European light vehicle production and sales decouple as Chinese imports take off
Despite the trials and tribulations of recent years, European Light Vehicle (LV) sales and production have largely shared the same fate, with both contracting by a CAGR of 3.8% and 4%, respectively, in 2019-23. However, since then, the relationship has started to diverge, with regional output declining by 3.9% in 2024 and 1.5% in 2025,…
Despite the trials and tribulations of recent years, European Light Vehicle (LV) sales and production have largely shared the same fate, with both contracting by a CAGR of 3.8% and 4%, respectively, in 2019-23. However, since then, the relationship has started to diverge, with regional output declining by 3.9% in 2024 and 1.5% in 2025, while sales increased by 4.6% in 2024 and 0.6% in 2025. This divergence implies that European automakers can no longer rely on expanding domestic demand to drive output growth. This trend is further highlighted by the shrinking share of European sales serviced by European-built models, which fell from 87% in 2019 to 78% in 2025, as imports capture a larger portion of the market.
Source: GlobalData
But is that the only factor at play? The chart above shows sales by origin as a proxy for European imports and exports: regional sales of European-built models are in blue, while the off-white line tracks sales of European-built vehicles outside of Europe. Taken together, the data suggests that the decoupling of sales and production is being driven by skyrocketing imports and stagnating exports.
Since Europe became a net importer of vehicles in 2021, the import-export balance has deteriorated sharply, reaching a deficit of 1.6 million units in 2025. This gap is projected to widen further over the next few years, expanding to 2.3 million units by 2030. This raises two obvious questions: where are these imports coming from, and why have exports stalled?
Source: GlobalData
The answer up until 2025 is almost exclusively China—despite the EU raising import tariffs on Chinese Battery Electric Vehicles (BEVs) to 17.8-45.3% (depending on OEM) from November 2024. In fact, the tariffs have not stemmed the influx of Chinese-made vehicles but have simply changed the mix of powertrains that are being imported, with Plug-in Hybrid Electric Vehicles (PHEVs) being instrumental in Chinese import growth. It is also no coincidence that 87% of Chinese-built models sold in Europe in 2025 fell into the Economy segment. After years of portfolio consolidation, European automakers have increasingly moved away from low-cost domestic offerings toward higher-margin vehicle segments, leaving a gap that Chinese imports are well positioned to fill.
Overall, competition from China—across both Western and Chinese OEMs producing there—remains high. In 2025, 1.37 million vehicles sold in Europe originated in China, a figure that is set to rise to 1.53 million units by 2030. This will cement China’s position as Europe’s largest single source of imported vehicles by far, even as a sizable proportion of Chinese manufacturing transfers to Europe. It is important to note that not all European markets are bound by EU tariff policy: the UK and Russia, for example, are under no obligation to adopt EU measures. Indeed, in the UK alone, roughly 290k vehicles, or 12.4% of total sales, originated in China in 2025.
Meanwhile, exports are stalling partly because European brands are losing ground in China itself. Sales of European-built models in China fell by 41% in 2020-25, despite overall growth of the country’s LV market, underscoring just how difficult it has become for European OEMs to compete with local manufacturers. The Chinese market has certainly proven brutal for European OEMs in recent years, with some automakers being forced to reinvent their brands—such as AUDI, with four letters rather than its four rings, and JLR’s Freelander range—to better align with Chinese consumers and regain traction in the world’s largest market. Nevertheless, even if these efforts succeed locally, they will be of little benefit to Audi’s and JLR’s European operations.
Source: GlobalData
Transatlantic trade between Europe and the US has also been far from stable over the last year, with President Trump increasing LV import tariffs from 2.5% to 27.5% from April 3, 2025. The policy was then subsequently softened, and rates were lowered to 10% for the first 100k vehicles imported from the UK from June 30, while a flat rate of 15% was enacted for the EU from August 1. One notable casualty of this action was the Dodge Hornet—a model built in Italy solely for US export—which ceased production after being rendered financially unviable.
That said, the initial impact on US sales of EU-imported vehicles was negligible. In Q2 2025, sales edged up marginally by 0.4% YoY as dealerships ran through inventories that were not subject to the tariffs. In the second half of the year, however, sales of EU-imported models fell by 17% YoY, even as the overall US LV market remained broadly flat.
Policy changes also weighed heavily on demand for European Electric Vehicle (EV) imports. The accelerated termination of federal EV tax credits of up to $7,500 for new vehicles under Trump’s “One Big Beautiful Bill Act” which took place on October 1, 2025, has had pronounced impacts. Indeed, European manufacturers boasted a large contingent of EVs among their imports to the US, which are now floundering. For instance, Volkswagen Group’s Audi e-tron and Volkswagen ID ranges declined by 68% YoY in Q4 2025. Despite these barriers, we expect Europe-US vehicle flows to remain relatively stable through 2030, with a slightly higher level of imports into Europe more than offset by a gradual recovery in European exports to the US.
Ultimately, Europe’s post‑2024 sales–production decoupling is less reflective of weak demand and more indicative of a worsening trade imbalance: imports—led by increasingly price-competitive Chinese-built models that have accommodated EU tariffs—are rising sharply, while exports are stagnating under intensifying competition in China and a more protectionist and volatile policy environment in the US. Even as European OEMs rebuild competitiveness in entry segments at home and regain momentum in key export markets, the market share lost already will be difficult to claw back. As a result, regional production is likely to remain structurally constrained even if European sales continue to grow.
We will also be keeping a close eye on the development of more speculative Chinese localization plans, including a potential third BYD plant; new facilities from MG and Great Wall Motor; Geely’s production at Ford’s plant in Spain; and Dongfeng and Chery using Nissan’s and JLR’s facilities in the UK, among others. If these deals materialize, they could be instrumental in helping to stem the current robust growth in vehicle imports from China and ultimately support an improvement in Europe’s vehicle trade balance.
James Norris, Manager, Production Forecasts, GlobalData
“European light vehicle production and sales decouple as Chinese imports take off” was originally created and published by Just Auto, a GlobalData owned brand.
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