Europe’s auto industry at a crossroads: Time for decisive action
- Paul Bennett
- Sep 25
- 7 min read
As Chinese automakers surge into Europe and legacy manufacturers accelerate their EV transition, the stakes have never been higher. Munich’s upcoming Global Data Automotive Europe Conference will be a pivotal moment to chart a bold path forward.
As Chinese automakers double down on Europe and legacy manufacturers race to electrify, the continent’s automotive sector stands at a defining moment. With Munich’s Global Data Automotive Europe Conference approaching, the industry faces hard questions about competitiveness, strategy and the bold action needed to secure its future.
Hot on the heels of the IAA Mobility Expo 2025 (IAA), Munich will host another pivotal automotive event: the GlobalData Automotive Europe Conference (15–16 October). This year’s agenda is packed with cutting-edge topics and features an impressive roster of speakers and panellists from across the automotive spectrum. Delegates will unpack the major issues, trends and insights currently challenging, disrupting and reshaping the European automotive industry.
Looking back, the IAA proved to be a watershed moment for the sector, showcasing both the strength of established manufacturers and the rising tide of Chinese competition. It also highlighted the complex dynamics shaping the evolving landscape of electric vehicles (EVs) and sustainable mobility.
European manufacturers fight back
European automakers arrived in force, demonstrating their commitment to electrification and innovation. BMW led with its Neue Klasse iX3 EV – a model it describes as “the redefinition of the BMW brand and the logical dawn of a new era of individual mobility.”
Other giants followed: Mercedes-Benz presented its new GLC with EQ technology, Volkswagen unveiled the ID Polo EV and Scout concept, Renault debuted the Clio 6, Skoda launched the Epiq SUV, Audi showed its Concept C sports coupe, while Cupra and Opel rolled out the Raval and Mokka GSE respectively.
This strong showing underscored Europe’s determination to maintain its position, particularly in the small-and mid-size EV segments crucial for mass adoption.
‘Bold and fast action required’ – but is it enough?
On 12 September in Brussels, the Third Strategic Dialogue with the European Automotive Industry concluded with the call for “bold and fast action” – a declaration that, to my mind, appears to be somewhat lacking in urgency.
Given the significant challenge posed by the influx of vehicles from Chinese manufacturers, one might have expected a more robust response. Personally, I would have thought that the First Strategic Dialogue would have allowed delegates to conclude that, “bold and fast action was required”. The European automotive industry is facing a pivotal moment, and the response whilst measured and diplomatic in tone needs to better reflect the gravity of the situation.
While it’s positive that the need for decisive measures has been recognised, the question remains – is this enough, and is it too little, too late? The European auto sector needs more than simple acknowledgment of the challenges it faces, rather it requires a concrete, proactive strategy to maintain its competitive edge in the rapidly evolving global market.
The Chinese onslaught
Perhaps the most striking development at the IAA was the unprecedented presence of Chinese automakers. With 14 brands and more than 100 suppliers – double previous attendance – major players such as BYD, Xpeng, Leapmotor, Changan, Chery, Avatr, Hongqi, GAC and Aito showcased their latest EVs, PHEVs and digital features.
BYD, for example, launched its next-generation DM-i Hybrid Technology and Denza Megawatt Flash Charging technology, positioning its PHEVs as an attractive stepping stone for consumers moving from ICE to full battery-electric.
Implications for Europe
China’s focus on the new energy vehicle (NEV) was announced in the early 2000s as part of the country’s broader industrial strategy. Their aim was ‘to become a dominant global player in automotive’. In a little over 20 years, with the help of a largely lethargic European industry, China’s aspiration is well on its way to fruition.
How could this possibly have transpired? Simply put, and in my opinion, the European OEMs either didn’t believe that China would be able to achieve their goals or pooh-poohed the ‘new energy vehicle vision’, or where simply too focused on their day-job of selling vast quantities of cars in China which for some OEMs accounted for 50% of their global profits. Either way, the legacy OEMs have been found wanting as Chinese manufacturers have achieved a tremendous feat in an extremely short period of time for which they must be applauded.
For example, let’s take BYD Auto who today is the largest global manufacturer of electric vehicles. The company was established in 2003, producing their first ICE car only two years later in 2005 and their first BEV in 2009. In six short years they have succeeded in building a vast vertically integrated business including a fleet of RoRo car carriers. In fact, BYD Auto only rely on third party suppliers for glass and tyres. Their meteoric rise to date is quite simply, mind-boggling.
