Europe
German carmakers face historical crisis as Chinese competition and market contraction erode profits
The German automotive industry is enduring a severe period of distress, driven by intensifying competition from Chinese vehicle manufacturers and an increasingly overheated domestic market in China.
For decades, China served as the primary engine that propelled German carmakers into global titans, yielding robust sales and billions in profits. Today, that historic reliance has transformed into their heaviest liability.
According to an analysis published by Politico, domestic Chinese manufacturers—having spent decades observing, learning, and investing—are now producing better-equipped electric vehicles at prices lower than those offered by Volkswagen, BMW, and Mercedes-Benz.
At the same time, China’s automotive market—the largest in the world—has become severely overheated and contracted by a fifth this year. The sharp downturn has forced both domestic and foreign automakers into a ruthless battle for survival.
The tangible impact of this pressure became clear this month as German carmakers reported their half-year financial results, disclosing billions of dollars in losses alongside announcements of widespread layoffs and plant closures across Europe.
“The environment has never been as challenging as the one we face today,” Oliver Blume, Chief Executive Officer of the Volkswagen Group, told investors. “Looking ahead, the risks before us are steadily mounting.”
The structural distress within the auto sector delivers another blow to Germany’s already struggling economy. It also presents a escalating political predicament for Chancellor Friedrich Merz’s fragile coalition ahead of critical state elections this autumn.
Dismantled dreams in the automotive sector
Since the 1980s, China had functioned as the primary engine of high profit margins for German automakers.
To gain access to a vast and rapidly expanding consumer market, carmakers were required by Beijing to establish joint ventures with local partners.
For decades, that arrangement proved highly lucrative, delivering massive returns to shareholders.
However, in the post-pandemic era, Chinese companies rapidly outpaced their German rivals in electric vehicle technology, which gained swift adoption across China.
While German brands long enjoyed high prestige among Chinese consumers, buyers have swiftly shifted toward domestic manufacturers offering superior technology at lower price points.
“They are suffering massive losses in China and may no longer be able to recover there,” said Pedro Pacheco, an automotive analyst at the consulting firm Gartner.
Chronic problems spread beyond China into Germany
The fallout is increasingly being felt inside manufacturing plants within Germany itself, rather than remaining confined to China.
BMW announced this week that it will eliminate 8,000 jobs across Germany by the end of 2027, with severance payments set to begin in October.
Mercedes-Benz is asking its workforce to extend weekly working hours from 35 to 40 hours for the same pay.
Meanwhile, industry flagship Volkswagen is locked in negotiations with labor unions over plans to lay off 100,000 workers and shut down domestic factories.
This severe downturn is providing political momentum to the Alternative for Germany (AfD) party, which is gaining traction in national polls.
The party is leveraging the auto sector’s decline and job losses to launch sharp attacks on the government.
“Even major industrial pillars like Volkswagen, Porsche, or Infineon are recording historic drops in profits and planning hundreds of thousands of layoffs in the coming years,” AfD co-leader Alice Weidel said this week. “This demonstrates how far the deindustrialization of our business hub has truly advanced.”
Merz and his governing coalition will get an initial indication of how these cutbacks resonate with voters during state elections this autumn in Saxony-Anhalt and Mecklenburg-Western Pomerania, both of which are strongholds for the AfD in eastern Germany.
Chinese vehicles begin to dominate European market
While automakers continue to perform well in North America and Europe, the collapse of sales in China is eroding overall profits.
Facing fierce domestic competition and systemic overcapacity at home, Chinese carmakers are exporting vehicles in record volumes.
Europe has emerged as their primary target market: China now sells more vehicles in Europe than Germany sells in China.
European consumers are enthusiastically embracing these imports. According to the latest data from the automotive industry association ACEA, sales of Chinese-made cars in the European Union surged by 63% in the first half of this year, rising from 338,000 units in 2025 to roughly 549,000 units in 2026.
That figure now represents nearly 10% of total European automobile sales.
Although German car companies carry an unparalleled exposure to China, even manufacturers with no operational footprint there, such as Renault, are feeling the severe impact of rising Chinese vehicle sales in Europe.
