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The REAL Reason German Cars Are Falling Behind
The REAL Reason German Cars Are Falling Behind
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Subtitles (225)
0:00
You’ve probably heard Europe is slapping tariffs on Chinese EVs to protect millions
0:04
of jobs from a wave of cheap imports. But what if it does the exact opposite?
0:09
What if these tariffs aren’t protection at all? What if it’s a slow economic trap
0:13
that turns giants like Volkswagen and BMW into zombie automakers while handing China control
0:19
over Europe’s digital and industrial future? The worrying part… it might already be too late.
0:25
As of 2025, Europe’s automotive industry employs around 13.8 million people. Germany alone accounts
0:31
for over 700,000 of those jobs, making cars one of the backbone industries of the entire country.
0:37
Volkswagen, Mercedes-Benz and BMW… these iconic names define the industry. And that kind of brand
0:43
power doesn’t come cheap. Except there’s a new
0:45
name threatening the industry. In 2025, the German auto sector
0:49
lost over 51,000 jobs. Around 7% of the entire workforce gone in a single year. A direct hit to
0:56
one of the country’s most important industries. And for many, the blame points in one direction.
1:01
Meet the BYD Dolphin. A small plug-in hybrid that’s quietly starting
1:05
to show up in markets across Europe. It’s aimed at the exact buyers most German auto companies
1:10
built their entire system around: everyday drivers looking for something affordable, efficient, and
1:15
modern. And it sells for just $26,000 to $28,000. That’s cheap… and disruptive.
1:21
It’s one of the first mass-market models BYD designed specifically for global expansion out of
1:26
China. For drivers, it was seen as a salvation. For automotive companies, a threat.
1:32
In 2024, the EU followed suit from the US and imposed tariffs ranging from 17% to 38% on
1:39
Chinese electric vehicles. Surprisingly, Germany’s center-left government voted against the proposal,
1:44
mainly because their auto industry was worried about economic retaliation. It was another move in
1:49
a growing pattern. Industrial powers tightening the screws on each other, each trying to slow
1:54
the other down. But the market didn’t slow. EV demand in Germany kept climbing anyway.
1:59
And the biggest winner in all of it… was China. And that’s where things start to get confusing.
2:05
Because if these tariffs are meant to protect the German car market,
2:08
why are some of the biggest CEOs in the industry now warning the European Union to back off?
2:13
Ola Kallenius, CEO of Mercedes-Benz has been at the forefront of modernizing the
2:18
company. And part of that has been a pivot to electric cars. He’s long been
2:22
a strong supporter of hybrid and fully electric models, so after taking over,
2:26
he spearheaded a $12 billion dollar investment into battery-powered vehicles.
2:30
Kallenius doesn’t seem to view China as a threat , but as a partner.
2:34
Kallenius was brought along on an official Germany state visit to China in 2024.
2:38
It was seen as a statement that Germany was open to collaborating with the Chinese companies on
2:43
new automotive initiatives. And while he’s the most vocal face for this initiative,
2:47
he’s far from alone. The boards of Volkswagen and BMW have both been strongly opposed to
2:52
any proposed tariffs, with the companies frequently sending trade ambassadors to China.
2:56
But it’s not politics.
2:57
It’s profit.
2:58
While German automakers are in direct competition from Chinese manufacturers,
3:02
the two nations are economically intertwined.
3:05
More than people realize.
3:06
German automakers traditionally derive more than 30% of their profits from the Chinese market,
3:11
where western cars are still a hot commodity among the upper class. The liberalization of
3:16
China’s economic system in the last few decades has made the country an
3:19
economic powerhouse. It’s said that if China sneezes, the entire German
3:23
DAX index catches a cold. So for companies like Volkswagen, BMW, and Mercedes-Benz,
3:29
China isn’t just another market. It’s one of the biggest sources of profit they have.
3:34
But they’re also held hostage by it.
3:36
And that raises the real question: If European automakers are so dependent
3:40
on that relationship… how are Chinese EVs still able to undercut them on price so aggressively?
3:46
UBS Investment Bank is one of the pre-eminent sources for anything related to financial and
3:51
industrial analysis. The company’s Teardown series dug into the finances of BYD shortly
3:57
after the Chinese company broke into the European market. Since 2020, China has
4:01
emerged as one of the biggest beneficiaries of the global economic shakeup. The country has
4:06
transformed itself from a net importer of cars to the world’s largest exporter. BYD’s Atto 3,
4:13
their first heavily exported model, was enough to turn the entire car market on its head.
