The European automotive industry is undergoing a profound structural shift driven by the rapid rise of Chinese electric vehicle manufacturers and increasing global competition in the transition toward electrified transport. The combined pressure of technological change, trade tensions, and shifting market dynamics is forcing long-established European carmakers to reassess their industrial strategies and cost structures.
The expansion of Chery Automobile illustrates the scale of this transformation. Founded in China in the late 1990s with local government support, the company has grown into a significant player in the global automotive market, particularly in electric vehicles. In a notable reversal of traditional industrial flows, Chery has expanded into Europe, including the establishment of a production facility in Spain in 2024.
That facility is located at a former Nissan plant in Barcelona, which ceased operations in 2021. The site has been revived through a partnership between Chery and Spanish firm EV Motors, which has also revived the historic Ebro brand to produce vehicles using Chinese technology and components. While the move has restored some employment at the site, workers have reported differences in working conditions compared to the previous Nissan era and have called for a dedicated collective agreement.
At the same time, Europe’s leading automakers are facing worsening financial pressures. Recent data indicates declining profits across major groups including Volkswagen Group, Mercedes-Benz Group, and Stellantis, with some reporting losses. Only a limited number of companies, such as BMW, have managed to maintain relatively stable results, though often with reduced margins.
Against this backdrop, Volkswagen has announced a major cost-cutting program that could involve up to 100,000 job reductions globally, significantly higher than earlier estimates. The company is also considering the closure of multiple factories in Germany, marking an unprecedented step in its modern history and highlighting the severity of the restructuring underway in the European automotive sector.
Industry analysts attribute much of the pressure to intensifying competition from Chinese manufacturers. These companies have expanded their global market share through lower production costs, faster innovation cycles, and strong integration of software and battery technologies. As a result, European manufacturers have lost ground both internationally and within China, where domestic brands have increasingly dominated the market.
Another key factor is the slower-than-expected adoption of electric vehicles in Europe. According to sector experts, European automakers have struggled to adapt their industrial structures to the demands of electrification, while still carrying high production costs and operational rigidities rooted in long-established manufacturing models.
In response, the European Union is examining additional industrial protection measures, including potential expansion of tariffs on electric vehicles imported from China. While these policies aim to level the competitive playing field, experts caution that structural advantages held by Chinese manufacturers—particularly in battery supply chains and vertical integration—cannot easily be offset by trade barriers alone.
The debate has also expanded to broader questions of European industrial strategy. Some industry leaders are calling for increased public investment, coordinated industrial policy, and a unified approach to restoring competitiveness against China and the United States. Others argue that regulatory fragmentation and slow decision-making within Europe hinder rapid adaptation to global technological shifts.
Meanwhile, Chinese manufacturers continue to expand their international footprint. Alongside dominance in their domestic market, they have significantly increased exports of electric vehicles, reinforcing China’s position as a global leader in automotive electrification. This growth has been driven not only by traditional automakers but also by technology-focused companies entering the automotive sector over the past decade.
The result is a fundamental reordering of the global automotive landscape. Europe’s industry, according to analysts, now faces the challenge of redefining its production model and competitive strategy in an environment increasingly shaped by rapid technological innovation and intensifying global rivalry.
