Autos Dance To The Trump Tune While China Matters
By late January 2025, we predicted a storm for car shares. Indeed Trump’s tariffs helped to significantly instill more fear in the sector. Then Trump changed tack on tariffs, and the Autos sector is now back to square one.
This is presumably optimistic, as the Trump induced uncertainty is there to stay, while Chinese competitors are even more determined to dominate the car planet, without accessing the US market, thus at the expense of Europe and Japan.
The following summary table is worth pondering. In the run-up to the Great Financial Crisis, Europe dominated production with 27% of the 73m units produced. By 2024, its market share had halved, with global production more than 95m cars. China and a raft of smaller countries have taken over and contributed 100% of the growth between 2007 and 2024. Of course, European manufacturers have their non European plants in China and elsewhere (Central Europe, Morocco, Turkey, India etc). However, the lesson is that they are being ejected by ambitious local players. Europe used to be a net exporter. It now essentially buys as many cars as it manufactures.
The following summary table is worth pondering. In the run-up to the Great Financial Crisis, Europe dominated production with 27% of the 73m units produced. By 2024, its market share had halved, with global production more than 95m cars. China and a raft of smaller countries have taken over and contributed 100% of the growth between 2007 and 2024. Of course, European manufacturers have their non European plants in China and elsewhere (Central Europe, Morocco, Turkey, India etc). However, the lesson is that they are being ejected by ambitious local players. Europe used to be a net exporter. It now essentially buys as many cars as it manufactures.
Europe lost the manufacturing battle
What the table above highlights, is that the US is not where the action is. The US is a structural importer of c. 5m cars, but the seismic shift has happened in India, China, Vietnam, even Russia etc. European investors tend to look at a German set of wheels and see a good product that must sell, when the current reality is that a Russian car buyer is happy to drive a BYD.
Reciprocal tariffs à la Trump, have focused European minds on their luxury car navel, with the acceleration of Chinese car manufacturers still being poorly understood. The latest Shanghai Motor Show certainly pointed to western car manufacturers redesigning their products to better suit Chinese tastes, but above all the show displayed the explosive competitive creativity on the part of native Chinese manufacturers. After all, there are Chinese start-ups now peddling flying cars… Consider Hongqi/FAW, AeroHT/Xpeng, Changang/EHang, AeroFugia/Geely. While Europe is tied up by absurd tariffs, Chinese car manufacturers are contemplating a ‘low-altitude economy’ estimated to be worth close to $500bn by 2035.
The Chinese domination concern will not disappear, and it is through that lens that the listed European car sector needs to be reassessed and expectations lowered.
One should take a cue from the following table that tracks the fast paced trimming of earnings. It will probably not stop here.
2025 earnings forecasts in free fall
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