation. It factors in weather, traffic, time of day, your destination, even your mood. And it adapts the car accordingly. No input required.

It's the same shift happening on our phones and computers right now. We used to open apps and do things ourselves. Now we just tell an AI what we want. It figures out the rest. Apps become interfaces we no longer need.

The AIDV is the automotive version of this shift. But it goes further. Your car collects more context than you could ever process. It anticipates what you need. And acts on it.

Picture this: You're stressed after a long day. It's late, you just want to get home. The car picks up on it through biometrics. It dims the interior lights, plays calming music, and adjusts its driving style. Smoother acceleration. Gentler cornering.

The next morning you're heading to work. Well-rested, good mood. The car notices that too. It drives more dynamically. Sportier.

In an SDV, AI is a feature. In an AIDV, AI runs everything.

Based on Augustin Friedel

Who's Already at AIDV?

Short answer: China. OEMs like Geely, Li Auto, and Xpeng are going all-in. They're turning AI into the central nervous system of their cars. AI orchestrates not just driving but all vehicle domains: Powertrain, cockpit, climate, energy.

Most Western OEMs are still in the concept phase. They use AI too, but only as one feature among many.

SDV consultant Augustin Friedel came up with a simple test. If you don't meet these 4 points, you're still at the SDV:

1. Frequent AI model updates. Not just standard software updates

2. Ongoing tests of AI behavior, with the ability to roll back updates

3. AI learns independently from driving data, without needing complete retraining

4. AI is integrated across all systems. Not just a single feature

This matrix shows where each automaker stands. The further top-right, the more AI controls the car. Bottom-left means AI is just a feature.

Assessment of the AIDV maturity of car manufacturers (Augustin Friedel)

The uncomfortable truth is that legacy OEMs often still struggle with their SDV strategies. Some Chinese players are already one step ahead.

Why Traditional Automakers Struggle So Much

Because it's not just about software updates. It's a completely new architecture.

Chip developer Arm describes 3 simultaneous disruptions:

1) Centralization

All computing power moves to one central high-performance chip. Decades of legacy code have to be ported to a new architecture. For established manufacturers, this is a gigantic transformation. For startups, an advantage.

2) AI-First

AI is no longer a feature. It's the foundation. This requires significantly more computing power, memory, and energy.

3) End-to-End AI

Until now, self-driving systems worked in sequence: one module detects objects, another plans the route, a third handles control. With end-to-end, a single AI model handles everything. It receives sensor data and directly controls steering, brakes, and throttle. No one can fully explain how each decision gets made.

And this third point is the game-changer. End-to-end doesn't just make autonomous driving better. It makes it affordable.

No more 100,000 lines of code for every traffic situation. Instead, one model that learns from data.

Once autonomous driving becomes affordable, robotaxis become reality.

Why Robotaxis Are Coming Now

The cost of autonomous vehicles has dropped dramatically.

Example: LiDAR. That's the laser sensor self-driving cars use to scan their environment. A LiDAR sensor cost $75,000 a few years ago. Today it's under $200.

Waymo's new robotaxi costs an estimated $75,000. Baidu's RT6 is at $28,000. Goldman Sachs projected $50,000 per robotaxi for 2030. They've practically hit that target already.

Goldman Sachs expects the crossover between 2036 and 2040. After that, a robotaxi will be cheaper than owning a car.

From 2036 onwards, a robotaxi should be cheaper than owning a private car (Goldman Sachs).

ARK Invest sees the robotaxi market at over $10 trillion. That explains why 4 of the world's 11 trillion-dollar companies are investing in robotaxis: Alphabet (Waymo), Amazon (Zoox), Tesla, and NVIDIA. Waymo is currently raising $15 billion at a valuation above $100 billion.

For comparison, Volkswagen is valued at around $60 billion. A robotaxi startup is worth almost twice as much as Europe's largest automaker.

And that's why AIDV will prevail. Billions in capital are flowing into development, with or without German automakers.

My Take

The problem isn't that legacy automakers aren't transforming. The problem is they're too slow.

While they transform, the target keeps moving.

German automakers still struggle with software. New models still get delayed because of software issues. Many still can't roll out over-the-air updates at scale.

But they're catching up.

These corporations invest billions. Hire tens of thousands of software developers. Found subsidiaries like CARIAD. And even buy into competitors like Xpeng and Rivian.

All to finally catch up to the software-defined vehicle.

The problem?

SDV is becoming a commodity.

Soon saying "We have an SDV platform" will be like "We make a phone with a touchscreen."

We used to say that software is eating the world. Nvidia CEO Jensen Huang goes further: "AI is going to eat software."

The first automakers are going all-in. They see themselves as AI-first companies.

And that changes everything. With an AI-defined vehicle, an AI model controls all vehicle functions. No more hand-coded algorithms. No modules to maintain. Updates come from training, not coding. At least in theory.

Right now, traditional automakers are hiring tens of thousands of software developers. But an AIDV might not need them. It needs AI models that learn from data.

We might be building skills that become obsolete before we're done building them.

🔗 bi1 | dd1 | ean1 | li1 | sb1 | sb2

That's all for today.

Feel free to reply to this email with your thoughts.

Until next week,
Philipp

PS: If you find value here, share it with someone who should read it too.

I’m Philipp Raasch.
Ex-Mercedes. Now I help 80,000+ automotive professionals make sense of the industry's biggest transformation.

Welcome to Issue #101 of The German Autopreneur.

German automakers just wrapped up 2025 with their worst earnings in years.

The main reason? China.

BMW, Mercedes, and Volkswagen sold fewer than 3.9 million cars there combined. The lowest in 13 years. Volkswagen dropped to third place in China. Behind BYD and Geely.

Sounds like the beginning of the end.

But something surprising just happened.

Major American investment banks are upgrading German auto stocks. Goldman Sachs now recommends buying BMW and Mercedes. Just months ago, they warned against these same stocks. Now they're suddenly optimistic.

What do they know that we don't? Are we about to see a turnaround in 2026?

The Bet Nobody Expected

You might think investors are betting on a German comeback in China.

But they're not.

Goldman Sachs, Morgan Stanley, UBS, Barclays, Bernstein. One pattern runs through all their analyses: Nobody expects traditional German brands to recover in China.

Quite the opposite. Goldman Sachs ran a scenario: What happens if the China business for BMW, Mercedes, and Volkswagen completely collapses? Zero profit from China?

The surprising result: Even then, BMW and Mercedes would be undervalued at current stock prices.

Volkswagen is different. They need China the most.

Analysts call this "China-Free Valuation." The idea: The market has punished German auto stocks so brutally that it already values China at zero.

Some go further. They say the market values China negatively. As a loss-making business that will eat profits from Europe and the US.

So the real bet isn't: Will China come back? It's: Can BMW, Mercedes, and Volkswagen remain profitable without China?

The China Crash

China was the cash cow for German automakers.

2016 and 2017 were peak years. Volkswagen's joint ventures contributed between €4 and €5 billion to group profit. Every year. Almost one-third of total group earnings.

2023? Just €2.6 billion. 2025 is expected to drop below €1 billion.

We know the causes: BYD's rise. The EV price war. And a fundamental shift in what Chinese buyers consider "premium."

Volkswagen faces the biggest problem in China. They're seen as outdated there. Technologically behind. Something for your parents' generation. The catch? The average new car buyer in China is in their mid-30s.

What Investors Expect

Optimistic analysts see three factors for 2026:

1. Europe stabilizes. The market barely grows, but it's not shrinking either. They expect slight growth in 2026

2. US as the stress test. The US market is large enough to partially offset China losses. If German brands grow there in 2026, they might survive without China.

3. Cost-cutting programs deliver results. Mercedes launched a €5 billion savings program. Volkswagen is cutting 35,000 jobs. BMW is targeting similar savings.

The logic: Cut costs faster than revenue falls, and margins improve. Even without growth. For the first time in 2 years, profit forecasts for German automakers are going up again.

But they're overlooking something.

Analysts expect rising margins at European automakers in 2026 (Reuters)

Projected earnings growth: EU auto sector vs. EU overall market (Reuters)

The New Models

Investors are betting on cost-cutting. But something else happens in 2026.

BMW, Mercedes, and Volkswagen are launching their most important new models in years. These cars are make-or-break. If they fail, so does the turnaround story.

• BMW: The iX3. First model of the "Neue Klasse"

• Mercedes: The electric CLA and GLC

• Volkswagen: An entire portfolio with Chinese partners

The key question: When do these models arrive? And when will the effects show?

BMW and Mercedes expect real impact only in Q3 and Q4 2026. For Volkswagen, we're talking late 2026.

Mercedes and BMW shared 2026 forecasts with their suppliers. Each expects fewer than 500,000 vehicles in China. That's a roughly 20% drop from 2025. Back to levels from 10 years ago.

Meanwhile, Chinese manufacturers are planning for 2026:

• Huawei's auto alliance HIMA: 1.3 million (+120%)

• Nio: 460,000 (+40% to 50%)

• Xiaomi: 550,000 (+34%)

The message is clear.

Even Mercedes and BMW aren't expecting a turnaround from these models. The goal is more modest. Slow the decline. And hopefully find a floor.

My Take

The stock market has decided. It no longer values German automakers' China business as an opportunity. But as a liability.

BMW, Mercedes, and Volkswagen disagree. They refuse to give up China and keep investing. Their goal: Find a floor.

The market punishes them for it. The message is clear: Stop burning money in a losing battle.

But even Wall Street is divided. Two camps face each other:

The optimists bet on profitable downsizing. Smaller but more profitable. Their bet: Retreat from China, focus on Europe and the US.

