Europe’s auto industry in fight for survival

The scale of threat posed by Chinese vehicle manufacturers to legacy European OEMs has reached crisis point.

China’s exports have risen exponentially, whereas its domestic demand for European brands has contracted, posing serious challenges to Europe’s automotive industry. In the first half of the year, China was the largest source of imported vehicles to the European Union, increasing its volumes by 52.8% year-on-year to more than 708,000 vehicles, which accounted for more than a third (34.8%) of all EU car imports.

The EU and China have reached an interim agreement to cap Chinese exports of hybrid and plug-in hybrid vehicles by more than half over the next four years. The arrangement is designed to ease trade tensions and protect European automotive manufacturing.

Hybrid-electric vehicles were the most popular powertrain over the first eight months of the year, accounting for 36.6% of new EU car registrations, while plug-in hybrids (PHEVs) increased their share from 8.8% to 10%.

Battery electric cars captured 21.7% of the market, up from 15.8% during the same period in 2025, although in August BEV registrations were up by more than 50% across Europe, to account for more than 29% of the market, according to JATO Dynamics.

Europe’s OEMs are also on the backfoot in the competition for components, such as semiconductors and power electronics, as well as critical materials. A report by EY has warned that the bloc’s automotive industry faces growing supply chain risks from its dependence on a limited number of countries.

As a result, Europe’s electric truck manufacturers are struggling to comply with the EU’s own proposed European local content requirements for new vehicles. A new Ricardo study commissioned by the European Automobile Manufacturers’ Association (ACEA) found that around half of medium and heavy trucks produced in Europe are currently unable to meet proposed battery localisation rules. The “made in the EU” requirements proposed by the bloc’s Industrial Accelerator Act (IAA) mean that, as things stand, EU-made trucks would not qualify for access to public funding and incentives, including public procurement, purchase subsidies and tax benefits for battery-electric, fuel-cell and plug-in hybrid vehicles.

Europe’s battery supply chain simply has insufficient capacity to meet proposed localisation requirements to satisfy the IAA, which is destined to come into force in 2028.

In the face of these adverse conditions, ACEA is lobbying the EU to reform its legislative framework to help OEMs achieve the triple goal of decarbonisation, economic security and job preservation. ACEA argues that emissions targets enforced by financial penalties alone will not deliver the transition to zero emission road transport. The manufacturers want a market-based approach that offers greater flexibility and more time (especially for vans) to switch to zero emission powertrains.

Meanwhile, at a retail level, dealerships remain central to the car-buying journey across Europe, according to new research from Codeweavers. Its survey of more than 5,000 consumers across the UK, France, Germany, Italy and Spain, found that most buyers still complete their vehicle purchases entirely in person. Italy, France and Spain recorded the highest proportion of dealership-based purchases, whereas fewer than half (47%) of UK respondents purchased their vehicle entirely in person, indicating more widespread adoption of alternative purchasing journeys.

Paul Humphreys, Managing Director – Retail at Cox Automotive, said: “Consumers increasingly want the convenience of researching online, comparing options and checking affordability digitally, but they still value the reassurance and expertise that dealerships provide. The opportunity for retailers is creating a connected experience that allows customers to move between channels effortlessly.”