Europe’s automotive industry in the face of competition from the US and China
Automotive industry
Fecha: septiembre 2024
Raymond Torres
SEFO, Spanish and International Economic & Financial Outlook, V. 13 N.º5 (September 2024)
The European automotive sector is experiencing a considerable slump in both absolute terms and relative to its American and, even more so, Chinese counterparts. Between 2019 and 2023, the sector contracted by 16.6%, and preliminary data for this year suggest that the downward trend is continuing. The decline is the result mainly of supply factors, including a technology lag, which is impeding the response to the new environmental requirements, creating high prices that are weighing on demand and affecting competition. Barriers to the demand of electric cars also persist. While Spain has not been immune to these challenges, it has managed to mitigate some of them, due to its relatively stronger position within the European market. Nevertheless, the broader industry faces an uncertain future without strategic interventions to address these structural weaknesses. Going forward, neither the imposition of tariffs nor vehicle purchase subsidies are likely, by themselves, to reverse the decline in a sustainable manner. According to the empirical evidence, investment incentives, centred around the technology of key components like batteries, would be the better policy alternative.