Automotive analyst Matthias Schmidt noted that the influx of inexpensive Chinese vehicles featuring advanced technology has put pressure on Renault and its budget brand, Dacia.
Renault disclosed on Thursday that sales of its Dacia brand fell by 8% year-on-year in the first half of 2026.
European firms forced into cooperation with Chinese rivals
The European Commission attempted to intervene by imposing tariffs on Chinese-made electric vehicles following an anti-subsidy investigation, but the added costs have done little to stem the inflow.
The tariffs do not apply to plug-in hybrid vehicles, leaving a lucrative loop-hole for Chinese manufacturers to exploit.
These shifting dynamics are driving several European automakers to forge direct partnerships with Chinese competitors.
Stellantis, the Franco-Italian-American conglomerate, established a joint venture with Chinese manufacturer Leapmotor. According to ACEA data, Leapmotor’s European sales surged from just 7,701 units in the first half of 2025 to 48,261 units during the same period this year.
Volkswagen CEO Blume hinted that his company could pursue a similar path, telling investors the carmaker might begin manufacturing certain models in Europe that were originally developed in China for European consumers.
Olaf Lies, Minister-President of Lower Saxony—a major shareholder in Volkswagen—said earlier this summer that it would be a strategic error for the automaker to isolate itself from China’s technological advancements.
“Our objective should not be to isolate technological developments from one another,” Lies stated.
However, Schmidt warned that such a strategy carries significant risks for the German brand’s equity.
He noted that these vehicles would effectively remain Chinese-engineered cars bearing a VW badge, a dynamic that could prompt consumers to buy the cheaper Chinese-branded versions directly.
Accelerating the search for new markets
European automakers are also attempting to offset losses by pursuing growth in emerging markets.
“North America, India, and the Global South represent our growth engines for tomorrow,” Blume told investors during a briefing.
Yet Chinese manufacturers have already established a commanding presence in those regions, dominating electric vehicle sales across Southeast Asia and Latin America.
Under heavy pressure, European automakers are also attempting to monetize their mass-production expertise by capturing a share of rising global defense spending.
Blume told investors that Volkswagen is engaged in “very advanced discussions” with a defense contractor, adding that he expects “a decision to be made within this year.”
However, portions of the workforce, particularly in Germany, remain hesitant about associating the company with the arms industry.
Furthermore, the move carries a serious risk of retaliation from Beijing. Earlier this month, China imposed export restrictions on 14 defense and technology firms, including German defense giant Rheinmetall.
While those measures were presented as retaliation against export curbs targeting Chinese entities, automotive companies entering the defense sector could find themselves exposed to similar actions.
“European carmakers must act very, very carefully because this is not just a quick gain,” Pacheco warned. “It may look like one, but once you step onto that chessboard, you need to know how to play chess.”
Europe
Nokia and ICEYE sign deal to build sovereign Ukraine satellite network
Nokia and space technology company ICEYE have signed a memorandum of understanding with Ukraine’s Ministry of Defence to establish a satellite communications network controlled directly by the Kyiv government.
A press release issued by Nokia noted that the parties will jointly assess the feasibility of implementing a Ukrainian-controlled communications system.
The agreement was announced on 22 October during the Finnish Prime Minister’s visit to Ukraine. The primary goal of the cooperation was described as bolstering the country’s defence capabilities, first and foremost by strengthening its independent satellite communications capacity.
Earlier in October, ICEYE and Nokia announced that they would jointly develop secure broadband communication systems operating in low Earth orbit for public institutions.
Designed for defence, border security, emergency services, and disaster response teams, these European-origin technologies are stated to allow states to directly own and independently operate their own satellites, ground infrastructure, and terminals.
In remarks on the matter, ICEYE Chief Executive Officer and Co-Founder Rafal Modrzewski stated that Ukraine requires secure, sovereign, and high-capacity satellite communications systems under its complete control.
Mikko Hautala, Nokia’s Director of Geopolitical and Government Relations and Chairman of the Nokia Defence Board, pointed out that satellite networks ensure the continuity of communications even when terrestrial transmission infrastructure suffers damage.
