The global electric vehicles race: Where does Europe stand?

As the automotive industry continues to advance toward electrification, European and UK OEMs must navigate a rapidly changing electric vehicles landscape.

The European Union (EU) and the UK have long been pivotal players in the global automotive market, with combined sales that demonstrate their considerable leverage. However, recent automotive industry trends indicate their position is waning, particularly amid fierce competition from China and the US, which are both investing heavily in electric vehicle (EV) industry technology and production capabilities.

To reclaim their edge in the electric vehicle market, European OEMs must adopt strategic solutions, including localizing supply chains, enhancing collaboration with technology partners and prioritizing innovation in sustainability. By embracing these approaches, they can navigate current challenges and position themselves as leaders.

In 2025, S&P Global Mobility forecasts that the EU and UK will account for 20.5% of global vehicle sales, underscoring the importance of this region as a key market. However, this position is weakening on the global stage and reflects a decline from the dominant position held 25 years ago.

Although the EU and UK automotive industry have traditionally enjoyed robust vehicle sales, competition has intensified, driven by China’s rapidly growing electric vehicle industry and the US’s substantial government incentives and strong domestic manufacturing base. Japan and South Korea also present formidable competition, with established automotive giants and advanced technology driving innovation.

Historically, European brands have set the pace in automotive innovation, enjoying a regulatory environment that allowed them to thrive. But sales by European brands globally have dipped below the 25% share they once held. To regain their competitive edge, European OEMs must adapt and embrace a multifaceted strategy focused on innovation, collaboration and strategic investment in response to evolving automotive trends.

To regain relevance, European OEMs must take proactive steps that emphasize local production, innovation and sustainability. The European Commission’s recent initiatives—including the Strategic Dialogue and the €1.8 billion investment in securing a competitive supply chain for battery raw materials—are vital. However, OEMs must also prioritize their own strategies to enhance local production capabilities and reduce reliance on external suppliers.

1. Invest in local production and supply chains. The automotive trend of de-globalization presents a unique opportunity for European OEMs to localize supply chains and bolster domestic production. By investing in local manufacturing capabilities, OEMs can enhance resilience against global disruptions like the COVID-19 pandemic. This shift aligns with the growing consumer demand for sustainable, locally produced vehicles and helps OEMs differentiate themselves in a crowded market.
2. Embrace innovation and sustainability. European OEMs can distinguish themselves with a commitment to stringent environmental regulations and EV technology. By prioritizing research and development in sustainable technologies, OEMs can attract eco-conscious consumers and strengthen their market positions. This approach includes investing in battery technology, charging infrastructure and alternative energy sources to enhance their  EV offerings’ appeal.
3. Enhance collaboration within the industry. European OEMs must foster collaboration with technology firms and other stakeholders to drive innovation. By forming partnerships and clusters similar to those in Silicon Valley, they can leverage proximity to accelerate the growth of supporting industries like semiconductors and software, which are critical for EV production. Collaboration can also help streamline processes and facilitate the sharing of best practices, ultimately accelerating the pace of innovation.
4. Adapt to consumer demand. OEMs must understand and address consumer pain points. Recent research from S&P Global Mobility shows that consumers prioritize electric range, charging time and affordability when considering EVs. By focusing on these critical areas, European OEMs can better meet consumer expectations and enhance their competitive positions. This strategy may involve benchmarking against global technology advancements and ensuring EVs remain competitive in performance and cost.
5. Foster agility in decision-making. European OEMs must adopt more agile practices to respond quickly to market changes. The traditional approach of long-term strategies and slower decision-making hinders competitiveness in a fast-paced environment. By fostering a culture of agility and adaptability, OEMs can better position themselves to capitalize on emerging opportunities and respond to shifts in consumer preferences and market dynamics.

To further refine their strategies, European OEMs can benefit from applying Michael Porter’s Diamond framework, which provides insights into nations’ competitive positions by industry. This framework emphasizes the importance of specialized factors beyond traditional economic conditions:

• Factor conditions. OEMs must focus on attracting and training a skilled workforce, particularly in emerging fields related to EV technology and sustainability. Collaborating with educational institutions to develop specialized training programs can help ensure a steady pipeline of talent.
• Supporting industries. Because Europe excels in certain supporting industries like semiconductors and automotive software, OEMs should leverage these strengths while tackling challenges in scaling battery production. Strengthening ties between tech firms and automakers can foster innovation and boost competitiveness.
• Demand conditions. Consistent incentives for EV adoption are crucial, but OEMs must also work with local governments to ensure effective policies across regions. This strategy may involve advocating for standardized incentives that support consumer adoption of EVs.
• Firm strategy. OEMs should prioritize collaboration and agility. Partnering with startups and tech firms can foster innovation and advance EV development.