The Ongoing Collapse of the Western Car Industry: Q1 2025, Part 3 Europe.
Europe
The European EV market shrank slightly in 2024, but that was significantly due to a significant fall in Tesla sales of 10.5% and a Germany-specific collapse in EV sales due to the complete termination of EV incentives at the end of 2023 and an intensifying recession in that country; Germany is a very important market for Tesla. The removal of EV incentives for foreign cars in France, together with the new tariff on imported Model 3’s, was also not helpful to Tesla. Increased competition also played a part though, with Tesla’s competitors upping their game; especially VW, BMW and a Geely-Volvo with its local manufacturing plants. This table from Troy Teslike (from his Twitter feed, he has a very reasonably priced paid service that provides very detailed analyses of Tesla’s sales and profits etc.) shows the concentration of the falls in Telsa’s sales within Germany and France. Notably, sales also flatlined in the UK which is the second biggest EV market in Europe (not far behind Germany) and being outside the EU is not subject to the EU anti-China EV tariffs.
Tesla’s EV market share dropped nearly one full percentage point, from 12% to 11.1%, perhaps the face lifted Model Y will help in the New Year. In 2024, the market share of EVs in Europe fell from 24% the previous year (and 23% in 2022) to 22%, with the BEV share remaining flat. The UK market was a standout, with EV market share rising from 23.9% in 2023 to over 28%; with that share rising to 40% in December 2024. The UK is now the world’s fourth biggest market for EVs, one that will grow again in 2025 and perhaps overtake Germany; wide open to Chinese brands (as is the much smaller Norway). In both Germany and France EV market share fell in 2024, as incentives were abruptly removed (Germany) and reduced and focused on EVs produced with relatively “clean” electricity grids (France, effectively excluding cars made in China).
EV sales are set to grow in 2025 as new EU regulations together with the yearly increase in the UK mandated EV target market share force manufacturers to sell more EVs. In the UK the 2025 targeted per manufacturer BEV sales share is 28% (vs 22% for 2024) and rises yearly from then on to 33%, 38%, 52%, 66% and 80% (in 2030). A nightmare for the traditional ICEV manufacturers that have dragged their feet when it comes to EVs, and a great opportunity for the foreign BEV manufacturers such as Tesla, SAIC-MG (hit by punitive EU Ev tariffs), Geely-Volvo, Chery, and of course BYD. Although there is some “give” in these targets as they can be offset by promises of more BEV sales in the future and other low emissions vehicles. In addition, the UK government is now reviewing the 2025 target after much pressure from the car manufacturer’s industry body.
Any resulting increase in UK competition may not help Tesla, as other manufacturers step up EV sales efforts to dodge government fines / having to buy credits from other manufacturers and Tesla is stuck with its high-cost Germany-produced Model Y’s. It will continue to benefit from EV credit sales to other manufacturers though. The Chinese manufacturers are making inroads with SIAC-MG taking a just over 4% (4.76% in December) market share (of the overall UK car market) with 81,500 sales, and it is continuing to provide more competitive updated and new models; like the new MG ES5, a real challenge to the VW ID3 for quite a few less pounds.
The new Leap Motor B10 is also a very direct competitor for the ID3, coming soon to the UK. The larger C10 BEV (a Model Y competitor) was launched in Europe last September, and the EREV version will be available in March. Leap is utilizing a Polish Stellantis plant to produce these models and the smaller T03 (which competes directly with the Dacia Spring).
Geely-Volvo grew UK sales by a third to a 3.85% share (4.64% in December with Polestar), including its competitive EX30 and the Polestar 3 that challenges the German SUVs.
Chery-Omoda sold 3,600 from nothing the previous year (0.72% share in December with Chery-Jaecoo), after only entering the UK in mid 2024; with Chery taking over a Spanish plant closed by Nissan. With models such as the Omoda C9 (below reviewed in South Africa where Chery is well established) coming to the UK in the Spring of 2025, and the ICEV Omoda 5 (and the BEV E5) introduced in mid-2024, and the Jaecoo J7 (again reviewed in South Africa) introduced very late in 2024.
