Profits have collectively collapsed, and fuel vehicle manufacturers are trading time for space.

The financial reports of overseas fuel-powered car companies have been released one after another. The faltering steps of their electrification transformation, polished by financial indicators, have been vividly demonstrated.

Among the three German giants, Volkswagen's operating profit in the first half of the year declined by 32% year-on-year. Mercedes-Benz suffered a complete collapse, with its net profit in the second quarter dropping by 69% year-on-year and the overall figure in the first half of the year sliding by 56%. BMW's 26% decline may seem more decent, but the main reason is that it took a nosedive earlier than others, resulting in a lower year-on-year comparison base.

Some are increasing revenue but not profit, while others are seeing a decline in both revenue and profit. The old-established powers in the automotive industry have found a common language in the field of accounting.

One Tree Alone Cannot Support the Sky

Regardless of their positioning or sales volume, the financial performance of old-established fuel-powered car companies shares a common feature: The decline in profit far exceeds the decline in revenue and sales.

Volkswagen Group's revenue in the first half of this year was 158.36 billion euros, showing a decline of less than 1% compared with the same period last year. The delivery volume reached 4.4 million, a slight year-on-year increase of 1%. However, its operating profit decreased by 32.79% year-on-year, indicating a significant weakening of profitability.

The two luxury brands, Mercedes-Benz and BMW, are no different. BMW's revenue decreased by 7.98% year-on-year, but its earnings before interest and taxes (EBIT) dropped by 26.83%. The gross profit margin of its automotive business fell below 15%.

Mercedes-Benz's performance is the most worrying. Its revenue in the first half of the year declined by 8.59% year-on-year, and its EBIT was directly halved. Compared with the peak single-quarter profit level of 4 billion euros, Mercedes-Benz's net profit in the second quarter was only 960 million euros.

Looking solely at the automotive business, the revenue decreased by 11.1% year-on-year, and the decline in EBIT was even more exaggerated, with a year-on-year reduction of over 70%.

Among other car companies that have released their financial reports, from Stellantis to Ford, most have presented a report card that makes investors' blood pressure soar. The worst-hit is Ford. Due to the impact of tariffs on its own business, its net profit dropped from $3.17 billion in the first half of last year to $440 million in the same period this year, a significant decrease of 85.98%.

The obvious decline of fuel-powered cars, the sluggish sales of pure electric vehicles, and the fact that plug-in hybrid/hybrid vehicles are shouldering the main burden but not fully succeeding seem to be the common symptoms of these old-established powers.

In the second quarter of this year, Mercedes-Benz's overall passenger car delivery volume declined by 9%. Among them, the delivery of pure electric models, which dragged down the overall performance, dropped by 24%. On the contrary, the sales of plug-in hybrid electric vehicles (PHEV) soared by 34%, which was one of the few bright spots.

Similarly, Hyundai Motor sold 143,000 pure electric vehicles in the first half of the year, while the sales of hybrid vehicles exceeded 300,000, and the growth rate was even faster.

In the sales structure of South Korea's Kia in the second quarter, the sales of hybrid electric vehicles (HEV) increased by 24%. The performance of battery electric vehicles (BEV) was mediocre, with a year-on-year increase of 8.3%. On the contrary, the plug-in hybrid models dragged down the overall performance, with a year-on-year decline of 16.8%.

Compared with the ubiquitous charging piles and the numerous green license plates in China, factors such as the weak infrastructure, high supply chain costs, and relatively high energy prices in the European and American markets have objectively hindered the penetration of pure electric models and promoted the sales of plug-in hybrid and hybrid vehicles.

However, this market differentiation has also created a new problem for the old-established car companies with global operations: China and "the rest of the world" are becoming two markets with completely different positioning.

Differentiated Markets

According to the China Federation of Machinery Industry, in the first half of 2025, the new energy vehicle market in China delivered another piece of good news, with the market penetration rate reaching 44.3%, setting a new record for the same period.

In 2024, the sales of plug-in hybrid/extended-range vehicles in the domestic market soared to 5.14 million, with a year-on-year growth rate of up to 83.3%, single-handedly boosting the penetration rate of new energy vehicles in the country. In the first half of this year, pure electric vehicles took the lead and became the frontrunners in the new energy market.

In contrast, the progress of new energy vehicles in the overseas market is somewhat disappointing.

As the market with the highest penetration rate of new energy vehicles outside China, Central Europe started at almost the same time as China, but its current penetration rate has only barely reached 20%.

Meanwhile, the European Union has long included hybrid vehicles in its subsidy scope. Hybrid/plug-in hybrid vehicles account for more than 40% of new car sales in Europe, which is more than five times that of pure electric vehicles. There is a structural difference compared with the domestic sales structure.

