Europe Went All In on EVs. Now Its Automakers Are Losing Out.

Global sales of electric vehicles (EVs) in 2025 increased by 20 percent over the previous year, exceeding 20 million units worldwide, with much of the increase driven by Europe, where sales jumped by 30 percent, according to the International Energy Agency (IEA).

But even in a red-hot market, European carmakers are struggling to turn a profit on EVs.

Stellantis, Europe’s second-largest auto manufacturer, reported write-downs of 22.2 billion euros ($24.9 billion) as part of its EV “reset” in the second half of 2025, largely due to overinvestment in electric cars.

Operating profit margins at Volkswagen, Europe’s largest carmaker, fell to 1.8 percent in 2025 from 5.6 percent in 2024, and the company announced that it would lay off an additional 50,000 workers, amounting to 15 percent of its workforce.

Europe’s automakers are caught between two adversaries: Chinese automakers that are aggressively taking market share and undercutting profit margins, and their own governments, which have attempted to force a complete transition to EVs regardless of consumer demand.

In 2023, the European Union mandated a 100 percent elimination of tailpipe carbon dioxide emissions starting in 2035, effectively banning the sale of new internal combustion engine vehicles, though it recently revised that to a 90 percent emissions cut.

In response to these and other mandates, car companies invested in new EV production lines, with Volkswagen alone committing $193 billion in 2023 to electrify its fleet.

“I think that European auto manufacturers are paying the price for paying more attention to what regulators want than what their customers are asking for,” Jeff Degner, a research fellow at the American Institute for Economic Research, told The Epoch Times.

He calls much of the money spent on the EV transition “government-induced malinvestment.”

Overestimating Demand, Underestimating China

In announcing this year’s write-downs from its EV “reset,” Stellantis CEO Antonio Filosa concurred.

“The charges announced today largely reflect the cost of overestimating the pace of the energy transition that distanced us from many car buyers’ real-world needs, means and desires,” Filosa said in a February statement.

America’s largest auto manufacturers, Ford and General Motors, have been more cautious about going electric than their European counterparts and have pulled back faster as losses have accumulated.

In January, General Motors announced a $6 billion write-down, shortly after Ford announced a $19.5 billion write-down, as both companies stepped back from their EV commitments.

“EV adoption hasn’t developed at the pace or with the economics many of those original commitments assumed, and at the same time, European automakers are facing a much more competitive market,” Stephanie Valdez Streaty, director of industry insights at Cox Automotive, told The Epoch Times.

After starting from virtually zero several years ago, Chinese autos made up 20 percent of the EU’s battery-electric sales by May 2026, Streaty said.

Chinese automakers have captured the majority of global EV sales, matching Western carmakers in quality and features and beating them on price. Some Chinese models, such as BYD’s Seagull, which sells for approximately $10,000 in China, are not only undercutting competitors on price but also delivering on quality, according to reviews by publications such as InsideEVs and Top Gear Philippines.

For European markets, BYD rebranded and upgraded the Seagull as the Dolphin Surf, which launched at a discount price of $22,400 but now sells for about $25,800. This falls under the price of comparable European-made models such as the Citroën ë-C3, which starts at about $26,200, but remains higher than budget models such as the Dacia Spring at $20,100 and the Renault Twingo E-Tech at $21,800.

“The number one trend in the auto industry so far this decade is just the explosive growth in Chinese auto exports,” Garrett Nelson, equity analyst at the Center for Financial Research and Analysis, told The Epoch Times. He estimates that China is now exporting more than 1 million vehicles per month.

“They’ve invested very heavily in infrastructure, in logistics, in order to be able to export so much more than they used to,” Nelson said.

China’s automobile exports rose by 53 percent in the first half of 2026 compared with the same period a year earlier, while exports of new energy vehicles more than doubled, according to Chinese regime data.

“The European market is really being flooded with low-cost Chinese EVs,” Nelson said, and Europe’s 10 percent tariffs and other duties on Chinese cars have failed to halt China’s expansion.

China’s Competitive Advantages

The major Chinese auto brands are BYD, Geely, SAIC, and Changan. In 2025, BYD overtook Tesla as the world’s largest seller of EVs.

According to Degner, BYD’s production costs are 20 percent to 30 percent lower than those of European carmakers for similar models. But European regulators, even as they pushed domestic auto companies to switch to EVs, simultaneously passed mandates that made manufacturing in Europe significantly more expensive.

This included a state-mandated transition away from coal and other fossil fuels in favor of wind and solar power, resulting in Europeans now paying some of the highest energy and electricity costs in the industrialized world, multiples of those in China.

“The Chinese have a competitive advantage, but that competitive advantage was created because of the high cost that European regulators are imposing,” Degner said.

