Stability Returns After Years of Turbulence
Europe’s car industry is showing early signs of stabilization following a prolonged period of market uncertainty. Data from the European Automobile Manufacturers’ Association (ACEA) indicate that new vehicle registrations across the European Union have remained largely unchanged throughout 2025, signaling a pause in the steep declines of previous years. The improvement is being driven by improved supply chain reliability, steady energy costs, and consistent consumer demand. Electric vehicles are at the forefront of this recovery, now representing roughly 20% of new sales, supported by government subsidies and the expansion of charging infrastructure across key EU markets.
Chinese Electric Vehicle Makers Expand Footprint
As Europe’s domestic market steadies, Chinese automakers are moving aggressively to capture more of the region’s EV segment. Companies including BYD, MG, and Zeekr have increased exports and are planning European production facilities to reduce the impact of newly imposed tariffs. The European Commission levied duties of up to 35% on China-built electric vehicles in late 2024, citing state-backed subsidies that gave Chinese firms a competitive edge. Despite these tariffs, Chinese brands have grown to account for around 5% of the European market, appealing to price-sensitive buyers and corporate fleets with affordable and technologically advanced vehicles.
European Legacy Carmakers Face Rising Pressure
For established manufacturers such as Volkswagen, Renault, and Stellantis, stabilized sales have not translated into higher profits. The influx of lower-cost Chinese EVs has narrowed margins and accelerated the need for cost-cutting and investment in local battery production. Industry groups are pressing the European Union to boost support for domestic manufacturing and innovation in green technology. Analysts warn that 2026 could be a pivotal year as Europe’s traditional automakers work to maintain their position in an increasingly electrified and globally competitive market.
