European Commissioner for Industrial Strategy Stéphane Séjourné in July 2026 explicitly called the situation of the European automotive industry an existential crisis. In his assessment, not only jobs in the factories themselves are threatened, but the entire ecosystem of related industries, from parts suppliers to distribution networks and automotive services. In 2019, the automotive industry supported approximately 13.8 million jobs in the European Union, representing roughly one in sixteen working Europeans, and over 7 percent of the bloc’s total economic output.
The growing expansion of Chinese manufacturers is becoming one of the most significant challenges for the European automotive industry. According to a report prepared by the Union of Entrepreneurs and Employers and the Centre for Eastern Studies, the current situation has been described as China shock 2.0. Unlike the first wave of China’s rise in the early 21st century, the current competition primarily concerns sectors considered strategic, such as automotive, machinery, chemicals and technologies related to the energy transition. The authors of the report point out that China’s trade surplus has already exceeded 1 trillion dollars annually, equivalent to nearly 1 percent of global GDP, and is the result of years of consistently implemented industrial policy in Beijing.
Data from June 2026 shows that Chinese brands already accounted for 11 percent of total new car sales in Europe. In the fully electric vehicle segment, their share reached 15 percent, while in the case of plug-in hybrids, which are not subject to EU tariffs, the share of Chinese manufacturers reached as much as 34 percent. This means that one in three plug-in hybrids sold in Europe comes from China. Dataforce Analyst Julian Litzinger points out that Chinese manufacturers are deliberately increasing hybrid sales before the European Union manages to extend anti-dumping duties to this category of vehicles as well.
In May 2026, Chinese brands overtook Japanese competitors for the first time in history in terms of monthly sales in Europe. The share of Chinese companies was approximately 12.01 percent, while Japanese corporations closed the month with a result of 11.32 percent. Analysts indicate that Chinese manufacturers achieved this result despite anti-dumping duties imposed by the European Union, which in some cases, such as for SAIC, reach 35.3 percent. The key to success turned out to be shifting the offer towards plug-in hybrid vehicles, which are not subject to tariffs, and investing in local production within the Union. BYD, the largest Chinese electric vehicle manufacturer, is building its first European factory in Hungary, and other corporations such as Geely and Chery have also announced plans to start production in Europe. The SDCM report estimated that the effects of growing competition from China could mean a loss of up to 87 billion euros in value for the European automotive industry.
Chinese competition breaks through EU barriers
European car manufacturers spent huge sums preparing for a rapid transition to electric drive, which consumers did not provide on the expected scale. When demand for electric vehicles turned out to be lower than forecasts, write-downs were brutal. At the same time, high production costs in Europe, including expensive energy and labour, and excessive bureaucracy put European manufacturers in a worse position against Chinese competition. The president of the Polish Automotive Industry Association, Jakub Faryś, points out that the industry is over-regulated by more than 100 different legal acts at the European level, not counting national ones.
In response to the deteriorating situation, the European Commission in December 2025 backed away from the plan to completely ban the sale of combustion engine cars from 2035. Under the new proposal, car manufacturers would have to achieve a 90 percent emission reduction target, and the remaining 10 percent of emissions would have to be offset through the use of low-carbon steel produced in the Union or e-fuels and biofuels. Reuters described this project as the European Union’s biggest departure from green policy in the last five years. Behind the Commission’s decision is the desire to protect millions of jobs in a sector that is struggling with many challenges, including competition from China, new tariffs imposed by the administration of President Donald Trump, and the requirements of EU climate policy.
Entrepreneurs also point to the problem of digital transformation. Volkswagen, which for years tried to build its own software, ultimately failed in this area, deepening its competitive problems. Chinese manufacturers, with more advanced IT systems and better range performance, are gaining an advantage over European rivals who are still struggling with outdated technological platforms and high production costs.
Costly transformation, weak demand and high energy costs
The scale of job reductions in the European automotive industry is unprecedented in decades. According to a report by the EU research agency Eurofound, the automotive industry in the European Union directly employs approximately 6 million workers and another 6 million in related industries. Since 2019, the rate of job reductions in the sector has clearly accelerated. In 2024 alone and at the beginning of 2025, layoffs announced by European companies affected approximately 100,000 jobs.
