European car sales saw a 2.1% drop in January 2025 over last year. This decline was fueled by a sharp fall in diesel and petrol car sales, which outweighed the success of fully electric and hybrid-electric cars.
According to data from the European Automobile Manufacturers Association (ACEA), big markets such as France, Italy, Germany, and the United Kingdom posted decreases in new car registrations, although Spain was the sole big market to register a year-on-year growth.
Market Performance Overview
The combined sales in the European Union (EU), the United Kingdom, and the European Free Trade Association (EFTA) nations dropped below 1 million units, the lowest ever since August 2024.
- Volkswagen and Renault registered growth rates of 5.3% and 5.4%, respectively.
- Stellantis, however, experienced a steep 16% drop in sales.
- The EU market alone saw a 2.6% drop in sales, though there was strong growth in battery electric vehicles (BEVs) and hybrid electric vehicles (HEVs) by 34% and 18.4%, respectively.
- Plug-in hybrid electric vehicles (PHEVs), however, saw an 8.5% decline.
Electrified vehicles (BEVs, HEVs, and PHEVs) accounted for 57.2% of passenger car registrations, up from 47.4% last year.
Spain was the exception, recording a 5.3% sales growth, while France (-6.2%), Italy (-5.8%), Germany (-2.8%), and the UK (-2.5%) declined.
EU Auto Sector Plans and Policy Challenges
The European Commission will publish new automotive sector plans on March 5 following consultations with automakers, unions, and stakeholders.
- European manufacturers are facing tough Chinese brand competition and the danger of heightened U.S. tariffs.
- Motor manufacturers have requested the European Commission issue CO₂ emissions flexibility regulations that went into effect in January 2025.
- Some companies have hiked petrol car prices to drive consumers to alternative electric cars, but the measure threatens to delay consumer purchases entirely.
On the other hand, electric transport lobby associations argue that relaxing CO₂ regulations would postpone investment in EV infrastructure and hurt the EU's competitive edge in the electric mobility market.
Challenges Facing European Automakers
There are a number of pressures facing European automakers, such as:
- Increased production costs compared to Asian manufacturers
- Potential new U.S. tariffs on European cars
- EU's ambitious CO₂ emissions targets
France has proposed giving manufacturers more time to meet these emissions standards, citing that an accommodation needs to be found between environmental ambitions and economic realities.
Electric Car Takeup and Infrastructure
Though new vehicle sales declined overall, the growth of electric and hybrid vehicles signals a shift toward sustainable transport.
- The EU has committed to a 90% reduction in net emissions by 2040, in addition to the 55% reduction by 2030.
- However, affordability and charging infrastructure remain significant challenges to mass adoption of EVs.
Automaker-Specific Developments
- BMW has cancelled its £600 million investment in the UK's Mini factory in Oxford, blaming EU tariffs charged on Chinese cars as being more of an issue than UK mandated EV sales targets.
- Tesla saw a dramatic 50% fall in sales in Europe in January 2025, in the UK, France, and Germany, due to increasing competition and saturated markets.
Prospects for 2025 and Beyond
The German automobile association (VDA) forecasts a 2% increase in the European new car market in 2025 to 13.2 million units.
- Electric vehicle battery sales will register a 67% increase, solidifying the industry shift towards electrification.
- The car industry is required to boost production and sales of zero-emission and low-emission vehicles to meet the 2025 CO₂ emission targets and the 2035 target of 100% zero-emission vehicles.
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