Electric cars were once the weak point of Germany’s auto industry. Now, demand is rising so quickly that it has created a different problem. Volkswagen, Mercedes-Benz and BMW are selling a growing share of battery-powered models, but EVs still tend to generate lower margins than combustion-engine cars.

At the same time, factories and supply chains cannot always keep up with orders. That leaves manufacturers caught between protecting profits and losing customers to faster-moving rivals.

EV Demand Has Accelerated

Electric vehicles accounted for about 26% of sales across Germany’s three largest carmakers in the third quarter of 2026. A year earlier, the figure was around 19.5%. The wider market shows the same direction. Battery-electric registrations in Germany rose by 58.1% during the first nine months of 2026 compared with the same period a year earlier.

Across the EU, BEVs reached a 22.7% share of new registrations, up sharply from 16.1% in 2025. For manufacturers that spent years trying to convince drivers to switch, this is an important breakthrough.

More EVs Can Mean Lower Margins

The problem is that an electric car is still often less profitable to build. Battery packs remain expensive, while companies are spending heavily on new platforms, software, factories and supply chains.

Volkswagen finance chief Arno Antlitz has acknowledged that stronger EV sales are putting pressure on results. The group also faces falling demand for combustion models in Europe and China, removing some of the higher-margin sales that previously helped finance the transition.

Mercedes and Volkswagen do not expect electric and combustion vehicles to reach comparable profitability until around 2030.

Factories Cannot Always Keep Up

Demand has shifted faster than production planning. Some customers now face waits of up to a year for popular electric models. That creates a dangerous situation for German brands. If buyers cannot get the car they want quickly enough, they may turn to competitors, particularly Chinese manufacturers with broad EV lineups and aggressive pricing. Increasing production is not simple either.

Closing combustion-engine lines earlier than expected can trigger write-offs, while converting factories requires large upfront spending.

China Adds More Pressure

Competition from China is intensifying at the same time. German manufacturers have already been losing market share there as local buyers increasingly choose domestic brands. Mercedes cut its 2026 profit guidance in October, while BMW lowered its automotive margin forecast again in November.

BMW now expects its automotive EBIT margin for the year to sit between -0.5% and 0.5%, partly because of restructuring costs and weaker demand in China. Mercedes expects an adjusted car margin of only 2%–3%.

Jobs Are Already Being Lost

The pressure is also reaching employment. Germany’s automotive workforce fell below 700,000 in the first half of 2026, its lowest level since 2005. Around 42,300 fewer people worked in the sector than a year earlier. Electric cars require different components and fewer mechanical parts, while companies are simultaneously cutting costs and restructuring operations.

The transition is therefore changing not only what manufacturers sell, but also how many people they employ and what skills factories need.

The Industry Faces A Paradox

German automakers once worried that consumers were not buying enough EVs. Now the opposite problem is emerging. Demand is growing, but the vehicles customers increasingly want are still less profitable than the models they are replacing. That creates a difficult transition period in which stronger EV sales can actually weaken short-term earnings. The long-term direction looks clearer: electric cars are taking a larger share of the market. The challenge for Germany’s carmakers is turning that demand into sustainable profits before competitors capture too much of the transition.