4:17
And there was one little secret behind it all.
4:20
In 2023, Chinese electric vehicles already had a 25% cost advantage over many of their
4:26
legacy competitors. Any time a company comes in with a major cost advantage, it shakes up
4:31
the field… as long as they can sustain it. It’s common for new companies to start with
4:36
loss leaders. They push aggressively low prices to draw customers in, then either raise prices later
4:42
or bleed money until they can’t sustain it. That usually comes with a catch.
4:46
Because once prices go up, the early wave of buyers often disappears. But with BYD,
4:51
that pattern doesn’t seem to be playing out the same way.
4:53
It’s all about owning the right pieces of the puzzle.
4:56
BMW, Mercedes, and Volkswagen might be German brands, but today, almost everything is a global
5:02
process. From the raw steel that makes up the cars to the computer chips that control its
5:07
complex dashboard system, a car isn’t built in one part. The auto plants are more likely to assemble
5:12
pre-fabricated parts, brought in from around the world. China has already been offering a low-cost
5:17
alternative for manufacturing for years, giving it a clear role in almost every economy around
5:22
the world. And for most auto manufacturers, only around 30% of parts are manufactured in-house.
5:28
BYD plays a very different game. Instead of outsourcing most of its
5:32
supply chain, it produces roughly 75% of its components internally,
5:36
thanks to China’s well-established industrial sectors. That has many advantages. It helps keep
5:42
costs down thanks to the lack of import fees and transport costs. It’s the equivalent of
5:47
buying a pre-built LEGO set from abroad, and owning the LEGO factory. This gives Chinese
5:52
electric vehicles a manufacturing cost and speed advantage that’s hard to compensate for. They
5:57
can pass those savings right on to the customer. That gives them a lot of money to throw around.
6:02
In 2023, the company was able to increase its R&D spending by 97%. That played a key role in
6:08
the development of the Dolphin, an even more affordable model designed to move their brand
6:12
worldwide. The company’s stock price began to skyrocket, and even today it continues
6:17
to climb. But questions still linger about its future in Western markets amid tariffs
6:22
and political pressure. However, that isn’t
6:24
slowing it down. BYD has bigger plans. And Europe is firmly in its crosshairs.
6:30
BYD has a plan, and it goes far beyond cars. It all comes down to the vision of one man,
6:35
Wang Chuanfu, the founder of BYD. Unlike the many legacy auto companies, BYD only
6:40
dates back to 1995. It doesn’t have an established reputation for quality to fall back on. In fact,
6:46
it started as a mobile phone battery company, and only entered the automobile market in 2003.
6:51
Now, it’s making up for lost time.
6:54
Chuanfu has been courting some of the most powerful investors in the world
6:57
ever since he launched his company, receiving a $230 million investment
7:01
from Warren Buffett in 2008. He quickly became a billionaire, which allowed him
7:05
to create a path to become the leader in the Chinese automotive market. The company
7:09
was able to weather China’s government's reduction of electric vehicle subsidies.
7:13
But Chuanfu’s biggest innovation might be happening under everyone’s nose.
7:17
Right now, the biggest roadblock to BYD’s determination to break into the European
7:21
market in force is logistics. Europe has a robust car market of its own,
7:26
and even without tariffs, the cost of transporting large machines to another
7:30
continent is a stumbling block to any major company. In order to truly take
7:35
over the European auto market, BYD will have to solve its supply and manufacturing issues.
7:39
It may have figured out a way to do that in a way that takes advantage of Europe’s decline.
7:44
And it might be happening under everyone’s nose.
7:46
In 2026, word broke that BYD was in talks to purchase a selection of manufacturing plants
7:52
that weren’t heavily in use. While the “Big Three” of German automakers are still healthy,
7:57
plenty of other European automakers have fallen on hard times. BYD would take over those plants,
8:03
and suddenly they would be able to bring their assembly-line,
8:06
mass-production oriented style of manufacturing to the European
8:10
mainland. For those who wanted Chinese cars, they would be more accessible than ever.
8:14
For those who didn’t… well, they might not know.
