European automotive industry structural crisis

The European automotive industry is experiencing a structural crisis driven by the transition to electric vehicles and intensifying global competition. Manufacturers are struggling with waning demand for internal-combustion models, stricter EU emissions standards, and the 2035 ban on new gasoline and diesel cars. Major German groups, including Volkswagen, have reported halved profits and declining sales, leading to discussions regarding plant closures and large-scale job cuts. This instability extends to supply chains in regions like the Czech Republic and Slovakia.

Financial pressures are compounding these challenges. Leading German suppliers such as ZF, Continental, and Schaeffler are facing high debt levels; in 2025, average financial expenses for these suppliers reached 102% of their operating profits. This debt burden hinders necessary investments in electrification and software development.

Additionally, the sector faces significant competitive pressure from outside the EU. Chinese manufacturers are increasing their market dominance, while Moroccan production provides a low-cost alternative for the Spanish market. Models produced in Morocco, such as the Dacia Sandero, have frequently outsold domestic European competitors like the Seat Ibiza due to lower costs and fewer regulatory burdens.