Hautala said that together with ICEYE, they will explore how reliable and sovereign satellite communications can enhance Ukraine’s resilience and provide the Kyiv government with control over communications on which it depends.
Based in Finland, space company ICEYE develops and manufactures radar satellites and makes data obtained from these satellites available for use.
According to information shared by the company, its technologies are used in defence and intelligence, as well as in environmental monitoring, insurance, and emergency response operations.
Reports indicating that restrictions had been placed on the US satellite connection used by the Ukrainian military surfaced just before this agreement.
In a post on the night of 14 October, former Ukrainian Defence Ministry Adviser Serhiy Sternenko stated that terminals were losing connection when travelling at speeds of 160 kilometres per hour, and that these disruptions later began occurring at speeds of 60 to 70 kilometres per hour as well.
SpaceX head Elon Musk maintained that the US government owns and manages Starshield, the military version of Starlink, and that restriction decisions were therefore taken by US authorities.
The White House, meanwhile, stated that it had nothing to do with the restrictions.
According to a 22 October report in The Wall Street Journal citing US officials, US President Donald Trump personally asked Musk to lift the restrictions in question.
Following the discussion, US and Ukrainian officials stated that the system began operating more stably, while some Ukrainian representatives said functionality had not yet fully returned to its previous state. Trump confirmed that Ukraine’s Starshield access had been restored.
The restrictions met with backlash across Europe.
Accusing Musk of playing political games, Polish Foreign Minister Radoslaw Sikorski posted on the X platform: “We are your European customers, we are watching you.”
Poland has purchased approximately 25,000 Starlink terminals for Ukraine since 2022 and continues to cover the satellite connection costs of the Armed Forces of Ukraine.
Following these developments, the European Commission also announced that Ukraine’s inclusion in the Govsatcom programme is under consideration.
Bringing together the existing satellite capacity of EU member states, the secure communications programme is planned by Brussels to be expanded with commercial services at the start of 2027.
Europe
Mélenchon’s “new France” vision triggers fierce cross-party debate
Following the unrest in France this month, the country finds itself split between Jean-Luc Mélenchon’s project of a “new France” and Marine Le Pen’s call for “law and order”.
Triggered alongside the student revolt, the question of national identity has moved to the centre of the presidential race.
“This is Mélenchon’s ‘new France’,” said National Rally (RN) leader Jordan Bardella and Identity and Freedom (ID) party leader Marion Maréchal Le Pen, linking the scenes of violence directly to the phrase.
According to several recent speeches by the leader of France Unbowed (LFI), “new France” signifies a country transformed positively by immigration, women’s rights, shifting family structures, social mobility, and the political demands of younger generations.
Mélenchon contends that this optimistic vision can become a reality if voters elect him president next year.
Two Frances to clash this weekend
Yet as the April 2027 elections draw closer, Mélenchon’s vision of a “new France” has turned into a recurring target for Marine Le Pen’s party, the RN, because it encapsulates a fundamental rift over French identity.
While Le Pen’s party draws on nostalgia for a revived nationalist past, Mélenchon’s vision of a “new France” envisages a clean break with the old order.
These two visions appear set for a direct collision this weekend. Le Pen will stage a gathering in Orléans before 10,000 supporters, which RN officials say will focus on authority, French identity, and public order.
Mélenchon’s party, LFI, is expected to join demonstrations against the RN alongside other left-wing forces and trade unions in the historic French town associated with Joan of Arc, which Le Pen treats as a nationalist symbol.
Echoes of Sartre in “new France”: Change over essentialism
Defending the concept of “new France” against its critics, LFI argues that it cannot be understood without reading a little of the philosopher Jean-Paul Sartre and grasping the legacy accumulated from the left’s long ideological battles.
From a Sartrean perspective, “new France” is not a fixed, essentialist identity, but a fluid, changing reality.
Rather than declaring “this is who we are”, this outlook is grounded in “this is what we live through”, describing the varied realities confronted by precarious workers, women, people of non-French origin, and young voters.
According to this view, their lived experiences fit neither the right’s nor the left’s traditional national representations.