The pessimists warn of a value trap. The stocks look cheap but aren't. Behind the price is structural decline. No turnaround coming.

They say: Without China volumes, economies of scale disappear. Cost per car rises. Lose China, lose the world's largest car market. And with it, the foundation for global competitiveness.

Both camps agree on one thing: China is gone for German automakers.

And that brings us to an uncomfortable question:

What if they're right? What if China really does collapse?

We rarely ask this in the industry. Because it sends a signal nobody wants to send: Doubt.

But we need a Plan B. And there's a third possibility: China doesn't collapse completely. German automakers find a floor. They hold on. Smaller, but profitable.

German automakers believe it. The stock market doesn't.

One of them is wrong.

🔗 cnp1 | citi1 | ey1 | faz1 | ft1 | ft2 | gold1 | hb1 | hb2 | hb3 | hb4 | ms1 | re1 | re2 | re3 | re4 | re5 | sc1 | ubs1 | vw | wsj1

That's all for today.

Until next week,
Philipp

PS: If you find value here, share it with someone who should read it too.

I’m Philipp Raasch.
Ex-Mercedes. Now I help 80,000+ automotive professionals make sense of the industry's biggest transformation.

Welcome to Issue #100 of The German Autopreneur.

The biggest race in automotive? It's not about range anymore. Not about charging speed. It's about robots.

CES wrapped up in Las Vegas last week. Hyundai made a stunning announcement: They'll produce 30,000 humanoid robots per year starting in 2028.

They're serious.

And Hyundai isn't alone. Tesla builds Optimus. BMW started with Figure two years ago. Mercedes pilots Apollo. BYD plans 20,000 humanoids by end of 2026.

The race is on.

A pattern emerges: Automakers don't just build with robots anymore. They're now building robots themselves.

What's happening here? And what does it mean?

Why Automakers Suddenly Build Robots

A modern car is basically a robot on four wheels.

Same batteries. Same electric motors. Same sensors. Same AI chips. The supply chains overlap significantly.

If you can build cars, you can build robots.

Elon Musk says: "Optimus will be worth more than our car business."

Hyundai's Chairman: "Robotics will be 20% of our business by 2030."

These aren't side projects. Robots are becoming automakers' next big bet.

The Brownfield Advantage

Here's where it gets interesting.

Our factories were built for humans. Stairs. Narrow corridors. Tools designed for hands.

Traditional industrial robots need brand-new, empty halls. Full factory rebuilds. That costs billions.

But humanoid robots are different. They fit directly into existing workflows.

Boston Dynamics' Atlas (Hyundai's robotics subsidiary) walks through the same door as you do. Picks up the same screwdriver. Climbs the same stairs.

Our world is built for humans. That's exactly why humanoids work.

This is the Brownfield Advantage: Automation without the need for factory reconstruction.

Hyundai's humanoid robot Atlas (Boston Dynamics)

The Brutal Math

The economic logic isn't new.

In 2015, Volkswagen's HR chief calculated: A robot costs only a fraction of a skilled worker. But back then, robots lacked flexibility.

Not anymore.

A German factory worker costs about €45 per hour. A humanoid robot: €12 to €15 per hour, and the price keeps falling.

The math works everywhere. High-wage countries have the strongest incentive. But even in lower-cost regions, the gap is closing.

What the Sceptics Say

Not everyone's convinced.

In early 2025, a Fraunhofer study concluded: Humanoid robots are a dead end. At least for now. Too slow. Too unreliable. Too unsafe.

They have a point. Many humanoids today only have 2 to 4 hours of battery life. Not exactly factory-ready.

But that's short-sighted. This isn't about what's possible today. It's about the future. And that future arrives faster than many think.

Two things accelerate development:

1. The demographic crisis. Nobody wants to do repetitive, physically demanding jobs anymore

2. AI advancement. Robots aren't programmed anymore. They're trained. What used to take years is now learned through demonstration. Within weeks.

And here's what sceptics miss.

If you wait until robots are "perfect"? You'll have a problem. You miss out on training data from your own factory. The real-world experience.

Tesla doesn't run Optimus because it's perfect. They run it so that it becomes perfect.

Because when one robot learns a task, all others can use that knowledge instantly. One learns, all can do it. That's the fundamental difference from humans.

Where We Stand Today

So where do things actually stand? A few companies are already testing humanoids in real factories.

BMW started a Figure pilot in Spartanburg in 2024. The robots place metal sheets into body panels. Over 30,000 BMW X3s have been built this way.

Tesla deploys hundreds of Optimus robots in its Gigafactories. They sort battery cells.

Humanoids start where environments are stable (McKinsey)

China produced over 10,000 humanoids in 2025 alone. That's 70% of all humanoids worldwide.

And in Europe? Just 6%. According to McKinsey, only 7 humanoid companies exist here. None have reached pilot phase yet.

7 companies, none of which are in the pilot phase (McKinsey)

The Old China Playbook

Beijing leaves nothing to chance.

Late 2023, China's Ministry of Industry declared humanoids a strategic priority. The goal: Mass production by 2025. They're treating robots like EVs 15 years ago.

The playbook is familiar: Subsidies for manufacturers and for users. Produce in China and you get your robot practically sponsored.

No country has more humanoid startups. Over 35 new models launched in 2024 alone.

In 2025, China invested $3.4 billion in robotics. 42% more than the US. 70% of the global supply chain already sits there.

If China continues this way, we know how it ends. Just like with EVs.

Build Robots or Buy Robots?

What if the biggest value driver isn't factory savings? What if the robot itself becomes the product?

Morgan Stanley projects: The humanoid robot market could reach $5 trillion by 2050. The entire global auto market today: $3 trillion.

This isn't a niche. An entirely new core business is emerging.

And that's pretty attractive for automakers.

We see two strategies:

1. Some build robots as new products. Tesla, Xiaomi, Hyundai, BYD. They're expanding their portfolio. Betting that the robot becomes the next car. Not just for their own factory. But for the market.

2. Others use robots as tools. BMW, Mercedes. They buy robots. From Figure. From Apptronik. The goal? Making car production cheaper and more efficient.

On one hand: Valid focus on core business.

On the other: The familiar risk. German companies become dependent on tech from China and the US.

So What About Germany?

There are promising players. NEURA Robotics builds humanoids. Schaeffler is making a strategic pivot. From cars to robots. At CES, they showcased drivetrain components for humanoid robots.

For German suppliers, this is an opportunity. The robotics market grows faster than automotive. Those who build components for cars today could build components for robots tomorrow.

McKinsey says: 40-60% of a humanoid's cost goes to drivetrain components. Supply them, and you earn on every robot sold.

Then there's KUKA. Germany's former world leader in industrial robots. In 2016, China's Midea bought the company. German know-how, built over decades. Then transferred to China. For many in Germany, it's the nightmare scenario all over again.

My Take

But here's what I think: There's still a chance. Especially for Europe.

If a robot costs the same in Germany as in China, why produce there?

For decades, production moved to Asia. The reason: Low labour costs.

If robots eliminate that cost advantage, other factors matter again. Proximity to customers. Shorter delivery times. Stable, resilient supply chains.

But I see two risks:

1. Many companies aren't ready. They're still fighting digitalization. Cloud migration. Data silos. AI pilots. These are the basics companies haven't mastered yet. Robots build on top of that. They are the next layer of digitalization. They need clean data and connected systems. If you can't handle that, robots won't help.

2. Germany could block its own path. Again. New technologies always follow the same pattern here. Scepticism. Over-regulation. Lost competitiveness. And this time there's more: It's only a matter of time before unions and worker representatives declare war on humanoids.

Few industrial locations need robots as urgently as Germany. High wages. Expensive energy. Missing skilled workers. And a manufacturing base under pressure. Robots are the missing puzzle piece. Germany should be going all-in.

But Germany is also the place most likely to resist.

But here's the thing: Industrial robots didn't destroy jobs in the end. They took over tasks nobody wanted anymore. And simultaneously created foundations for new industries and jobs.

The good news?

It's not too late. Germany is still in the race.

The question is: Will Germany act this time?

🔗McKinsey | Fraunhofer IPA | Handelsblatt | Humanoid Press

That's all for today.

Feel free to reply to this email with your thoughts.

Until next week,
Philipp

PS: If you find value in this newsletter, please share it with someone who might benefit.

After 10 years at Mercedes-Benz, I quit in 2020. In 2024, tarted writing "Der Autopreneur". It became Germany's largest newsletter on automotive transformation. Now it’s also available in English.

LinkedIn | About me | German Version

Welcome to Issue #99 of The German Autopreneur.

Europe just spent 6 months debating the combustion engine ban. Last week, the decision finally came.

The result? A compromise that satisfies no one.

But that's not even the real problem.

While Europe argued about combustion engines for months, China's new 5-year plan is taking shape. E-Mobility? Not even mentioned.

For China, that chapter's closed. They won. The market is theirs.

Now they're funding the next wave. Artificial intelligence. Humanoid robots. Quantum computing.

Meanwhile, Europe debates whether combustion engines should still be sold in 10 years.

China builds the AI factories and robots that will make those cars.

Today we'll look at what the EU decided. Why nobody's happy. And why Europe has a focus problem.

Europe's Never-Ending Combustion Engine Debate

Quick background: In 2021, the EU made a decision. From 2035 onward, only zero-emission vehicles can be sold.

A combustion engine ban.

But ever since, debates have flared up repeatedly. Should this really happen? Should the ban be reversed?

Europe spent the last 6 months stuck on exactly that question.

This debate cuts deepest in Germany.

