German Auto Industry Faces Slow Recovery Amid Economic and Regulatory Challenges

The German automotive sector is anticipating only a modest recovery in 2026, with new car registrations expected to increase by just 2% to 2.9 million vehicles, remaining roughly 20% below the pre-crisis levels of 2019. According to the Verband der Automobilindustrie (VDA), electric vehicle registrations are projected to rise by 17%, nearing one million units, while electric car production is expected to climb by 5% to 1.76 million. However, overall domestic car production may decrease by 1%.

The industry is grappling with multiple pressures, including ongoing economic weakness, high energy costs, US tariffs, and difficulties in key export markets such as China and the United States. VDA President Hildegard Müller has called for timely, clear political decisions in Brussels, particularly advocating for relaxed EU rules concerning the combustion engine ban set for 2035 to help ease the transition.

Besides sector-specific challenges, broader economic concerns are underscored by German insurers demanding improved competitiveness to combat stagnating growth. The insurance sector points to structural issues such as weak economic expansion, cumbersome regulations, insufficient reforms, and skilled labor shortages that hamper investment and innovation in Germany, impacting key industrial players including the auto industry.

Both industry leaders and insurers emphasize the need for decisive political reforms to bolster growth, investment conditions, and workforce capabilities, crucial for sustaining Germany's position as an influential automotive hub amid global economic uncertainty.