About 2.6 million fewer cars roll out of European factories than in 2019. That is a drop of 19%, and it is the starting figure of a September policy brief from Bruegel, the Brussels think tank. The brief’s verdict is blunt: the EU has answered the crisis in its car sector with protection when it should be helping carmakers adapt.
Why output fell
COVID-19 restrictions hit production in 2020, and semiconductor shortages interrupted assembly lines in 2021 and 2022. Demand then weakened as well. Europe’s showrooms moved 2.2 million cars fewer in 2025 than in 2019, and Bruegel says nobody can yet tell whether that is a dip or a lasting change. Signs point to the lasting kind: city dwellers use public transport more, young people care less about owning a car, the fleet is ageing and the used-vehicle market is growing.
One detail complicates the picture. Manufacturing across the EU has stayed stable, which suggests activity is being reshuffled into other sectors, not simply lost.
Nor is the car industry on the edge of collapse. Its value chain employs 14 million people, which is 6% of EU employment, remains a large net exporter, has posted historically high profit margins and spends around €3 billion each quarter on battery and electric vehicle plants. What is at risk, the report says, is “erosion of export markets, technological leadership and supplier networks.”
An implicit pact
Bruegel describes current policy as “an implicit pact”: Brussels keeps foreign competitors out, and manufacturers in return build their supply chains in Europe. “Consumers and taxpayers will bear the costs of this pact,” the authors say. The Commission has proposed postponing the switch to electric vehicles and attaching compulsory local-content conditions to EV subsidies, while the Union has put tariffs on Chinese electric vehicles. “This approach is misguided,” the brief says.
The price tag is specific. A rule that battery cells be produced inside the EU would lift what they cost, now €50 per kilowatt-hour, to €85, roughly €2,100 more for a typical electric car. Low-carbon steel rules would add €200. Commission plans for simpler vehicle approval would save carmakers only €61 per car. The heaviest burden lands on cheaper models and poorer buyers.
France gives an early look at the effect. Its subsidy scheme in practice leaves out Chinese brands, and sales of ineligible electric models dropped 60% relative to eligible ones. Constant rule changes make matters worse, the report warns: “regulatory unpredictability is itself a competitiveness cost.”
A tariff with a gap
The tariffs of October 2024, set at up to 35.3%, hit battery-only cars and spare plug-in hybrids. Shipments of the first kind have levelled off while hybrids pour in. Bruegel argues that blunts the duties as protection for European factories and pushes buyers toward more polluting cars. This year Chinese-built EVs, over half of them wearing Western badges, passed 20% of the EU’s electric sales.
Its remedy is the same tariff on both types, plus a deal with Beijing, limited in time, that sets export quotas and restores duties automatically if they are breached. Euronews adds that Brussels is said to have opened contact with China this month on curbing hybrid exports.
Pressure on carmakers is real. Volkswagen warned of one-off charges near €10 billion, lowered its margin outlook to no more than 1% and dropped out of the Euro Stoxx 50.
Sources
- 'Made in Europe' battery rules could add 2,100 euros to electric car prices, report says (Euronews)
- The European Union's automotive sector needs a plan, not undue protection (Bruegel policy brief)