8:17
The plant takeover is just one part of BYD’s plan.
8:20
The other is to acquire the dormant brands, reskinning their cars and creating a new line
8:24
of European cars. All with Chinese technology, money, and design at the core. This has already
8:30
been done, with Italian companies like DR Automobiles using defunct Italian car names
8:35
like Italia to rebadge vehicles from Chinese brands that are less well known in the West.
8:40
These have been nicknamed “Zombie Brands”.
8:43
It’s a model that when paired with BYD’s low costs and wide appeal,
8:46
could be a deadly blow to the industry.
8:49
So why isn’t the car industry acting like it? Why
8:51
are European regulators the only ones who seem to be panicking?
8:55
The most popular electric model in the Volkswagen stable is the ID.4. And it’s
8:59
become notorious for its complex software system and how long it takes to fix when
9:03
anything goes wrong. We’ve all had that moment when the cell phone or computer
9:08
demands a software update at the most inconvenient time. Cars that do the same can provide a bigger
9:14
hassle. Users often complain of patches for software glitches taking months to roll out,
9:18
sometimes requiring a visit to the dealership to get the car back in working order.
9:22
Which is why BYD is working to not just be cheaper… but faster.
9:27
BYD may have been one of the first major EV manufacturers to emerge from China,
9:31
but it didn’t stay alone for long. Companies like NIO quickly followed,
9:36
targeting the higher end of the market with SUVs and premium electric vehicles that were
9:40
still cheaper than many Western rivals. But the real advantage was the software.
9:44
Chinese EV companies built their cars more like tech products than traditional automobiles.
9:49
The software, batteries, and user experience were designed to work together from the start.
9:54
It’s been described as the equivalent of waiting for a letter in the mail to get an
9:58
update for Volkswagen… compared to clicking on a smartphone update to get the Chinese equivalent.
10:03
Because despite the cars rolling off the assembly lines, these companies increasingly think like
10:07
software firms first… and automakers second. This is one of the biggest advantages China
10:12
has right now over its Western competition. The century-old automakers that dominated the
10:17
industry for decades had to be dragged into the internet age kicking and screaming. They
10:22
weren’t built for a software-first world. And for a long time, neither were many of their customers.
10:27
By contrast, BYD and its Chinese competitors were created in 1995, when software and internet
10:33
technology were already locked in as a part of everyday life. Their software is
10:37
built for the car, ready to be seamlessly updated as needed as you commute to work.
10:42
But why exactly does a commuter car need such advanced technology?
10:46
For the most dramatic example of just how far ahead of the game Chinese car software is,
10:50
we’ve got to look at one of the highest-end cars out there. The Xiaomi SU7 Max sedan can
10:56
go from 0 to 62 miles per hour (100 kph) in just 2.78 seconds thanks to its dual-motor
11:02
setup. It’s the kind of performance once associated with elite European sports brands.
11:07
But it wasn’t what was under the hood that got people’s attention.
11:10
The car is packed with advanced sensing hardware,
11:13
including a 128-line LiDAR system. Short for “Light Detection and Ranging,” the
11:19
technology uses pulsed lasers to map the world around the vehicle in real time,
11:23
helping the car analyse traffic, obstacles, and road conditions with extreme precision.
11:28
What really stood out though , was the sheer amount of power behind it.
11:32
The vehicle has 11 high-definition cameras feeding into dual Nvidia
11:36
Drive Orin chips capable of processing 508 trillion operations per second.
11:41
This isn’t just powerful technology for a car.
11:44
It's a powerful technology for everything.
11:47
Each Xiaomi SU7 Max has more processing power in it than the guidance computers
11:51
on 500 Tomahawk missiles combined. This is smart technology disguised as a car.
11:58
Every one of these cars that is brought into a country will essentially be a super-fast,
12:02
super-smart computer sharing the roads with hundreds of thousands of older models..
12:06
This has led to a new generation of cars.
12:09
Software Defined Vehicles.
12:11
These cars weren’t designed like traditional automobiles with software added later. They
12:15
were built around software from the very beginning. In many of the newest models,
12:19
AI systems sit at the centre of the driving experience, controlling everything from navigation
12:24
and safety features to battery optimisation and autonomous assistance. The hardware matters. But
12:30
increasingly, the software is the product. That changes the entire manufacturing model.
