EU carmakers are in a challenging squeeze between reduced consumer demand for new cars and increased competition from technologically advanced Chinese suppliers, with little prospect for improvement. While large carmakers have financial cushions, smaller car parts manufacturers are feeling the brunt of this trend.

So said automotive session panellists during last week’s European Economic Congress in Katowice attended by Kallanish.

Compared to the pre-pandemic high in 2019, the EU has seen annual new car registrations fall by some 2 million tonnes. “I don’t see anything on the horizon that indicates we can recover those 2 million registrations,” said Polish Automotive Industry Association president Jakub Farys. Poland is however an outlier, posting an all-time record combined passenger and light commercial vehicle registrations in 2025.

Chinese carmakers have meanwhile grown their EU market share from 2% in 2024 to 8% in 2025, and to 11% in the first quarter of 2026. “Competition is a normal part of our market, but it’s going very fast,” he noted. Chinese carmakers’ chief executives have said they are aiming for 15% in the short term. “This means that 1.5m cars … will not be produced in Europe.”

“The condition of the overall automotive industry in Europe is facing many questions, dilemmas and points for which it does not have an answer,” said Janusz Puzon, plant director at Stellantis Tychy vehicle plant. The automotive industry has expanded rapidly since the 1950s/60s, led largely by European technological solutions, but this is changing, necessitating a fight to maintain market share.

Customer attitudes are also changing. Owning a car used to be “like a dream,” he continued. “For many of us, many years ago, it was the only form of communication, it was something very fundamental; but today, I have the impression, it has become an extension of the mobile phone or laptop.”

From the perspective of car parts suppliers, who have seen over 100,000 job losses in recent years, “there is no special idea [solution] at the moment,” said Tomasz Beben, president of Poland’s Association of Automotive Parts Distributors and Producers. The industry is in dialogue with the automotive industry and the European Commission, resulting in the “first signs of change”.

He added: “We’re talking about some form of local content in order to support the core of the automotive industry in Europe.” Otherwise, there will be further car parts market share loss because “these parts factories will simply be relocated to cheap labour countries”.

The industry is under pressure amid Chinese competition and restricted US market access, as well as unfulfilled expectations for European vehicle electrification after carmakers had invested considerable sums into electric vehicle production, said Mateusz Starczyk, chief executive of automotive leasing firm mLeasing.

Carmakers have nevertheless accumulated capital over the years to provide a cushion for restructuring. “What awaits the European automotive industry is most certainly a large restructuring,” he noted. The toughest component will be the cost of labour, which is much higher than among Asian competitors.

Ford Polska ceo Attila Szabo pointed out that 2025 saw a reduction in EU20 commercial vehicle sales volume, which is usually a bad sign for the economy. Overall automotive sales surged in March, with various foreign suppliers pushing for higher numbers to close the quarter. “I don’t think we’ll have the same numbers in April,” he noted.

Competition with China is difficult. “The EU must do more. The Made in EU agenda is a fantastic thing; it’s the right approach to save ourselves from the full Asian attack,” he continued. But due to the highly integrated nature of the European industry, it would be wrong to exclude Turkey and the UK from the measure as this would raise production costs.

Jacek Puzuk, ceo of diesel engine parts manufacturer Wuzutem, suggested EU carmakers should focus on what they have done well the last 70 years. “Striving for zero emissions, I think, it not necessary for us. Striving for minimising emissions, yes,” he noted. Unlike the polluting engines of 20-30 years ago, petrol and diesel engines built today in Europe can compete with Chinese engines. “The Chinese are not able to produce low-emission petrol or diesel engines,” he added.

Challenged by the moderator about whether consumers want to remain dependent on costly imported fuel, he suggested biofuels could be used to reduce costs. Farys added the cost of petrol is one thing, but the cost of electricity can also be prohibitive in the case of electric cars. The infrastructure in Europe is not ready yet for full electrification, which is something carmakers have no control over, he added.

Shifting to producing electric vehicles just shifts the dependence to imported batteries, which creates potential problems with China, Beben warned.

Panellists also touched on the growing trend of carmakers looking to diversify into production for agriculture or for defence purposes, otherwise known as dual use. “We’re looking at sectors where diesel engines will still be needed for many years, such as heavy industry, diggers, heavy trucks, locomotives, especially in the US market,” said Puzuk. “The talk of diesel heading for its death, maybe one day, yes, but that will not happen for a very long time.”