Also BYD growing exponentially to 8,788 from just over a thousand the year before (1% share in December) and adding more and more models at more reasonable prices - like the BYD Seal U DM-i and the BYD Sealion 7 at very competitive prices, and the smaller BYD Dolphin that was released earlier in the UK. Overall, the Chinese btands had an 11.12% share of the UK car market in December. Xpeng is releasing the G6 in the UK in February and Nio and Zeekr are also slated to enter the UK market in 2025. This year could be the year when the “Chinese invasion” of the UK car market really takes off.
Hyundai-Kia has 10.45% (only 6.45% in December) of the UK market, while the VW Group brands dominate with over 25%, (24% in December) BMW 8.8% (10.25% in December), Mercedes 5.3% (4.4% in December), Toyota 5% (5.17% in December) and Nissan 5% (4.69% in December). Ford UK sales fell nearly 24% to a share of 5.7% (5.49% in December). The British made Vauxhall sales also continued to fall to 4% in 2024 (the same in December).
The UK market will be an excellent example of what happens to a non-protected market with a government mandate to drive EV market share when the Chinese ramp up their efforts, like Norway on a smaller level. The Australian market is also good example without the government mandate. Benefitting the Chinese manufacturers, both the UK and Australia drive on the left side of the road; as does Hong Kong. The European producers cannot afford to lose the UK market, especially a VW Group that currently dominates it, and Vauxhall whose UK production sites may not be viable with falling US sales; the closure of the latter’s Luton plant was announced in November 2024. The vast majority of the Nissan Sunderland plant’s output is for export, so that does not seem at risk unless Nissan export sales stumble, especially as Honda has no production plants in Europe.
The EU regulations target the average tail-pipe emissions of a manufacture rather than set a specific BEV target, and mandate a 15% reduction in those emissions in 2025 vs. a 2021 base year. The only way to meet this will be for majority ICE manufacturers to significantly increase sales of EVs (BEVs and PHEVs). With all manufacturers driven to increase EV sales so as not to be hit with significant financial penalties, competition will increase and therefore margins may fall. An additional negative will be the continued drift into recession of much of Europe, which may lead to falling car sales overall. The next EU mandated reduction in tail-pipe emission will be in 2030, when emissions are mandated to fall by 55% with respect to the 2021 base year.
The financial penalties for not meeting the EU mandates complicate the calculations for the legacy ICEV manufacturers with respect to the anti-China EV tariffs. Some manufacturers may still decide to sell Chinese-made EVs within the EU as the lower Chinese manufacturing costs together with the reduction in EU financial penalties may more than offset the anti-China EV tariffs. Mazda has made this calculation and decided to sell the China made Mazda 6e (a rebadged Changan Shenlan SL03, made by the Changan-Mazda JV in China) in the EU with competitive pricing.
To maintain margins, a number of European manufacturers may also favour their lower cost production sites in Romania (Renault-Dacia), the Czech Republic (VW-Skoda), Spain (Mercedes-Benz, Ford, Stellantis-Europe, Renault, VW and VW-SEAT), Turkey (Renault, Hyundai-Kia, Toyota, Ford), Algeria (Mercedes-Benz, Hyundai-Kia), Poland (Stellantis-Europe) and Hungary (Mercedes). Together with the planned / in construction Chinese manufacturing sites in Turkey, Hungary, Algeria, Spain and Poland (a JV with Stellantis-Fiat and Leap Motor) this may produce a fundamental shift of car manufacturing away from Germany, France, Italy and the UK and toward the periphery of Europe. A move that could significantly deindustrialize North-Western Europe, the UK and Italy. Not helped by recent EU moves to cut off even more of the cheap Russian pipeline gas (transiting through Ukraine) and replace it with much more expensive LNG.
