The global automotive market faced a tough reality check in 2024, with growth slowing to just +1.7% after a robust +10% in 2023. Allianz Trade’s latest report highlights that 2025 is set to be another challenging year, particularly for Europe, which lags behind China and the U.S. in both market growth and electric vehicle (EV) adoption.
Challenges facing Europe’s auto sector in 2025
While China continues to lead with a +40% surge in EV sales, Europe saw a contraction in 2024, marking it as the only major market to experience such a setback. With tighter CO2 regulations on the horizon, European automakers face mounting pressure to innovate and compete in the EV space.
The Allianz Trade report identifies three key challenges for Europe’s auto sector: a delayed shift to electrification, over-reliance on Chinese battery supply, and a misalignment between policy goals and practical implementation. European manufacturers have underinvested in technology and R&D, making their vehicles less competitive and more expensive than their Chinese counterparts. Additionally, Europe's dependence on China for batteries and the looming threat of trade tensions further strain the industry.
A roadmap for Europe’s automotive comeback
However, the report also outlines a 10-step plan for Europe to regain its competitive edge, drawing lessons from China’s industrial policies, Norway’s infrastructure development, and Tesla’s innovation-driven approach. Recommendations include reducing model line-ups, investing in tech and charging infrastructure, exploring new markets, and fostering joint ventures.
For policymakers, strategic actions such as imposing tariffs, offering subsidies, and investing in EV infrastructure are essential to drive growth.
Download the report on Allianz Trade's website
