The Indictment
They Said It Themselves
Fifteen years ago I was writing about the risk facing big auto if it didn’t move on EVs early. Tesla was the visible signal. A growing Chinese focus was already in the rear view mirror, if you cared to look. The response from industry experts was ridicule. Their best argument, delivered with confidence, was that if big auto decided to go electric it could do it in twelve months and leave everyone behind.
They were not stupid people. They were people who had decided, collectively and deliberately, that the truth was too expensive to accept.
The BMW i3 is the moment I keep returning to. When it launched, it was, without qualification, the best car on the road. Then Tesla announced the Model 3. I wrote at the time that BMW needed to immediately cut the i3’s price to the bone, take the loss, and kill the Model 3 before it arrived. If Tesla steals the march on mass-market EVs, I wrote, it is game over.
BMW did not cut the price. They had no counter-strategy. They eventually discontinued the i3 quietly, as though it had been a minor experiment rather than proof that they had everything they needed to own this transition.
Following my advice would have cost them money. What they chose instead cost them the industry.
This piece is not I told you so. It is an indictment of an industry that chose denial over survival, and then used its own executives, its own lobbying arms, and its own trade press to keep the story clean while the collapse was already underway. The evidence is not mine. It is theirs. Their memos. Their keynotes. Their partnership announcements. Their sales figures.
Read what they actually said. Let’s start with the memo.
In early 2025, an internal Volkswagen management document was leaked. In it, Audi CEO Gernot Döllner wrote: “Es geht längst nicht mehr um Marktanteile. Es geht um den Fortbestand der deutschen Automobilindustrie.”
Translation: “This is no longer about market share. This is about the survival of the German automotive industry.”
Not competitiveness. Not profitability. Survival.
An entire industrial sector, the one that built the modern economy of the most powerful nation in Europe, is asking whether it continues to exist. And the auto press is writing headlines about a comeback.
The Story You Were Told
Go read the trade press from the 2026 Beijing Auto Show. InsideEVs called it “Fighting Back.” The Financial Times Future of the Car Summit produced LinkedIn posts about “two operating systems” and “China speed.” Executives gave keynotes. Analysts wrote threads. The narrative being constructed, carefully and consistently, is one of recovery. Western legacy automakers, chastened but wiser, are returning to China with better products, smarter partnerships, and renewed purpose.
It is a lie. Not a misreading. Not an oversimplification. A lie constructed from true facts, arranged to obscure the only conclusion the facts actually support.
Here are the facts.
Exhibit A: The Products
At the 2024 Beijing Auto Show, InsideEVs journalist Kevin Williams spent fifteen minutes on the floor and reached a conclusion that no Western automotive executive had been willing to state publicly. Western-badged cars in China were, in his words, “crap.” Old designs. Weak interiors. Basic infotainment. None of the technology Chinese buyers had come to expect. At prices significantly higher than domestic brands.
This was not a supply chain problem. It was not a regulatory problem. It was not unfair Chinese government subsidies, the excuse the industry spent years hiding behind. It was a product problem. The cars were not good enough. The people who built them knew it and said nothing publicly for years, while their market share collapsed.
By 2026, VW’s share of the Chinese market had fallen off a cliff. Mercedes EV sales dropped from 9.7 per cent of global shipments in the first half of 2024 to 8.4 per cent in the same period of 2025. Not a plateau. A retreat, while the company’s CEO was simultaneously telling the world the industry needed to be saved.
Exhibit B: The “Recovery”
At the 2026 Beijing Auto Show, the trade press found its comeback story. Hyundai showed the Ioniq V. VW unveiled the ID Aura, the ID Era, and the ID Unyx. Buick relaunched with the GL8 Encasa and Electra E7. The buzzwords deployed by both VW and Hyundai were identical: “China Speed” and “By China, For China.”
Read those phrases again slowly.
The Hyundai Ioniq V’s ADAS system - the core intelligence of the vehicle, the technology that will define the customer relationship for the next decade - comes from Momenta, a Chinese autonomous driving company. The car is developed in partnership with BAIC, using Chinese suppliers and Chinese software throughout.
Volkswagen’s new models are developed in conjunction with Xpeng and SAIC. The software architecture that will run those vehicles, the layer that commands margin and owns the customer, is Chinese.
This is not a recovery. This is a transfer of the product’s value-generating core to Chinese technology partners, while retaining the badge, the dealer network, and the European consumer’s residual brand loyalty. The Western automakers are keeping the logo. They are charging you for the logo, giving you Chinese tech at premium prices. They are conceding everything the logo used to mean.
There is a name for this arrangement. It is called the Foxconn model. Apple retained the ecosystem, software, margin, and customer relationships. Foxconn got the manufacturing contract. The difference is that Apple knew which side of that arrangement it was on. Volkswagen and Hyundai appear to believe they are Apple. They are becoming Foxconn.
Exhibit C: The Confession They Didn’t Mean to Make
At the St. Gallen Symposium, VW CEO Oliver Blume took the stage and confirmed that the business model that had carried Volkswagen for decades no longer works. When pressed on the path forward, he pointed toward two things: higher tariffs and defence industry contracts using VW factories.
Let that land.
The CEO of Volkswagen, one of the largest industrial enterprises in human history, stood at a prestigious European symposium and described his strategic vision as: political protection from competition, and renting factory floor space to the weapons industry.
The minister-president of Lower Saxony, who sits on VW’s own supervisory board, went further. He publicly floated the idea of Chinese carmakers building their cars at VW plants in Germany.
So the proposal on the table from VW’s own governance structure is to become a contract manufacturer for the Chinese industry that defeated it. That is not a business model for the next decade. That is an obituary being written in advance, by the people who should be fighting hardest to prevent it.