Turkey and Hungary have access to Russian gas through Turkstream, Algeria has its own gas, and Spain has significant access to Algerian gas (12 bcm out of 41 bcm of imports in 2023, which could be increased if Morocco-Algeria relations improve and the pipeline through Morocco to Spain is restarted). Italy also uses significant amounts of Algerian gas via the Trans-Med pipeline (26 bcm in 2023 and set to increase further, out of 62 bcm total imports), Azerbaijan gas via the Trans-Adriatic pipeline (10 bcm in 2023, set to double in the next few years), Norwegian gas though a number of pipelines (4 bcm in 2023), Dutch gas via the Trans-Europa-Naturgas pipeline (TNEP, 2.6 bcm in 2023), and Libyan gas through the Greenstream pipeline (2.5 bcm in 2023 and set to increase). Italy’s LNG needs are met from Qatar, the US and Russian supplies are quite limited and are set to fall in the future. Such relatively low cost gas may not be of any help though as Fiat sales in Europe are falling badly (see below).
In addition, Spain (and Portugal) made the very sensible move in June 2022 of disconnecting wholesale gas prices from the spot market clearing electricity price, the “Iberian exception”; with the price of electricity generated from gas reduced directly though subsidy to a set price that removes unnecessary alternative energy company profiteering from EU anti-Russian sanctions, directly benefitting the Spanish (and Portuguese) economy. The other EU countries did not take such a measure, instead subsidizing electricity prices overall and therefore directly facilitating energy company sanctions profiteering at the expense of their own economies and government deficits; crony capitalism. Now set to get worse with the cutting of all gas supplies that transit through the Ukraine, and a policy of also cutting all Russian LNG supplies while at the same time antagonizing another major supplier - Qatar. The main beneficiaries will be the US gas suppliers and industrial zones, together with the industrial zones of peripheral Europe, and North Africa and China.
The Stellantis European brands such as Fiat, Peugeot, Citroen, Lancia, Opel and Vauxhall are predominantly focused on the European market. Lancia is a niche brand, and there is little real overlap between Peugeot-Citroen, Opel-Vauxhall and Fiat. Stellantis has worked to reduce costs through a sharing of platforms between the brands. There are also a number of other, unrelated smaller brands such as Maserati and Alfa-Romeo (both of which have seen steep sales falls in 2024). In 2023, the worst performing brand was Citroen that sold less than 400,000 cars, and a Lancia which sold only 45,000. Peugeot continued to grow slowly with 1.124 million sales (104,000 of those sales in South America), while Opel-Vauxhall was more successful with sales growth of 15% to 670,000. Fiat grew sales by 12% to 1.35 million in 2023, with market leadership in Brazil, Italy, Turkey and Algeria; 542,000 of those sales were in South America - predominantly Brazil and Argentina.
In Europe, Stellantis’ short-term profits have been driven predominantly by a strategy of over-pricing, cost cutting and reduced investment which is now delivering negative impacts in the medium term. These impacts have intensified as 2024 has progressed, with year over year sales falling 25% in September 2024 in Europe; 34% in Italy (43% for Fiat overall in Europe), 17% in France (41% for Citroen overall in Europe), and also 24% for an Opel-Vauxhall that predominantly sells in the UK and Germany.
JATO
Fiat has been especially hit in 2024 by the forced withdrawal of the Fiat 500 hybrid due to its lack of ADAS (Advanced Driver Assist System) which became mandatory in the EU, and the failing 500e model which is just too damned expensive for what it provides.
