European car brands face existential threats on many fronts in 2025, but they are all bad news and there is hope for beleaguered investors.
The headlines are reassuring and the most important words of the crisis are CO2, China, tariffs, restructuring and Germany. Despite the overwhelming negativity, the Morgan Stanley investment bank and the investment researcher Evercore ISI are detecting some positive aspects for investors.
The maximum urgent factor considerations of the European Union regulations on carbon dioxide emissions, with fines at the end that are collected by larger failures. These CO2 regulations, to force Europeans reluctant to buy electric cars and gradually prohibit sales of new internal combustion motor cars until all new ones disappear until 2035, will have other perverse effects. Manufacturers and politicians are riding a curse curse to dilute regulations.
EU Commission President Ursula von der Leyen’s Strategic Dialogue on the Future of the European Car Industry will be launched this month and watering down the CO2 rules will be top of the agenda.
Manufacturers lagging behind in the quest to satisfy the EU mandate are being forced to raise costs on their top successful ice machines, lest they earn even more cash to stifle sales and subsidize electric vehicles. This is bad news for earnings.
Luca de Meo, the CEO of Renault and president of the European Automobile Manufacturers Association, says the European auto industry faces fines of up to €15 billion ($15.5 billion) for failing to meet the EU’s 2025 CO2 emissions targets.
There is the risk of China, which is still difficult even after the giant tariff increases. And speaking of price lists, President Trump’s new management has sown fear and discouraged with his scattered references to imaginable tariff barriers. It has had an unfair merit for years, since its products are a topic for price lists of 2. 5% in the United States, while they are 10% in the other direction.
The threat from China, with its 30% efficiency advantage, is forcing so-called legacy manufacturers to think the unthinkable and close excess production. Volkswagen threatened to close 3 factories, although it backed off after talks with unions. Stellantis and its 14 brands is also said to have too many factories and ousted CEO Carlos Tavares’s replacement will have some tough decisions to make.
According to French automotive consultancy InoveV, average European car sales of sedans and SUVs have fallen from an average of 18 million per year between 2017 and 2019 to 13 and 15 million between 2020 and 2024.
“It is clear that the European automotive industry is suffering more and more overcapacity. Even if several giant European factories have closed their doors beyond ten years, production overcapacity is still significant in Europe,” UNOVEV said in a report.
And Germany, Europe’s biggest auto market, is in dire straits.
Professor Ferdinand Dudenhoeffer, director of The Automotive Studies Middle in Germany, said the German auto industry’s backlog was a 10-year gap. Sales in 2025 won’t be much higher than 2. 8 million in 2024. This is compared to a peak of 3. 6 million sedans and SUVs in 2019 prior to cooking.
Professor Stefan Bratzel, director of the German Center for Automotive Management, said government action was needed to repair the competitiveness of German industry. Next month’s snap general election means action will be delayed while winners negotiate on building the government.
“That (the election) will lose another half a year in bringing structural reform into place in Germany. That means a great burden for the auto industry in Germany,” Bratzel said in an interview.
GlobalData has summed up the traditional about the outlook for 2025.
“We deserve to build expansion in 2025 with the advent of new models and more financial flexibility. Despite this, the ongoing geopolitical tensions, as well as the cave of the German and French governments, bring a wonderful uncertainty that deserves to lead to the sale. Offs,” Globaldata said in a report.
Globadata predicts that Western Europe sales will increase 2. 3% to 11. 71 million, to 0. 9% last year.
Investment bank UBS has reiterated its long-held view that 2025 will be the best typhoon ever for automakers, with pressure costs and stricter CO2 regulations (despite the possibility of long-term attenuation). There are dangers in prices and low demand, which will translate into profits amid factory closures.
Fuel gauge pointing empty. Yo
Investment researcher Evercore Isi said that the negative issues that in 2024 will persist in 2025, however, that positive facets are on the horizon.
“Do you think this discomfort will last all year?” This is the brilliant point of our perspectives by 2025, we do not necessarily think about it, “said Evercore ISI in a study note. He estimated that sales in the middle of the year can also begin to increase and that production hours will possibly appear in 2026. promising.
“Has any of the secular headwinds gone away? Mix, EV, Lacklustre legacy tech. No. But rising volumes are always the cue for any Auto ailment,” it said.
Morgan Stanley changed its outlook for Europe’s auto manufacturers in 2025 from “Cautious” to “In-Line.
“We see a more balanced risk/reward ratio, with still some room for trouble, but also opportunities that the market is likely to be missing,” Morgan Stanley said in a report.
Morgan Stanley said positives will come with a return to affordability for SUVs and sedans, with some respite from European regulations.
“……. . . Pent-up demand is the structure and affordability continues at historic levels, reaching healthy levels through mid-2025, outpaced by falling prices, falling interest rates, subsidized financing, available revenue source, and potentially subsidies,” the report says.
The news about the imaginable rates deserves to give more visibility to the problem. Chinese car brands can create alliances with Europeans to increase EV penetration, but they also allow Europeans to gain advantages from their technology manager, according to Morgan Stanley.
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