BRUSSELS, September 24 — EU passenger car production has fallen by around 2.6 million units since 2019, a 19 percent drop, according to figures cited from ACEA for 2021 and 2026. That is the scale of the problem a new policy brief from a Brussels-based economic think tank sets out to address, and its central argument is blunt: the European Union’s response to the crisis in its automotive sector has centred on protection rather than adaptation. The brief argues that the EU’s automotive sector needs a plan, not undue protection.
The sector remains an enormous employer, and whole communities exist because of twentieth-century automotive production. The brief quotes de Meo (2024) warning that the “prosperity of Europe is at stake”.
How the decline happened
Output dropped sharply in 2020 because of COVID-19 restrictions, and production lines were interrupted throughout 2021 and 2022 by semiconductor shortages (Ziegler and Heidling, 2023). Demand has fallen alongside supply. Europeans bought 2.2 million fewer new cars in 2025 than in 2019, and it is unclear whether that drop is temporary or structural.
Greater use of public transport in cities and less importance attached to cars among young people might contribute to structural decline (ITF, 2024). Declining new car sales go alongside the ageing of the fleet and growth in the used-vehicle market (Zacharof et al, 2025).
One detail complicates the picture. EU manufacturing as a whole has remained stable, suggesting productive activities are being reshuffled to other manufacturing sectors rather than lost outright.
The policy fight
The European Commission has proposed to delay the transition to electric vehicles while introducing compulsory local content requirements for EV subsidies, and the EU has imposed tariffs on Chinese EVs. The brief calls this approach misguided. It says the EU should pursue a negotiated agreement with China to set export quotas for a maximum volume of electric vehicles, and that in September 2026 the EU made a first approach to China to discuss voluntarily limiting Chinese hybrid electric car exports to Europe.
If negotiations fail, temporary safeguards can be introduced. The goal should not be to prevent competition with the Chinese but to give European producers time to catch up.
The brief recommends simplifying the EU’s automotive policy architecture, tackling economic-security concerns through resilience criteria rather than local-content requirements, prioritising structural competitiveness enablers, and treating incoming investment as a catch-up opportunity. Any support should be temporary and linked to industry efforts to improve competitiveness in the manufacture of affordable electric vehicles, with costs to consumers and taxpayers kept proportionate to the benefits of preserving industrial capacity and jobs while maintaining an ambitious pace of decarbonisation.
What to watch next is whether the September approach to Beijing produces a negotiated quota on Chinese hybrid electric vehicle exports, or whether Brussels falls back on temporary safeguards. Either way, the brief’s authors have framed the choice for European producers as time to catch up, not shelter from competition.
