Nearly all German manufacturers are boosting incentive promotions or planning further inducements for customers.
Bernd Gottschalk, president of the German auto industry association (VDA), believes the escalation cannot continue.
Consistently high incentives would be "highly dangerous" he said. Currently only a few can avoid the push to raise discounts, he added.
There is also alarm at the German Federation for Motor Trades and Repairs (ZDK). "We are almost at the point of reaching an American-type situation," warned President Rolf Leuchtenberger. He criticized the "revenue fetishists" for overlooking the "essential question of returns."
The German Association of Motor Vehicle Importers (VDIK) came to a similar conclusion.
VDIK President Volker Lange said additional discounts will "hardly generate new customers" among economically uncertain Germans.
But the incentives war is spinning out of control. Even premium carmakers Porsche, Mercedes-Benz and BMW are trying to help dealers sell. Mercedes is offering attractive financing for E- and the A-class models. BMW is subsidizing stock sales of its 3- and 5-series sedans.
Volume manufacturers are digging even deeper into their own pockets. Double-digit discounts are available across all brands. The price reduction is 4,000 euros on some models.
Michael Lamle from the Volkswagen dealers' Association said the discount battle did not lead to more sales but to just "changing money."
VW is offering an 800 euros incentive on for its best-selling Touran if it gets into a bidding war to win a customer. This discount comes even though "from a business perspective, a subsidy is unnecessary," Lamle said.
VDA President Gottschalk said: "The consumers' mentality of bargain hunting and extreme haggling is preventing a reversal of the trend."