Published by Global Banking & Finance Review®
Posted on September 9, 2025
3 min readLast updated: January 22, 2026
Add as preferred source on GoogleChancellor Merz supports Germany's auto industry amid US-China rivalry, focusing on innovation and reducing red tape.
By Rachel More and Christoph Steitz
MUNICH (Reuters) - German Chancellor Friedrich Merz, formally opening the Munich car show on Tuesday, pledged support for the country's embattled auto sector, calling for innovation to head off threats from China and the United States as well as excessive red tape.
Carmakers, Germany's biggest industrial sector, are grappling with the toughest challenge in decades, squeezed by higher U.S. import tariffs, weak demand in Europe, a shift to EVs and a raging price war in China.
"Global competition in the automotive sector, not only for electric vehicles, is intensifying. This competition is particularly strong from China and the USA," Merz said at IAA Mobility, Europe's top auto trade show.
Merz said he planned to meet with carmakers, suppliers and other stakeholders for a summit addressing the industry's challenges in the next four to six weeks, though he did not provide details on what sort of support would be on offer.
With Germany's economy stalling, the conservative chancellor has pledged to ramp up investment to lure more business activity and growth, but the wider region is battling for relevance in the global auto sector amid high costs and stiff regulation.
European carmakers from Volkswagen and BMW to Renault and Fiat-owner Stellantis have used this year's autoshow to showcase new EVs and lower-cost models as they take on nimbler Chinese rivals.
CHALLENGES
Europe's automakers, however, also face an elevated U.S. import tariff rate of 27.5% on their cars. A framework agreement between Brussels and Washington to reduce that rate to 15% has not yet been implemented.
Protecting Germany's car industry was key to ensuring prosperity in the country, Merz said, stressing the importance of shielding the sector amid the shift towards EVs.
"We do not want to limit ourselves to a single solution, we want competition between the best ideas and the best technology," Merz said, adding he wanted to expand industrial battery production in Germany to meet growing demand for EVs.
Executives are due to meet European Commission President Ursula von der Leyen on Friday to discuss the EU sector's future, with industrial groups criticising a current target to essentially ban combustion-engine cars from 2035.
On Tuesday, a report by research and campaign group Transport & Environment showed that all of Germany's carmakers were on track to meet the EU's 2025-2027 carbon emissions targets, apart from Mercedes-Benz.
(Reporting by Rachel More and Christoph Steitz; Editing by Ludwig Burger, Madeline Chambers, Adam Jourdan and Bernadette Baum)
The automotive industry encompasses all companies and activities involved in the design, development, manufacturing, marketing, and selling of motor vehicles, including cars, trucks, and motorcycles.
EU emissions targets are regulations set by the European Union to limit greenhouse gas emissions from vehicles, aiming to promote environmental sustainability and combat climate change.
Innovation in the automotive sector refers to the introduction of new technologies and processes to improve vehicle performance, safety, and environmental impact, including advancements in electric vehicles.
Economic growth is the increase in the production of goods and services in an economy over time, often measured by the rise in Gross Domestic Product (GDP).
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