Photo. Envato
The EU’s ambitions are increasingly coming up against the reality of the market. War, tariffs, and strong competition from Asia are forcing European manufacturers to make tough decisions and scale back their plans. It’s becoming more and more obvious that without a change in strategy, achieving zero emissions by the target date may be out of reach.
The European automotive industry is currently facing one of the most difficult moments in its history. Once synonymous with luxury, quality, reliability, and technological splendor, European brands are increasingly running out of steam. The 15% tariffs on cars imported from the EU to the US, although widely reported in the media, have turned out to be just another stone added to the already overloaded backpack that the European industry is carrying on its shoulders. The problem is that instead of helping to relieve the sector, EU officials seem oblivious to the fatigue and are forcing manufacturers to do even more squats. At the same time, several processes are being imposed, and none of them seem to be temporary.
The EU’s zero-emission target
The first and probably fundamental process that is changing the face of the market is the transition to zero emissions. The European Union has clearly stated its goal that by 2035, all new passenger cars and vans must be zero-emission. For trucks, the target is a 90% reduction by 2040, with some exceptions, such as special-purpose vehicles. In theory, this is a step towards a cleaner future, but in practice it is a challenge that is beginning to resemble an ordeal for many manufacturers.
And the numbers speak for themselves. According to PZPM data, in 2024, zero-emission vehicles (BEVs) accounted for 13.6% of registrations in the EU. In the first half of 2025, this figure rose to 15.6%. However, the increases are minimal, as in June alone, BEVs achieved a 15.9% share, only 0.3 percentage points more than in March.
According to Jakub Farys, president of the Polish Automotive Industry Association, we are not seeing a breakthrough today, but rather a clear stagnation. In the first half of 2025, the share of electric cars was 15.6%. “This is still 10 percentage points too low, even on a European scale,” he notes in an interview with Energetyka24. Even more worrying are the figures for the last three months, when the share increased by only 0.3-0.4 percentage points. „This is not a pace that will get us anywhere. If we were seeing monthly increases of 50-70%, we could sleep peacefully, because we would be approaching the EU target in leaps and bounds. But today we are talking about something that is barely noticeable. It is a statistical fluctuation that may simply be due to the fact that tens of thousands of people have postponed their car purchases by a month. This does not change the overall picture,” emphasizes Faryś.
If the current pace continues and Europe fails to meet its climate targets, this will not only be a PR disaster, but will also have measurable financial consequences for the automotive industry. These could reach as much as €16 billion, according to EU regulations.
We are not aware of this, but the shadow of EU penalties is already visible today. Just walk into a car dealership to see the new market logic. Combustion engine cars are becoming more expensive, while electric cars are becoming cheaper and tempting with exceptionally favorable leasing and rental offers. This is not a sudden surge of generosity on the part of manufacturers, but a necessity. Selling a sufficient number of zero-emission vehicles has become a condition for survival, because every missing percentage point of market share means a multi-million dollar burden.
explains Faryś>
The president of PZPM points out that the EU’s carrot and stick approach is particularly ruthless in this industry. If a manufacturer achieves the required level of electric car sales, the problem disappears. If not, financial penalties are inevitable. The paradox is that even the best offer, the most attractive promotions and the widest range of models are not enough if the market and infrastructure cannot keep up with political ambitions. And it is infrastructure that is the Achilles« heel of the transition today. The process of charging an electric car is still too time-consuming and inconvenient for many drivers. Sure, manufacturers can offer wallboxes for next to nothing, run big education campaigns, or roll out support programs, but they can’t build the transmission networks that last saw major investment in Poland in the last century. Nor will they install power connections, which are currently the biggest bottleneck on the road to zero-emission motoring.
The expansion of Chinese EV
The second area that is becoming a serious challenge for the European automotive industry is the expansion of Chinese car manufacturers. As Faryś explains, European companies have been present on the Chinese market for many years, but only on condition that they enter into a joint venture with a local partner. In practice, this meant sharing technology and know-how in exchange for the opportunity to operate and earn money in one of the world’s largest markets today. At the same time, China, for reasons completely different from those that prevailed in Europe, decided to focus on electromobility. It was not about reducing CO2 emissions, but about combating smog in huge cities, which became a key argument for the authorities in favor of developing the sector. Drawing on the knowledge of their European partners, Chinese manufacturers mastered the art of car manufacturing and then independently acquired full competence in the design of electric vehicles.
