The auto industry wants to save in the USA what is lost in China. Oversized models and combustion engines are intended to drive up the collapsed margins. This poses many risks.
BMW X7, Audi Q7, Mercedes GLS: growth hopes in the USA. Photo: PR, HB/Gemini
German car manufacturers are relying on the USA because business in China is weakening and profits are falling. In the US, customers buy large, expensive cars; Chinese competition is kept away by tariffs and software bans.
More than three quarters of the cars sold in the USA are combustion engines; at BMW it is over 80 percent of sales. SUVs and pickups bring higher margins, which is why BMW is planning an even larger SUV specifically for the US market.
BMW has invested a total of $16 billion in Spartanburg, VW has invested over $4.3 billion in Chattanooga. Nevertheless, the share of German brands is only 7.8 percent and has hardly grown in a ten-year comparison. Audi sold 16 percent fewer cars in the first nine months and Porsche sold 14 percent fewer. The overall market shrank by seven percent between 2016 and 2025.
Punitive tariffs also reduce profits at BMW and Mercedes, which produce in the USA. Audi boss Döllner is therefore negotiating customs relief with the US government, according to Handelsblatt information.
New York, Düsseldorf. His appearance alongside Donald Trump brought Gernot Döllner a lot of criticism at home. “We believe in the American market,” shouted the Audi boss at the election campaign event in the US state of Georgia to the cheers of Trump supporters – and announced the construction of a plant. The framework is debatable. But his words apply to the entire German auto industry.
The USA is the most important hope market for German manufacturers. Americans buy large and expensive cars: More than four out of five new cars are SUVs, pick-ups or vans; on average, buyers paid more than $50,000 in September. In addition, the Germans there are spared from Chinese competition because punitive tariffs and a ban on Chinese vehicle software will keep manufacturers away from the People's Republic from the 2027 model year.
“We see the region as an important market for profitable growth,” said Volkswagen CEO Oliver Blume recently. Mercedes-Benz boss Ola Källenius explains: “The USA remains extremely important for us and we will continue to invest in this market.” And the new BMW boss Milan Nedeljkovic even chose the company's largest plant in Spartanburg as the backdrop for his first big appearance.
Audi sold 16 percent fewer cars in the USA through September compared to the previous year.
But behind the enthusiasm there is also need. Because US business is intended to compensate for what is disappearing elsewhere - especially in China. BMW, Mercedes and VW had to warn of lower profits this year due to weak sales in the Far East. “Manufacturers cannot ignore the USA if they want margins to rise again,” says Simon Schnurrer, partner and head of the car business at the consultancy Oliver Wyman.
However, this requires customs relief, which Audi boss Döllner is currently negotiating with the US government, according to information from Handelsblatt. Even BMW and Mercedes, which sell and build more cars there, earn less because of the tariffs.
However, in order for growth to be successful, German car bosses have to rethink their strategies, because the overall market is not growing: In the first three quarters, new registrations in the USA fell by two percent compared to the previous year. Between 2016 and 2025, the market even shrank by seven percent. This is shown by an exclusive analysis by Handelsblatt of data from the service provider Marklines.
German manufacturers have so far not succeeded in taking market share from their competitors: the growth of BMW and Mercedes does not compensate for the losses of VW, Audi and Porsche; together, the share of German brands has fallen. Their US market share is currently 7.8 percent.
One reason for the decline is the tariffs, another is the previous year: before the tariffs came into force in spring 2025, manufacturers had sold a particularly large number of cars in the USA, and the basis for comparison is correspondingly high. But even in a ten-year comparison, market shares have hardly grown.
The fact that VW is currently shrinking is mainly due to its premium subsidiaries. While the core brand only lost slightly in the first nine months, Audi sold 16 percent fewer cars and Porsche 14 percent fewer.
Mercedes and BMW have not had to give up any market shares since the beginning of the year. The Stuttgart company remains at the same level as the previous year, while the Munich company was able to increase US registrations by more than four percent. Unlike Audi, both companies have been manufacturing in the USA since the 1990s. In Spartanburg, South Carolina (BMW), and Tuscaloosa, Alabama (Mercedes), both manufacturers are putting together their large SUV models.
Despite the difficult initial situation, manufacturers have big goals for the region. The VW Group wants to more than double its market share in the USA to eight percent by 2030. Mercedes wants to sell a third more cars there by then.
The corporations spend a lot of money on this. BMW has invested a total of $16 billion in its Spartanburg plant. $1.7 billion was spent on the most recent expansion. Mercedes announced investments of seven billion dollars in North America, four of which will flow into Tuscaloosa alone.