“I would say that the Europeans only have themselves to blame as they have put into place, whether at the national or international level in the EU, the kinds of regulations that are making life more difficult for the [auto] industry as a whole.”

In addition, over decades, China has built a global infrastructure for mining and shipping raw materials for batteries, including graphite, lithium, and cobalt. The majority of these materials are also refined, processed, and manufactured into batteries in China.

And Chinese companies benefit from scale and an enormous domestic market.

Of the 20 million EVs sold worldwide last year, more than 13 million were sold in China, and more than half of worldwide sales were Chinese-made vehicles, according to the IEA.

In addition, a February report by the Rhodium Group states that Chinese automakers benefit from extensive vertical integration of the manufacturing process, as well as state grants, tax incentives, and preferential financing.

Lessons for US Carmakers

Is Europe’s EV adventure a cautionary tale for the United States?

The Trump administration believes that it is. The administration eliminated federal tax breaks for EV buyers and canceled the tailpipe emissions and fuel efficiency regulations imposed by the Biden administration that would have effectively phased out many gasoline-powered models.

And there is reason to doubt that most Americans want electric cars.

While EV sales surged in Europe, the United States went in the opposite direction, with electric car sales plummeting by 45 percent in the fourth quarter of 2025 compared with the fourth quarter of 2024. America’s annual EV sales in 2025 ended up slightly lower than in 2024, at about 1.5 million vehicles.

EVs remain a niche market in the United States, where driving distances are often longer and the charging infrastructure remains sparse enough to give EV owners “range anxiety” on longer trips. Beyond this, there is the concern that EV demand has been highly dependent on government mandates and subsidies.

According to the IEA, the increase in European sales was partially driven by political mandates, specifically the tightening of the EU carbon dioxide emissions limits that came into effect in 2025, targeting a 15 percent reduction from 2021 levels.

Conversely, the sharp decline in U.S. sales coincided with the Trump administration’s cancellation of the $7,500 tax credit for EV purchases.

“Once that expired, the demand went from about 12 percent of the U.S. auto market down to 6 percent within a year, and so I think that is an indicator that the overall consumer taste for EVs is still not where regulators would like to see it,” Degner said.

Having a market so dependent on government incentives creates a significant risk for carmakers when deciding on corporate strategy and potentially hundreds of millions of dollars in capital investments. Even Tesla, which has been selling EVs profitably, reported in July that its operating income fell by 57 percent.

However, outside of the United States, EVs are expanding rapidly throughout North America and South America.

While to date, trade barriers have largely kept Chinese cars out of the United States, America is being encircled, with Chinese carmakers making rapid inroads in Brazil, Mexico, and Canada.

BYD began selling EVs in Brazil, South America’s largest market, in 2022. By 2025, Chinese carmakers produced 85 percent of EVs sold in Brazil, according to an IEA report.

Recent trade deals among China and Mexico and Canada have opened those markets to Chinese carmakers, and sales of Chinese cars surged in Mexico last year, according to the Council on Foreign Relations.

“This is very concerning for U.S. automakers,” Nelson said. “You’re seeing trade groups raise red flags and sound the alarm regarding what this might mean.”

Finding Ways to Compete

Could U.S. automakers compete in the EV market if they wanted to? Some analysts say yes, with conditions.

“In the U.S. market, in light of rising gas prices right now, we’re seeing a decline in EV demand, but a significant increase in the demand for hybrid engines, which do have, of course, some electronic and battery components,” Degner said.

“By cutting red tape and access to those kinds of technologies, and certainly those kinds of natural resources, there’s ample evidence that the U.S. could compete with BYD if those barriers were removed.”

America could match China’s access to essential raw materials, but mining prohibitions and other regulations have held up this development, Degner said.

Japanese automakers Toyota, Honda, and Nissan have largely sidestepped the battery-electric vehicle market, focusing instead on hybrids, in addition to traditional gasoline-powered cars.

Regarding cost advantages, a Rhodium Group report titled “Why Are Chinese EVs So Cheap?” disputes that Chinese carmakers are more efficient, stating that, measured by revenue per employee and despite high levels of automation, Chinese auto companies “significantly underperform Western peers,” including Tesla, whose employees generate more than six times more revenue than BYD employees.

Instead, the report states that Chinese carmakers win through vertical integration, control of their supply chains, an enormous domestic market, and generous financing from suppliers.

Matching China’s cost structure, the Rhodium report states, would require Western firms to develop similar supply chains, particularly in mineral mining, refining, and processing, to expand automation, reduce labor head count, and even build factories in China, where labor and energy are cheaper.

“Europe’s experience shows the importance of maintaining flexibility as the market evolves,” Streaty said.

“EV adoption continues to grow, but we’re also seeing manufacturers adjust their strategies and maintain a broader mix of powertrains.

“That flexibility allows automakers to continue investing in electrification while responding to what consumers are buying today.”