German Car Manufacturing Sector Power Demand Could Fall

Why It Matters

The decline signals reduced industrial electricity demand and underscores Europe’s vulnerability to China’s EV dominance, affecting both the automotive supply chain and energy markets.

Key Takeaways

• German car power demand to decline as production falls
• EV output rising but insufficient to offset ICE decline
• China’s EV surge pressures Europe, tariffs debated
• Volkswagen cuts German capacity by 40% by 2028
• EU subsidies aid EVs, but limited market share

Pulse Analysis

Germany’s auto industry has long been a cornerstone of the nation’s energy consumption, accounting for nearly 3% of total electricity use. Yet the latest VDA data shows a gradual erosion of that demand, with power draw slipping to 12.86 TWh in 2024 after years of modest decline. The trend reflects a broader contraction in vehicle output: production peaked before the pandemic, fell sharply, and now hovers around 4.15 million units. Even as electric‑vehicle (EV) volumes climb—reaching 1.67 million in 2025, a 23% increase—the overall manufacturing base is shrinking, limiting any offsetting rise in electricity use.

The competitive landscape is reshaping the sector’s outlook. China now produces 34% of the world’s vehicles, up from 28% in 2019, while Europe’s share has slipped to 19%. This shift, coupled with China’s control over critical raw‑material supplies and generous EV subsidies, pressures German manufacturers to adapt or lose market share. Policy responses are contentious: the VDA opposes EU tariffs on Chinese EVs, fearing retaliation, while the United States threatens 10% duties on German exports, adding another layer of uncertainty for the industry.

For stakeholders, the implications are twofold. Energy providers must anticipate a slower growth trajectory for industrial electricity demand, potentially reallocating capacity toward other sectors or renewable integration. Automakers, meanwhile, face a strategic crossroads: invest heavily in EV production to capture the growing share—projected to exceed 40% of domestic output—while managing the inevitable decline of internal‑combustion‑engine (ICE) lines under tightening EU emissions rules. The €3 billion German subsidy scheme offers a modest boost, but its impact is limited to a small slice of the market. In sum, Germany’s automotive power demand is set to fall, reflecting a broader transition that will reshape both the continent’s manufacturing footprint and its energy landscape.