The European automobile industry is facing a perfect storm of challenges that analysts believe will continue to impact the sector in the coming year. Automakers in Europe have been grappling with various obstacles on the path to full electrification, including a lack of affordable electric vehicle (EV) models, a slower rollout of charging infrastructure, stiff competition from Chinese manufacturers, stringent carbon regulations, and the looming threat of targeted U.S. tariffs.
These challenges have put European automakers in a tough spot, with industry experts foreseeing a turbulent road ahead. Julia Poliscanova, senior director for vehicles and e-mobility supply chains at Transport & Environment, described the outlook for European automakers as “quite bleak.” She emphasized that European car sales remain below pre-Covid-19 levels, and automakers are struggling to adapt to higher interest rates.
The European Union has set ambitious targets for reducing emissions from new vehicle sales, with the cap on average emissions dropping to 93.6 grams of CO2 per kilometer in 2025. Exceeding these limits could result in significant fines for automakers. The European Automobile Manufacturers’ Association has called for regulatory relief to ease compliance costs as EV demand falters and economic conditions deteriorate.
Several of Europe’s major car manufacturers have seen their stocks plummet this year, with Volkswagen, Mercedes, BMW, Stellantis, and Renault all experiencing declines. Among them, Stellantis has led the losses, down 37% year-to-date, while Renault has managed gains amid hopes of outperforming its competitors in certain markets.
Industry experts like Rico Luman, senior sector economist at ING, remain pessimistic about the financial outlook for European OEMs. Luman highlighted the challenges posed by the shift to EVs, which are generally less profitable than conventional vehicles, impacting the industry’s bottom line.
Despite the difficulties, some analysts believe that the key to boosting EV adoption lies in offering more affordable models to consumers. Horst Schneider, head of European automotive research at Bank of America, suggested that European lawmakers may need to provide some leeway to support carmakers as they navigate the transition to electric vehicles.
As the European auto industry grapples with these challenges, stakeholders are closely watching for potential developments that could reshape the sector and influence consumer choices in the future. The industry’s ability to overcome these hurdles and adapt to changing market dynamics will be crucial for its long-term sustainability and competitiveness in the global automotive landscape.
