Europe’s car industry is fighting for survival

Let's start in the U.S. American import tariffs have already made cars produced in Europe 15 per cent more expensive. Add to that the stronger euro and prices will have increased by more than 30 per cent compared to the beginning of 2025. This is no longer viable unless you are prepared to sacrifice your entire profit margin.

The prospect of a U.S. judge ruling on the legality of these import tariffs offers little comfort. Even if they are found to be unlawful, U.S. trade law contains enough provisions to impose alternative tariffs, and even higher ones for some targeted sectors. President Trump needs additional revenue to finance the tax cuts in his 'Big Beautiful Bill'. And he will find it.

Then there is Europe itself. Higher energy prices than in the U.S. and China have been a handicap for years, but are now proving disastrous for the car industry. Car manufacturing is energy-intensive, involving steel, aluminium, plastics, paint shops and assembly lines. Electric vehicles (EVs) do not solve the problem. On the contrary. Anyone producing in Europe today starts with a structural cost disadvantage.

Unfair competition

But the real problem comes from China. The Chinese car industry is playing a different game on a different pitch with different rules. While European manufacturers are playing football, the Chinese are turning up with American football. Thanks to massive subsidies, low labour costs, in-house batteries, no historical legacy and minimal dealer costs, Chinese manufacturers can offer prices that European brands cannot compete with. This is not just a difference in efficiency, but in systems too.

According to calculations by BNP Paribas Research, in the lower EV segment, European models are, on average, 17% more expensive than Chinese ones (including import tariffs), while offering 28% less standard equipment. In the higher segment, the price difference is smaller, but European cars are still more expensive. Does brand loyalty at least provide additional protection?

Minimum prices

Import tariffs – 10% as standard, plus an additional 15% to 35% depending on the Chinese manufacturer – protect European producers against the influx of Chinese cars. However, to soften Chinese retaliation, the European Commission plans to replace import tariffs with minimum prices. Import tariffs increase the cost of Chinese EVs by more than minimum prices. The protective wall for European manufacturers will therefore come down. At the same time, EVs will become cheaper for consumers, accelerating the shift to electric driving.

Belgium shows where this is heading. From 2026, only fully electric company cars will remain 100% tax-deductible. EVs and plug-in hybrids already account for more than half of the market today. Studies show that once a certain threshold is crossed, a tipping point is reached after which electrification accelerates rapidly. Norway reached Belgium’s current level of EV and hybrid penetration in 2017. Now, EVs account for over 90% of new vehicle registrations.

The uncomfortable truth is that European manufacturers are facing accelerated electrification and Chinese competitors with a significant technological lead in this field. The comparison with the transition from traditional photographic film to digital photography is compelling: the technology was well understood, and the trend was clear, but those who clung too long to the existing model were inevitably overtaken.

Closing that gap will require more than import duties or minimum prices. Europe will need to simplify faster, invest heavily in battery technology and rethink its industrial value chains. Fewer models, more scale. Less nostalgia, more execution. Protective measures can buy time, but they cannot guarantee a future. In this fight for survival, Europe must start catching up quickly.