The automotive sector is a key industry for economic growth, employment, and innovation. However, for years now, it has had to face an intense adaptation as, at a global level, it is undergoing one of the deepest structural transformations in its recent history.
This transformation, whose impact on the global market shares of the various producing countries is already more than evident, has, fundamentally, four closely related causes: the technological shift toward electrification and the digitalization of vehicles; the intensification of global competition, with an increasing prominence of several Asian countries; a significant reconfiguration of value chains; and geopolitical tensions, which, although initially of a more cyclical nature, have been an underlying, relevant element for years with varying degrees of intensity.
Let us start with the data.
In 2025, global vehicle manufacturing surpassed 96 million units. China is the world’s leading producer, with more than 34 million vehicles annually, followed by the United States (over 10 million), Japan (over 8 million), India (over 6 million), and Germany (just over 4 million). These five countries account for 66% (compared with 62% a decade ago) of global production, and only China, the US, and Japan together account for more than half.
If we look back over the last ten years, a very significant shift in the market shares of producing countries is evident. This shift benefits China and India, whose shares in 2025 —35.8% and 6.7%, respectively— represent an increase of 32.5% and 46.5%, respectively, compared with 2015. Some countries, such as India itself or Mexico, have gained prominence by acting as emerging industrial hubs, integrating into regional supply chains.
At the other end, the principal European producing countries: in those same ten years, Germany’s market share has fallen by 35.2% to 4.3%, losing its fourth position to India; Spain’s share (the second European producer, after Germany) has fallen by 20.1%, losing its global eighth position to Brazil; and France, which has dropped 30.8% to 1.5%.
Outside Europe, the most affected by the shift are Canada (down 48.2%) and Thailand (down 28.6%), but other major producers such as the United States, Japan or South Korea also record substantial losses in their market shares.
The main axis of transformation in the sector is, without a doubt, the electrification of vehicles. Global sales of electric vehicles have moved from representing 0.7% of the total in 2015 to 22% in 2024, which equates to more than 17 million units. However, the global distribution of these sales is highly unequal, with China leading the ranking: in 2024, nearly 11 million electric vehicles were sold in that country (two-thirds of global sales), while in Europe sales stalled at just over 3 million vehicles (18.5% of global sales that year); in the United States, although it rose somewhat from the previous year, electric vehicle sales accounted for only 8.5% of global sales.
“Against China and the United Kingdom, in the European Union there is some stagnation — or even a decline — in demand for electric vehicles”
On the other hand, electric vehicle sales accounted for almost 50% of total vehicle sales in China in 2024, a figure that four years earlier was less than 6%. The United Kingdom, Europe’s large economy with the highest share of electric vehicle sales relative to total, reached 28% in 2024, a rising trend it has maintained since 2019. In the European Union, however, there is some stagnation — or even a decline — in demand. Thus, EV sales accounted for 21% of total in 2024 (the same as in 2022), largely influenced by the waning momentum of major markets such as France, Spain or Italy and, above all, Germany, where in 2024 only 19% of vehicles sold were electric after reaching 31% in 2022.
From the perspective of EV production, the lead also lies with China: not only is it the world’s leading vehicle producer, but around 40-45% of its production is devoted to EVs. It is followed at a great distance by the EU as a whole, where electric vehicles account for roughly 20% of production, with Germany (25%), France (20-25%), and Spain (10%) as the main producers; finally, the United States allocates 10-12% of its production to this segment.
But beyond electrification, the car has also become a highly digitalized product, where software, connectivity, data, and digital services play an increasingly relevant role in its value added. This shift, which has altered the traditional relationships between manufacturers and suppliers, favors new tech players and manufacturers with scale and vertical integration capabilities at the expense of traditional makers. This is precisely the case in China.
“The transition to electric vehicles has allowed China to maximize its structural advantages”
Because the rise of international competition, particularly from China, is one of the most disruptive factors facing the sector. And it is the transition to electric vehicles that has allowed China to fully exploit its structural advantages. Thus, the Asian giant benefits from a huge domestic market, enabling mass production and lowering unit costs; in addition, many of its industrial groups are vertically integrated, especially in batteries and electronics, which makes it easier for its manufacturers to access the essential inputs in the new environment. Moreover, industrial costs (labor, energy, logistics, etc.) are low, and sustained public support (direct and indirect) for more than a decade has accelerated investment and learning. All this results in China being able to produce electric vehicles at prices significantly lower than those of its main competitors, raising competitive pressure and squeezing margins in third-country markets, particularly in Europe, for a product—the electric vehicle—that is less profitable than internal combustion vehicles for most European manufacturers.
Finally, geopolitical tensions have steered the evolution of the automotive sector since the mid-2010s. The rivalry between the United States and China, cross-sanctions, the war in Ukraine, and the growing fragmentation of trade have directly affected costs, industrial localization, and access to markets. Thus, the sector has become a battlefield of economic and strategic contest, and this is reflected in the trade and industrial policies of the three major geographic regions: the United States, China, and Europe.
All of the above — electrification and digitization of the automobile, the new competition, geopolitical tensions, and the lessons learned during the pandemic about the risks of relying on a few suppliers — has reconfigured, and continues to do so, the rules of the game for a critical sector. Its value chains have become more regional, with greater attention to supply security and a heavier reliance on digital tools to plan and control production and logistics. Moreover, in this new map battery manufacturers and access to critical materials such as lithium, nickel, or cobalt gain prominence, and the weight of companies in software, data, and automation grows, because they increasingly influence how the industry is organized and where value is created.
Simultaneously, the technological shift alters the position of countries and regions, introducing a strong territorial competition for new plants and components: on one hand, those able to develop ecosystems of batteries, electronics, and software, attracting investment and strengthening their industrial weight; on the other hand, those that do not do so sufficiently risk falling behind. In short, the geography of automotive is increasingly ordered by technological capabilities —and by new rules of trade and access to markets— and not only by labor costs.
Europe is particularly affected by these changes in a sector that remains highly relevant: automotive accounts for around 7% of the European Union’s GDP (10% in Spain), employs more than 13 million people, directly and indirectly (about 6% of EU employment, compared with 9% in Spain) and acts as a drag on other sectors. It also has a high international exposure with a large share of its production destined for export (primarily intra-European), in percentages that vary by country (from 85% in Spain or 80% in Germany to 50% in France).
“As a more traditional producer, Europe is seeing its production, market share and manufacturing margins eroded”
Indeed, as we have seen, the deep structural transformation of the sector is having a differentiated impact on Europe. As the more traditional producer, it is witnessing erosion of its production, market share, and manufacturing margins. Added to this is an electric vehicle demand that is stagnant and weaker than anticipated, limited access to third markets, and a high external dependence on batteries and critical components. Furthermore, there is a need to adapt plants and production capacities to newer, more digitally oriented processes, in a context of intense regional competition to attract industrial investment and protect jobs, which sometimes makes it difficult to take decisions at an aggregated scale.
Maintaining such an economically, socially, and territorially important sector requires rapid, deep, and Europe-wide coordinated adaptation efforts. The obvious risk is that structural changes outpace the economic policy response. Avoiding this requires a clear and ambitious strategic approach, with realistic and coherent objectives, which integrates industrial, commercial, climate, and technological policies, as well as the setting of stable rules of the game. In short, this is a complex, yet unavoidable and urgent debate for Europe’s industrial future.
