Why German Auto CEOs Need to Go

Welcome to Issue #84 of The German Autopreneur!

A smartphone company launched its first car in March 2024. Now it ranks 3rd among the world's most digital automakers. Way ahead of BMW, Mercedes and VW.

Xiaomi proves: If you understand software, you can disrupt the auto industry.

The new Gartner Digital Automaker Index 2025 is out. It shows which manufacturers are winning the software transformation. And which are losing.

This is about the big shift happening right now: From Metal to Code.

The results? China overtakes the US. Europe falls behind. German manufacturers keep declining.

Today we'll see who's winning this transformation. Who's losing. And why German auto leadership has to go.

Four Chinese Companies Chase Tesla

The Gartner Index evaluates 24 automakers across 8 categories. Everything from corporate culture to autonomous driving. It uses over 14,000 data points to measure software transformation. A perfect score would be 100%.

Tesla leads with 79.3%. Going up 3% since 2024.

Behind them? Only Chinese manufacturers:

• Nio: 76.9% (+8%)

• Xiaomi: 72.5% (new to index)

• Xpeng: 63.9% (-4%)

• Li Auto: 60.1% (new to index)

This shows Tesla's lead is shrinking. And China is becoming a real threat.

Xiaomi: Newcomer of the Year

They've been delivering cars since March 2024. Now they're ranked 3rd globally.

And they even lead in talent, autonomous driving, and tech experience categories.

Their secret? They don't need to unlearn 100 years of hardware thinking. They start exactly where traditional automakers are trying to get.

Xiaomi brings 20 years of smartphone experience. They understand digital products. They already have the software. They just built a car around it.

The numbers tell the story: 360,000 cars sold in 18 months. Tesla took 6 years to hit that number.

China Overtakes the US, Europe Crashes

Regional average scores:

• China: 53%

• USA: 50%

• Europe: 33%

• Japan: 26%

China leads for the first time. Europe hits its lowest score since the index launched.

Why is China so successful?

Chinese EV startups are often led by tech founders. They understand software. They know how to build digital products. And they're not afraid of change. They're the attackers - with nothing to lose.

German Manufacturers Get Worse, Not Better

Here's the bad news:

• VW: 34.8% (-1%)

• Mercedes: 37% (-5%)

• BMW: 36.9% (-7%)

While competitors catch up, German manufacturers keep falling behind.

Gartner puts German OEMs in the "laggards" category. They're behind in technology and organization.

Gartner explains the problem: “European manufacturers show no real progress in culture, leadership, or talent.”

They say many boards still don't understand the importance of software. So they prioritize other things.

Autonomous driving shows the decline clearly: In 2024, German manufacturers were still in the top 3. In 2025, Xiaomi, Nio, and Tesla lead this category. German manufacturers are out of the top spots.

What Blocks Legacy Automakers

Gartner explains: "The problem starts with the board. It's hard to fundamentally change leadership. Often even major shareholders don't understand why software-first matters."

The core question: If the board doesn't get it, how can the organization transform?

Legacy automakers face 5 key problems:

1. Leadership without commitment - Software isn't a real priority

2. Conservative culture - They avoid risk

3. Inefficient R&D - Money gets wasted

4. Talent problem - Top software developers prefer tech companies

5. Competitive disadvantage - Can't match tech company salaries and conditions

According to Gartner, traditional automakers are unattractive to software talent. A huge competitive disadvantage.

Software-First Organization = Software-First Vehicle

The index shows a striking correlation: 0.88 between "Software-first Organization" and "Software-first Vehicle".

This means: Companies that prioritize software internally also deliver better products. Technology alone isn't enough.

Top performers have a clear playbook:

• Software as core business - Not an add-on

• Tech-experienced leadership - CEOs & boards with software backgrounds

• Agile decisions - Fast, unbureaucratic processes

• UX and AI focus - User experience at the center (not just buzzwords)

In the auto industry, 20.3% of board members have tech backgrounds. For CEOs, tech profiles stagnated at 12.8%. That's the problem.

Some Established Manufacturers Are Catching Up

Not all traditional manufacturers are falling behind:

• Hyundai: 45.5% (+33%)

• Stellantis: 41.4% (+29%)

• GM: 46.3% (+16%)

Their formula: Put tech people in charge, build unified software platforms, and pay competitive salaries.

These manufacturers prove: Catching up is possible. But only with structural and cultural changes.

My Take

German automakers are making drastic cuts. VW is eliminating 35,000 jobs. Mercedes 20,000. ZF 14,000. They're closing plants. Breaking up old structures. They're using this crisis to scale back to a healthy size.

But the study shows: That won't be enough.

The problem starts with the board.

While there's radical restructuring at the bottom, leadership stays unchanged.

We're trying to master the biggest transformation in automotive history. With the management team from the hardware era. That can't work.

Tech companies like Xiaomi prove: If you understand software, you can disrupt the industry in record time.

It all comes down to the decisions at the top.

It's time for generational change in German boards.

Not just swapping one CEO for another manager with the same mindset. We need a completely new type of person.

We don't need NPCs in boardrooms. NPCs are Non-Player Characters from video games. They always react the same way. They follow pre-programmed patterns. No creativity. No adaptability.

But that's exactly what we see: They're using yesterday's solutions for tomorrow's problems.

Now it's disruption time. It's not about optimizing anymore. It's about reinventing the car. We don't need optimizers. We need entrepreneurs who understand the new rules.

The current leadership did a great job. In the old world. Now it's time for renewal.

From Metal to Code. Not just at the bottom. But at the very top.

🔗 ft | ait | ev | af | md | ga

That's all for today.

Feel free to reply to this email with your thoughts.

Until next week,
Philipp

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After 10 years at Mercedes-Benz, I quit in 2020. In 2024, I started writing "Der Autopreneur". It became Germany's largest newsletter on automotive transformation. Now it’s also available in English.

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