Automotive Industry Struggles in Q3 2024: A Steep Decline in Output
According to EUROFER’s Economic & Steel Market Outlook 2025 2026, the automotive sector in the European Union (has been on a downward trajectory in 2024, continuing a three-quarter streak of output declines. In the third quarter of 2024, the sector faced a 12.1% decline, a sharp worsening compared to the 7.8% drop experienced in the second quarter. This marks a significant departure from the positive cycle observed from 2022 to 2023, which was largely driven by the recovery from the pandemic and low production levels in 2021 and 2022.
The steep drop in automotive production can be attributed to several economic and sector-specific challenges. Key issues include the ongoing supply chain disruptions, which have resulted in delays in vehicle orders, especially for key components like semiconductors. Furthermore, inflation and the erosion of household real incomes have further dampened consumer demand, which remains below pre-pandemic levels.
The sector is also grappling with uncertainty surrounding electric vehicle production standards, the need for more EV infrastructure like charging points, and overall demand uncertainty stemming from economic instability. These combined issues have led to a slower-than-expected recovery in the automotive sector.
Passenger Car Demand in the EU: A Mixed Performance Across Member States
In terms of demand for new passenger vehicles, the EU saw a modest increase in 2024, with new car registrations rising by 0.8%, reaching a total of approximately 10.6 million units. However, the number of cars sold is still approximately 2.4 million units below the pre-pandemic level of 13 million units registered in 2019. This represents a persistent shortfall in consumer demand despite efforts by automakers to boost sales with new models, especially electric and hybrid vehicles.
Among the major EU car markets, Spain showed the strongest growth, with an impressive 7.1% increase in new car registrations in 2024. France recorded a 3.2% drop, Germany saw a 1% decline, and Italy experienced a slight reduction of 0.5%. Notably, Spain’s performance in the December 2024 period was outstanding, showing a 28.8% surge in new car registrations, while other markets, such as Germany and Italy, continued to see declines in the same month.
The increase in car registrations in December 2024 (+5.1% compared to December 2023) was a positive sign, but Germany recorded a 7.1% drop in registrations during the same period, illustrating the regional disparities within the EU. This divergence highlights that while some markets are experiencing modest recovery, others continue to struggle with consumer reluctance.
Electric Vehicle Market Share: Rapid Growth but Still Facing Hurdles
A significant aspect of the EU automotive market in 2024 was the continued rise of electric vehicles In December 2024, electric cars achieved a market share of 15.9%, which contributed to an overall 13.6% share of the market for 2024. This marked a substantial year-over-year growth, positioning EVs as the third most popular vehicle type in the EU, just behind petrol and hybrid cars.
In contrast, diesel vehicles continued to lose ground, with their market share falling to 11.9%. Despite this shift, petrol cars remained the dominant type, holding a 33.3% share, while hybrid-electric vehicles (HEVs) strengthened their second position with a 31% market share.
Despite these gains, the transition to electric mobility still faces significant challenges. There are ongoing concerns among consumers regarding the high upfront costs of EVs, as well as charging infrastructure limitations, particularly in rural areas. The slow rollout of public charging stations across the EU has deterred potential buyers, creating a barrier to widespread adoption of EVs.
Additionally, there are concerns about the environmental impact of EV production, especially with regard to the mining and processing of raw materials like lithium and cobalt. These concerns have led to skepticism from both consumers and environmentalists, further complicating the transition to a fully electric fleet.
Outlook for 2025-2026: Modest Recovery Amid Ongoing Uncertainties
While the EU automotive sector continues to struggle in 2024, there is cautious optimism for a modest recovery in the following years. However, this recovery is expected to be slow and uneven across different regions and sub-sectors.
In 2025 and 2026, automotive output is expected to grow by 2.1% annually, but the total volume will still remain well below the pre-pandemic levels seen in 2019. Several factors will drive this recovery, including the gradual improvement in economic conditions and the potential effects of monetary easing that could stimulate consumer demand and investment in the sector.
However, the EV transition will continue to be a key focal point. Despite the challenges surrounding EV infrastructure, the EU is committed to a green future, with initiatives like the European Green Deal and NextGenerationEU supporting the shift towards electric and hybrid vehicles. Still, the sector will need to address issues like EV infrastructure development, consumer incentives, and regulatory alignment across the EU member states to ensure long-term success.
Challenges for Global Trade: The Impact of the US and Chinese Markets
For EU car manufacturers, global trade remains a vital component of the sector’s recovery. In particular, exports to key markets like the United States and China are seen as crucial for the sector’s long-term success.
However, the global automotive landscape is becoming more competitive, with Chinese automakers ramping up EV exports to the EU. This presents a dual challenge: while it creates opportunities for EU manufacturers to access new technologies, it also heightens competition in the electric vehicle market. Additionally, the US Inflation Reduction Act (IRA) is likely to boost domestic EV production in the US, reducing the demand for EU-made electric cars in the American market.
The trade war between the US and China has also affected the global automotive supply chain, leading to rising raw material costs and a fragmented market for critical components. The EU automotive sector will need to find ways to navigate these global trade tensions while ensuring its competitiveness on the world stage.
Past Trends: From Pandemic Slump to Modest Recovery
The EU automotive sector experienced one of the steepest declines during the COVID-19 pandemic, with output plunging by 18.7% in 2020. The sector’s recovery began in 2021, albeit slowly, with a 2.6% increase in output. 2022 saw more robust growth at 5.3%, driven largely by a rebound from the previous year’s low base and a positive market performance in the first half of the year.
However, despite the recovery from the pandemic slump, the sector has continued to face challenges since late 2022. War-related disruptions and energy price shocks from the Russian invasion of Ukraine have created uncertainty for European manufacturers, particularly with regard to energy-intensive manufacturing processes and supply chain disruptions.
Outlook for the Future: Navigating a Complex Road Ahead
Looking ahead, the EU automotive sector is expected to face a prolonged recovery period. While growth in electric vehicles and hybrids presents opportunities, the industry will need to address supply chain issues, economic headwinds, and consumer uncertainties to ensure long-term stability.
Governments across the EU will need to continue supporting incentive programs for consumers to transition to greener vehicles and invest in charging infrastructure. On the other hand, car manufacturers will need to innovate and streamline production processes to meet the new EV standards while staying competitive in a challenging global trade environment.
Ultimately, the success of the EU automotive sector will depend on its ability to adapt to changing market conditions, address evolving consumer preferences, and secure strong international demand for EU-made vehicles, especially in the US and Chinese markets. The next few years will be a critical period for the sector as it navigates through uncertainty and strives to recover from the challenges of the pandemic, supply chain disruptions, and global economic instability.