In other major markets such as Japan and the United States, hybrid vehicles have an almost overwhelming advantage in Japan, and hybrids are also more popular than pure electric vehicles in the United States. In the sales structure of the U.S. automotive market, the total share of hybrid, plug-in hybrid, and pure electric vehicles is approximately 20%. Compared with the "steadily growing" pure electric vehicles, hybrid vehicles are showing a more promising growth trend [1].

Relying on the enthusiasm for hybrid vehicles in the U.S. and Japanese markets, Toyota's hybrid vehicle product line achieved sales of 5.5 million units in the first half of the year.

This difference in sales structure has gradually magnified the gap between the Chinese market and "the rest of the world," and has also brought two practical problems to fuel-powered car companies:

Firstly, there are two completely different sets of rules of the game. Domestic new energy vehicles generally adopt a design of higher configuration at the same price, which has systematically disrupted the price system built by overseas fuel-powered cars. The brand premium is no longer recognized. However, in the European and American markets where the penetration rate of domestic car companies is relatively low, their price system and profit margins can still be maintained.

Secondly, both sets of rules of the game need to be taken into account. China is the world's largest automotive market, and no car company, no matter how wealthy, would easily give up its sales in China. Therefore, despite the setbacks in their electrification efforts, old-established car companies still have to continue to compete with domestic new energy car companies in China.

In this situation, overseas fuel-powered car companies will all face the same problem that Toyota once encountered: They need to rely on fuel-powered cars to maintain their profit levels, while also taking into account the R & D of hybrid/plug-in hybrid vehicles and not relaxing their investment in pure electric vehicles.

They need to grasp all three aspects firmly. However, in a game of mahjong, it's impossible for all four players to win. So, they have to sacrifice their profit margins.

Earning One Portion of Money but Spending Two

In the first half of this year, Volkswagen's software subsidiary CARIAD and its battery business PowerCo incurred a loss of 1.76 billion euros. After the former created an epic blunder in the over - the - air (OTA) upgrade of plug - in wireless systems, its self - developed software system has not been fully implemented yet. The latter is still in the process of ramping up production capacity, and its losses are increasing quarter by quarter.

The fact that the innovation sectors, which have been entrusted with important tasks, still need support from the parent company to this day may be the similar root cause behind the common problems of fuel - powered car companies.

In 2020, the Volkswagen ID.3 was undergoing an emergency software update before delivery.

Whether it's software or batteries, electrification investment is associated with heavy assets. From the pure - electric platform to the electronic and electrical architecture, from power batteries to assisted - driving functions, huge amounts of capital are required in every aspect.

During the rapid increase in the penetration rate of new energy vehicles in China, overseas fuel - powered car companies have basically failed to reap any benefits. They have ceded the market to others, and still need to make up for their electrification debts. As a result, the profits have disappeared from their financial reports.

European and American car companies are often considered slow in their electrification transformation. However, in fact, these old - established powers were among the first explorers in the new energy era. It's just that despite their good attitude, their capabilities are rather limited.

BMW's first - generation i3 entered the Chinese market in 2014 when subsidy fraud was prevalent. However, its avant - garde design, narrow tire width, poor range, and over - confident pricing led to dismal sales. On the contrary, the gasoline - to - electric converted i3 was very popular.

BMW's first - generation pure - electric i3

Mercedes - Benz launched its pure - electric platform EVA in 2019. However, the pure - electric EQS and EQE based on this platform have both become like obscure new energy models. Beneath the background of self - developed components, there is a helpless shortcoming in the electronic and electrical architecture.

Although Mercedes - Benz has postponed its transformation goals, it has not given up on its investment in electrification and has reinvested in the new pure - electric platform MMA. The MMA adopts a domain - centralized architecture, supports faster OTA upgrades, and the first model, the CLA, will use Momenta's solution.

Having entered the market early but with huge investments ultimately resulting in a "start - over" situation. They need to rely on traditional energy to stabilize the overseas market and new energy to hold on to the Chinese market. With two portions of expenses but only one portion of profit, the result of making up for lost ground in a hurry is weak revenue and a collapse in profit.

In the first half of the year, Ford sold 91,000 pure - electric vehicles, and it was losing money on each unit sold. Volkswagen sold 465,000 units. Although the sales proportion increased, the profit margin was extremely low. When explaining the decline in profit, Volkswagen did not hesitate to blame the electric vehicles: "The increase in the sales volume of pure - electric vehicles with lower profit margins."

During this painful period of transition between the old and the new, these old - established powers still have to trade time for space.

However, time waits for no one. While you are making progress, others are not idle. So, when a competitor was paying tribute to Ferrari, the honored Ferrari had already rushed to take the competitor's new car home overnight.

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