Germany didn't just build combustion engines. Germany invented them. For nearly 150 years, they defined what Germany was. The heartbeat of Mercedes, BMW, Porsche. The reason "Made in Germany" meant the world's best cars.

Combustion engines aren't just technology in Germany. They're identity.

Now that's ending.

Hundreds of thousands of jobs are at risk. Entire regions could lose their economic foundation. A century of expertise becoming obsolete.

This isn't just about phasing out a technology. For Germany, it feels like losing an identity.

That's why the debate got so heated.

Two camps emerged:

Camp 1: Keep the ban

Countries like Spain. Companies like Volvo and Polestar.

They bet everything on EVs. Billions invested. They trusted the rules wouldn't change.

Now they're fighting to keep those rules in place. Any softening of the ban would be unfair. It would devalue their investments.

Camp 2: Scrap the ban

Countries like Germany and Italy. Companies like Mercedes, BMW, VW.

They want the ban gone completely. The official reason: Government shouldn't pick technologies. The market should decide. Let customers choose.

But that's just the public story.

Here's what's really happening:

German manufacturers face crushing pressure. Seven factors reinforce each other:

1) The China cash machine stopped

For decades, China was the money printer. VW sold more than every third car there. China profits funded everything else.

Then German market share crashed. From 24% to 15%. The money printer stopped.

2) EVs are killing combustion sales in China

Why did this happen?

More than half of new cars in China are now electric.

Here's the problem for German brands: Chinese buyers choose German cars for their combustion engines. But when they want an EV, they don't buy German.

So as combustion demand drops, German sales collapse with it.

That's the real reason for the market share crash.

3) Forced to fund both technologies at once

To survive in China, they need competitive EVs now. Racing against local brands with a 5-year head start.

But simultaneously, the US still buys combustion engines. Trump's pushing that even harder.

The consequence: They must develop EVs AND combustion engines in parallel.

Double the platforms. Double the supply chains. Double the production lines. All while China profits disappear.

4) Combustion engines need European volumes to survive

Here's why that matters:

Developing a combustion engine costs billions in fixed costs. The more you sell, the lower the cost per car.

If Europe stops buying combustion engines, only the US and a few export markets remain. Volumes drop. Margins collapse. Maybe turn negative.

5) The brutal paradox

That creates a brutal paradox.

German manufacturers desperately need European combustion sales. Without Europe, combustion volumes collapse. Without volume, combustion engines lose money.

And they need combustion profits to finance competitive EV development for China.

The paradox: They need Europe buying combustion engines to finance getting out of combustion engines.

6) The EU won't give them that time

But here's the problem: The EU won't give them that time.

Clear CO₂ targets exist. Miss them, pay billions in fines.

German manufacturers need time. Time to keep selling combustion engines profitably. Time to use those profits to catch up on EVs.

The EU says no. High EV quotas. Starting now.

7) Plant closures threaten

And if the transformation hits too fast?

Combustion plants shut down. Jobs vanish. Entire regions lose their economic foundation.

That's why the German government backs them. Slow it down. Make it socially acceptable. Protect jobs and regions.

The problem: Germany already tried this approach.

With coal. For decades, Germany pumped billions into keeping unprofitable coal mines alive. The goal: Make the transition gradual. Protect mining jobs as long as possible.

What happened?

Mining jobs disappeared anyway. Just over 50 years instead of 10.

Germany bought time and social peace. At a massive cost.

These 7 factors explain the desperate fight.

This dominated Brussels for months. Last week, decision day arrived.

The Combustion Engine Ban Was Scrapped - Kind Of

The EU Commission announced its proposal. Instead of 100% CO₂ reduction by 2035, now it's 90%.

Here's what changed:

The old rule: From 2035, only zero-emission cars can be sold. A combustion engine ban.

The new rule: From 2035, a manufacturer's average fleet emissions must be 90% lower than 2021.

What this means: Combustion engines can still be sold. But only if manufacturers collect enough credits.

How the credit system works:

Every combustion car sold produces CO₂ emissions. Manufacturers must balance those emissions with credits.

Manufacturers earn credits by:

• Selling EVs (small EVs earn bonus credits)

• Using EU green steel in production

• Selling cars that run on e-fuels (synthetic fuels made with renewable energy)

The big shift: Combustion engines remain legal.

But earning enough credits is expensive. Very expensive.

The effect: Combustion engines become luxury goods. Like a Rolex. For the few who can afford them.

In 2036, you'll probably still be able to buy a Porsche with a combustion engine. Much more expensive than today. But a Golf? Unlikely.

But here's the catch: This only applies to private buyers.

Company fleets face much stricter rules. By 2030, 54% of new fleet registrations must be electric. By 2035, 100%.

That's an effective combustion ban for company cars. And since fleets account for 60-70% of all sales, that's what really matters.

The bottom line: Almost nothing changes.

The result: Nobody's happy

• Volvo: "We're ready. Suddenly the rules change because someone else wasn't ready."

• VDA (German auto association): "Keeping all technologies on the table must be more than empty words."

• Polestar: "Backtracking now doesn't just hurt the climate. It destroys Europe's competitiveness."

The debate continues. Burning through time, resources, tax money, and focus.

And while Europe fights itself, here's what's happening in China.

China Moves On

Remember China's new 5-year plan? The one taking shape while Europe debated combustion engines?

E-Mobility doesn't even appear on the strategic industries list anymore.

The Chinese government just classified EVs as an established industry. Translation: State support ends. Case closed.

The numbers prove it. China will sell around 16 million EVs and plug-in hybrids in 2025. Market share sits stable above 50%. More than half of new cars are electric.

The mission is accomplished.

Over the past decade, China invested over $230 billion into building this industry. The cost? Over 400 EV makers went bankrupt since 2018. Many more will follow.

Sounds catastrophic. It's not.

This is consolidation after victory.

China built capacity for 50 million vehicles yearly. Only half get sold. The result: Brutal price wars. Hundreds of bankruptcies.

But also: Foreign automakers got pushed out systematically. China built an entire industry from nothing. Became the market leader. The cost leader. The technology leader.

Mission accomplished.

Now the incubation phase ends. State support withdrawn. Survival of the fittest begins.

Weak players die. The survivors become global powerhouses.

That was the whole point. China just created companies that can compete with anyone, anywhere.

Now comes the final shakeout.

Meanwhile, the entire system already pivots to the next target.

China Pivots to the Future

The new strategic industries: Artificial intelligence. Quantum computing. Bio-manufacturing. Humanoid robotics.

Even automakers are all in. BYD, Xpeng, Xiaomi. They're pouring billions into AI-powered robots for production lines.

The goal: Factories running 24/7. No human workers. No wages. No unions.

BYD just committed $13 billion to intelligent manufacturing. Xiaomi is building fully automated factories. Zero human workers on the production floor.

This is China's next move. EVs? Done. Now it's about production itself. AI and robotics. The next cost revolution.

While Europe debates combustion engines for 2036, China builds the robots that will produce cars in 2036. At costs nobody else can match.

Polestar's CEO nails it: "The Chinese won't pause. They'll take over."

My Take

Europe's real problem is focus. Where attention goes. Where energy gets invested.

Six months of debate. For a compromise nobody wanted. For rules that barely shift the status quo. For a deadline 10 years away.

Think about that for a second. The world will be unrecognizable by then.

AI is the next industrial revolution. It will fundamentally reshape how industries work. How economies function. How we live and work. The shift from hardware to intelligence accelerates even faster.

In 10 years, cars won't be mechanical transport. They'll be intelligent robots on wheels.

Many experts believe we'll have AGI by then. Artificial intelligence surpassing humans in every domain. Handling most knowledge work. Running factories.

Either way, 2035 will be unrecognizable.

And amid this tectonic shift? Europe is seriously debating whether 10% of fleet emissions can still come from combustion engines in 2035.

Europe has a focus problem.

Look, I get it. I understand the emotional attachment. The automotive industry built Germany. It means identity. Heritage. Pride.

I feel it myself.

But nostalgia isn't a business model.

China has what Europe doesn't. Long-term focus. Strategic capital deployment. They're building new industries systematically. One after another.

Europe burns resources preserving old structures. Compromises. Exceptions. Special rules. Calling it keeping all technologies on the table.

That works for now. While old industries still print money. But what happens when that stops? When the old dies and nothing new exists to replace it?

The real question: When does Europe finally stop debating yesterday and start building tomorrow?

🔗 Sources

That's all for today.

Feel free to reply to this email with your thoughts.

Until next week,
Philipp

PS: If you find value in this newsletter, please share it with someone who might benefit.

After 10 years at Mercedes-Benz, I quit in 2020. In 2024, I started writing "Der Autopreneur". It became Germany's largest newsletter on automotive transformation. Now it’s also available in English.

LinkedIn | About me | German Version

Welcome to Issue #98 of The German Autopreneur.

For 40 years, it was one of the world's most successful partnerships. German engineering meets Chinese ambition. Together they brought cars to China. Earned billions.

Today everything's different. German automakers are losing ground in China. Market share dropped from 24% to 15% in just five years.

Behind closed doors, executives say: “China is lost.”

But is that really true?

Beatrix Keim has a different perspective. She's THE China expert of the German auto industry. Over 30 years at VW, BMW, Jaguar Land Rover. Nearly two decades of that time in China itself.

Her first trip to Beijing was in 1991. Back then, the city was full of bicycles. Two metro lines. Food ration cards still in use.

She watched the entire transformation unfold.

And she says something that changes how you see the situation:

"China plays poker with us. But they show their cards. We just need to learn how to read them."

