The Paris Motor Show, the discussions between France and Germany on the relaxation of European rules on engines and negotiations in Brussels with China on the restriction of its exports place this essential sector of industry at the centre of the news. They illustrate the extent of the crisis that is hitting it, even though it was for a long time one of the strong points of the European economy, both in terms of jobs and exports.
Since the beginning of the year, the fall in manufacturers' share prices has been spectacular: Stellantis (-56%), Renault (-17%) but its share price had already fallen significantly in 2025, BMW (-39%), Mercedes and Volkswagen (-29%). Three factors have successively combined to lead to this deterioration, the costly acquisitions decided by the managers, European regulations and recently the rise of Chinese industry.
Renault's acquisitions over the past 25 years have been a series of failures for which the company and its shareholders are paying the price today. With a market capitalization of 7.8 billion, it is worth less than a third of its historical advertising supplier Publicis (25 billion). It started with the failure of the merger with Volvo. The Swedish government did not want the state to take a stake in the company. It was a bad thing because Volvo was bought by the Chinese company Geely and Sweden no longer has a manufacturer.
The acquisition of Dacia, which was a consolation prize after the failure of the attempt to buy Skoda, was originally a good way to establish itself in Eastern Europe after the fall of communism. But it was not planned that the models would be imported into Western markets, especially in France. However, this was the case and they successfully competed with Renault's models on what was its strong point, the entry-level model. The company then decided to relocate the production of these models, particularly to Turkey, without this improving its profitability.
Nissan's entry into the capital was even more harmful, except for the managers of the time who saw their remuneration soar. Nissan took advantage of Renault's network to establish itself permanently in France but there was no reciprocity and the company closed the world's three largest markets, China, the United States and Japan to redirect to Brazil and Russia with the consequences that followed.
Peugeot-Citroën did not make a better deal by merging with Fiat, which had previously acquired Chrysler. The group was therefore largely exposed to the American market. Stellantis had to deal with the consequences of Donald Trump's return to power in the United States. The introduction of tariffs with neighboring countries where Chrysler had made investments to reduce its costs weighed on profitability. Added to this was the disappointing result of the acquisition of Opel's activities in Germany, considered insufficiently profitable by its shareholder Ford.
German manufacturers had been very cautious and apart from buying the prestigious English brands Bentley and Rolls Royce, they had focused on the success of their models all over the world. They therefore believed that they could easily overcome the real revolution for the sector represented by Brussels' decision to ban the marketing of vehicles equipped with combustion engines in 2035, thus giving manufacturers barely fifteen years to adapt. No country in the world has so far made such a rigorous choice.
The consequences of this first European decision had not been assessed. However, it was supposed to lead to a real industrial transformation. The abandonment of the production of combustion engines implied the closure of many factories, jeopardising hundreds of subcontractors and tens of thousands of jobs. Future electric motors powered by batteries required metals and rare earths that Europe was not producing, less than 10 years before the deadline set.
The time frame was very short for such a transformation, while consumer demand was low because the range was insufficient to meet their needs. This situation has changed recently due to the improvement in battery capacities and especially the rise in fuel prices, but we are still far from a threshold of 50% of electric vehicle registrations for individuals.
In addition to this 2035 target, Brussels has constantly tightened the rules on CO2 emissions from cars, which has added costly constraints for manufacturers and affected their profitability. Current discussions between French and German manufacturers aim to find an agreement on the postponement of the 2035 date and on the mandatory share of parts manufactured in the Union to avoid customs duties. Once the agreement is reached, they will have to convince the European authorities to adopt it, which would offer the industry a respite to face the systemic threat that Chinese manufacturers now pose.
The third cause of the crisis that the sector is going through is the underestimation of this threat in the past. French manufacturers, although they had been present in China and Hong Kong for a long time, never managed to make a significant place for themselves because they had concentrated on entry-level models where they had no chance of being competitive. German manufacturers had made the opposite choice and had a spectacular success. You only had to walk around Shenzhen or Shanghai to see that there were more Porsches there than in the whole of France.
Exports and production of cars in China over the past twenty years have been the main source of profit for German companies. The current reversal makes the consequences even more painful. In five years, the share of foreign vehicle registrations has been halved, while Chinese car exports have increased sevenfold. While consumption has stagnated since the end of the Covid-19 epidemic, which is the main cause of the slowdown in growth, two underestimated phenomena have intervened in Europe.
The first is the industrial transformation of the country. From simple suppliers or subcontractors, Chinese companies have transformed themselves and become competitors of large international firms, particularly in the automotive sector, by benefiting from their huge domestic market, which has become an essential factor in reducing costs. Secondly, the acquisition of a beautiful foreign-made car was a strong signal of social success. This is no longer the case since there are Chinese brands capable of fulfilling this role and in a general context of international tension, a certain nationalist reflex has emerged and guides consumer choices.
The discourse attributing the success of Chinese manufacturers in Europe to subsidies or overcapacity testifies to a collective blindness. The real answer is not in the criticism of a competitor but in the remedy of its own weaknesses. The European states and institutions must therefore acknowledge their mistakes and remedy them by correcting bureaucratic excesses and setting a timetable for the transition to electric vehicles that no country in the world has imposed on itself.
The lessons of past mistakes must be learned. The recovery of the European car industry requires first of all the adoption of European rules concerning engines and emission standards spread out over time to take account of industrial constraints. It also involves the establishment of partnerships with Chinese competitors where everyone would win. This must also be the challenge of the ongoing discussions with Beijing