Long-term production and sales trends in the European automotive industry
The European automotive industry has faced a series of setbacks over the past decades. The first major shock came with the 2008 global financial crisis, after which car production and sales never returned to their 2007 peak. Demand and production declined again during the COVID-19 pandemic. The outsourcing of assembly partly explains the decreasing motor vehicle production numbers in Western Europe, although Eastern European countries have benefited from this process and have experienced strongly increasing production. However, the decline in European car sales is worrying. Major markets such as Germany, the United Kingdom, France, Italy, and Spain have all experienced declining demand. The reasons are multiple: rising vehicle prices, demographic changes and shifting mobility patterns. At the same time, stricter environmental regulations and the transition toward electric vehicles have increased costs and added pressure to the industry.
Shrinking European motor vehicle production and sales
The European automotive industry (in this analysis: the EU-27, the UK, Switzerland, Norway, Russia, Turkey and Ukraine as reliable data are not available for the remaining countries) has suffered strong negative effects over the past decades. The first trend-breaking event was the 2008 global financial crisis. Demand decreased, and production levels dropped from the 2007 peak of almost 23 million vehicles to about 17 million in 2009. From 2020 onwards, the COVID-19 crisis also had a very strong negative effect on production, causing a sharp decrease during the period 2020–2023. Overall, production has experienced a long-term decline. In 2025 it reached only 17 million vehicles, never again reaching the long-term peak recorded in 2007, when almost 23 million motor vehicles were produced (Figure 1).
Figure 1: Evolution of European motor vehicle manufacturing and sales, 2005-2025 (million vehicles)
Source: International Organization of Motor Vehicle Manufacturers (OICA)
Western producers decline; CEE production rises through outsourcing
This is not entirely surprising, since the outsourcing of motor vehicle production from the more developed parts of Europe had already started earlier, driven by cost-reduction strategies. Eastern Europe and Asia were and remain attractive destinations for this process, while over time China has become an extremely large car manufacturer. But Central and Eastern European countries have also benefited from the outsourcing of manufacturing. For example, car production has increased significantly in Slovakia, Romania, Hungary, and the Czech Republic, as well as in Portugal. In Western Europe, other processes with much higher value added have remained, together with part of the production. Central and Eastern European countries also aim to move toward higher value-added activities, as they are more exposed to competition between outsourcing destinations. However, moving upward in the value chain can be challenging and may be limited by countries’ resources (e.g., the availability of highly skilled human capital). Therefore, for the Eastern European region, increasing car production is favourable, while its decline could have strongly negative effects on national economies.
At the same time, in countries such as Germany, France, and the UK, the decrease in production (Figure 2) is also largely negative news. It signals that automotive manufacturers may be in a worse financial position and may require further cost reductions. More importantly, it may indicate declining demand for their products. Although these countries may retain activities with very high value added, their economies (particularly Germany’s) have also relied significantly on car production. Country-level car production needs to be evaluated together with sales.
Figure 2: Motor vehicle production in European countries in 2025 and change compared to 2005 (thousands and %)
Source: International Organization of Motor Vehicle Manufacturers (OICA)
Major car markets face declining demand
To provide a solid picture of the European automotive industry, country-level car production needs to be evaluated together with sales. European car sales shrank sharply after the financial crisis and have never returned to the peak reached in 2007, when 23 million motor vehicles were sold. Even in the years following the crisis, sales remained close to the 2009 level, around 19 million vehicles, and did not reach 22 million even in 2019. This represented a major challenge for car manufacturers, which responded by pursuing more aggressive cost-cutting strategies. A visible recovery in sales started around 2016, but from 2020 onwards the COVID-19 crisis had a very strong negative effect on demand. Car sales declined significantly to 17 million in 2020 and further to 15 million in 2022. By 2024, sales had recovered to around 19 million motor vehicles, but this level corresponds roughly to the lowest point of the previous major crisis. In other words, sales have only climbed back to the trough reached during the earlier downturn, clearly demonstrating how unfavourable demand for new cars remains in Europe.
Focusing on the largest car market in Europe, Germany, almost 3.2 million motor vehicles were sold there in 2025. However, this represents an almost 11.26% decrease compared to 2005 (Figure 3). This trend is also reflected in the increasing average age of cars: in 2010, the average age of vehicles in Germany was around 8 years, while by 2024 it had exceeded 10 years. Other countries with high motor vehicle sales volumes (the UK, France, Italy, and Spain, each with more than 1 million vehicles sold in 2025) have also experienced declining demand. Only a few countries report increasing new car sales compared to 2005: Poland (174%), Bulgaria (58%), the Czech Republic (59%), Norway (41%), Slovakia (40%), Denmark (2%). The list is surprisingly short.
The reasons behind this trend are diverse. New car prices have been steadily increasing, partly due to the growing share of electric and hybrid vehicles equipped with expensive battery packs. Socio-demographic factors also play a role, including a smaller proportion of people in age groups that typically purchase new cars. In addition, changing mobility needs and increasing competition from the East (particularly the growing presence of Chinese car manufacturers) have affected demand (KPMG, 2023). Furthermore, the competitiveness of European car manufacturers has not been at its strongest in recent years. The transition to electric vehicle production has not been smooth, and further delays may be expected for various reasons. This situation has become particularly challenging as environmental requirements and the transition toward less polluting electric vehicles have become increasingly strict. Stricter environmental regulations, such as the Euro 6 emission standard, have also contributed to higher vehicle prices, which has further reduced demand.
Figure 3: Motor vehicle sales in European countries in 2025 and change compared to 2005 (thousands and %)
Source: International Organization of Motor Vehicle Manufacturers (OICA)
The overall picture of the European automotive industry is somewhat darker than expected. Car manufacturers face enormous cost pressures, the transition from traditional internal combustion engine vehicles to electric vehicles (while emission regulations for conventional cars are becoming increasingly strict), and new, strong competition from China. This creates a highly challenging environment that must be addressed, as the automotive industry remains one of the strongest pillars of the European economy.
Sources
- International Organization of Motor Vehicle Manufacturers (OICA). Link: https://oica.net/
- KPMG (2023). The European automotive industry – Unlikely to return to normal. Link: https://assets.kpmg.com/content/dam/kpmg/xx/pdf/2023/02/the-european-automotive-industry.pdf