February brought a chill to Europe’s auto market, with new-car registrations across the EU, EFTA and U.K. markets falling 3.1 percent year-over-year to 963,540 units, according to figures released by the European Automobile Manufacturers’ Association (ACEA). It marked the steepest monthly drop in five months and underscored the broader economic malaise gripping the region.
Economic Gloom Deters Shoppers
A combination of stagnant growth, high borrowing costs, and inflation concerns has dampened consumer confidence across much of Europe. Faced with financial uncertainty, many buyers are delaying or altogether skipping big-ticket purchases — especially cars powered by internal combustion engines.
Sharp Declines for Gasoline and Diesel
Sales of gasoline vehicles plummeted 24 percent, while diesel registrations fared even worse, dropping 28 percent compared to February 2023. These declines contributed significantly to the overall market contraction. The retreat reflects both shifting consumer preferences and the impact of increasingly stringent emissions regulations.
EV Momentum Builds Despite Broader Slowdown
While traditional powertrains faltered, electric vehicles (EVs) continued to surge, providing a rare bright spot in a gloomy market. Battery-electric vehicle (BEV) sales rose 26 percent across the region, buoyed by tightening environmental standards and strategic incentives from automakers.
Country-Level Growth Varies
Germany — Europe’s largest auto market — posted a 31 percent jump in EV registrations. Italy and the U.K. saw even more robust gains of 38 and 42 percent, respectively. Spain also bucked the broader trend, with overall sales climbing thanks in part to a 61 percent increase in EV demand.
Automakers Face Rising Pressure
The upbeat EV numbers are not enough to mask growing tensions for European automakers. Geopolitical uncertainty, slowing demand in China, and fears of U.S. tariffs on Mexican and Canadian imports are reshaping their global strategies.
Tesla Takes a Hit
While most automakers benefitted from EV enthusiasm, Tesla experienced a 40 percent plunge in European registrations. Industry analysts point to increasing backlash against CEO Elon Musk’s political views, including his vocal support for Germany’s far-right Alternative für Deutschland (AfD) party, as a key factor behind the decline.
New Entrants Intensify Competition
Legacy players such as Renault, Volkswagen Group, and Stellantis are aggressively launching more affordable EVs to stay competitive. Renault’s R5 E-Tech — priced at €25,000 — and the €23,300 Citroën e-C3 from Stellantis are aimed squarely at entry-level buyers. But these models face stiff competition from Chinese manufacturers like BYD, Nio, and Xpeng, who are rapidly expanding their footprint in Europe with similarly priced alternatives.
Policy Shifts May Reshape the Road Ahead
A recent EU decision to ease CO2 emissions targets for automakers may provide short-term relief to manufacturers under pressure to electrify. The move gives brands like VW, Stellantis, and Renault more time to scale up their electric lineups while still complying with regulatory demands.
However, it remains to be seen whether this regulatory pause will dampen EV growth in the coming months — or provide a stronger bridge for automakers racing to meet evolving emissions standards with cost-competitive electrified offerings.
As 2025 approaches, Europe’s auto industry finds itself at a crossroads: navigating economic headwinds while accelerating toward an electric future. Whether consumer confidence rebounds or policy support shifts further will determine if the February slump is a temporary dip or a sign of longer-term volatility.