The surge of Chinese automakers at the IAA signals their clear intent to gain significant market share in Europe, directly challenging the dominance of established European brands. For example, Chinese brands in the UK now account for more than 10% market share compared to less than 1% in 2020. In the next few years, we will witness a slew of new brands entering both the EU and UK markets; all arriving with the same high aspirations of selling their cars and securing their market share goals, primarily this will be at the cost of the European legacy manufacturers.
Such implications are very serious indeed. European manufacturers face the monumental task of accelerating their EV transitions while simultaneously battling technologically advanced and potentially more affordable Chinese alternatives. This is far from a fair fight. Many Chinese automakers benefit from state and or regional government support, lower labour costs as well as lower energy costs giving them a significant competitive advantage. You only have to compare equivalent models on sale in their home market with Europe to understand that Europe provides rich pickings for Chinese manufacturers to exploit and conquer.
In this vein, BYD is currently building a production facility in Szeged, Hungary that will shortly come on stream, adding further pressure to legacy manufacturers. As an EU-member state, vehicles produced in Hungary (be they PHEV, BEV or for that matter ICE) will enjoy tariff-free access to the entire EU market, effectively circumventing any potential EU tariffs.
This strategic move allows BYD and other Chinese automakers to establish manufacturing facilities within the EU, be it Hungary or another low labour cost production country and undercut European manufacturers on their own turf. To my mind, this can only be considered as madness.
Europe’s Auto Industry: Too Big to Fail
13.2 million Europeans work in the automotive sector
10.3% of all EU manufacturing jobs
€383.7 billion in tax revenue for European governments
€106.7 billion trade surplus for the EU
Over 7.5% of EU GDP generated by the automotive industry
€72.8 billion in annual R&D spending (33% of the EU total)
(Source: ACEA)
From tariffs to JVs: A path forward
Just like many of the banks in the global financial crisis where considered too big to fail, so is the European automotive industry and it must be safeguarded. In partnership with OEMs and Tier-1 suppliers the EU commission needs to be extremely bold, courageous and decisive, and implement a proactive strategy immediately, before more years pass and we look back over our collective shoulder, wondering what happened. We have no time to waste. We need action today.
As stated, the BYD auto plant in Hungary will shortly be active, and I’m certain that this will suit the Hungarian economy very well by attracting considerable inward investment and very likely guaranteeing employment for many thousands of Hungarians. Yet, what is fails to do is to serve the long-term interests of the European Union and its established automotive industry. As such, it is my firm belief that it is time to revisit the trade criteria implemented by China on Western auto manufacturers when they set up production facilities in China all those years ago and implement reciprocal measures today.
Let’s not forget that China mainly built their automotive industry on the back of the knowledge and manufacturing skills acquired from major European manufacturers. For example, back in 1984, Volkswagen Group established the Shanghai Volkswagen Automotive Co (SAIC) in a JV to build the Santana model. It was this that effectively established the Chinese auto industry, and the firm went on to build 4 million Santana models until production ceased in 2013.
So, what is the entry price to be paid by Chinese auto manufacturers who wish to access European Union’s 450 million consumers? Well, it’s very straightforward. Chinese car companies must establish joint ventures with existing European automakers, mirroring the requirements once imposed on European manufacturers in China. These joint ventures must mandate a controlling interest of 51% for the European partner, ensuring that European companies retain decision-making power and influence. In addition, an agreement setting out the requirements for technology sharing that encompasses vehicle design, software development and battery technology together with the requirement for a certain level of components used in the manufacture of vehicles to be purchased from EU producers.
Such measures would not only protect European jobs and expertise but also foster innovation and collaboration. By mandating that Chinese automakers partner with European companies, the EU can ensure that European manufacturers benefit from the influx of technology and investment, allowing them to compete more effectively in the global EV market and Chinese manufacturers have free access to the EU. This represents a fair and balanced approach which delivers a win-win for all stakeholders.
Unite and demand action
The ‘Auto Union’ of European carmakers must unite and demand action from the European Commission. This isn’t about protectionism; it’s about ensuring fair competition and safeguarding a vital industry.
The future of the European automotive industry hangs in the balance. The time for decisive action is now. Europe must act to protect its auto industry from being overrun by heavily subsidised competition.
Paul Bennett’s expertise keeps Madox Square LLP on course in the ever-shifting automotive landscape. Offering a blend of strategy, collaboration, and a sharp eye for emerging trends, he’s looking to ensure his clients are well-positioned for the future. And if his rowing machine times are anything to go by, he’ll likely cross the finish line ahead of the competition — Rich Tea biscuits in hand.
