The European automotive industry is facing a full-blown collapse, as regulation, technological shortcomings, and fierce competition intensify simultaneously. A recent analysis by the US consultancy Kearney describes a crisis that strikes at the very foundations of the sector. The phasing out of internal combustion engines is accelerating this structural upheaval, as established business models are losing their viability. At the same time, competitive pressure from Asia is increasing, while the domestic market offers little stability. This collapse is therefore of a new magnitude, as even large manufacturers are finding it increasingly difficult to find alternative solutions.
Crash due to regulation and market pressure
In the European market, pressure is mounting due to strict CO₂ regulations, which increase both costs and risks. This is exacerbating the economic crisis, even though Europe has so far been considered a safe market. The structural shift is hitting manufacturers particularly hard because investments in new technologies must be made while profits are declining.
Outside of Europe, the situation is also deteriorating, while competitive pressure continues to intensify. In China, European companies lack the necessary clout in the electric vehicle market, and tariffs are hindering sales in the US market. These factors are exacerbating the downturn because international growth sources are drying up and the domestic market remains overstretched.
Shrinking Margins as a Consequence of Structural Change
Kearney analyzed the financial figures of major manufacturers such as VW, BMW, Mercedes, Stellantis, and Renault and derived a forecast to 2030. The result shows a significant deterioration, as the average return on sales is plummeting into negative territory. This development underscores the crisis, as financial resources for innovation are dwindling.
Without fundamental corrections, severe losses are imminent, forcing a painful decline in the industry. Competitive pressure is further intensifying because new entrants have more efficient cost structures. Thus, the structural change is gaining momentum and leading to a further collapse in profitability, which short-term measures will hardly mitigate.
The End of the Internal Combustion Engine as an Accelerator of the Crisis
From 2035 onward, only vehicles with zero CO₂ emissions during operation will be permitted to be sold in the EU, effectively ending the era of the internal combustion engine. This phase-out will hit European manufacturers particularly hard, as their technological lead was based precisely on this drive technology. The industry is thus losing a key anchor of stability.
While the EU is considering exceptions for plug-in hybrids or range extenders, such measures do little to alter the fundamental trend. The structural break is merely postponed, while the decline of existing models continues unabated. The crisis will therefore persist, even if individual segments appear to experience temporary relief.
Batteries and Software Intensify Competitive Pressure
The electric car differs fundamentally from the conventional vehicle, as battery and software expertise determine market share. Chinese manufacturers are leading in these areas, significantly increasing competitive pressure. European brands are losing influence, even though their reputations remain strong.
This transformation marks a profound upheaval that extends far beyond a mere economic downturn. The current slump is therefore not a snapshot in time, but rather a structural shift in the global automotive industry. Those who fail to manage this transformation will slide further into crisis, while new players expand their dominance.