A problem that will get even worse in the UK market, which is not protected from Chinese cost-effective EVs and is increasing its ZEV mandate every year. In the first 11 months of 2024, Fiat’s sales in Italy fell 16%, in Germany 21%, in France 15%, in Turkey 26% and for the full year 14% in the UK. This European sales drop was very significantly offset with sales growth in South America (e.g. in Brazil specifically where sales grew by 10%); in the first 11 months Fiat’s global sales only fell by 4.42%. The European sales fall intensified in the fourth quarter, with Fiat being pushed into third place in its home country of Italy (behind Toyota and VW) with the risk of falling behind Dacia into fourth place. The company has now become a predominantly South American car company, with Brazil by itself now representing the majority of Fiat sales (471,000 out of 780,000 in the first 11 months of 2024). With South American sales met from local production of regionally specific models, the outlook for Fiat’s Italian production sites may be very dark. There have already been a number of production halts at the Italian factories and Stellantis Italy output fell 37% in 2024 to only 475,000 from 751,000 the previous year.
The UK ZEV mandate is a big problem especially for the UK-focused Vauxhall brand, where EVs reached a 40% market share in December 2024; with Vauxhall sales falling 21% to only 78,000 for all of 2024. Its sister Opel brand managed to sell 148,000 cars in Germany in 2024, an increase of 5%. Overall Vauxhall-Opel sales held about steady at around 700,000 with the vast majority in Europe and MENA. With the collapse in Fiat sales in 2024, Peugeot is by far the biggest selling Stellantis brand in Europe at about 1.2 million sales (with about 850,000 in Europe, over 100,000 in South America). Citroen continued to struggle, with sales falling in its home French market.
None of the individual Stellantis brand groups have the manufacturing scale and new product funding to develop into more than national/regional players, including the South American offshoot with its localized production and regionally-specific models, and with the recent collapse in European sales many may not have the scale for ongoing viability. For all of 2024, the Peugeot 208 was the only Stellantis EV in the top 20 selling EVs in Europe, coming in at #19. For November alone, there were no Stellantis EVs in the top 20, not auguring well for a 2025 where both the UK and EU have raised the bar for EV sales. Perhaps another fallout from the lack of investment in Stellantis as it focused on short term profits.
With the recent dynamics in Fiats sales, Stellantis risks becoming three separate car companies with little overlap; Stellantis-North America, Stellantis-Europe and Stellantis-South America (predominantly Fiat with 600,000 sales, plus over 140,000 Peugeot and Citroen sales which are all locally produced together with small amounts of Stellantis-NA brand sales). All struggling with the scale to fund new product development and resist increasing competition; especially from China in South America, Europe and MENA.
Over the next two years, the VW group may rapidly become a European regional car company, with some additional sales in North America and elsewhere, as its Chinese (and Asian and Australasian) sales continue to decline toward what may be very low levels given its lack of competitive EV products in Asia and Australasia. In 2023, VW sold 3.8 million cars in Europe (y-o-y growth of 24% as the economy recovered from the COVID 19 pandemic) with 472,000 being all electric (it was the market leader in the EV segment). That was compared to 3.6 million in Asia (3.2 million in China), 900,000 in North America, 466,000 in South America (predominantly Brazil), and 360,000 in MENA. In 2024 VW sales in Europe grew modestly, while it increased its share of European EV sales. Sales in the US grew 15%, while Chinese sales dropped about 8%.
The loss of those Chinese, and Asian in general, sales would fundamentally transform VW; cutting it off from the largest and fastest growing national and regional EV market in the world. In 2024, VW China sales are down 8% y-o-y with no VW EV models anywhere in the model rankings. The Chinese are also now heavily entering the South American and MENA markets, and will be doing so in the UK where VW is the market leader. VW was heavily dependent upon its China sales for its profitability and with its profits in China now collapsing it is now unable to subsidize its other operations with those profits; creating a very serious financial crisis for the company which has already lead to previously unheard of layoffs in its German plants.
This is exacerbated by the much higher energy costs that it has to bear due to the European self-harming anti-Russia sanctions. The EU anti-China EV sanctions have also limited its ability to build cars cheaper in China and export them to Europe. The mandated moves to EVs in the EU, and the UK, are also critically impacting VWs profits due to the higher production costs, and the high levels of investment and probable write offs on ICE plants, required; VW simply left it too long to move toward EVs. Every new VW EV sold produces less profit than the VW ICEV sale that it replaces. The company’s attempts to go it alone on software and battery production, rather than work with the leading Chinese producers, have also back fired.
