Europe’s car manufacturers are facing mounting concerns about their long-term viability as they grapple with rising car prices and intensifying competition, according to a report from Jato Dynamics.

The report highlights a sharp decline in new passenger car registrations across 28 European markets, with just 9.74 million units registered in the first three quarters of 2024.

This marks a significant drop from 12.11 million units registered during the same period in 2019 and an even greater gap of 2.55 million units compared to 2018 levels.

Felipe Munoz, global analyst at Jato Dynamics, pointed to a “deeper-rooted problem” in the industry, noting: “Europe is a mature automotive market and therefore years of extreme growth are an event of the past. However, while the automotive market has typically demonstrated a cyclical nature, current weak performance and high price tags are not a natural response to years of crisis.”

New regulations requiring all cars sold in Europe to be zero-emissions by 2035 - and by 2030 in the UK - are driving up prices, according to Jato.

While consumers are being encouraged to shift to battery electric vehicles (BEVs), the rapid pace of change has created economic challenges.

The average retail price of a car in Germany has now reached €56,735, exceeding the country’s pre-tax average annual salary of €51,900. Similar trends are evident in other major markets: France (€49,000), Spain (€54,000), Italy (€56,000), and the UK (£49,451 or €59,360 at current exchange rates).

China has capitalised on the shift to BEVs, flooding the European market with affordable alternatives. Of the 7.2 million BEVs sold globally between January and September 2024, 4.1 million were sold in China, with 3.7 million of those produced by Chinese manufacturers. China’s control over battery supply chains has enabled it to produce BEVs at competitive prices, adding pressure on European manufacturers.

Interestingly, the rising prices of internal combustion engine (ICE) vehicles have contributed significantly to the cost crisis.

In Germany, ICE vehicle prices increased by 26.1% between 2019 and 2024, compared to just 5.2% for BEVs. Similar trends were observed in Spain (ICE up 17.7%, BEV up 1.9%) and the UK (ICE up 29.4%, BEV up 16.5%).

France stands out as an exception, where ICE vehicle prices rose by 10.4%, while BEV prices decreased by 6.4%. Italy was the only major market where BEV price increases (31.5%) outpaced those of ICE vehicles (18.4%).

Munoz explained: “The rising prices of ICE vehicles comes in contrast to what many believe: that the arrival of more electric cars is the driving force behind Europe’s pricing problem. However, with just ten years until the EU’s 2035 deadline, it is alarming that BEVs still account for only 15% of total passenger car registrations in Europe.”

Europe’s inability to lower prices has already had a profound impact, with Western Europe losing 3.3 million units in new car sales between 2019 and 2023.

Munoz warned that the rise of China as an automotive superpower has fundamentally altered the competitive landscape, posing an existential threat to European manufacturers.

“Until now, European OEMs may have been able to remain profitable despite higher prices. However, the emergence of China as an automotive superpower has changed the game and they must now look for new ways to reduce their prices in an increasingly competitive market, or risk extinction,” Munoz concluded.

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