Exhibit D: The Lobbyist Wearing a CEO’s Suit
In August 2025, Ola Källenius, CEO of Mercedes-Benz and simultaneously president of ACEA, the European Automobile Manufacturers’ Association, gave an interview to Handelsblatt. His warning was stark: if the EU’s 2035 ban on new combustion engine sales remains in place, Europe’s automotive industry will “collapse.”
“We need a reality check,” he said. “Otherwise, we are heading at full speed against a wall. Of course, we have to decarbonise, but it has to be done in a technology-neutral way.”
Every word of this is carefully constructed lobbying, delivered in the register of CEO candour.
“Technology-neutral” does not mean what it sounds like. It does not mean openness to multiple solutions. It means: do not force us to commit to electrification on a timeline that exposes how far behind we are. It means: preserve our optionality to keep selling combustion engines indefinitely while we describe that as climate responsibility.
Källenius then deployed what may be the most audacious rhetorical move in the entire saga. He warned that consumers would rush to buy combustion cars ahead of the 2035 deadline, and that this rush “doesn’t help the climate at all.” He used the climate argument to oppose the climate policy, in service of the industry that spent decades obstructing it.
The 2035 ban did not create this crisis. Mercedes was going to go fully electric “where market conditions allow” by 2030. It abandoned that commitment quietly and completely. The ban didn’t force that retreat. The retreat happened because the company could not execute the transition it promised, and chose to lobby against the deadline rather than meet it.
The crisis is self-authored. The regulation is being blamed for revealing it.
The Thing Nobody Is Saying
Every summit, every keynote, every trade-press feature, every LinkedIn thread from FT conference moderators operates under a shared assumption: that this situation is recoverable, that the right combination of partnerships, product refreshes, and regulatory relief will restore something like the previous order.
It will not.
The split has already happened. Not at the level of market share data or product roadmaps. At the level of where value is created and who owns it. When the intelligence of the vehicle, the software, the ADAS, the data architecture, the OTA update capability, is Chinese, and the badge is European, the European industry has already lost the thing that will matter in ten years. What remains is distribution, brand heritage, and a customer base that hasn’t fully understood what it’s buying yet.
Tu Le of Sino Auto Insights said the quiet part with unusual directness: “The only path forward for legacy auto in China is to partner with Chinese tech companies.” He meant it as a survival strategy. Read it again as a structural description. The only path forward is dependency on the competitor. That is not a comeback. That is the terms of surrender.
Mark Andrews, author of Driving the Dragon, noted that BYD CEO Wang Chuanfu predicted in 2024 that the joint-venture market share in China would fall to just 10 per cent within three to five years. The Western automotive press treated this as one data point among many. It is a forecast from the man who beat them, about how complete the defeat will become.
What Business Model Innovation Actually Means
The St. Gallen professor who wrote about VW’s strategic failure reached for the Kodak and Nokia comparisons, and they are correct as far as they go. But they don’t go far enough.
Kodak and Nokia failed as companies. Their failure was contained. What is failing in Germany is an industrial identity that is the load-bearing pillar of an entire nation’s employment base, tax revenue, trade balance, and political stability. The Ruhr Valley didn’t just build cars. It built the economic foundation on which post-war German democracy rested.
VW’s attempt to build software capability, Cariad, 1,500 engineers relocated to Silicon Valley - failed not because of location or mindset, as the professor suggested. It failed because those engineers were still funded by, reporting to, and evaluated against the metrics of the first curve. The mothership’s entire incentive structure existed to protect combustion engine margins. Cariad wasn’t allowed to threaten that. It was a political gesture toward change that was never permitted to become actual change.
You cannot build the future when the present controls the budget.
This was visible. Not to consultants hired to see it. Not to analysts with privileged access to boardrooms. To enthusiasts like me, writing comments on the internet fifteen years ago. The signals were not hidden. The BMW i3 proved they could build the right product. Tesla’s announcement of the Model 3 marked a strategic choice. The industry looked at that choice, calculated the short-term margin hit, and chose denial. They discontinued the i3. They would have lost money on the i3. Instead, they lost the industry.
The Verdict
Audi’s CEO said it is about survival. VW’s CEO confirmed the business model is broken. Mercedes’ CEO is lobbying to extend the model that failed. VW’s supervisory board is discussing becoming a Chinese contract manufacturer. The “recovery” at Beijing consisted of European badges on Chinese technology.
No auto magazine will write this sentence. No conference moderator will say it from the stage. No industry analyst with clients to protect will put it in a report.
And that is the final part of the indictment. The denial did not happen in a vacuum. It was curated, conference by conference, summit by summit, headline by headline, by an entire ecosystem of commentators, analysts, and trade journalists with enough stake in the comfortable version of the story to keep it intact. The people paid to see clearly chose, consistently and professionally, not to.
So here it is.
The German automotive industry lacks a strategy. It has a set of managed retreats dressed in the language of transformation, backed by lobbying dressed in the language of economic realism, producing products that are Chinese technology dressed in European heritage.
They said all of this themselves. In memos. In keynotes. In interviews. In partnership announcements, written as triumph.
The indictment writes itself. All you have to do is read what they actually said.
This is merely a high-level analysis. A detailed analysis is in my book Gas’lighting. Book your copy now here for $8 before it becomes available post-launch for $14.99. https://a.co/d/02h33JeQ
Aldo Grech is the author of Silent Echoes, The Great Populism Hustle, and HOW: Elections Are Won in the Digital Age. He writes on political manipulation, narrative capture, and the mechanics of power.
”The future is embedded in the choice”. Books and private advisory.