European vehicle manufacturers at a crossroads
A new report has warned European vehicle manufacturers that only bold and decisive action will ensure they remain competitive into the 2030s.
Titled ‘Can Europe Still Build Cars into the 2030s?’, the report has been published by global consulting firm AlixPartners.
It identifies several structural challenges facing the European car industry that it warns cannot be resolved by tariffs, trade exemptions or current industrial policies alone.
The most immediate is the cost gap with Chinese manufacturers, with research finding a Chinese electric car costs £15,100 to produce while a European electric car costs £23,400 by comparison.
Meanwhile, vehicle software is another area where Chinese brands are setting the standard. They have developed and updated software-defined architectures from the outset, with cars under three years old making up more than three quarters of their sales. However, models launched in the last three years make up less than a third of sales for European manufacturers, who also have to invest billions of pounds to to develop the next generation of electrified, software-defined vehicles.
Battery cost and regulatory divergence between China, Europe and the United States also present substantial challenges for European brands, the report warns.
Andrew Bergbaum, global co-leader of the automotive and industrial practice at AlixPartners, said: “Europe built its modern industrial prosperity on the car. That legacy is now at stake. European carmakers margins have collapsed from 13.2% in 2021 to 6.9% in 2025, Chinese manufacturers are circling underused European factories, and the cost of developing the next generation of vehicles runs to billions of euros at precisely the moment carmakers can least afford it.
“The window to act from a position of financial strength is closing – and closing faster than most boardrooms and governments assume.
“The good news is that this is not a story with a predetermined ending. The companies and governments that make bold commitments now will define European automotive for the next decade. Those that continue to defer will find those decisions made for them, on someone else’s terms. The path forward is clear, but what remains to be seen is which companies – and which governments – are prepared to take it.”
