The good news for Europe’s automakers is that home sales will rise a bit in 2026. The trouble is, sales by rivals from China will likely accelerate; result – falling market share, evaporating profits, closing factories, rising unemployment. And Germany, once the unassailable leader of the global auto industry, is in the crosshairs.
According to GlobalData, sales in Western Europe – that includes the big five markets of Germany, France, Britain, Italy and Spain – will grow just 1.6% in 2026 to nearly 12 million, boosted by strong electric vehicle sales, many of which will come from brands in China.
These sales will be led by the likes of BYD, SAIC’s MG, and Chery’s Jaecoo and Omoda. New names will be appear including Stellantis affiliate Leapmotor, the Geely powerhouse which now includes its own name vehicles plus its subsidiaries Polestar and Volvo. Chery is launching its own brand, plus smaller electric vehicles badged Tiggo. Guangzhou Automobile Group’s Aion is cranking up sales in Britain and on to mainland Europe. And in case the German premium manufacturers think they can breathe a sigh of relief for not being exposed to the mass market, Chinese upmarket names like Xpeng, Zeekr, NIO and Ziaomi have other ideas to upset Porsche, Mercedes, BMW and Audi. China and upmarket vehicles is no longer an oxymoron.
Fitch Ratings expects sales of 13 million vehicles in all of Europe in 2026. BMI now predicts a 1% decline after initially seeing a 2.6% rise. But the most important number is perhaps the 3 million annual sales that have disappeared since the Covid pandemic struck.
Devastating toll of China’s incursion
The European industry is still geared up to service this bigger number, although job-loss plans at Volkswagen – 100,000, and 8,000 at BMW, 9,000 at Porsche, 13,000 at Bosch and 14,000 at ZF, already tell the story of the devastating toll of China’s incursion, which is gathering pace.
Chinese autos now account for almost 10% of the European market. Global consultancy AlixPartners expects this to rise to 16% by 2030, and many consider this to be a seriously conservative estimate.
Investment bank UBS puts it this way.
“The global rise of Chinese (manufacturers) remains the top challenge for European manufacturers and suppliers in 2026. After BMW, we expect more risk of profit warnings from German manufacturers on restructuring charges. We also see downside risk to underlying performance of mass manufacturers,” UBS said in a report.
Professor Stefan Bratzel’s Center of Automotive Management said in the first seven months of 2026, the EV market in Germany was booming and sales for the whole year could rise to 850,000, boosted by an increasing number of attractive new models, government subsidies and high gasoline prices.
New more affordable EVs include the Renault 4 and 5 E-Tech, the Citroën ë-C3, VW’s Škoda Epiq, and the Fiat Grande Panda. Citroen and Fiat are Stellantis brands.
But the Chinese manufacturers are winning more market share.
German EV brands fell from 63.5% to 54.2%
“German group brands still dominate the domestic EV market, but their combined market share fell noticeably from 63.5% to 54.2% in the first half of 2026 compared with the prior-year period. Tesla, the Stellantis brands, and Chinese manufacturers have been able to meaningfully increase their market shares in battery-electric registrations, with market leader Volkswagen losing out the most,” Bratzel said in the report.
“But even across all drivetrains, Chinese manufacturers are among the biggest market winners over the first seven months, while German and Japanese manufacturers are losing market share: BYD, for instance, has overtaken Volvo in new (sales) in Germany for the first time. Electromobility and Chinese newcomers will permanently reshape the balance of power in the German market,” according to Bratzel.
The European Union needs to step in and help Europeans handle competition, said by some Europeans to be unfair.
“Subsidy policies and regulations need to be adjusted accordingly, so that value creation takes place predominantly in Europe and unfair business practices are avoided,” he said.
“First step – restore cost competitiveness”
The EU’s Industrial Accelerator Act, currently stuck in the European Parliament and not expected out until next year, wants to promote action to save local automakers from succumbing to ballooning Chinese competition.
According to a report from Professor Ferdinand Dudenhöffer’s Center of Automotive Research, the German automotive industry employed 841,000 in 2018 and this will slide to 500,000 by around 2030.
“The process of shedding jobs will play out over the coming years. The avalanche is nowhere near its full size yet – it is only just beginning to roll. The years ahead will be grim,” Dudenhöffer said in a report.
What is to be done?
“The first step is to restore cost competitiveness,” Dudenhöffer said.