This is according to a Deloitte Global Automotive Consumer Study 2026. It also holds lessons for the South African automotive market.

Why German automakers are losing their home market:

Deloitte’s research suggests that German manufacturers are no longer benefiting from the automatic loyalty of domestic consumers. German buyers are increasingly price sensitive, more cautious about new technologies and less willing to pay a premium purely for brand heritage. As a result, Germany is evolving into what Deloitte describes as a discount driven market.

This marks a significant departure from the past, where engineering excellence and brand prestige allowed German manufacturers to command higher margins at home. Today, consumers expect tangible value, transparency on pricing and proven reliability rather than promises of future innovation.

Germany becomes a discount market:

One of the most striking conclusions of the Deloitte study is the repositioning of Germany as a discount market. German consumers are delaying vehicle purchases, holding on to older cars for longer and actively comparing offers across brands and powertrains. Incentives and price reductions now play a decisive role in purchasing decisions.

Electric vehicles have not yet delivered the mass market breakthrough many manufacturers expected. High prices, charging infrastructure concerns and uncertainty around residual values continue to slow adoption. This has forced manufacturers to discount EVs heavily, eroding margins and weakening brand positioning.

China becomes a premium market:

In sharp contrast, Deloitte identifies China as a rapidly emerging premium automotive market. Chinese consumers show a strong appetite for new technology, digital services and advanced software driven features. They are increasingly willing to pay more for vehicles that deliver innovation, connectivity and personalisation.

Chinese brands have capitalised on this shift by offering highly specified vehicles at competitive prices while maintaining a perception of technological leadership. Premium in China is no longer defined by mechanical engineering alone but by software capability, user experience and continuous digital upgrades.

The big shift to EVs is not coming in 2026:

Despite regulatory pressure and long term climate targets, Deloitte concludes that the large scale shift to electric vehicles will not materialise in 2026 in either market. In Germany, hesitation is driven by cost concerns and practical limitations. In China, while EV adoption is higher, growth is increasingly selective and focused on vehicles that deliver clear advantages beyond emissions reduction.

This finding challenges the assumption that electrification alone will secure future competitiveness. Deloitte’s analysis implies that manufacturers must align electrification strategies with consumer readiness and perceived value rather than policy expectations alone.

Asia wants software, Europe does not:

A critical divergence identified by Deloitte lies in attitudes towards software. Asian consumers, particularly in China, view software as central to vehicle value. Over the air updates, integrated digital ecosystems and seamless connectivity are seen as essential features rather than optional extras.

European consumers, by comparison, place less emphasis on software innovation and remain more focused on traditional attributes such as build quality and driving comfort. This mismatch places German manufacturers at a disadvantage in China, where local competitors excel in software development and rapid innovation cycles.

The core problem in Germany:

Deloitte repeatedly highlights a core structural problem in the German market. Manufacturers are caught between rising costs, cautious consumers and an incomplete transition to new business models. Legacy production structures and slow decision making make it difficult to respond quickly to changing consumer expectations

At the same time, the domestic market no longer provides the margin buffer it once did. Discounting erodes profitability and limits the ability to fund large scale investments in electrification and digitalisation.

Three fundamental shifts identified:

The Deloitte study identifies three fundamental shifts shaping the future of the automotive industry. First, value is moving from hardware to software and services. Second, consumer trust is earned through transparency and functionality rather than brand history. Third, market leadership is increasingly determined by speed of innovation rather than engineering perfection

These shifts favour manufacturers that are agile, digitally capable and closely aligned with consumer behaviour, qualities currently more evident in the Chinese market than in Germany.

Implications beyond for South Africa:

While the presentation raises questions about how Southern African markets may position themselves, the core lesson from Deloitte’s analysis is global in nature. Markets that remain overly dependent on legacy strengths risk rapid erosion of competitiveness. Those that understand changing consumer priorities and adapt accordingly are more likely to thrive.

South Africa shares characteristics with Germany in terms of legacy manufacturing, brand heritage and established dealer networks, yet increasingly faces competitive pressure from Chinese manufacturers entering with strong value propositions.

One clear lesson is the risk of assuming brand loyalty will endure without delivering clear and immediate value. As seen in Germany, consumers become more price conscious when economic pressure rises, and heritage alone is no longer sufficient to justify premium pricing. South African buyers are already demonstrating similar behaviour, comparing features, pricing and ownership costs more closely than before.