Strategic Crossroads: EU Auto Industry – CEO Priorities from ACEA’s H1 2025 Report

Oct 2, 20253 min read

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Executive Snapshot

The first half of 2025 has set the auto industry at a strategic crossroads. While Asia, led by China, continues to expand at scale, Europe faces contraction and fragmentation. A new growth pole is emerging in South America, driven by Chinese localization and regional investment. For C-level leaders, the question is no longer whether to adapt, but where and how fast to reallocate resources, partnerships, and infrastructure bets.

Global Context: Divergence in Growth and Power

Asia dominates: China’s car production rose 12.3% to nearly 13 million units, representing more than a third of global output. India and Japan also posted strong gains, underscoring Asia’s gravitational pull for demand and scale.
Europe contracts: EU production fell 2.8%, with Italy (–33.4%) and Spain (–12%) collapsing even as Germany (+4.4%) grew. Concentration risk is rising: three countries now account for 63% of EU production.
South America emerges: Registrations surged 12.7%, with Brazil up 3.3% and Argentina a stunning +86.4%. Chinese manufacturers are investing directly in local assembly, turning the region into a hedge against volatility in EU-US-China trade corridors.

CEO takeaway: The global center of gravity is moving decisively away from Europe. Boards must assume a multipolar auto landscape — Asia for scale, South America for diversification, Europe for legacy but vulnerable capabilities.

Innovation Strategy: Fragmentation of Electrification

Electrification is advancing, but not uniformly:

EU-wide trend: Hybrids captured 34.8% of registrations; BEVs grew to 15.6%. Progress remains below policy ambition.
Regional divergence: The Netherlands (35%) and Belgium (32.8%) are becoming BEV strongholds, while Poland (48.6%) and Italy (44.2%) are hybrid-heavy. France sits in between, with 44.7% hybrid and 17.6% BEV share.
Commercial fleets lag: Electrically-chargeable trucks remain at 3.6% share EU-wide, despite the Netherlands posting a +187% surge. Electrified buses rose to 21.6%, but vans — critical for last-mile logistics — remain under 10%.

CEO takeaway: Innovation strategies must be country-specific, not EU-generic. Infrastructure investment, consumer incentives, and OEM capabilities diverge sharply. A unified “EU strategy” risks misalignment; targeted deployment is essential.

Geopolitical Shifts: New Trade Blocs Redefining Flows

China dependency intensifies: Imports from China jumped 36% (465k units, 26.6% of EU imports), while exports to China collapsed 42%. Europe is losing both ends of the value chain.
UK & Türkiye as stabilisers: Exports to the UK grew 8.1% (€18.5bn), and Türkiye rose 34.5% (€7.8bn), offsetting some losses to China.
South America realigns: Beyond strong registration growth, local Chinese production signals a strategic re-mapping of supply chains. Brazil and Argentina are no longer just demand markets but emerging production ecosystems.

CEO takeaway: The EU is caught in a dual squeeze — over-reliance on Chinese imports and declining exports. Strategic diversification requires building deeper South America and Türkiye partnerships while hedging exposure to China.

Infrastructure Bottlenecks: Fleet Renewal and Energy Transition

The downturn in commercial vehicles is more than a sector-specific issue; it signals systemic underinvestment:

Vans –13.2%, trucks –15.4%, buses –4.4% registrations EU-wide.
Trade divergence: Van trade surplus halved (–49.8%), truck surplus shrank 12%, bus deficit ballooned to €1.2bn, driven by imports from Türkiye and China.
Broader impact: Delayed fleet renewal slows logistics modernization, public transport upgrades, and last-mile delivery electrification. This is not just an auto-sector lag — it reflects bottlenecks in infrastructure modernization across Europe.

CEO takeaway: Commercial fleet electrification must be treated as a strategic infrastructure investment, not a side policy. Delays here ripple across supply chains, energy transition goals, and urban mobility systems.

Actionable Risks for the C-Suite

China Dependency (High likelihood, high impact) Imports up +36%, exports down –42%. Strategic vulnerability intensifies.
Production Concentration (Medium likelihood, high impact) Germany, Spain, and Czechia = 63% of EU output. A shock in Germany cascades EU-wide.
Policy Overhang (High likelihood, medium impact) EU CO₂ rules and US tariffs weigh on margins; compliance relief is modest.
Commercial Fleet Delay (High likelihood, medium impact) Missed fleet renewal risks derailing 2030 emission targets.
Innovation Gap (Medium likelihood, high impact) Heavy-duty EV adoption under 5%. Fragmented adoption slows ecosystem maturity.

CEO takeaway: These risks are no longer “industry” risks. They represent macro-exposures for logistics, trade, and Europe’s broader competitiveness.

Strategic Playbook for CEOs

To navigate this turning point, executive teams should:

Rebalance export exposure away from China; double down on South America, Türkiye, and the UK.
Tailor EV strategies: treat NL/BE as BEV-first markets, PL/IT as hybrid-first, and Germany/France as mixed ecosystems.
Accelerate fleet pilots: electrify vans, trucks, and buses before 2026 to avoid compounding bottlenecks.
Stress-test supply chains: model shocks to Germany’s output and diversify production bases.
Engage in policy-shaping: CEOs must influence EU frameworks to secure pragmatic compliance pathways.

Conclusion: Europe at a Strategic Crossroads

The ACEA H1 2025 data confirms what many in boardrooms already sense: Europe is losing ground, not just in scale but in strategic resilience. Asia dominates, South America is rising, and Europe risks hollowing out outside of Germany.

For CEOs, the priority is not simply defending share but reshaping strategy around multipolar growth, fragmented innovation adoption, and cross-sector fleet modernization. This is the playbook for safeguarding competitiveness through 2030.