Stop Sleepwalking: Does Europe Still Want a Car Industry?

Walk around any major European motor show today and one thing is immediately clear.

China has arrived.

What was once seen as a curiosity has become a competitive force. Chinese manufacturers now occupy prime space, offering well-designed EVs, PHEVs, and ICE vehicles at price points and finance offers that many European brands struggle to match.

Their presence is no longer symbolic. Chinese-built vehicles now account for more than 10% of Europe’s car market, with an even stronger foothold in battery electric vehicles. The question is no longer whether they are coming. They are already here.

The real question is whether Europe still intends to have a car industry of its own.

An Industry That Underpins Europe

This is not simply a story about competition between car brands.

The automotive sector is one of Europe’s most important economic pillars:

• Contributes ~7% of EU GDP

• Supports millions of direct and indirect jobs

• Anchors regional economies across the continent

  
  

It is also one of the few industries where Europe has historically maintained global leadership. If this ecosystem weakens, the consequences will extend far beyond manufacturing. Employment, tax revenues, and industrial capability will all be affected.

This is not just an industry issue.

It is a question of economic resilience and strategic autonomy.

A Fast China vs a Slow Europe

China’s approach to automotive expansion has been fast, coordinated, and strategic.

Europe’s response has been slower and more fragmented.

The European Commission launched an anti-subsidy investigation into Chinese EV imports in 2023, confirming that state-backed support was distorting competition. Tariffs followed, in some cases reaching the mid-30 percent range. But by then, Chinese manufacturers had already secured a strong foothold.

Years of intense domestic competition had enabled them to:

• Drive down production costs

• Improve product quality rapidly

• Scale manufacturing efficiently

  
  

Tariffs may correct pricing at the margins.

They do not remove structural advantages.

Policy Complexity Is Slowing Execution

Europe’s automotive strategy is currently spread across multiple policy frameworks:

• Green Deal Industrial Plan

• Net-Zero Industry Act

• Critical Raw Materials Act

While each initiative serves a purpose, together they create complexity.

In contrast, countries like China and the United States are deploying clear, focused industrial strategies to secure leadership in mobility and clean technology. Europe, by comparison, risks falling behind not because of lack of capability, but because of lack of alignment and speed.

The Stakes: More Than Cars

Treating automotive as just another industry would be a mistake.

The sector sits at the intersection of:

• Manufacturing

• Technology

• Energy transition

• Employment

The transition to electric vehicles also introduces new dependencies.

The global battery supply chain is already heavily influenced by Chinese companies such as CATL and BYD. If Europe loses control over both vehicle production and battery ecosystems, it risks becoming dependent on external players for the future of mobility.

This also affects Europe’s ability to:

• Set global standards

• Control data and software ecosystems

• Maintain technological leadership

  
  

What Europe Must Do Next

If Europe intends to remain a global automotive leader, incremental change will not be enough. Three structural shifts are required:

1. Treat Automotive as a Strategic Industry

Europe often describes automotive as “strategic,” but policy does not yet fully reflect this.

Zero-emission vehicles and their core technologies should be prioritised with:

• Faster permitting processes

• Targeted financing

• Clear domestic production goals

  
  

Without this, investment will continue to shift toward regions offering stronger incentives and lower costs.

2. Use Market Access as Leverage

Europe’s single market is one of its greatest strengths. Access to that market should be used strategically.

Instead of relying only on tariffs, Europe can require:

• Local manufacturing and assembly

• Investment in European supply chains

• R&D commitments within the region

  
  

As vehicles become increasingly software-driven, data governance and cybersecurity standards should also be part of this framework.

3. Make the Transition Work for People

The shift to electric vehicles is not just an industrial challenge. It is a social and political one.

If the transition is seen as a threat to jobs, it will face resistance. Instead, it must be positioned as an opportunity.

This means:

• Reskilling workers in engine and transmission sectors

• Supporting regions heavily dependent on automotive jobs

• Aligning EV policies with job creation in batteries and software

A strong EV ecosystem could create hundreds of thousands of new jobs by 2030.

But this outcome is not automatic. It requires deliberate action.

The Window Is Closing

Chinese manufacturers are expected to continue gaining market share in Europe, potentially reaching the high teens before the end of the decade. But this is not yet inevitable dominance.

European manufacturers still have:

• Strong brand equity

• Established dealer networks

• Deep engineering expertise

The opportunity to compete remains. But it is narrowing.

Conclusion: A Strategic Choice, Not a Market Outcome

Europe still has the tools:

• Trade policy

• Industrial funding

• A vast single market

• A strong manufacturing base

What it lacks today is urgency and coordination. The decision facing Brussels is not abstract.

It is immediate and strategic.

Europe can either:

• Accept becoming an import market for vehicles and mobility technology

Or:

• Act decisively to protect and strengthen its automotive industry

Because this is no longer just about competition. It is about whether Europe intends to remain a producer of mobility, or become a consumer of it. If Europe still wants a car industry of its own, it is time to stop sleepwalking and act accordingly.