Ahead of the Paris Motor Show, AlixPartners calls on Europe's carmakers and governments to act before it is too late

LONDON (8 October, 2026) - AlixPartners, the global consulting firm, today published a major new analysis - Can Europe Still Build Cars into the 2030s? - calling on automotive manufacturers, suppliers and governments across Europe to take urgent and decisive action to secure the future of one of the continent's most important industries.  

The analysis is published the week prior to the Paris Motor Show and follows a turbulent summer for the European automotive sector, marked by accelerating Chinese market share gains, continued margin pressure and growing uncertainty over the industry's long-term direction. 

The analysis identifies several structural challenges facing the European car industry that it warns cannot be resolved by tariffs, trade exemptions or current industrial policies alone. 

The most immediate is the cost gap with Chinese manufacturers. AlixPartners finds that a Chinese-branded electric vehicle costs around $20,000 to produce compared with roughly $31,000 for a European equivalent - a gap that the analysis describes as structural rather than temporary, and one that is widening at a time when European consumers are under financial pressure. 

Beyond cost, the analysis identifies software as an equally serious challenge. Value in the car is shifting from hardware to code, yet Chinese carmakers have built software-defined architectures from the outset, updating and iterating at a pace European manufacturers have yet to match. Europe's established carmakers are taking far longer to bring new models to market - deriving on average less than a third of their sales from models launched in the last three years, compared with 76% to 100% for their Chinese rivals. The analysis also identifies the significant investment required to develop the next generation of electrified, software-defined vehicles - running to billions of euros per platform - as a further pressure on European carmakers at the moment they can least afford it. 

Compounding this further, the analysis finds that regulatory divergence between China, Europe and the United States on vehicle connectivity, automated driving software and data localisation has effectively ended the era of the global car. No single connected vehicle platform can now satisfy all three regulatory regimes simultaneously, requiring most European carmakers to plan and fund three distinct regional platforms rather than one. 

Of all the structural weaknesses facing European carmakers, the AlixPartners analysis regards the battery cost problem as one of the hardest for manufacturers to solve - rooted in geography, energy prices, and raw-material dependencies that no amount of operational improvement can overcome. Around 80% of cathode and battery-grade material refining capacity sits outside Europe, meaning battery factories built on European soil remain dependent on inputs priced and controlled elsewhere. The analysis finds that current policy incentives are not addressing this problem at the pace or scale required. 

The analysis warns that the consequences of these challenges are already visible. Fifteen European car plants are currently operating at less than 60% of their capacity, leaving enough unused production space to build around 2.5 million additional vehicles each year. AlixPartners notes that Chinese manufacturers are actively seeking to fill some of that capacity as a route into the European market. 

The AlixPartners analysis calls on manufacturers to act now - whether by consolidating operations, repurposing sites or closing plants where necessary - warning that those that delay will find their decisions shaped by circumstance instead. The analysis also calls on policymakers to reduce industrial energy costs and provide long-term certainty on electric vehicle regulation. 

Andrew Bergbaum, Global Co-Leader of the Automotive & Industrial Practice at AlixPartners, commented: "Europe built its modern industrial prosperity on the car. That legacy is now at stake. European carmakers' EBITDA margins have collapsed from 13.2% in 2021 to 6.9% in 2025[1], Chinese manufacturers are circling underused European factories, and the cost of developing the next generation of vehicles runs to billions of euros at precisely the moment carmakers can least afford it. The window to act from a position of financial strength is closing - and closing faster than most boardrooms and governments assume. 

The good news is that this is not a story with a predetermined ending. The companies and governments that make bold commitments now will define European automotive for the next decade. Those that continue to defer will find those decisions made for them, on someone else's terms. The path forward is clear, but what remains to be seen is which companies - and which governments - are prepared to take it." 

Xing Zhou, DACH Co-Head of the Automotive & Industrial Practice at AlixPartners, commented: "Germany - Europe's largest automotive economy - illustrates the European challenge in sharp relief. China has been the long-standing second home market for German automakers, but Chinese consumers no longer present the same level of opportunity for manufacturers that they once did. In their home market, Chinese brands have taken ten percent of volume from western manufacturers in just a few years[2], and in doing so have fundamentally reset consumer expectations on price, technology and innovation. A gradual response is not an option. Manufacturers need to restructure, support their suppliers and move faster on technology partnerships than most have been prepared to so far." 

Alexandre Marian, France Head of the Automotive & Industrial Practice at AlixPartners, commented: “France and Europe are at a genuine turning point and the decisions made in the next 12 to 18 months will shape the industry for the decade ahead. Europe has exceptional engineering capabilities, but the competitive benchmark has changed. Manufacturers need to aim at two-year development cycles, use AI to reduce cost and time to market, and invest in the next generation of vehicles. Industry will have to make difficult choices, and governments should be equally clear-eyed about their consequences and create the conditions for Europe to compete.” 

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Notes to Editors 

Footnotes
[1] AlixPartners 2026 Analysis: Can Europe Still Build Cars Into The 2030s?
[2] AlixPartners 2026 Global Automotive Outlook 

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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