Mélenchon identifies women as the face of the “new France”. This category also encompasses blended families, young people, LGBT rights, long-distance commuters, and French citizens whose ancestors were born abroad.
Broadsides from the right, criticism from the left
Although he has used the phrase for years, pollsters note that it has become increasingly prominent as identity politics has come to occupy a larger share of his campaigning.
For critics across the political spectrum, “new France” implies casting “old France” aside.
Conservative Bruno Retailleau, for example, describes it as “the end of France”.
Former LFI ally François Ruffin criticises Mélenchon from the left. In Ruffin’s view, the LFI leader is trading class-based political appeal for an appeal directed at diverse urban electorates, sacrificing working-class towns and deindustrialised regions in the process.
Others dismiss the phrase as a slogan fabricated to drive polarisation across every cultural fault line.
Promoting the concept in May ahead of the French municipal elections, Mélenchon said: “The new France is not one part of France set against another; it is the whole of France.”
A month later, he noted that crowds at his rallies chanted “On est chez nous!” or “This is our home!”
Usually associated with far-right gatherings through the variant “France belongs to us”, the slogan, according to Rapporteur, offers a simpler expression of what the two camps are actually contesting: who gets to define French identity, and who feels at home in France.
Europe
EU unveils Arctic plan targeting military corridors and resources
The EU is developing plans to enhance its military mobility in the Arctic and aims to establish “multimodal military movement corridors” across the High North.
According to a report by German Foreign Policy, this initiative was outlined in the EU’s new Arctic strategy presented by the European Commission in Brussels on Tuesday.
Under the strategy, a complex logistics network consisting of “ports, airports, and their inland connections” will be created across the Arctic, designed to “remain operational even under adverse weather conditions.”
The strategy paper also announces that “exercises or stress tests” will be conducted to ensure the smooth deployment of military forces and capabilities to the Arctic.
Through this strategy, the EU is responding to the reality that climate change-driven Arctic ice melt is facilitating access to regional natural resources while opening new sea routes, such as the Northeast and Northwest Passages, which can now be used for both commercial and military operations.
The Arctic strategy aims for greater independence from the US and envisages laying a “pan-Arctic” submarine cable running from Europe through the polar region to East Asia.
Arctic natural resources
The EU’s new Arctic strategy addresses, among other topics, the natural resources located in the Arctic, both beneath the seabed and on land.
Due to thawing ice, these resources are already accessible or will soon become easier to reach, and Brussels supports their extraction.
Specific projects highlighted include a rare earth element extraction venture near Kiruna in northernmost Sweden and a plan to mine molybdenum in eastern Greenland.
Departing from its previous 2021 Arctic strategy, the Commission no longer advocates an outright ban on oil, gas, and coal extraction in the Arctic within a multilateral framework.
This policy shift comes as Norway has emerged as the bloc’s most vital natural gas supplier, providing approximately 30% of all its natural gas imports following the EU’s phased reduction of Russian energy imports.
However, production from Norway’s existing fields is expected to decline in the 2030s. Consequently, Norway plans to explore new deposits in the Barents Sea, where vast reserves are estimated to lie.
Dependent on raw material supplies from Norway as well as strategic cooperation with Oslo, the EU no longer opposes these exploration plans.
New sea routes opened by melting ice
The EU is also turning its attention to the gradual opening of new Arctic shipping routes.
For instance, the Northeast Passage, running along Russia’s northern coastline from East Asia to Europe, is now open to navigation between August and October.
This route is considerably shorter than the conventional transit via the Indian Ocean, significantly reducing shipping costs, especially in light of current oil prices.
A Chinese shipping firm launched regular services via the Northeast Passage this summer, while a South Korean vessel recently returned to the port of Busan after completing its maiden commercial voyage along the corridor.
Although used by few vessels to date, the Northwest Passage has also come into operation as a route extending from the North Atlantic through Canada’s northern archipelago and north of Alaska toward East Asia.
Experts believe that, during the summer months, this passage could offer advantages over the traditional route via the Panama Canal “for certain vessel types and transport routes.”