Germany lost approximately 125,000 jobs in the automotive industry since 2019. In France, employment in this sector fell by about one third since 2010, from approximately 425,000 workers to fewer than 290,000. Parts suppliers are feeling this most acutely. Their industry organisation CLEPA reports that the supply chain lost over 100,000 jobs in just two years, while creating only 7,000 new ones in the same period.
– 140 families are affected every day – said CLEPA’s Secretary General.
This means that every working day in Europe, approximately 140 people in the automotive supply sector lose their jobs. Mercedes-Benz has announced a voluntary departure programme, offering employees up to 500,000 euros to leave their jobs, which is the largest job reduction programme in the company’s history. BMW plans to reduce employment by approximately 5 percent by the end of 2026. Bosch and ZF Friedrichshafen, two of the world’s largest suppliers, have announced significant layoffs. ZF Friedrichshafen plans to reduce between 11,000 and 14,000 jobs in Germany by 2028. For suppliers, who are a key link in the value chain, the crisis is particularly severe because their margins are typically lower than car manufacturers’, and they themselves are more dependent on production volumes.
Wave of layoffs and factory closures
The most dramatic reports are coming from Volkswagen, Europe’s largest car manufacturer. The company’s CEO Oliver Blume proposed doubling previously agreed job cuts to 100,000 positions and warned that four German plants are threatened with closure after 2030. Blume indicated that looking to the future, more and more risks are emerging, including over 150 competitors in China, all of whom are heading for the European market.
According to media reports, Blume is considering closing four German factories in Hanover, Emden, Zwickau and the Audi plant in Neckarsulm. This would be the largest restructuring project in the company’s history. Trade unionists have already started protests, and negotiations with powerful unions, including IG Metall, promise to be extremely difficult. At the same time, Bernstein analysts noted that Volkswagen’s management is trying to walk a tightrope, reassuring investors while telling its workforce that the house is on fire, which is an almost impossible task. The German automotive lobby VDA explicitly stated that more factory closures are inevitable, and reforms should be accelerated to reduce the blow to one of the region’s industrial pillars.
– The situation in the entire automotive industry is like a discussion at Volkswagen and not every production location can be maintained in the future – said Hildegard Müller, President of the VDA.
Volkswagen on the brink of the biggest restructuring in its history
The European Union’s response to the crisis is deeply divided. Only 10 of the 27 member states supported the final countervailing duties on Chinese electric vehicles. Five countries voted against, and 12 abstained, revealing deep divisions within the bloc. Germany, home to Volkswagen, Mercedes, BMW, Audi and Porsche, voted against the tariffs, fearing retaliatory action from China that could hit the wider, export-dependent German economy, including machinery, chemicals and industrial components.
Other member states have their own reasons for hesitation. Hungary has become a landing place for Chinese investment in batteries and electric vehicles. Spain and France want Chinese car factories on their territory. Poland and the Czech Republic remain tied to German supply chains. This divided response has allowed Chinese manufacturers such as BYD to gain an advantage. White House advisor Peter Navarro warned that the European Union’s 17 percent tariff on BYD is too weak to stop the Chinese manufacturer and its competitors from taking over Western automotive markets. According to Navarro, Beijing acts, Brussels deliberates, and BYD drives through the resulting gap.
At the same time, the European Union is working on a proposal to reward manufacturers that produce cars locally, under so-called Made in Europe provisions, which are part of the Industrial Accelerator Act. However, the legislative process is long, and Chinese manufacturers such as Zhejiang Leapmotor and Chery Automobile have already begun adding production capacity in Europe. Hildegard Müller of the VDA suggested that manufacturers should allow foreign competitors access to their factories, sharing supply chains, which in her view still brings people and countries together. This shows how deeply the crisis has changed the way of thinking even among traditionally protectionist lobbies. Experts point out that the problem today extends far beyond trade issues and concerns the future of European industry, the preservation of jobs and the economic security of European Union member states.
Fot. Pixabay