This week, we'll look at what that means. Why Europe underestimated China's strategy. And why there's still a path forward. If we finally learn to see what's been visible all along.

Why We Lost

1984: Volkswagen became one of the first Western automakers to form a joint venture in China. With Shanghai Automotive Industry Corporation. SAIC in short.

The rules were clear: Market access in exchange for technology transfer. 50-50 partnership. The German expats had one job: Train Chinese colleagues so well that you're no longer needed.

Was that naive?

Beatrix says no: "Technology transfer was the price of market access. Everyone knew that."

The real naivety was somewhere else. German automakers underestimated the ambition. They thought China wanted to catch up. In reality, China wanted to overtake.

But initially, the partnership worked perfectly.

The VW Santana became a symbol. "It runs and runs and runs." Just like the Beetle in Germany.

From China's north to south. West to east. Everywhere you saw VW. And everywhere it worked.

Beatrix remembers: "When you said you worked for VW in China, you didn't need to explain anything else. That was pride."

For almost 40 years, VW was number 1 in China. Market share hit over 40% at times.

But beneath the success was a critical mistake. They looked at China through European eyes.

Here's an example:

In Europe, we go to the hardware store. Buy materials. Fix things ourselves. That's DIY culture.

In China, if something breaks, you have it fixed. They want convenience, not work.

German automakers built cars for the 50-year-old German engineer obsessed with build quality.

China is a market of 30-year-olds who grew up with WeChat and Alipay.

They don't want a mechanical masterpiece. They want a smartphone on wheels.

Beatrix puts it bluntly: "The mistake was focusing only on engineering excellence in the drivetrain. Not on design and the customer's digital expectations."

While German manufacturers were proud of their engines, China was pushing digitalization forward.

The result: BYD overtakes VW. Xiaomi builds a car in 3 years that competes with Porsche. Chinese brands control 69% of their own market.

How China Got Here

It started in 2012.

That's when Xi Jinping took power. That's the real turning point.

He cleaned up. Fought corruption. China positioned itself as a strong player.

At the same time, something was happening in the background that many didn't take seriously: The Five-Year Plans.

Beatrix says: "That was naive. Not the joint ventures themselves. But underestimating how strategically long-term China thinks."

China has worked in 5-year plans for decades. The economy is state-directed. Much more than in Europe or the US.

And in these plans, the EV strategy was written in stone.

Why EVs?

Not because of climate. For strategic reasons.

China couldn't compete with combustion technology. Western manufacturers were too far ahead.

So they focused on something new. Alternative mobility. Batteries. Software.

And pumped hundreds of billions of dollars into the industry.

Beatrix puts it this way: "China acts as a whole system. State and economy together. For us, that's not how government works."

That was the disadvantage for Western automakers.

But now something's shifting.

Beatrix Keim is the China expert of the German automotive industry.

Why German Manufacturers Can Come Back Now

The current situation is brutal. Many in the industry are pessimistic.

But Beatrix is optimistic.

She gives 5 reasons:

1. The New Five-Year Plan

The direction is set: Focus will shift starting 2026. Away from mobility. Toward quantum technology, bio-manufacturing, military.

In the new plan draft, EVs are no longer prioritized as a "strategic emerging industry." It's now considered "established."

That means fewer subsidies. Less state protection.

The Chinese auto market is overheated. Too many players fighting in a brutal price war. Many manufacturers sell under 200,000 cars per year. That's not profitable.

Beatrix puts it this way: "The revolution is eating its own children right now."

Many Chinese manufacturers won't survive. The market will consolidate.

That's an opportunity for European OEMs.

2. Quality Becomes Important Again

The new theme in the Five-Year Plan: Quality, safety, stability.

There were too many accidents. The market grew too fast. Immature technology. Improper use.

Starting in 2026, new standards will become mandatory.

This will enforce exactly the quality that many Chinese startups neglected in their rush to market.

3. German Automakers Are Massive Employers

VW employs nearly 100,000 people in China. BMW and Mercedes thousands more.

And China is still in an economic crisis. Unemployment is high.

Beatrix says: "The government can't afford to put these people on the street."

That's political leverage.

4. New Models Are Coming

German automakers have learned the lesson: Developing cars in Germany for China doesn't work. They're too far from local preferences.

So now they're developing in China for China. Cheaper and closer to the customer.

They're working with local partners to catch up on digital technologies.

Dozens of such models will hit the market in the next few years.

5. Mutual Dependence

Beatrix says: "China needs trade. The domestic market isn't enough."

Decoupling makes no sense for either side. China needs Europe. Europe needs China.

My Take

The cards were always on the table.

The Five-Year Plans were public. The EV strategy too.

But European automakers underestimated them. Didn't take them seriously. Ignored them. Maybe just didn't understand them.

Why? Germany and China are separated by almost 8,000 kilometers. But the cultural distance? Far greater.

They operate completely differently. And that intercultural understanding is still what's missing most.

That's the core problem. Not the technology. Not the strategy. The understanding.

But there's hope.

Beatrix believes that in 5 years, the German auto industry will be better positioned in China than today.

Not with 50% market share anymore. But as a stable, profitable player in a consolidated market.

Not everyone will make it. Beatrix is blunt: "I don't think Skoda will survive in China."

But for the major players, the cards are good. They just need to play them right.

And most importantly: Finally learn to read China's cards. Because they're still on the table.

That's all for today.

Feel free to reply to this email with your thoughts.

Until next week,
Philipp

PS: If you find value in this newsletter, please share it with someone who might benefit.

After 10 years at Mercedes-Benz, I quit in 2020. In 2024, I started writing "Der Autopreneur". It became Germany's largest newsletter on automotive transformation. Now it’s also available in English.

LinkedIn | About me | German Version

Welcome to Issue #97 of The German Autopreneur.

A smartphone company builds a Porsche clone. Gets laughed at. Then becomes profitable in 19 months.

This took Tesla 10 years.

The company is Xiaomi.

In Germany, one thing caught attention: Their first car looks exactly like a Porsche Taycan. A Chinese company copying Porsche? The pride of German engineering? How could they.

But there's a bigger story here.

Apple spent 10 years on their car project. Invested $10 billion. Then killed it.

Smartphone maker Xiaomi announced their car in 2021. Launched it in March 2024. 19 months later? Profitable. How did the smartphone maker achieve what Apple couldn't?

The answer: Xiaomi copied. Systematically. From day one.

Today we'll look at how strategic copying became one of the most successful auto launches in history.

The Birth of the Xiaomi Playbook

Back to the beginning. 2011.

Xiaomi unveils its first smartphone, the Mi 1. And everyone sees it immediately: This is an iPhone clone.

The catch? It’s half the price. But comparable specs.

Lei Jun founded Xiaomi. He appears on stage in a black turtleneck. Just like Steve Jobs. Chinese media calls him "Leibos." A mix of Lei and Jobs.

Lei Jun vs. Steve Jobs in a black turtleneck sweater (wcc)

Here in Europe, we would have laughed at this. In China, it's strategy.

China treats copying as strategy. The concept even has a name: "Shanzhai."

It means something like "knockoff." But it's more than just copying. It’s fast iteration and clever adaptation of existing ideas.

It's pragmatic. Why reinvent the wheel?

The Xiaomi playbook is born: To learn from the best. Iterate quickly. And make it better.

It worked for smartphones. They copied Apple's design. Adopted Samsung's hardware. Added their own software.

By 2014, Xiaomi is China's largest smartphone manufacturer.

How Could This Work So Fast?

Xiaomi follows two principles at once.

Principle 1: The Fast-Follower Strategy

Apple and Samsung invest billions in R&D. They want to be ahead of the wave. Bring innovations to market first.

Xiaomi does the opposite. They watch what others develop. See what works in the market. Then they jump in.

No risk. Minimal costs. Fast time-to-market.

The principle: Innovation through recombining what already exists.

Principle 2: The "Triathlon" Model

This is how Xiaomi described their early business model:

1. They sell hardware at cost price. To build a massive user base

2. The real money comes from software, services, apps, and subscriptions

3. Sales runs exclusively online and later through their own stores

The numbers? Hardware margins under $10 per device. Service margins are 75%.

Hardware is the door opener. Services are the actual business.

In 2021, they wanted to apply this playbook to cars.

Xiaomi Enters the Car Business

In 2021, Xiaomi faces a decision: Should we build a car?

The board is skeptical at first. A smartphone has 2,000 components. A car has over 30,000.

But Lei Jun sees the parallels. A car is becoming a "smartphone on wheels." Software, connectivity, digital experience. That's exactly Xiaomi's playground.

The decision is made: We're doing it.

Of course they rely on their proven playbook. They just need a benchmark.

For smartphones, it was Apple. For cars, they choose Porsche. Simply because of what Porsche represents.

In March 2024, they launch the SU7.

It looks like a Porsche Taycan. Same silhouette. Similar taillights.

The reactions? Chinese competitors call it "shameless." The press calls it "Porsche Mi." Mi stands for Xiaomi in China.

And in Germany? Nobody takes it seriously. Nice try. But that's not a Porsche. A cheap Chinese copy. Nothing more.

But the strategy works. For two reasons:

1. The car is surprisingly good. Reviews are positive. Customers are satisfied. It's not the cheap knockoff everyone expected

2. The controversy brings attention. Positive or negative doesn't matter. Everyone's talking about Xiaomi. That's marketing you can't buy.

The result: Nearly 90,000 orders in 24 hours. The entire year's production sold out in one day.

The SU7 becomes a success.

Xiaomi SU7 (above) vs. Porsche Taycan

The Second Car

Just a year later, the second car arrives. In June 2025, they launch the YU7.

