European car sales experienced their sharpest decline in five months this February as economic concerns led consumers to delay major purchases. According to the European Automobile Manufacturers’ Association (ACEA), new-car registrations fell 3.1% year-over-year, reaching 963,540 units. Among the region’s major markets, Spain was the only one to report growth, driven by a 61% surge in electric vehicle (EV) registrations.
Traditional Fuel Vehicles Plunge as EVs Gain Traction
The overall decline was largely due to a significant drop in demand for gasoline and diesel-powered cars. Sales of gasoline vehicles fell by 24%, while diesel registrations saw an even steeper decline of 28%. In contrast, battery-powered and hybrid-electric cars gained market share as European automakers pushed for cleaner alternatives to meet stricter emission targets.
Challenges Facing the European Auto Industry
European car manufacturers are bracing for another difficult year as economic stagnation in key markets continues to weigh on consumer confidence. The threat of U.S. tariffs and rising competition from Chinese automakers, particularly BYD Co., further complicates the outlook.
Despite these challenges, EVs were a rare bright spot, with sales climbing 26% as carmakers ramped up promotions to comply with stringent emissions policies. However, not all manufacturers benefited. Tesla Inc. saw a 40% decline in new registrations across Europe, attributed to consumer backlash against CEO Elon Musk’s political stance, including his support of the right-wing Alternative for Germany party.
Affordable EV Models and Rising Chinese Competition
To attract hesitant buyers, European automakers are introducing more budget-friendly EV models. Renault SA recently unveiled the R5 E-Tech, priced at €25,000 ($26,990), while Stellantis NV launched the Citroën ë-C3 city car for €23,300. These models are set to compete with an influx of Chinese-made electric cars from brands such as BYD, Nio Inc., and Xpeng Inc., which are aggressively expanding in the European market.
Market Leaders Brace for Policy and Trade Impacts
Volkswagen AG, the largest automaker in Europe, expects to sustain profitability in 2025 but faces risks from proposed U.S. tariffs on Mexican and Canadian imports. Similarly, Stellantis NV, which relies on North American operations, could be affected. Meanwhile, premium carmakers Mercedes-Benz Group AG and BMW AG are bracing for shrinking profit margins due to pricing pressures in China and ongoing trade disputes.
Future of EV Growth in Europe
A key question remains: Can Europe’s EV momentum continue? In early March, the European Union extended the timeline for automakers to meet tougher CO2 emissions targets, providing Volkswagen, Stellantis, and Renault with some relief. However, whether this policy shift will sustain EV demand remains uncertain.
Notably, EV sales surged in most major European markets except France. Germany recorded a 31% increase in new battery-powered vehicle registrations, while Italy saw a 38% rise and the UK experienced a 42% jump. This indicates that despite economic uncertainty, European consumers are increasingly willing to transition to electric mobility.
