Europe and U.K. auto industries falter as polarisation between China and U.S. grows, AlixPartners study finds

LONDON (June 25, 2025) – As global sales slow and polarisation between the Chinese and American automotive industries increases, Europe is at risk of being cut adrift amidst the disruption. Within this context, the U.K. automotive manufacturing sector is in a particularly precarious position, according to new analysis from global consulting firm AlixPartners’ Global Automotive Outlook, an annual in-depth review of the automotive industry. 

Global sales have slowed to a point of negligible growth
This year’s analysis found that global light-vehicle sales will increase by only 1% in 2025, with expansion in China and in Southeast Asia offsetting declines in the U.S. and Europe.  However, even in China, sales will grow just 3% in 2025, a phenomenon which may encourage international expansion plans by the stronger Chinese automakers and suppliers. 

Europe must avoid falling between two stools 
AlixPartners’ analysis indicates that the auto industry is rapidly polarising between the U.S. and China as they battle for dominance – potentially leaving the European industry in their wake. U.S. tariffs are expected to settle into costs of around $30 billion globally in 2026, meaning many auto suppliers will be challenged to rethink their pricing strategies. Set against this, Chinese automakers are targeting Europe to capture extra sales in the region by 800,000 vehicles in the next five years – taking the total to 1.8 million, or 10% of the whole market. In contrast, European automakers are expected to reduce sales and production by some 400,000 units over the same period, the equivalent of one and a half production facilities, and have earmarked more than $40 billion in assets for disposal in the supply base. Added to the $13 billion of European asset divestitures to Asian and the American companies since 2022, Europe is very much “for sale”.

In an industry dominated by disruption, the U.K. faces significant issues of its own  
Within a challenging European sector, the U.K. is potentially the most disadvantaged market of all, with sales volumes having significantly declined over recent years. In 2024, car manufacturing in the U.K. fell to less than half of its peak of approximately two million vehicles in 1972 and has dropped over 50% in the last eight years since 2016, with April 2025 output marking a historic low. 

In 2025, U.K. OEMs and suppliers are facing significant structural and economic challenges. There are six key factors which are being felt in particular: 

• Supplier fragility: Declining volumes have resulted in many suppliers facing distress or failure. Suppliers have not all been successful in consolidating footprint, rationalising overheads or right-sizing operations leading to issues passed onto OEMs. This is prompting some OEMs to explore accelerated exit strategies and supplier consolidation, exacerbating the problem.
• Fragmented supply chains: The U.K.’s fragmented supplier landscape - often characterised by small-scale operations and limited bundling opportunities - has led to inefficiencies in logistics and pricing.
• Transition to electrification: The route towards EV adoption, per the government’s mandated timeline, continues to be extremely challenging and likely not achievable as the industry copes with the significant costs involved against a backdrop of slowing sales, consumer skepticism and a lack of charging infrastructure.
• Energy costs and infrastructure: Disproportionately high energy prices in the U.K., compared to other European countries, pose a significant cost disadvantage.
• Labour and skills shortages: The U.K. automotive sector faces a growing skills gap, particularly in areas related to digital technologies and EV systems. Post-Brexit immigration rules have also limited access to skilled labour from the EU, compounding recruitment challenges.
• Investment and financing uncertainty: Political and economic uncertainty has led to cautious investment behavior. OEMs and suppliers may hesitate to commit to long-term projects in the U.K. without clear and stable industrial policies, especially in the face of global competition from countries offering more attractive incentives. 

Andrew Bergbaum, Global Leader of Automotive & Industrials at AlixPartners, commented: 
“The automotive industry is contending with the most disruptive period in its history and Europe, the birthplace of the motor car, is more challenged than anywhere else. As the U.S. and China vie for automotive supremacy, there is definite sense that large swathes could well be up for sale throughout the entire value chain. Whether it is U.S. businesses looking to diversify, Chinese entrants wanting to exploit new markets or financial investors seeking turnaround opportunities or trophy assets there is no doubt that the industry is in a period of fundamental change born of unprecedented disruption. The next five years will be critical, and indeed many players do not have the luxury of time as we enter a period where transformation, consolidation, acquisition, and innovation will variously define the industry’s future.”

Nick Parker, U.K. Leader of Automotive & Industrials at AlixPartners, commented: 
“While it is encouraging to see advanced manufacturing recognised as one of the U.K.’s IS-8 this week, today’s automotive production numbers are a far cry from the heydays of the 1970s, which are unlikely to be repeated. Amid ongoing global disruption and widespread industry transformation, the U.K. automotive sector is at a critical juncture. Adapting to the myriads of global and local challenges requires collaboration among stakeholders — whether OEMs, suppliers, the investor community, or the government — and must be underpinned by a commitment to action. The U.K. still has much to offer the automotive world. But, despite the Government’s welcome commitments to industry cost-reduction this week, the extent of the U.K.’s role will be determined by the decisions being taken at this moment and companies’ ability to execute against them with urgency and clarity of purpose.”

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About AlixPartners
AlixPartners is a results-driven global consulting firm that specializes in helping businesses successfully address their most complex and critical challenges. Our clients include companies, corporate boards, law firms, investment banks, private equity firms, and others. Founded in 1981, AlixPartners is headquartered in New York and has offices in more than 20 cities around the world. For more information, visit www.alixpartners.com.

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