This time they take the world's best-selling EV as their benchmark: The Tesla Model Y.

But by now, Xiaomi is more than just a copy.

Independent testers compared the YU7 with the Model Y. Their conclusion: "They took the Model Y as a benchmark and beat it in almost every aspect."

• Faster: 0-100 km/h in 3.2 seconds instead of 3.7

• More range: 835 km instead of 593 km

• Faster charging: 10-80% in 15 minutes

• Cheaper: $46,000 instead of $57,000

Xiaomi YU7 (above) vs. Tesla Model Y

The hype is even bigger than for the SU7: 289,000 orders in one hour. That's more cars than Tesla sells in China in an entire quarter.

Only 12 months between the two models. But a huge tech leap.

The first car runs infotainment, navigation, and driver assistance on 4 separate computers. The YU7 combines everything into a single control unit.

At Xiaomi, a car rolls off the line every 76 seconds.

For Tesla, getting to this speed was a hell. Years of struggle. They literally called it "Production Hell." Xiaomi did it with their first car.

Now here's the latest news: Xiaomi just announced their car division is profitable. After 19 months.

Tesla took 10 years. Most Chinese EV startups still aren't profitable today.

The secret?

Xiaomi didn't pioneer. The market was established. They watched what worked. Copied it. Then made it their own.

The Recipe for Success

Two things helped.

1) The New Copy-Paste Strategy

Professor Howard Yu calls it "Shanzhai 2.0."

In the past, Chinese companies simply copied. The products were cheaper. But always worse than the original.

That has changed. Now they follow a 3-stage process:

1. Deconstruct: Analyze and understand the best products

2. Source: Get the best components worldwide

3. Recombine: Put everything together and improve it

The result is no longer a clone. But an independent product. Better in many areas.

2) The Apple Supply Chain

Here's the irony.

Apple invested in China for decades. Built a network of iPhone suppliers. Taught them to produce at the highest level.

These exact suppliers now build Xiaomi's car.

• Luxshare Precision supplies the electrical wiring (they usually build iPhones)

• Lens Technology supplies the screens & sensor glass (they usually make iPhone displays)

• AAC Technologies supplies the sound (they usually make acoustics for Apple devices)

All of them produced for Apple for years.

Then came geopolitical tensions. Apple had to reduce risks. Diversify the supply chain. To India, to Vietnam.

These suppliers lost their biggest customer.

Right then, Xiaomi showed up. They got access to an established network.

Xiaomi inherited the supply chain which Apple built over decades.

My Take

It all starts with copying. The first Xiaomi smartphone looks like an iPhone. The SU7 like a Porsche. The YU7 like a Model Y.

But that's never the end goal. It's the beginning.

Then comes phase 2: They understand. They improve. Make it their own.

And here's where the cultural difference comes in.

In the West, copying has negative connotations. Theft. Uncreative. Embarrassing.

In China, it's pragmatic. Smart. A valid business strategy.

Xiaomi takes Tesla's production technology. Porsche's design. Apple's supply chain. And their own digital ecosystem. And puts it all together into a new product.

The result? Not the sum of the parts. But something more.

A car that fits into their digital ecosystem. That works seamlessly with all their other devices. Probably just like Apple imagined. But they never got there.

The numbers prove Xiaomi right. By the end of 2025, over 60% of their revenue comes from non-smartphone products. The car is becoming the core business.

Xiaomi proves one thing: You don't need to be first. Just take what's there. And build the best package.

The good news for legacy automakers? They can do this too.

The tech exists. The playbook exists. Just take what works. And build.

The hard part isn't the technology. It's the ego. Being willing to learn from others. Even from copycats.

🔗 bl1 | bl2 | ft1 | li1 | nyt1 | yb1 | yt1 | yt2 | yt3 | wcc

That's all for today.

Feel free to reply to this email with your thoughts.

Until next week,
Philipp

PS: If you find value in this newsletter, please share it with someone who might benefit.

After 10 years at Mercedes-Benz, I quit in 2020. In 2024, I started writing "Der Autopreneur". It became Germany's largest newsletter on automotive transformation. Now it’s also available in English.

LinkedIn | About me | German Version

Welcome to Issue #96 of The German Autopreneur.

For over a century, cars were defined by their mechanics. Horsepower. How they felt on the road.

That's changing.

Cars are becoming computers on wheels. Software Defined Vehicles (SDVs). And legacy automakers struggle with this shift. Not because of technology. Because of their own structures.

• "We need 40,000 new software developers"

• "We're launching a new software unit"

You hear this from boardrooms constantly. The assumption: If we hire enough people, we'll crack it.

But here's what Michael Fait told me. He works with automakers worldwide on building SDVs:

"Writing code isn't the problem in automotive software."

If code isn't the problem, what is?

Traditional automakers are trying to build software products using hardware company structures. That's the core issue.

I recently spoke with Michael about this. Today, I'm sharing the key insights from our conversation. Why middle management blocks innovation without meaning to. Why a hardware manager saving 50 cents can cost $100 million. And why the solution isn't more developers. It's different leadership.

100 Computers Must Work in Perfect Sync

First, let's understand the scale.

A modern car isn't one computer. It's a network of roughly 100 small computers.

These are called ECUs (Electronic Control Units). They control everything. Brakes. Airbags. Radio. Even window motors. Functions kept getting added over the years.

Millions of lines of code run on these ECUs. And all 100 computers must communicate in real time. Without errors. Because mistakes can hurt people.

Think of it as a digital orchestra playing in perfect sync at highway speeds.

Michael puts it this way:

"If someone had told me: We're building 100 different software services, deploying them all to the internet, and they need to work together flawlessly in real time... I would have said: That sounds like a pretty stupid idea."

But that's exactly what happens in cars today.

You can't solve this complexity by hiring more developers. You solve it by reorganizing how companies work.

And that's exactly what blocks legacy automakers. Here are the three reasons.

1) The 50-Cent Dilemma (or: Why Hardware Always Wins)

Imagine you're a department head for a control unit. A classic hardware manager. Your performance agreement has one clear goal: reduce costs.

You find a way to make the memory chip slightly smaller. You save 50 cents per car. With 2 million cars, that's $1 million in savings. You get your bonus. Get promoted. You did your job.

Fast forward three years.

The car is on the market. The software team wants to roll out a new feature via over-the-air update. A feature customers would pay for.

But it doesn't work. Why?

The memory chip is full. Because the company chose the cheaper chip.

That $1 million saving today blocks $100 million in revenue tomorrow.

Here's the trap: Legacy automakers optimize everything for SOP (Start of Production). Hardware gets sized for today's functions. Not tomorrow's.

The core issue? Traditional automakers still work toward SOP. The moment when the product is finished.

But software is never finished.

When building a car today, automakers must think years ahead. They need extra computing power for tomorrow's features. Features that haven't been invented yet.

2) Middle Management Blocks Transformation

The second problem Michael calls the "Frozen Middle."

Here's how it works.

You're a middle manager at a legacy automaker. If the next big software project fails, you'll probably keep your job. If it succeeds, you won't become a millionaire.

So why take the risk?

There's no real incentive to push for radical change. Michael describes the pattern: Someone sits in meetings and keeps saying "That won't work because..." They block every proposal for three years straight. By then, they've transferred to another department or retired.

The transformation never happens. But they kept their job.

This isn't malicious. It's rational behavior in a broken system.

Taking risks? You might lose. Making no mistakes? You get rewarded.

The system was built for a different era. When "being ready for SOP" was the goal. Not continuous improvement.

3) "You Don't Even Know What Good Looks Like"

Here's what Michael means.

Decision-makers often don't understand what modern software development looks like. They come from the hardware world.

The problem: These managers are supposed to build great software products. But they don't know what great looks like. Because they've never seen it.

This has serious consequences for the teams.

Many developers at legacy automakers still work with outdated tools. Proprietary systems from another era.

Let me show you:

At software companies, code changes get tested automatically. The system gives instant feedback. Your code works or it breaks something. You know within seconds.

A person (or committee) must read and approve 500 lines of code. Manually. Feedback takes days or weeks.

This isn't just inefficient. Nobody can focus after reading 50 lines. It's also a massive recruiting problem.

Great software developers won't work with outdated methods. They want modern environments and tools.

Michael puts it this way: "Automotive could be the most attractive employer in the world. Writing code that makes a car drive autonomously? Much more exciting than e-commerce."

But top talent won't come without the right environment. And only leaders who understand software can create that environment.

We Still Have Time (But Not Much Longer)

Here's the good news.

EV adoption is slow in Europe and the US. That buys legacy automakers time.

Why? Because customers expect software in EVs. Like Tesla showed them. With combustion engines, they're still more forgiving.

But the buffer is shrinking fast.

China tells a different story. Customers there buy cars like consumer electronics. Like smartphones.

They expect digital features. They expect software. Legacy brands are increasingly seen as yesterday's technology.

What I learned from Michael

The biggest problem isn't missing software developers. It's not missing technology. The problem is 100% organizational and cultural.

Legacy automakers have organizations built for a hardware world. For predictable cycles. For "being ready for SOP." But software needs iterative development. Software is never finished.

This is a fundamental shift. Legacy automakers still operate like hardware companies.

Chinese newcomers have an advantage here. They start fresh. They build their organizations for the SDV era from day one.

Legacy automakers face a tougher challenge. They must transform while the business keeps running. Like rebuilding a ship at sea.