In Europe, VW is not protected from competition from Hyundai-Kia and locally-produced Teslas and the increasing number of locally-produced Chinese brand cars. In the UK and Norway, it is not protected at all. 2025 will be a hard year for VW in Europe, with 2026 and later ones becoming harder and harder. This is not to say that VW has not greatly improved its electric vehicles, and is currently holding its own in the European EV market; with a leading 2024 European EV market share approaching 22%, twice that of second placed BMW. The VW ID7 is a very good example of VW’s progression, and VW has made major progress in fixing the shortcomings of the ID3, ID4 and ID 5, but can VW ever produce such cars profitably and compete directly with the Chinese brands? It also has the huge costs of closing its ICE production plants and retooling all of its ICEV production plants (as do Mercedes and BMW); costs that the Chinese competitors tend not to have.
VW also has the budget brand of Skoda with its main manufacturing plants in the Czech Republic and Slovakia and smaller plants in India and Kazakhstan (Skoda was forced to exit the Russian market). In 2023 Skoda delivered 867,000 vehicles (up 18.5% y-o-y). In 2024 Skoda sales increased by about 5% for the full year, but that increase accelerated as the year came toward a close - driven by the successful Enyaq EV (starting at GBP 45,000 in the UK, this is Europe not China!) that was the second best selling EV in Europe in November (fourth best for the full year), and the Octavia ICEV.
VW also owns the sporty Cupra brand, manufactured in Spain. Its sales grew over 50% in 2023 to 230,000, and its 2024 sales have grown by over another 5%. Its Cupra Born was the #14 best selling European EV in November 2024 and for the full year; awarded “best electric car 2024” by Autocar.
The Cupra brand is also sold in Australia, and priced very aggressively recently. The Australian market is much more competitive than the European markets, benefitting from Chinese competition.
Already, VW profits in the Chinese market have pretty much evaporated leading to a need to cut costs in its German operations that had been partially subsidized by those Chinese profits. VW had looked to cut 35,000 of its 120,000 workers in Germany, and some of its ten factories. After a three month standoff with its union, it has been agreed that there will be no staff cuts or plant closures until 2030 and in return the workforce will not receive wage increases during that period. This just delays the real pain that VW must go through, and instead maintains an inefficient way of operating while kicking the can down the road for a more intense crisis later. All of those existing factories, producing ICEVs and especially the ones producing internal combustion engines and related components, will require huge financial write-offs and costly refitting.
With operating margins of only 2% and a 43% profit collapse in Q3 2024 more drastic action will be required to free up revenues to fund the needed rapid move to EVs; which represented only 8.3% of deliveries in 2023, with BEV deliveries falling 4.7% in the first three quarters of 2024. In the UK in the first ten months of 2024, VW Group BEV deliveries represented only 11.8% of sales vs the 22% mandate; with the 2025 mandate being 28%. The pressure on VW to massively ramp up its BEV sales very quickly, both in China and Europe, is rising to a crescendo; a move that can only reduce its margins further.
Mercedes Benz sold 2.1 million cars in fiscal 2023, of which 660,000 were in Europe, 964,000 were in Asia, 340,000 were in North America and 81,000 elsewhere. In Q3 2024 sales were relatively flat, apart from in Asia where they were down 10%. The companies fundamental issue in Asia is its inability to develop successful EV models, placing it in danger as one Chinese brand after another moves into the luxury EV space. The new Mercedes CLA looks promising, but it has just had its China availability pushed back from April to August 2025 due to “software” issues and the other question is whether Mercedes can offer it at a competitive price and still make money. With the speed at which things happen in China, that is a long time. The CLA will be built in China and Hungary, not in Germany.