12:35
Instead of the factory being the heart of the company, it becomes the final assembly
12:38
point in a much larger tech ecosystem. And in China, that approach is quickly becoming the
12:44
standard for the future of the auto industry. But why does a civilian vehicle need more
12:48
processing power than military hardware, if all it’s going to do is drive to the grocery store?
12:53
At first, the move by the Chinese market into the European car market seemed like
12:57
it was pretty straightforward. European carmakers were turning out expensive,
13:01
old-school cars that didn’t suit the tastes or budget of today’s customers. Not only was
13:06
the new generation of adults struggling to make ends meet, but they were very climate-conscious
13:10
and not likely to want to buy a gas-guzzler. China’s sleek, mass-produced electric cars
13:15
seemed a natural fit for the market, and the demand had already been shown.
13:19
Except those numbers don’t quite add up anymore.
13:22
China already had a foothold in the European car market, with extensive trade between both
13:26
sides. But suddenly, this seemed to be perceived as a problem in a way it never
13:30
had been before. European governments weren’t just worried about losing market share. They
13:35
were worried about losing control of one of their most important industries altogether.
13:39
That fear pushed them toward tariffs on Chinese EVs.
13:43
It was a move that didn’t just threaten to disrupt the car market,
13:46
but risked triggering a much larger trade war between two deeply connected economies.
13:50
Because once tariffs start escalating, they rarely stay contained to one industry.
13:55
Modern Chinese electric vehicles aren’t just cars with batteries instead of gas tanks. They’re not
14:00
even the high-tech computerized cars that come from companies like Tesla today. Every Chinese
14:05
electric vehicle on European streets is coming in with a level of technology that essentially makes
14:10
it a mobile data center. They map the terrain around it and create an in-depth schematic of
14:15
every mile it drives. That map becomes part of the computer’s data for future drives.
14:20
But no one is sure if it stays there.
14:22
Over the last few years, cybersecurity experts have become increasingly interested in the study
14:27
of connected vehicle telemetry. It combines the real-time transmission of GPS, engine statistics,
14:33
and user data, ostensibly under strict cybersecurity safeguards. But while these
14:38
machines come with protections against hacking and data breaches from outside sources, nobody
14:44
is sure if the same goes from internal sources. President Xi has tightened state control over
14:49
strategic industries, ensuring every company still has deep dealings with the Chinese government.
14:54
These cars are learning about western infrastructure better
14:57
than many of the people who live around it. Their presence on the
15:00
roads of Europe is only set to grow as the low-cost cars make a bigger impact.
15:04
They’re on the verge of not just owning the market, but owning the roads.
15:08
So why is Europe suddenly so determined to stop Chinese EVs in their tracks?
15:13
Especially after spending decades outsourcing huge parts of global manufacturing to the East…
15:18
while its own industrial base slowly weakened along the way.
15:21
Now China sees an opening. And Europe sees a threat.
15:25
That’s what makes the tariff response so risky. They’re often described as a kind of economic
15:29
high-stakes gamble. Once one side starts raising barriers, the other side almost
15:33
always responds. Prices rise, supply chains tighten, and both economies absorb the damage.
15:39
But the EU isn’t backing down, because this isn’t about cars at all.
15:43
The tariffs are likely to speed up the decline of European car companies and
15:47
leave the manufacturers open to takeovers. But the electric car wars are actually an
15:51
elaborate proxy for an ongoing battle over software sovereignty. The Chinese
15:55
electric car influx isn’t just adding a new option to the car market in Europe,
15:59
it’s bringing in millions of mobile data centers to the roads of Europe. They’re potentially
16:05
transmitting schematics about all of Europe across the sea back to the parent company. And amid the
16:10
economic battle, a war over electric cars is being waged as a proxy for a larger data war.
16:16
But it might already be too late.
16:18
Europe’s tariffs are a 20th-century weapon against a 21st-century threat.
16:22
While it builds walls to keep cars out and preserve its manufacturing plants,
16:26
a digital Trojan Horse may have already come in through the front gate.
16:30
It’s not the only area where some high-stakes deception is in the works. Check out “12 US
16:34
Scientists Have Gone Missing or Died. What’s Going On?” to uncover the dark truth about
16:39
the biggest mystery in the science world, or watch this video instead.