Here's what needs to change:

1. Change incentives: Hardware managers shouldn't get bonuses for cost cuts that kill future software capability

2. Redefine SOP: In software, Start of Production isn't the end. It's the beginning

3. Open career paths: Let top developers advance without becoming managers

Software now defines how cars drive, brake, and feel. It's time it also defines how we work.

PS: Want to go deeper? Download the free SDV Pulse Report from Michael and Thoughtworks here.

That's all for today.

Feel free to reply to this email with your thoughts.

Until next week,
Philipp

PS: If you find value in this newsletter, please share it with someone who might benefit.

After 10 years at Mercedes-Benz, I quit in 2020. In 2024, I started writing "Der Autopreneur". It became Germany's largest newsletter on automotive transformation. Now it’s also available in English.

LinkedIn | About me | German Version

Welcome to Issue #95 of The German Autopreneur.

Former Stellantis CEO Carlos Tavares just made a prediction: Only 5-6 major automakers will survive the next 10-15 years.

His survivor list? Toyota, Hyundai, BYD, Geely. Maybe 1-2 more.Volkswagen, Mercedes, BMW? Missing.

For Tavares, VW symbolizes "Europe's inability to change.”

And he's not alone.

A leading German economist just warned that VW, Mercedes, and BMW won't make it to 2030. Not in their current form, at least.

Sounds dramatic. But worth taking seriously.

So today, let's look at what they're really saying. Are VW, Mercedes, and BMW actually at risk? What could happen to them? And what are the possible scenarios?

What happens to these companies?

Before we panic, let's be clear about something.

We're not talking about bankruptcies.

Volkswagen, Mercedes, and BMW are too big to fail. The names too valuable. Too critical to the economy.

This is about something else. A fundamental transformation.

Nokia still exists today. But it has nothing to do with the mobile phone giant it once was.

That's the kind of change we're talking about. The brand survives. But the core gets replaced.

Three things shift: Ownership. Technology control. Where the profits go.

Two recent examples show how this happens:

What happened to Stellantis:

When Carlos Tavares ran Stellantis, he made a deal with Chinese manufacturer Leapmotor. 20% stake. In return, Stellantis would sell their cars in Europe.

His honest assessment: They'll eventually try to take over Stellantis.

The trap is obvious: You help a competitor enter your market. Give them your distribution network. Your customer relationships. And one day, they might be bigger than you.

What happened to Volvo:

Geely bought Volvo years ago. An established European brand with loyal customers. The brand stayed. But technology and strategy? Controlled from China now.

Why this works for Chinese companies: They skip the hardest part of entering Europe. Building trust takes decades. Creating dealer networks costs billions. Buying an existing brand? Much faster.

So the question isn't: Will these brands disappear?

The question is: Who will own them in 2035? Who controls the technology? Where do the profits go?

Why now?

These warnings aren't random. German automakers face a perfect storm. Two things are hitting at once:

1) Transformation costs billions

New EV platforms. Battery factories. Software development.

2) The money source is drying up

For years, China funded this transformation. High margins. Strong sales. Steady profits.

Not anymore.

Local Chinese brands now hold nearly 70% of China's market. Five years ago, it was just over a third.

Volkswagen, Mercedes, and BMW have lost about half their China market share since 2021.

German automakers are losing market share in China (Bloomberg)

Here's the problem: China was their most important market. And they can't replace it. The US is going America First. Europe's market is flat.

The result: BMW, Mercedes, and VW made 46% less profit in the first nine months of 2025 compared to 2024.

They need billions for transformation. But the money is disappearing exactly when they need it most.

That's why scenarios that seemed impossible five years ago are now on the table.

4 possible scenarios for 2035

If this trend continues, four scenarios emerge.

None involves bankruptcy. But each means losing something different: ownership, product control, volume, or the brand itself.

Scenario 1: Chinese Ownership

German brands stay visible globally. But control shifts to China.

Chinese investors already own nearly 20% of Mercedes. BAIC holds 9.98%. Li Shufu of Geely holds 9.69%.

The stakes keep growing.

Eventually, the balance tips. Strategic decisions move from Stuttgart and Wolfsburg to Hangzhou and Beijing.

German sites focus on design and final assembly for Europe. The brands survive. But profits and technology control flow to China.

Volvo shows how this works. The brand feels Swedish. But Geely controls the technology and strategy. Most buyers never notice the difference.

MG went the same route with SAIC.

Scenario 2: Brand Licensing

This happens if Europe protects itself with trade barriers.

High tariffs on Chinese cars. Strict regulations. A fortress strategy.

In this scenario, European manufacturers keep building cars at home. Protected markets let them survive in Europe and the US.

But in China and emerging markets? Different story. They can't compete on cost there. So they exit manufacturing entirely.

What they keep: Their brand names.

Audi in China shows how this starts. They launched a sub-brand: "AUDI" in capital letters. No four rings.

SAIC develops almost everything. Platform, batteries, motors, software. Audi provides design and the brand name.

Right now, Audi pays SAIC licensing fees for the technology. And loses massive margin.

The next step: SAIC flips it.

They buy the Audi brand rights for China. Develop the cars. Build them. Sell them. Audi just collects licensing fees.

This could spread fast. India. Southeast Asia. South America. Anywhere legacy manufacturers can't compete on cost.

They become brand management companies. Revenue from licensing. But no cars, no customers, no control.

Economically rational. Strategically, a surrender.

Scenario 3: Luxury Only

Manufacturers withdraw from the volume market. No more fighting BYD for the masses.

Full focus on luxury. Where heritage and status still matter.

Volkswagen Group sells off brands. Shrinks. Keeps only the premium core.

Production drops dramatically. But margins stay high.

This only works under two conditions:

The software transformation succeeds. AND they stay technologically competitive with Tesla and Chinese brands.

The challenge? Low volume means high costs per unit. Harder to fund the R&D needed to stay competitive.

And look at today. Porsche and Mercedes both represent premium. Both are struggling. Premium alone doesn't work if the product falls short.

Scenario 4: Contract Manufacturing

Brands get sold off. The corporation becomes a contract manufacturer.

No longer own cars. Just building for others.

Think Foxconn for Apple. Build the hardware. But the brand and customer relationship belong to someone else.

Customers would be mobility services like Waymo or Baidu. Or tech companies that don't want factories.

They focus on software as the differentiator. Manufacturing? Just a commodity to outsource.

The upside: Factories and production jobs stay. For now. The downside: Value creation and margins disappear.

What's left: A manufacturing operation. Efficient production. Nothing more.

My Take

The good news?

There's a 5th scenario. One that prevents all the others.

The transformation simply succeeds.

German automakers still have the ingredients for success:

• Brands. Recognized and valued worldwide.

• Capital. VW ranks in the global top 10 for R&D spending. Playing in the same league as US Big Tech.

• Talent. German engineers, designers, and developers remain world-class.

The foundation is strong. The resources are there.

What needs to change is mindset. How these companies work. How they make decisions.

From industrial corporations to software-first companies.

And most importantly: Stay humble. Stop fighting China. Learn from them instead. They learned from German engineering for decades.

Tavares warns about the danger. But he also says something else: Technological leadership isn't permanent.

China built its lead in just a few years. It could lose that lead just as fast. If European manufacturers move faster on the next wave of innovation.

The question isn't whether the resources exist.

The question is whether change can happen fast enough.

This 5th scenario is real.

But here's what's certain: German automakers won't look the same in 10 years. Whether transformation succeeds or fails.

The only question left: Will they shape the change? Or let it happen to them?

🔗 ab1 | bl1 | bl2 | bl3 | en1 | ft1 | hb1 | sd1 | wx1 | yt1

That's all for today.

Feel free to reply to this email with your thoughts.

Until next week,
Philipp

PS: If you find value in this newsletter, please share it with someone who might benefit.

After 10 years at Mercedes-Benz, I quit in 2020. In 2024, I started writing "Der Autopreneur". It became Germany's largest newsletter on automotive transformation. Now it’s also available in English.

LinkedIn | About me | German Version

Welcome to Issue #94 of The German Autopreneur.

This story starts in 2018. In a Shanghai café.

Starbucks dominated China's coffee market back then. Over 40% market share. Stores packed. Success seemed unstoppable.

Then a new competitor flipped everything in just 5 years. Market share crashed to 14%.

In the same period, German automakers’ market share in China dropped from 24% to 15%.

The story is repeating itself in automotive.

Today I'll show you the strategic mistake both made, how the patterns mirror each other, and why responding is nearly impossible.

Starbucks Conquers China

To understand what happened, we need to go back in time.

In 1999, Starbucks did something many thought impossible. They brought expensive coffee to China. To a 4,000-year-old tea culture.

Most Chinese people had never tried coffee. When they did, they found it bitter and undrinkable.

But Starbucks had a plan. They weren't selling a drink. They were selling an experience.

Why did this work? China was going through economic transformation. A new middle class was emerging. Millions of families suddenly had money to spend.

They wanted to show they had made it. Western brands offered exactly that.

Starbucks understood this perfectly.

They sold coffee for 30 yuan. About $5. In a country where average monthly salary was below $100.

Being seen with a Starbucks cup meant you had made it.

But it was about more than price.

Starbucks brought a concept China didn't have. The "Third Place." A social space between home and office. Large stores. Comfortable seats. Free WiFi.

For young professionals, Starbucks became living room, office, and status symbol all at once.

The strategy worked perfectly.

2017 was the peak. Starbucks opened the Shanghai Reserve Roastery. 2,700 square meters. The world's largest Starbucks.

They controlled over 40% of China's coffee shop market. They were opening a new store every 15 hours.

They were unbeatable. Or were they?