And VW has invested more than $4.3 billion in its Chattanooga plant since it opened in 2011. In addition, there is the US subsidiary Scout's factory in South Carolina, which costs around three billion dollars. The plant, which will also produce an Audi model in the future, is nearing completion.
German car manufacturers also benefit from generous subsidies. In South Carolina, Scout has put together an incentive package worth $1.2 billion, and there are benefits worth $1.4 billion for the new Audi plant in Georgia. “Governments want to create US jobs,” says consultant Schnurrer. "This is not ideal for global value creation. But the subsidies attract manufacturers and the tariffs force them to produce locally."
An internal Mercedes presentation shows that working conditions in the USA are also more favorable than here. Accordingly, hourly labor costs in the US plant in Tuscaloosa are 17.9 percent lower than the average in German factories. In addition, the production employees there work a third more.
German manufacturers can play to their strengths in the USA. In the USA, electric cars hardly play a role. More than three quarters of all cars sold there have a combustion engine - in which German manufacturers are still the leaders. At BMW, combustion engines make up more than 80 percent of sales in the USA.
This is also why the USA is an important source of profit for corporations. Because they still earn more money with combustion engines than with electric cars. US customers primarily demand SUVs and high-performance models, with which manufacturers achieve higher margins. They are also buying more cars. “More new cars are sold per capita in the USA than in Europe. The manufacturers benefit from this,” says Oliver Wyman consultant Schnurrer.
At Mercedes, expensive vehicles such as the G-Class off-road vehicle, the S-Class luxury sedan and sports variants from the factory tuner AMG account for 30 percent of sales. BMW sells twice as many luxury X5 SUVs there as in the rest of the world. The sales share of the tuning subsidiary M is also by far the highest in the world.
In addition, the trade barriers protect the market from Chinese car manufacturers. In the People's Republic, the margins of German companies are being eroded by tough competition from domestic providers; in Europe, the Chinese are having their best year to date.
If you want to grow in the USA, you have to please American customers. That's why BMW wants to build a new model for the US market. In addition to the current luxury SUV X7, the portfolio is to be expanded to include another car. Dealers have long wanted a larger SUV that can compete with the huge models from domestic manufacturers, such as the Escalade from Cadillac.
At almost 5.4 meters long and around two meters high, they are oversized for European traffic, but such models are popular in the USA. According to information from company circles, Mercedes is also considering such a step. Both manufacturers, whose group-wide margins are far below their own standards, would benefit. Because the bigger the SUV, the bigger the profit.
What is certain is that the Mercedes best-selling GLC SUV will also be coming to the Alabama factory in the future - and will be manufactured alongside the large GLE and GLS series. The GLC and other models should be better adapted to the wishes of US customers. “We are currently learning to listen better locally,” Mercedes’ North America boss Jason Hoff told the Handelsblatt in the summer. Both premium manufacturers also have design centers in the USA - not in the southern states, where production takes place, but on the west coast in California.
That seems to make sense: Volkswagen has already experienced how negatively customers react to cars that don't exactly meet their needs. Management is now prioritizing buyers' preferences in the interior: in the future they will get more cup holders and USB ports in the interior.
However, the manufacturers are not alone in determining whether the calculation works. First of all, there are the customers themselves. Americans continue to buy cars, but increasingly on credit: According to the Fed, the debt from car loans totaled $1.71 trillion in the second quarter, more than ever before.
Buyers paid an average of $787 a month for a financed new car in the third quarter, and one in four loans now runs for seven years or longer, according to the car portal Edmunds. At the same time, more borrowers are defaulting on payments, and new arrears on car loans remain at an elevated level, according to the Fed. Even a slight dip in the economy could therefore abruptly slow down demand.
Added to this is politics in Washington. The exclusion of the Chinese could also be fatal for Mercedes: A bill that the Senate Commerce Committee unanimously approved in July would ban manufacturers from selling connected cars if Chinese owners hold more than 15 percent. At Mercedes, the state-owned company BAIC and Geely founder Li Shufu together have a stake of almost 20 percent.
At the same time, the Iran war caused gasoline prices to rise and shifted demand: in the two months after the start of the war, sales of hybrids rose by 37 percent, more than twice as much as the overall market. Toyota, Hyundai and Honda together account for 86 percent in this segment, leaving little for the Germans. Marketwide, Asian brands account for almost 52 percent of sales, up from less than 43 percent in 2020, according to Marklines.
The Germans benefit from the weakness of US manufacturers. Domestic suppliers such as General Motors, Chrysler, Dodge, Jeep, Ram and Ford lose significantly. The share of traditional Detroit companies is heading towards a record low in the USA. Around 20 years ago, every second newly registered car on US roads was a domestic brand. It is now less than 36 percent.