The emergence of new military capabilities was underscored in September when four Russian warships navigated the Shokalsky Strait between two Russian Arctic islands for the first time in history.
Military mobility in the High North
This development represents another driver behind the EU’s new Arctic Strategy placing particular emphasis on military aspects.
Russia has been strengthening its Arctic military positions for some time, partly because the headquarters of its Northern Fleet, which hosts part of its second-strike capability, is located on its north-western coast, and partly because its exceptionally long northern coastline remains strategically vulnerable.
NATO has likewise been expanding its activities in the Arctic considerably, holding numerous exercises across northern Finland, Sweden, and Norway, as well as in Iceland and Greenland, alongside its new “Operation Arctic Sentry.”
The strategy document states that the EU must now strengthen its own posture in the Arctic.
This objective is to be pursued both in cooperation with NATO and through independent EU measures.
For example, situational awareness must be enhanced, including by leveraging EU satellite systems, particularly Copernicus and Galileo.
Additionally, the planned IRIS2 satellite constellation, conceived as Europe’s counterpart to Starlink, should be expanded to cover the Arctic to improve communications.
To coordinate these initiatives, the EU plans to establish a Maritime Security Centre.
The EU places special emphasis on military mobility in the Arctic. According to the document, rapid and large-scale troop deployments must be feasible in the region at any time if required.
To this end, “multimodal military movement corridors” incorporating ports, airports, and their inland connections need to be established.
These facilities will be designed as a unified, complex logistics system “capable of remaining operational even under adverse weather conditions.”
Realising this plan will require preparation for “ice clearance,” “the handling of heavy and oversized military vehicles on frozen ground,” and “the rapid repair of damaged infrastructure.”
Looking ahead, the EU is urged to organize “exercises or stress tests focused on the smooth deployment of forces and military capabilities to and within the Arctic” in cooperation with NATO or like-minded partners.
Viewing these capabilities as vital for “credible deterrence,” the EU also underscores the need for its own icebreaker fleet to clear pathways through the ice for warships.
The Arctic’s role in “strategic autonomy” vis-a-vis the US
Throughout this process, the EU is not only adopting a clear stance toward Russia, but is also pursuing greater independence from the US.
On one hand, the strategy encourages deepening ties with Greenland, which is part of Denmark, does not belong to the EU, and has faced threats of US annexation. The document designates this relationship as a cornerstone of the new Arctic strategy.
On the other hand, the text calls for intensifying cooperation as part of a “Northern Neighbourhood” strategy with Norway, Iceland, and Canada, as well as with the UK, which occupies a strategically advantageous position despite not being an Arctic coastal state.
The EU maintains a security and defence dialogue with Norway, holding its fifth session this past April, alongside launching an “Arctic Dialogue” with Oslo this year.
Canada is classified by the European Commission as a “natural ally” in the Arctic. Observers note that while Canada is mentioned dozens of times throughout the strategy, the US is cited only a handful of times.
This contrast is seen as evidence that the EU is seeking independence from Washington in the High North.
Accordingly, the document explicitly references “European strategic autonomy” as an “integral component of the Arctic.”
Pan-Arctic cable plan extending to Japan
The EU Arctic Strategy also identifies Japan and South Korea as cooperation partners in the region.
This partnership is linked to plans to connect Greenland to the EU via a submarine cable, which would subsequently be extended across the Bering Strait to Japan and South Korea.
Berlin has advocated the construction of such a “pan-Arctic cable” for some time.
According to a statement issued in early July by the Berlin-based German Institute for International and Security Affairs (SWP), such an infrastructure project is highly desirable for multiple reasons.
First, data traffic between Europe and Asia, 90% of which currently passes through the Red Sea and the strait between Djibouti and Yemen (Bab el-Mandeb), “suffers from a high failure rate and a lack of redundancy.”
Furthermore, the Arctic route is “significantly shorter,” resulting in reduced latency and fewer transmission delays.
International equity trading in particular stands to benefit from “real-time data transmission” enabled by a new polar cable link.
SWP outlines two potential routes for the cable: one running west of Greenland and the other running east.
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