Europe’s Automotive Industry at the Crossroads of Technological and Geopolitical Shifts

The paper analyzes the profound transformation of the global automotive industry and its asymmetric effects on Europe, the United States, and Asia. It examines how electrification, digitalization, and new regulatory frameworks are reshaping production geography, innovation patterns, and trade dynamics. Through comparative evidence on production, R&D, trade flows, and industrial policies, it shows that Europe – despite its historical leadership – has entered a phase of relative decline. While China has built a competitive advantage through long-term industrial strategies, massive investments, and state coordination, European automakers have relied on high profits from internal combustion technologies, with limited reinvestment in innovation. The lack of a unified industrial policy and growing political fragmentation within the EU have further weakened its capacity to respond to global shifts. The paper concludes that Europe’s position in the automotive value chain will depend on its ability to restore coordination, foster technological upgrading, and redefine its industrial strategy in the age of electrification.