”At that time, the state set the direction for the sector’s development and provided it with full support. Initially, this did not take the form of direct subsidies, but rather broad financing for start-ups. Over a dozen or so years, hundreds of billions of dollars were invested in technology development, consciously accepting the fact that some of these companies would fail, some of the funds would be wasted, and even squandered. However, the most important goal was to build an advantage, and this was achieved,” says Faryś. “Of the approximately 1,300 manufacturers that were operating at the beginning of this revolution, about 300 remain on the market today, and their number will continue to decline. However, those that have survived have become so strong and innovative that they represent real value in the global balance of power,” he adds.
The natural next step was to expand into foreign markets. The first destination was the United States, but there, during Joe Biden’s presidency, a 100% tariff was imposed on Chinese electric cars. The motivations behind this decision were both political and economic, and were part of the ongoing rivalry for global dominance. „So Europe remained. And it is Europe which, for various reasons, including the war in Ukraine, has become even more closely associated with the Green Deal ideology. The statements made by the head of the European Commission a few days ago show that the course is not changing. However, I get the impression that no one in Brussels has looked at this simple table with real sales data,” says Jakub Faryś.
Chinese companies are starting to look more and more boldly at Europe. However, their expansion coincided with the European Commission’s decision to launch an investigation into unfair export subsidies, and the outcome of the investigation confirmed earlier suspicions. As a result, Brussels introduced tariffs on electric cars from China ranging from just over 7% for companies willing to cooperate to almost 40% for those that refused to talk. However, the restrictions do not apply to combustion engine or hybrid models, which has led to a wave of competitively priced cars entering the European market.
Differences of 25-30% compared to European counterparts are an irresistible argument for many customers. The Chinese are well aware that in the long run, loyalty will be determined not only by price, but also by service quality and parts availability, and they have announced that they will invest in these areas.
notes the president of PISM>
The scale of sales growth is impressive. In 2024, 3,623 Chinese cars were registered in Poland, and in the first half of 2025 alone, this figure rose to 16,616, representing an increase of 358.6% and a market share of almost 6%. The biggest players declare that they want to achieve a 15% share of the European market within the next 2-3 years. The example of BYD and the four factories being built in Hungary show that this is entirely achievable for Beijing. In June, the brand doubled its sales, achieving a 4.5% share of the European market on a monthly basis.
But for Europe, these figures have serious consequences. With annual sales of around 10 million cars, a 15% share means 1.5 million vehicles that will not be produced in European factories. This in turn affects the supply chain and means millions of tires, batteries and other components will not be produced, dealing another blow to the automotive industry, which has already incurred huge costs in its transition to electromobility.
The war in Ukraine
The third blow to the European automotive industry was the war in Ukraine, which hit the industry in a way that many managers underestimated. Just a few years ago, Russia was one of the largest and most profitable markets, with around 1.5 million cars sold there annually in the best years. Importantly, these sales were largely based on local production, but carried out jointly with European companies.
”The decision to impose sanctions and completely withdraw companies from Russia broke this cooperation overnight. Factories were sold for symbolic rubles or taken over by the state. Initially, some hoped that the conflict would be short-lived and a quick return would be possible – today, it is clear that this was naive. In just a few months, the Russian market was almost entirely taken over by Chinese manufacturers, who offered cars significantly cheaper than European ones,” explains Jakub Faryś.
There is no doubt that even if the war on our eastern border ended tomorrow and a democratic government with the best intentions took power in Russia, a return to the reality of 2022 would be difficult. The machine park is worn out, a significant part of the logistics and industrial infrastructure has been destroyed, and Chinese brands have already become firmly established in the minds of Russian drivers and taken their place in local supply chains. Restoring production in a technical sense could take a year or two, while regaining the market is a prospect measured in decades, if it is possible at all. The loss is all the more painful as Russia was one of the most profitable markets, and its takeover by Chinese manufacturers means a complete outflow of added value from Europe.
