Can European car industry restore lost confidence of financial markets in them?

The European automotive industry is facing a deep crisis, exacerbated by US President Donald Trump’s announcement of a 25% tariff on all imported cars. However, the industry’s troubles predate the tariff threat. European carmakers are grappling with declining sales, mounting production costs, and a rapid loss of market share to Chinese electric vehicle (EV) manufacturers. This shift has led to a steep decline in investor confidence. 

In order to bring the European automotive sector in the 21st century, the industry has to re-invent itself. Several suggestions have been expressed in The Conversation publication's recent article on this issue, which urges the industry to take a lesson from other industries that had to implement new strategies to survive massive changes, such as the digital revolution. 

The combined market value of Europe’s top five automakers—Volkswagen, Stellantis, Mercedes-Benz, BMW, and Renault—was just $212 billion before the tariff news, less than a quarter of Tesla’s valuation. Despite selling 25 million vehicles a year—about a third of all global car sales—the five major European automakers are valued far less than Tesla, which ranks just inside the top 15 and sells less than a third as many cars as Stellantis alone, the umbrella parent firm under which European brands like Peugeot, Alfa Romeo, Citroen, Maserati and others are produced. This stark contrast signals that financial markets have lost confidence in Europe’s ability to profit from an industry it once led for nearly a century.

However, the article urges that the problem runs deeper than trade or competition—it’s a systemic technological and cultural crisis. The traditional internal combustion engine, which once drove global prosperity and personal mobility, is now seen as outdated and inefficient. Privately owned cars are idle 95% of the time and often carry just one person. Meanwhile, the majority still rely on fossil fuels, even though electric alternatives are becoming cheaper to operate and increasingly viable.

As the industry’s founding regions—Europe and the US—struggle to adapt, Chinese firms like BYD are pulling ahead. BYD has not only overtaken Tesla in revenue but has developed charging systems capable of delivering 400 km of range in five minutes. Chinese EV makers export only a small portion of their production to the EU, meaning they are unlikely to be seriously impacted by EU import duties. Instead of trying to block Chinese firms with protectionist measures, the article argues that Europe should attract them to set up local production, thus spurring innovation and competition.

To navigate this crisis, the article's author believes that the European automotive sector needs to rethink its business model. First, automakers must shift from purely selling vehicles to offering mobility services, integrating trends such as car-sharing and autonomous driving. By leveraging their legacy brands and historical credibility—similar to how Kodak repositioned itself during the digital transition—European carmakers can retain relevance. Ferrari’s valuation, now higher than Stellantis’ despite its smaller output, demonstrates the power of brand value in the new market reality.

Second, governments must play a proactive role—not by subsidizing outdated practices, but by investing in the infrastructure necessary for future mobility. Just as European cities were restructured to accommodate early cars a century ago, they now need to modernize for electric and autonomous vehicles. China is already far ahead in this area, deploying vast charging networks and dedicated EV lanes. Without similar infrastructure development, European innovation risks stagnating.

Finally, Trump’s tariffs should be seen not merely as a threat but as a signal. While companies like Volkswagen—dependent on exports—will feel the immediate impact, the article points out that the crisis offers a chance to rethink and rebuild. Post-World War II Europe managed to align industrial ambition with strategic policymaking to great success. Now, a similar approach is needed. Rather than retreat, European leaders and industry heads must embrace bold, forward-looking innovation that redefines transportation on global terms.

By Nazrin Sadigova