Europe’s car industry is in a managed retreat. Brussels told automakers to dump gasoline engines for a full electric fleet by 2035. The companies spent the money. Customers did not show up in the numbers regulators assumed. Chinese brands did.
Volkswagen, Europe’s biggest maker, put roughly $193 billion into the electric shift starting in 2023. Its operating margin fell to 1.8 percent in 2025 from 5.6 percent the year before. In September it announced 50,000 layoffs—about 15 percent of its workforce. Stellantis, the next largest, took €22.2 billion in write-downs this year for its electric “reset.” Its CEO, Antonio Filosa, said the charges came from “overestimating the pace of the energy transition” and losing touch with what buyers actually want, can afford, and need.
The policy was clear. The European Union set a near-total ban on new cars that emit CO2 from the tailpipe by 2035, later softened to a 90 percent cut. Carmakers had little choice but to build battery factories, redesign platforms, and cancel or shrink combustion-engine programs. Regulators got compliance. Buyers got higher prices and limited real-world range. Plants now run below 60 percent capacity. Tens of thousands of jobs have already gone across the bloc.
China’s manipulative trade practices have wrecked Europe’s auto industry and left the EU scrambling to stop China from advancing further. We cannot allow this to happen in America or we will lose our nation’s manufacturing base. Chairman @RepMoolenaar’s bipartisan Connected Vehicles Safety Act will protect our national security and the future of American manufacturing. https://t.co/R8U1Pwbchs
— Select Committee on China (@ChinaSelect) June 1, 2026
China filled the gap. Its brands held about 20 percent of European battery-electric sales by May 2026, up from nearly nothing a few years earlier. BYD became the world’s top electric seller in 2025. A basic BYD Seagull sells for around $10,000 in China; the European version (Dolphin Surf) is still far cheaper than most local rivals. Chinese production costs run 20–30 percent lower. They control much of the battery supply chain, the processing of key minerals, and a home market that absorbed 13 million of the roughly 20 million electric vehicles sold worldwide in 2025. Exports of Chinese vehicles topped a million a month. New-energy vehicle exports doubled in the first half of 2026.
Tariffs were the first response. In 2024 the EU put extra duties of up to about 35 percent on Chinese battery-electric cars on top of the standard 10 percent. Chinese makers shifted volume into plug-in hybrids, which largely escaped the higher rates. Hybrid imports from China jumped sharply; prices fell. Chinese brands took a record share of European sales in August. Brussels then cut a deal this month to cap Chinese hybrid exports around 350,000 units a year starting in December. Officials call it a path to cutting those shipments by more than half over several years. European car executives, including those at Volkswagen, Stellantis, and Renault, are also pushing “Made in Europe” rules that would require a high share of local content for subsidies and tax breaks.
France and Germany said Friday they had struck a deal to favor European-made cars under a landmark EU industry bill in exchange for weakening a 2035 vehicle emissions target, ending months of wrangling between the bloc’s two biggest economies.
https://t.co/tqargK2egZ— POLITICOEurope (@POLITICOEurope) October 16, 2026
Chinese companies are already moving factories and supplier networks into Europe and nearby countries so they can stay inside any new walls. Changan has said it aims for 180,000 vehicles a year in Europe by 2028 and more later. Others are doing the same. The tariff and quota game has not stopped the share gains. AlixPartners expects Chinese brands to reach 16 percent of wider European sales by 2030.
Europe’s own energy costs made the problem worse. Years of renewable mandates pushed electricity and industrial power prices to some of the highest levels in the developed world. That raises the cost of building and running factories while Chinese producers keep a structural cost edge. Japanese makers, by contrast, kept hybrids as a core offering and avoided the same all-in bet. In the United States, electric sales dropped hard once the $7,500 tax credit ended; the market stayed a niche without heavy subsidies and dense charging.
The pattern is the same across other sectors. Europe’s trade deficit with China is roughly a billion euros a day. Carmakers are cutting capacity and jobs while Chinese plants expand. The recent hybrid understanding and local-content proposals buy time, but they do not fix the gap in costs, supply-chain control, or the original decision to force a technology timeline that buyers and factories were not ready to meet.
European automakers are now reviving old nameplates—an electric Citroën 2CV planned near €15,000, a Volkswagen ID.Polo aimed at €25,000—to try to compete on price. Those models arrive years after Chinese brands already own the affordable end of the market. The industry that once set the standard is negotiating managed decline while Chinese makers localize and keep shipping.
— The Whatfinger News Team: JC and Beth, with Grok on edits
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