Pandemic
The fourth blow to the European automotive sector was the pandemic and its long-term effects, which are still visible despite the passing of years. Lockdowns paralyzed factories, disrupted global supply chains, and blocked the flow of goods. Transport became more expensive and less predictable, and raw material prices skyrocketed. This was compounded by restrictions on the availability of labor, enforced by quarantines and sanitary restrictions, which further slowed down production.
The pandemic was also a catalyst for inflation, the effects of which are still being felt today. Five years have passed, and many companies are still rebuilding stability and looking for alternative sources of components, trying to protect themselves from similar turbulence in the future.
Donald Trump and his policies
American tariffs have been added to the list of problems facing the European automotive industry. The new-old US president, Donald Trump, announced in his usual style that a 15% tariff on cars from the European Union was “fantastic news for the automotive industry.” It is difficult to say whether he meant the American, European or simply any industry, but it is certainly not a cause for celebration in Stuttgart, Wolfsburg or Turin.
According to ACEA data for 2024, 757,654 new cars were shipped from Europe to the United States. Compared to the tens of millions of cars produced annually in the EU, this is a small percentage, but in terms of the economy, it represents hundreds of thousands of vehicles, over €38 billion in revenue, and tens of thousands of jobs. Importantly, in previous years, exports fluctuated between 850,000 and 950,000 units, so if the US market stops absorbing them to such an extent, it means that almost a million cars a year will not be produced in European factories, and with them millions of components and parts. The trade imbalance is clear, as around 160,000 cars are imported to Europe from the US each year, largely European brands manufactured in the US, mainly in the premium segment. The difference between exports and imports therefore works in Europe’s favor, and it is now Europe that will be under pressure.
As the president of the PZPM explains, the effects will not only be felt by manufacturers of finished cars. Although Poland does not directly ship large volumes of cars to the US, it is an important link in the supply chain. Imagine a factory that sends 40% of its production indirectly to the US. If the customer in Germany suddenly reduces its order to 10%, this means that 150 people will have to be laid off, for example. In a large city, this is painful, but in a small town, it is a real tragedy, because there are practically no alternatives to work,” says Faryś.
The current 15% rate is the result of a compromise, although Donald Trump initially considered introducing tariffs of up to 30%. Both sides considered this a certain achievement, but in practice it is only a partial success. The automotive industry is concerned not only about the level of tariffs, but above all about the lack of guarantees that they will remain at this level. The whole process of expiring tariffs, threats of failed negotiations and changing positions could have been carried out quickly and clearly by setting a specific value and sticking to it without unnecessary twists and turns. As a businessman, Trump should know that in such uncertain conditions, making decisions about long-term investments becomes much more difficult and risky. Looking at the future of the European automotive industry, it is impossible to make clear predictions today.
Until the end of this decade, Brussels« political ambitions remain clear and unchanged, and achieving full zero emissions in the automotive industry is seen as an overriding goal. Manufacturers have accepted these assumptions, incorporated them into their development strategies, and invested hundreds of billions of euros in modernizing factories, developing technologies, and expanding their range of electric vehicles. As Jakub Faryś points out, the problem is that the expected return on these huge investments remains disproportionate to the costs incurred. Shareholders are increasingly asking: “Where are the promised results, if after just a few years we have to allocate further funds just to maintain the pace of transformation?” In his opinion, this may mean that in the coming years, the goals themselves will not be abandoned, but it will be necessary to postpone their implementation and adjust the schedule to the real possibilities, both in terms of infrastructure and financial and social capabilities.
The president of the PZPM points to another, seemingly secondary but in fact crucial element of the whole puzzle: security. Growing defense spending, especially in Central and Eastern European countries, is consuming an increasing share of national budgets and naturally limiting the funds that could be allocated to the modernization of the energy sector and the expansion of transmission networks, i.e., infrastructure that is absolutely essential for the development of electromobility and the broadly understood energy transition. With the growing threat from Russia, the budgetary priority is shifting from investments in clean energy to defense needs. As Faryś emphasizes, this is a politically justified decision, but it may result in a serious slowdown in investments in electromobility. In practice, this means that the pace of change in the European automotive industry until 2030 will depend not only on technological progress, but above all on whether countries can strike a balance between military and energy security. If this balance is not achieved, the ambitious goals of the Fit for 55 program will remain largely a declaration, and the still inadequately prepared market will move at its own, much slower pace.