2018: The Attack Begins

A small café opened in Beijing in 2018. Luckin Coffee. No cozy corners. No ambiance. Just a counter, 1-2 baristas, and a QR code on the wall.

The founder wasn’t from the food industry. She came from tech.

Specifically: UCar. China's answer to Uber. She'd seen how apps could flip entire industries. She saw an opportunity.

Starbucks charged 30 yuan for a latte that cost 8 yuan to make. What if you offered the same coffee for 15 yuan and still made money?

Luckin did everything differently.

They didn't see themselves as a coffee chain. They saw themselves as a tech company selling coffee.

You couldn't pay with cash. You couldn't order at the counter. Everything went through the app. Only through the app.

This wasn't a gimmick. It was strategy.

Every order gave Luckin data. Customer preferences. Peak times. Purchase patterns. They saw exactly what worked. They could predict demand. Adjust prices dynamically. Make personalized offers.

And it was fast. Open app, order, wait 3 minutes, pick up. No lines. No small talk.

Young Chinese grew up with WeChat Pay and Alipay. For them, this felt like the future.

Starbucks suddenly seemed outdated.

But here's what really changed the game.

Based on millions of orders, Luckin developed new drinks specifically for Chinese taste. Not Western coffee adapted for China. Original Chinese coffee products.

Luckin understood local needs better. They moved faster.

And the expansion was brutal.

From January 2018 to March 2019, Luckin opened 5.2 stores per day. Within 18 months, they had more locations than Starbucks in all of China.

Classic disruptor story. They didn't try to beat Starbucks at their own game. They invented a completely new game.

Starbucks lost market share month after month. Especially young customers switched to Luckin.

The Impossible Dilemma

What could Starbucks do?

Option 1: Lower prices.

That would destroy the premium brand. Starbucks had spent 18 years teaching Chinese customers that coffee is an experience. That 30 yuan is justified.

Suddenly saying "actually, not really" would undermine everything.

Option 2: Stick with premium.

But what if premium suddenly becomes irrelevant? What if customers aren't willing to pay for "experience" anymore because convenience matters more?

And what if customers suddenly define premium completely differently?

Option 3: Both at once.

Keep the premium stores. But give discounts in parallel to keep price-conscious customers.

The problem: It’s confusing. Is it premium or cheap? The brand loses clarity.

There's no good way out. Classic lose-lose.

Starbucks still responded.

In 2018, they partnered with Alibaba. For delivery service, digital payment, and access to 500 million users.

A desperate attempt to buy the digital relevance they hadn't built themselves.

But it wasn't enough.

In 2023, the price war escalated. Luckin cut prices to 9.9 yuan. About $1.40 for a latte.

Mid-2025, Starbucks gave up. For the first time in 25 years in China, they introduced significant price cuts.

But this strategy backfired.

On Weibo, the hashtag "Starbucks" went viral. People mocked how desperate the brand was acting.

The discounts undermined the premium story. Starbucks was suddenly no longer a status symbol. Just another coffee chain.

The result: Within 5 years, market share fell from >40% to 14%.

In November 2025, the final step: They sold 60% of their China business to a Chinese investor.

From number one to barely relevant. In only 5 years.

The Same Story in Automotive

The parallel is striking.

In 1984, Volkswagen became one of the first Western automakers to form a joint venture in China.

Just like Starbucks, VW didn't just sell a product. They sold an image. German Engineering. Quality. Prestige.

Driving a German car was a status symbol.

For almost 40 years, VW was number one in China. The dominant foreign brand.

China became their most important market. 40% of all VWs were sold there. Profits from China financed everything else.

Then came the disruption.

The new players are called Li Auto, Xiaomi, or BYD. They come from tech.

Just like Luckin, they're redefining what matters. They say: The most important part of a car is no longer the engine or suspension. It's the software.

For young Chinese buyers, it doesn't matter how well a car handles curves. It matters how well it integrates into digital life.

They want a smartphone on wheels. With AI assistants. Seamless WeChat integration. Software updates that make the car better. Advanced driver assistance systems.

And just like Luckin, Chinese brands understand local needs better. They develop features Chinese customers actually want.

They're data-driven. They're closer to customers. They move faster.

In 2023, it happened. BYD overtook VW in China. Just like Luckin overtook Starbucks.

And German OEMs face the same dilemma.

Should they give discounts? Or stick with premium?

They’ve tried both:

• VW's China chief said in 2023: "We won't participate in the discount battle." The new goal: Remain the largest international automaker in China. Not largest. Largest international. Accepting to become a niche player.

• In 2024, Mercedes tried discounts. The EQE got 40% off. The result? In October 2024, not a single new EQE SUV was registered. The discount didn't signal "great deal." It confirmed the product wasn't as good as local competition.

Both strategies failed.

And another parallel. Like Starbucks with Alibaba, German automakers are partnering with Chinese companies.

VW formed a strategic alliance with Xpeng to buy the software they couldn't build themselves.

But it's too late. German automaker market share in China fell from 24% to 15%. In just 4 years.

My Take

The common mistake is arrogance.

Starbucks and German OEMs overestimated their own success. They underestimated local competition. They thought premium alone would be enough.

Starbucks thought the Third Place experience was unbeatable. German manufacturers thought their engineering heritage was unbeatable. What works in Germany works everywhere.

Both overlooked how quickly a local challenger can turn the tables. With 3 tools:

1. Aggressive pricing through cost advantages

2. Products matching local taste

3. Digital technology as core of the product, not as add-on

Luckin isn’t a coffee shop with an app. It’s a tech platform selling coffee.

Nio, Xiaomi and others aren't automakers with software. They're software companies building cars.

That's the fundamental difference.

And the dilemma is real. There's no good answer.

Lowering prices kills the brand. Staying premium kills relevance. Doing both doesn't work.

Starbucks today stands at 14%. They've sold most of their China business.

German automakers stand at 15%. They're desperately investing in local partnerships. Trying to save what can be saved.

But this pattern applies far beyond Germany. Any legacy manufacturer faces the same two fatal errors:

1. Believing brand heritage alone justifies higher prices when the product no longer leads.

2. Underestimating software as the foundation of the product, not just a feature.

Who would have thought software could disrupt the coffee industry? But that's exactly what happened.

Software can disrupt any industry. Including automotive.

Legacy automakers making these same mistakes will end up like Starbucks: Once dominant, now struggling to survive.

🔗 yt | bl | re | ft

That's all for today.

Feel free to reply to this email with your thoughts.

Until next week,
— Philipp

PS: If you find value in this newsletter, please share it with someone who might benefit. Your support helps me continue my independent work for the automotive industry.

LinkedIn | About me | German Version

Welcome to Issue #92 of The German Autopreneur.

In 2007, Apple launched the iPhone. For $499.

Too expensive for a phone, everyone thought.

Today we pay €1,200 for an iPhone without hesitation.

Apple shifted our value perception. They taught us what a smartphone is worth.

Now the opposite is happening with cars. China is shifting value perception downward.

Chinese cars offer the same features for half the price. Western brands suddenly look overpriced.

Today we'll look at how China is destroying the premium positioning of Western automakers. A simple model explains everything. And shows why legacy manufacturers now seem too expensive.

Every Business Strategy Rests on 3 Lines

One model explains almost every business strategy. The Value Stick.

Imagine 3 horizontal lines:

• Top: Willingness to Pay - What customers think it's worth

• Middle: Price - What you charge

• Bottom: Costs - What it costs to make

Between these lines sit 2 gaps:

• Value Gap (value minus price): Bigger gap = more attractive to customers

• Profit Gap (price minus costs): Bigger gap = more profit

The Value Stick shows the two strategic levers: increasing value or reducing costs (Harvard Business School)

Companies can win in 2 ways:

Option 1: Lower costs. Through scale, efficiency, integration. Then cut prices while staying profitable. This expands the value gap.

IKEA did this. Flat-pack furniture you assemble yourself. Much cheaper. Still profitable.

Option 2: Increase perceived value. Through branding, design, service. Then charge higher prices. This expands the profit gap.

Apple did this. Premium design, strong brand, closed ecosystem. Customers gladly pay more.

Both strategies work. The question: Who does what better?

German Automakers Owned Premium for Decades

Let’s take German automakers as an example.

They perfected the value strategy for decades.

They invested heavily in their brands. In the myth of German engineering, quality, prestige.

The result? Strong brands command higher prices.

A Mercedes costs more than a Toyota. Not just because of technology. But because of what Mercedes represents.

German manufacturers justified their premium through 2 pillars:

• Superior product: Better engines, precise craftsmanship, premium materials

• Strong brand: Status, heritage, emotional connection

These pillars reinforced each other. Technical excellence strengthened the brand. And the strong brand justified higher prices.

This worked for decades. Premium automakers charged more. Customers gladly paid.

Perceived value exceeded the price. The value gap delivered solid margins.

China Is Now Using Its Playbook for Cars

Then China entered with a different approach.

The same playbook that worked in other industries.

They focus on cost leadership. Pushing costs to levels Western manufacturers can't match.

How?

1. Battery integration: BYD makes 90% of its batteries in-house. Cuts costs by 50%.

2. Development speed: 1.3 years per model vs. 4 years for traditional automakers. Less time = lower costs.

3. Supply chain clusters: In Shanghai, manufacturers get all components within 4 hours. This minimizes logistics costs. And creates speed.

4. Scale advantages: China sold 11.5 million EVs in 2024. Europe sold less than 3 million. Higher volume = lower unit costs.

The result? Chinese EVs cost 20-50% less than comparable European models.

And China passes these savings to customers.

Lower prices. Bigger value gap.

