There are many changes happening in the automotive sector in Europe: In this blog we will focus on Germany, Spain, and Central and Eastern Europe. Each region comes with its specific set of challenges and opportunities presented by global shifts into electric vehicles, shifting demand patterns, and flows of foreign investment. In the post, we shall take a closer look at some of the dynamics that shape these key markets.
Germany: a declining major player
Since 2018, car manufacturing in Germany has faced a dramatic decline in production. Having reached in 2023 the same level of production as in 1985, the German car-making industry cannot catch its breath. Among the causes of this slump, reduced demand for combustion cars is at the top, accompanied by high energy costs as a factor to make manufacturing more expensive. Export markets too are shrinking, which until this time helped prop up German carmakers.
Yet, in spite of such challenges, Germany is the most important location for EV manufacturing after China. Competition remains relentless, though, with Chinese manufacturers putting on steam and gnawing at the market share of their rivals. And to add to all these difficulties, the German government has axed the subsidies on EVs-a step that can reduce the growth of electric vehicle adoption and production further and give manufacturers lesser reason to scale up their EV output.
Spain: Resilience in the Midst of Change
The Spanish automotive industry has also shown great resilience, especially in the recovery post-pandemic. This year, Spain manufactured 2.5 million vehicles, 10% more than last year. However, these figures still show production below pre-pandemic numbers.
The government does serious work of increasing the volume of EVs production and corresponding infrastructure with the financial resources of the Next Generation EU Fund to transform the industrial base in general.
This, again, strengthens Spain as a no-crisis country moving forward to attain further growth in this sector. However, there are many challenges, especially scaling up the EV production lines concerning the increase in demand. Further support by the government and making strategic investment will decide whether the ambition of laying the position of the country as a leader in the European EV market is achieved or not.
Central and Eastern Europe: Ready for a Record Year
With countries like Slovakia, Hungary, and the Czech Republic, Central and Eastern Europe has gained significant momentum in contributing to the post-pandemic recovery of the automotive sector. The region is on its way to achieving a record year in 2024, while Slovakia is going to beat its production highs for the first time this year. All this is possible only because of foreign investments, notably from Western Europe.
However, if there is one factor that makes CEE susceptible to changes in global market dynamics, it is none other than external investments. While the region prepares for its positioning as a hub for EV production, it also has to face off some fierce competition from powerhouse China, whose dominance in the EV market is on an upward trend. Furthermore, the competitive advantage of production cost advantages is less definably clear in the field of EVs against China, where advanced technologies and infrastructure take precedence. In order for CEE countries to remain competitive, significant investments in EV infrastructure and innovation will be required. Without these key improvements, the region risks losing its edge in a rapidly evolving automotive landscape.
Conclusion
This is all to say that Germany, Spain, and Central and Eastern Europe have to cope with an entirely different developing automotive landscape: while Germany used to be on top of the automotive food chain, it still faces an impending production crisis despite strong EV representation; Spain uses EU money to further build its production capacity in a push for EVs, while CEE faces challenges regarding infrastructure for EVs and competition from global players as it enjoys strong post-pandemic growth.
