The European automotive industry under pressure

The automotive industry on the Old Continent is faltering in the face of an uncertain viability of the transition to electric power, fierce international competition and regulatory pressures. Recent disappointing publications from the sector's European giants, and forecasts that have been revised downwards for the most part, testify to a worrying trend.

On the tightrope

The sector is particularly affected by the erosion of market enthusiasm for electric cars, despite the colossal investments injected by manufacturers to comply with new trends and environmental requirements. The high cost of electric vehicles, on average 36% more expensive than combustion models, is holding back their adoption, with EV market share in Europe dropping from 16% in 2015 to 13% in 2023. Faced with high prices and a lack of infrastructure (charging stations, etc.), consumers are turning more to hybrid models, perceived as a more affordable and less restrictive alternative.

In addition, the industry is facing significant bottlenecks linked to supply and operational challenges associated with electric vehicle production, leading to production delays and insufficient supply.

On the other hand, competition from Chinese manufacturers, who offer more attractive prices, has also eroded the dominant position of European manufacturers such as Volkswagen, which is losing ground on the Chinese market. The situation is all the more delicate given the importance of the Chinese market for German brands (30% of pre-tax profits for BMW, Mercedes and VW), economic uncertainty in the country and customs tensions between authorities.

Faced with an asphyxiating economic situation and a lack of disruptive growth drivers, the industry is not expected to return to its pre-Covid-19 levels for another decade, with the exception of luxury manufacturers such as Ferrari, which are more resilient thanks to their pricing power.

A stock market low

On the financial markets, the situation is clearly illustrated by the performance of the STOXX Europe 600 Automobiles & Parts index, which has fallen by 3% over three years and 6% since the start of the year, reflecting the continuing difficulties of the European automotive sector.

Among the most significant changes since January 1 are :

Up: Ferrari (+25%), Renault (+9%) and Michelin (+5%).

Down: Stellantis N.V.(-34%), Porsche AG (-18%), BMW AG (-21%) and Mercedes (-8%).