The loss of its Asian sales would produce a Mercedes with only 1.1 million sales; 60% in Europe, 31% in North America and with possible product development financing difficulties. For 2024 as a whole, the company sold slightly fewer vehicles than in 2023, with North American sales rising, Europe+MENA sales falling slightly (with Mercedes being heavily impacted by the sluggishness of its German home market), and Asian sales falling by 10% (with a 13% fall in China). Sales of BEVs actually fell, a trend that is very threatening for the company’s future, and sales of the more expensive models also fell; especially the S-Class. Such a sales mix change is detrimental to profit margins. In 2024, EVs will be about 19% of Mercedes’ sales, and it is on track in the UK to meet the ZEV mandate.
BMW sold 2.55 million cars in 2023 (y-o-y growth of 6.5%), of which 943,000 were in Europe, 1,070,000 were in Asia (825,000 in China), and 396,000 were in the US (of the 480,000 in the Americas). BMW have been more successful than Mercedes in developing EV models, but their mix of cars (top sellers being the mid-tier X3, iX1 and 3/4-series) places them more directly in the path of mass Chinese competition. For 2024 as a whole, the company saw sales fall slightly in Europe+MENA, marginally in North America (although the sales mix changed negatively as high end vehicle sales fell while the cheapest Model 2 and X1 had sales jumped), and catastrophically in China where sales fell 30%; resulting in global sales falling by more than 10%. The collapse in the profitability of its China sales, together with the negative sales mix changes were only slightly offset by success in selling EVs; with BMW now #2 in the European EV market. In 2024 EVs will be about 23% of BMW’s sales, and it is on track in the UK to meet the ZEV mandate. The loss of the Asian sales which represent 40% of BMW global sales would result in a European-centric manufacture (2/3 sales in Europe, 1/3 in the Americas - predominantly the US) with only 1.5 million sales, which may experience significant problems funding new vehicle development.
A big problem for VW, Mercedes and BMW (as well as other European brands) is that one of their biggest European markets is outside the EU, the United Kingdom (with 490,000, 88,000, 160,000 sales in 2023 respectively for the three German brands), and therefore does not have the EU anti-China EV tariffs. As with the much smaller Norway together with Turkey and MENA, one would expect the Chinese manufacturers to focus their exports to the region on these markets. With the UK’s mandated yearly increases in the share of EVs in each brand’s sales, the EV-focused Chinese brands (and Tesla with its Shanghai-produced Model 3) have a definite advantage. What happens in the UK market may be instructive of what will happen in the EU markets once the Chinese regional manufacturing plants come on line from 2026 onwards. The German manufacturers should be very worried.
The five drivers above split three in favour of the Zeekr and two for BMW; with a lot of disappointment with the Porsche given its much higher price, the utter banality of the VW, and the unimpressive Nio ET 5. Porsche, Audi and Mercedes may be about to have a “Lexus moment” with respect to the Chinese luxury cars, but an even more serious one than the the previous Toyota/Lexus challenge as the German functionality/price combination is fundamentally undermined while at the same time they are far behind in the EV space and the in-car technology space. BMW seems better able to deal with the challenge, at least outside of China. Although the company is certainly pushing its luck with its extravagant pricing, the new mid-tier ICEV X3 comes with a base model price of GBP 48,375 but that is of course before all those “extra” functions have to be paid for. The range topping M50 with options will cost you GBP 76,815, compared to the no-options and relatively badly equipped price of GBP 66,980. This is for a “mid-tier” SUV that competes with the Tesla Model Y, no wonder Tesla can make so much money in the UK. The Zeekr 7X SUV EV is priced at the equivalent of only US$32,000 (GBP 26,000) in China, so Zeekr can easily undercut BMW in the UK and still make a good profit.
Ironically Toyota may be even less well equipped than the German manufacturers to deal with this “Lexus” moment.
Here is another test with the Audi Q4 (derived from the VW ID4), the Kia EV6, the Tesla Model Y, the Porsche Macan, the Polestar 4, and the Ford Explorer (also derived from the VW ID4).
