\u201cOur business model has changed.\u201d That\u2019s what Oliver Blume, the chief executive of the Volkswagen Group, Europe\u2019s largest automotive giant, said at a recent press conference in Madrid to present the new Cupra Raval. He was referring to the deeply challenging moment the industry as a whole is going through, one in which the center of innovation and production has shifted from Europe to China.<\/p>\n
\u201cIn the past, we developed in Germany, in Europe, and from there we sold our products around the world with a good quality standard. Today that\u2019s no longer possible due to regulations, how customer expectations have changed, and competition,\u201d the executive said. He argued that Volkswagen now works in the opposite direction: it brings to Europe the processes it learns in China, where it has partnerships with local companies such as SAIC Motor (owner of MG) and Xpeng.<\/p>\n
The German executive\u2019s remarks capture well what was a disastrous 2025 for the European automotive sector: losses or steep drops in profits dominated the financial results of the main car manufacturers, with the exception of BMW, which managed to stay in line with the previous year. To the reasons Blume spelled out, one must add last year\u2019s most destabilizing factor: the erratic tariff policy of U.S. President Donald Trump<\/a>, whose extra duties on car and component exports hit German plants particularly hard. Spain, although the second\u2011largest vehicle producer in Europe, does not export a single car to the United States, though it does ship parts.<\/p>\n However, the shockwave from Trump\u2019s tariff policies and his policies favoring combustion\u2011engine vehicles in the United States also hit the balance sheets of America\u2019s own carmakers. In fact, the withdrawal of electric\u2011vehicle incentives in the U.S. market pushed companies such as Ford, General Motors, and Stellantis (the latter a European\u2011U.S. consortium whose brands include Fiat, Peugeot, Citro\u00ebn, Chrysler, and RAM) to make a strategic shift aimed at extending the life of their combustion models. That shift cost Ford and Stellantis losses of $8.2 billion and $26.3 billion, respectively. General Motors, a company heavily focused on the U.S. market, did manage to stay profitable, but its earnings plunged 55% to around $2.5 billion, although its outlook for this year is more optimistic, according to its annual results presentation.<\/p>\n Beyond Trump, U.S. manufacturers \u2014 along with European groups such as Mercedes\u2011Benz and Porsche \u2014 have cited a more fundamental reason for revising their electrification plans: electric\u2011vehicle sales<\/a> are growing, but not as fast as the industry once expected.<\/p>\n \u201cThere is a mismatch between an industry moving rapidly toward electrification and a market that is not growing at the same speed, in a context of rising international competition and geopolitical uncertainty,\u201d explains Donia Razazi, industry expert in Spain at the consultancy Ayming. \u201cMoreover, although Europe has a solid industrial base, it still shows a high external dependence on key elements of electrification, such as batteries or certain technologies<\/a>, which is a weakness in the current environment.\u201d <\/p>\n The fall of Tesla<\/p>\n As for Tesla, the pioneer of electric mobility owned by Elon Musk<\/a>, the outlook is cautious after a year in which its profits fell by 46%. Tesla has also been hit by Trump\u2019s policies, despite Musk\u2019s role in bringing him to the White House and later joining his administration as head of the Department of Government Efficiency<\/a> (DOGE). But the company\u2019s biggest challenge today is Chinese competition. China\u2019s leading manufacturer, BYD<\/a>, which produces only plug\u2011in vehicles (that is, fully electric or plug\u2011in hybrids), has already overtaken Tesla as the world\u2019s leading electric\u2011vehicle maker thanks to its expansion into markets such as Europe, where it is growing at breakneck speed.<\/p>\n For example, Tesla saw its sales in Europe fall by 26.9% in 2025, to nearly 239,000 units, while overall electric vehicle sales in the European market grew by 29.7%, according to data from the European Automobile Manufacturers\u2019 Association (ACEA). BYD has captured that market share, with a 268% increase (more than 187,000 registrations). And the losses for Musk continue: in the first two months of this year, BYD has delivered 36,000 vehicles, while Tesla has recorded just 26,000.<\/p>\n However, BYD\u2019s success comes with a caveat: the price war it has helped fuel \u2014 both in China and abroad \u2014 has taken a toll, with profits falling 19% in 2025. That is not the case for other Chinese brands such as Chery, whose profits rose 34.6% last year; SAIC, which saw earnings soar 506% after a disastrous 2024; and Geely, which has remained stable. <\/p>\n Jos\u00e9 Ignacio L\u00f3pez, professor of business organization at CEU San Pablo University, notes that competition from China \u201cis not cyclical but structural,\u201d because \u201cChinese manufacturers arrive with cost advantages, battery integration, and the ability to compete on price in segments where European consumers are under significant pressure.\u201d<\/p>\n European carmakers want to copy the Chinese<\/p>\n Among Europe\u2019s automotive groups, Renault posted the biggest losses (setting Stellantis aside), around \u20ac10.93 billion ($12.89 billion), although its situation is due to a specific event. The company chose to sacrifice its 2025 results through an accounting change designed to ensure that its exposure to Nissan \u2014 of which it is the largest shareholder \u2014 would not weigh on its books in the coming years. The move reflects the fact that the Japanese manufacturer is undergoing a deep restructuring of its business, which cost it around \u20ac5 billion ($5.9 billion) in losses in 2025. That figure combines the first three quarters of its latest fiscal year, which closed in March 2026, and the final quarter of the previous fiscal year, covering January to March 2025. In Japan, the fiscal year runs from April to March.<\/p>\n