Chinese Cars Are No Longer Worse

The equation used to be simple. Chinese cars were cheaper but worse.

Not anymore.

Chinese EVs now match European models on every metric. Top safety ratings. Advanced driver assistance. Premium materials. Over-the-air updates. Luxury features that cost thousands extra at traditional brands.

In some areas, Chinese cars are better. Software. Digital features. Range per euro.

Example: The Xiaomi SU7 offers more digital features than a Porsche Taycan. At one-quarter the price.

Scott Galloway calls this the "good enough" strategy. Deliver 80% of the premium product at 50% of the price.

That's what Xiaomi does with cars. They deliver most of what makes a Porsche special. For less than half the cost.

For many customers, that's enough.

How Value Perception Shifts

Here's where psychology takes over.

New competitors offer good enough features at much lower prices.

At that moment, something shifts in customers' minds.

The price anchor moves down. Customers expect lower prices. Their willingness to pay drops.

The old premium suddenly looks overpriced. Customers question what they're paying for.

The story used to be clear: European cars cost more because they're better. Better technology, quality, craftsmanship.

This narrative is collapsing.

Features are comparable. Technology is on par. Sometimes even better.

What's left? The brand. But does that alone justify 50% more?

China Is Now Building Brand Too

Now comes the real threat.

Western companies always excelled at branding. They built strong brands to charge premium prices.

China always excelled at cost reduction. They replicated Western products at a fraction of the cost.

They won on price. But their brands stayed weak.

This is changing.

Through technology leadership, Chinese manufacturers are building brand value for the first time.

They might soon have both. Cost leadership AND strong brands.

German brands have strong branding but high costs. Chinese brands are efficient and are now building their brands (own illustration)

How European Automakers Are Responding

European automakers have recognized the problem. China combines low costs with growing brand value.

They're responding in 3 ways:

1) Raising perceived value

They lost their technology edge. Now they're investing to catch up. Especially in software.

The goal: Regain technical superiority.

The challenge: It's a race. While they catch up, China keeps advancing.

2) Cutting costs

Job cuts. Savings programs. Plant closures. We see it weekly.

But structural disadvantages remain. European energy costs are twice China's. Labor costs 4x higher. Development takes much longer.

They can't match China's cost structure.

3) Focusing on the premium segment

Focus on the highest end. Protect the brand built over decades.

The risk? They lose volume. Lose economies of scale. And lose an entire generation of buyers.

My Take

The Value Stick model shows what's happening.

For decades, European brands rested on 2 pillars: Superior technology AND strong brand.

Now one pillar has collapsed.

Tech leadership is gone. In some areas, Chinese brands are better.

Only the brand remains. But that alone can't justify 50% higher prices.

China shifted the price anchor down. And the entire value perception with it.

The real threat: They're building brand value through technology leadership. For the first time, they could have both cost advantage and strong brands.

Traditional automakers must fight on 2 fronts. Cut costs. And defend perceived value.

What doesn't work: High costs with no real premium story.

And what premium means? That’s no longer defined within Europe.

That's all for today.

Feel free to reply to this email with your thoughts.

All the best,
Philipp

PS: If you find value in this newsletter, please share it with someone who might benefit. Your support helps me continue my independent work for the automotive industry.

LinkedIn | About me | German Version

Welcome to Issue #91 of The German Autopreneur.

German automakers have 2 to 6 weeks of chips left. Then supplies run out. Then production stops.

The German Automotive Association (VDA) is warning about shutdowns. Not someday. Now. Within weeks.

The reason? A Dutch chipmaker named Nexperia.

But Nexperia is just a symptom. The real problem? Europe trapped between two superpowers.

The US and China are fighting for global dominance. And Europe? Caught in the middle. Dependent on both. Pressured by both.

Today we'll look at how this situation happened. And what it means for the automotive industry.

Why One Company Can Stop European Auto Production

Nexperia is a Dutch chipmaker. Not many know the name. But they’re absolutely essential.

They produce simple semiconductors:

• Transistors and diodes

• For airbags, LED controls, sensors

• Hundreds in every car

The numbers tell the story:

Nexperia controls 40% of the global market for these chips. And 55% of their revenue comes from automotive.

Technically, the chips are simple. But without them, nothing works.

How the Crisis Escalated

The real problem isn't Nexperia itself. It's the Chinese parent company Wingtech. And Washington’s determination to cut that link.

Here's what happened:

December 2024: The US puts Wingtech on its sanctions list. The reason? National security. Washington claims sensitive semiconductor technology could flow to China.

September 2025: The US delivers an ultimatum to the Netherlands. Remove Nexperia's CEO or face sanctions.

The target: Zhang Xuezheng. Founder of Wingtech. CEO of Nexperia. Washington sees this dual role as a security threat.

If he stays, Nexperia faces sanctions. Game over.

September 30: The Dutch government takes control of Nexperia. Zhang is removed by court order. Official reason: "Governance failures" and "improper transfer of resources to foreign entities.”

This is a huge step. A government removes the CEO of a private company. Under pressure from another country.

October 4: China retaliates. Beijing blocks all Nexperia exports from China. Immediate. Calculated. Devastating.

The impact? Without these chips, car production stops. Every vehicle needs hundreds of them. And alternatives take months to certify.

Here's the irony: These chips are designed in the Netherlands. Manufactured in Hamburg. Then they travel to China for testing and packaging. 80% return to Europe as finished products.

This is modern supply chain optimization. Maximum efficiency. But also extremely vulnerable.

And now this chain is broken.

The Auto Industry in Panic Mode

The consequences:

• VW has set up a task force. Already considering short-time work for tens of thousands of employees

• BMW and Mercedes are making emergency plans with suppliers

• Bosch is also affected

The VDA released strong numbers:

• In 3 to 5 days, 4 out of 7 major suppliers face delivery problems

• In 5 to 10 days, 5 out of 6 automakers can't fulfill customer orders

Stockpiles are running low. An insider says: "We're talking about hours or days at most."

Yes, other suppliers exist. Infineon. STMicroelectronics. But ramping up takes time. And every new component needs certification. Months of testing. Months automakers don't have.

Europe Trapped Between Superpowers

The Nexperia crisis exposes Europe's impossible position. Trapped between the US and China.

This goes way beyond automotive. This is about the new world order.

China keeps getting stronger. The US wants to stop that. By any means necessary.

Meanwhile, American dominance is slipping. Every space the US leaves, China fills.

And they're fighting this war with economic weapons. Technology restrictions. Export controls. Resources. Trade barriers.

The US moved first. Restricted chip exports to China. China hit back with rare earth controls.

Every time they fight, Europe bleeds.

Europe's Impossible Choice

Europe has three options. None of them are good.

Option 1: Side with the US

Align with America. Accept their technology restrictions. Follow their lead on China.

The problem? Trump's America doesn't treat Europe like an ally anymore. It treats Europe like a competitor.

High tariffs on European goods. Demands for military spending. Policy that changes by the day.

Meanwhile, Europe depends on China economically. China is Germany's largest trading partner. Bigger than the US.

Side with America? China retaliates. Rare earths. Critical minerals. Chips. Any leverage they have.

Option 2: Side with China

Welcome Chinese investment. Deepen economic ties. Ignore US objections.

This isn't an option either.

Europe relies on the US just as much. For defense. For technology. For AI. For energy since Russian gas stopped.

Option 3: Stay Neutral

Most emerging markets follow this playbook. Keep both sides happy. Trade with both. Commit to neither.

For Europe, this is the only reasonable path. Pick a side and you pick a fight. Stay neutral and you might survive.

But neutrality isn't easy. It requires constant balancing. Give a little here. Take a little there. Never fully commit to either side.

What Europe Must Do Now

The solutions break down into 3 steps:

Short-term: De-escalation

The Dutch and Chinese economic ministers are talking. No breakthrough yet. Germany is coordinating with automakers. The goal: A diplomatic solution. And fast.

Medium-term: Diversify Supply Chains

The lesson: Reduce risk without cutting ties. Europe can't abandon China. But it can't depend on China for everything either.

That means spreading production across regions. Alternative suppliers. Backup manufacturing sites. Redundancy for critical steps.

Yes, it costs more. But the alternative costs everything.

Long-term: Build Independence

Europe needs its own supply of critical materials. Batteries. Chips. Rare earths. Defense equipment. Energy.

But this doesn't happen overnight. We're talking decades.

My Take

The Nexperia crisis isn't about automotive. It isn't about Europe. But European automakers are paying the price anyway.

Imagine China doing this in reverse. Removing a Dutch CEO in Shanghai. Seizing company control. Under pressure from Beijing.

Unthinkable? That's exactly what just happened. Just with the US doing it.

This is war. Not with tanks. With technology. With semiconductors. With resources. With economic leverage.

Another warning. In a long series Europe keeps ignoring.

The only option is the hard middle path. The path emerging markets navigate every day. To keep the balance. To stay neutral.

And at the same time: Build Independence.

The alternative? More of this. More crises. More collateral damage. Every time the giants fight, Europe bleeds.

🔗 ap1 | ap2 | au1 | au2 | ca1 | ca2 | el1 | fa1 | ft1 | hb1 | hb2 | hb3 | hb4 | he1 | he2 | ma1 | ni1 | ni2 | nyt1 | re1 | re2 | re3 | re4 | re5 | re6 | wi1 | wi2 | wi3

That's all for today.

Feel free to reply to this email with your thoughts.

Until next week,
— Philipp

PS: If you find value in this newsletter, please share it with someone who might benefit. Your support helps me continue my independent work for the automotive industry.

LinkedIn | About me | German Version