The stalling demand for electric vehicles in Europe and moves by European finished vehicle manufacturers to reorganize their production bases have been attracting a great deal of attention, and are having a significant impact on the economic trends in Germany and other major European countries. In this report, we will review the current status of the changes in the environment surrounding the European automobile market and their impact on the Central and East European economies, as well as the outlook for the European automobile market in 2025 and the relationship between the European automobile market and the Central and East European economies. It is important to keep in mind the regulatory trends surrounding electric vehicles, the reorganization of production bases of European finished vehicle manufacturers, and the expansion of Chinese finished vehicle manufacturers into Europe.

1. current status of the European automobile market and outlook for 2025

The European automobile market has been rapidly shifting to EVs in recent years. The European Union (EU) has set a goal of completely shifting new car sales from internal combustion engine vehicles to zero-emission vehicles by 2035, and governments have introduced policies and subsidies to promote EVs. However, by 2024, EV sales in Germany, France, and other major countries will drop significantly year-on-year, indicating that demand has stalled. This slump in demand can be attributed to shrinking government subsidies and the high price range of most EVs. In particular, subsidies for EV purchases have been reduced in Germany, and consumers are becoming less willing to purchase EVs. 2025 and beyond is expected to present further challenges for European automakers, as the EU will tighten CO₂ emission regulations starting January 1, 2025, requiring automakers to further reduce emissions. emission regulations from January 1, 2025, requiring automakers to further reduce emissions. As a result, manufacturers are urgently seeking to expand EV production and technological innovation, but sluggish demand and rising costs are weighing on them, making industry-wide reorganization inevitable.

2. relationship between the European auto market and Central and Eastern European economies

Central and Eastern European countries have played an important role as production bases for the European automotive industry due to their low-cost labor and geographical advantages. In particular, Poland, the Czech Republic, Hungary, and Slovakia have become major production centers, and the economies of these countries are heavily dependent on the auto industry. However, the economies of Central and Eastern European countries have also been affected by the slump in demand across Europe and the reorganization of production bases. For example, as major automakers review their production capacities and consider plant closures, their plants in Central and Eastern Europe may be among those affected. There is concern that this will have a negative impact on local employment and economic growth. Furthermore, the shift to EV production is forcing traditional internal combustion engine-related parts manufacturers to shift technologies. Many parts manufacturers in Central and Eastern Europe are being asked to adapt to new technologies with limited resources, and competition for survival is intensifying.

3. regulatory trends surrounding electric vehicles

The EU has introduced strict CO₂ emission regulations with the aim of protecting the environment and creating a sustainable society; from January 1, 2025, even stricter emission standards will apply, requiring automakers to accelerate EV production and sales. Violations of these standards are subject to hefty fines, so automakers are rushing to respond. However, the sluggish demand for EVs and rising production costs have prompted some industry groups and some manufacturers to call for deregulation. For example, the European Automobile Manufacturers Association (ACEA) has asked the EU to move up the review of CO₂ emission standards scheduled for 2026. This is due to concerns that the current strict regulations will have a negative impact on industry competitiveness and employment.

4. reorganization of production bases of European finished vehicle manufacturers

Due to fluctuating demand, stricter regulations, and cost pressures, European automakers are reorganizing their production bases. For example, Volkswagen (VW) has announced plans to close three plants and lay off thousands of workers in the face of sluggish demand and increased competition. In addition, the shift to EV production has led to a series of restructuring and closures of plants that produced traditional internal combustion engine vehicles.