The Porsche provided little extra real value than the Polestar which was half the price when all the extra payments for “extra features” that are standard in other cars (or cost a lot less) that German cars are famous for! It also had less range than the Polestar, as it only had 82% of the claimed range vs. 91% for the Polestar. The Audi had the lowest range, and was most definitely wanting in the in-car electronics sphere. There were also some comments about cheap materials used in this “premium” brand. The Model Y, Explorer and Kia all had about the same range; between 78% and 81% of their claimed ranges. Not good results for the “German luxury” price premium.
Another big issue is that replacing the internal combustion engine that the German manufacturers excel at with an electric battery and electric drive train greatly levels the playing field, taking away a major source of the German brands’ advantage. For example, in the video below the electric Porsche Macan Turbo is compared to the Hyundai Ioniq 5N and its a close call between the two. The former costs GBP 95,000 in the UK (in China 968,000 RMB, equivalent of US$132,600) and the latter costs GBP 65,000 in the UK (in China 398,000 RMB, equivalent of US$54,500). A huge difference for cars judged to be so close in value, with the Hyundai a third less in the UK and less than half the price in China.
Probably why Porsche’s sales in China fell 28% in 2024, from 79,283 to 56,887; a third year of declines (from a high of nearly 100,000 in 2021). In Germany sales were up 11% to 86,541, in Europe outside Germany up 8% to 75,899, in the US up 1% to 86,541, and in other markets up 6% to 55,533. With the intensified attack on the luxury sector by Chinese brands in 2025, the decline in Chinese sales can be expected to accelerate. Porsche will become a Europe-centric car brand (with over half European sales in German), with a substantial US offshoot and lesser sales in overseas and emerging markets (with some of the latter and UK sales also coming under attack from the Chinese brands).
The huge geographic price differential also shows how massively cheaper are cars in China compared to Europe, especially in the UK where a steep premium is charged for the right hand drive versions. Just imagine if some Chinese manufacturers start charging closer to cost plus transportation in the UK, especially when they are already providing cost effective right hand drive cars to the Australian market? Just imagine if the Xiaomi XU7 becomes available in the UK in 2026, game over for the Macan?
A good example of the absolute price gouging of the German brands in Europe, and most especially the UK, is the 2025 BMW ICEV M135; for a base price of GBP 43,000 with none of those “extras” that the Germans charge so much more. The actual car shown below has those “options”, and is basically a “hot hatch” with a price of GBP 55,000! That’s with a cheap-feeling interior, less options (e.g. adaptive dampers), a lower power to weight ratio and less torque than the less expensive previous version, and a fake exhaust sound (on an ICEV!). That the VW Golf R (starting at the even more expensive GBP 44,535!) is considered to be much more of a “drivers car” than the BMW says a lot about the dilution of the BMW brand. Many have said that the grille looks more like a Kia than an expensive BMW, and its styling certainly does not stand out from the crowd.
This is in the same price range as the bigger and much faster Kia EV6 GT EV the Tesla Model Y EV performance and the Zeekr 7X EV (available in the UK in 2025)! VW have actually restricted the power of their all electric ID3 GTX performance so as to not cannibalize the sales of their ICEV hot hatches; no dual motor version is available. The South Koreans, and the Chinese have no such issues. The new BYD Seal 06 GT EV hot hatch has been released in China for a price of the equivalent of US$19,000 to US$26,000; leaving so much pricing margin to undercut hot hatches in Europe and especially the UK. In Europe, the German manufacturers have that “fat and happy” look, waiting to be slaughtered by well-priced Asian competition. Once the Chinese market becomes saturated with EVs there will be a tidal wave of such competition. The UK market will lead the way.
The Renault group, Renault and the sub-brands Dacia (660,000 sales) and Alpine, grew sales by 9% to 2.2 million vehicles in 2023; of which 550,000 were in France, 190,000 Italy, 180,000 Turkey, 160,000 Germany, 135,000 Spain, 125,000 Brazil, 100,000 UK and 60,000 in Romania. That’s 63% of sales in just 5 European countries plus Turkey, nearly 70% when Brazil added. The remaining sales were outside Europe: Argentina (50,000), Mexico (44,000), Morocco (61,000) and India (53,000). The group has no presence in China, Canada and the US, South East Asia or Australasia. This geographic distribution of sales may protect Renault from the Chinese onslaught somewhat, but it will still be challenged by the increasing Chinese presence in South America and MENA, as well as a Chinese focus on the UK market. The main Renault brand is struggling in 2024 with sales down about 6% globally, while the cheaper European-focused Dacia brand grew sales slightly. Within a no growth European car market, the Renault group gained market share; with the low cost Dacia (based in Romania) becoming even more important to the overall group. Dacia is the European budget brand, even undercutting MG in the UK (where SAIC has not been nobbled by a brutal level of EU EV tariffs), with cars like these:
For the whole of 2024, neither Renault nor Dacia had an EV within the European 20 top selling models. For the month of November the Renault 5 made it in at #16 and the Renault Scenic made it in at #19, showing some progress. But Renault and Dacia need to improve much more if their sales are not to be impacted by the move to EVs that is being driven by UK and EU regulations, with Dacia having the most work to do. There have been a slew of BEV and PHEV new models announced recently, and more to come in 2025.
In 2024, Hyundai-Kia sold just over 1.065 million cars in Europe (mostly imported), a small 4% drop from 2023. Toyota sold 1.25 million a 6% y-o-y rise, Nissan 350,000 a 4% rise, Suzuki about 195,000 (only a small increase, and sales dropping off toward the year end), Mazda down 7% to 172,000, and Honda 51,000 a small drop, and Mitsubishi 60,000 up over 50%. The vast majority of the Japanese brand sales were manufactured in a Europe which represents only a small share of the sales of the Japanese and South Korean manufacturers.
The Chery JV with Ebro-EV has taken over an ex-Nissan factory in Spain, as well as building cars in Poland at a Fiat factory. Geely-Volvo already has production plants in Europe, and BYD is constructing plants in Hungary and Turkey. SAIC, which was hit with the highest EU EV tariffs has yet to announce plans for a plant in Europe. Its biggest European market is a UK which is outside the EU, so it may decide to focus there and on other non-EU markets (the lack of growth in MG sales in the UK in 2024 should be troubling to SAIC). The Chinese “invasion” will not reach full blast until more of the regional manufacturing plants come on line and the Chinese EV market becomes saturated. This may provide a relative reprieve for the other car brands in the region, but from late 2026 onwards we can expect this period of relative calmness to disappear. This may be the period when the crisis in the European car market starts to reach a crescendo, especially with many major brands having lost much if not all of their Chinese, Asia as a whole (excluding Japan and South Korea), Australasian and even South American sales.
The decline of especially the German car manufacturing industry, but also possibly those of both France and Italy, will ripple across many related sectors of those nation’s economies. The car industry employs 800,000 directly in Germany, and another 1.8 million indirectly; as well as representing a big chunk of German exports. The movement of regional car manufacturing (and the related employment) to the European periphery, such as Spain (already the second biggest car manufacturer in Europe), Romania (e.g. Dacia), Hungary and Turkey (the planned sites for BYD manufacturing), and the Czech Republic (Skoda) will also cause severe issues within the EU; both for the EU free market zone and with a change in the balance of economic and political power away from North West Europe. The UK car manufacturing industry is also in significant decline, and very exposed to a Nissan that is in severe difficulties (Nissan produced 325,000 cars in the UK in fiscal 2023/24; nearly 40% of UK output), and a BMW-Mini where only the ICEV version is made in the UK (the electric version is made in Germany and China). In addition, Ford manufactures internal combustion engines in the UK which will be increasingly displaced by electric power trains.