The European car industry is bursting at the seams. New duties – both from the US and within the EU on Chinese electric cars – are hitting companies like Volvo and Renault.
Here’s what’s happening: tariffs are strangling business, while competition with China and falling demand for electric cars are adding to the problems. Basically – it’s a double whammy for the industry.
Volvo Cars reported a nightmare second quarter of 2025. Their operating profit collapsed 63.75%, from SEK 8 billion to SEK 2.9 billion (roughly $297.1 million).
Why. The EU imposed duties on Chinese electric cars of up to 45.3%, depending on the brand. Volvo, part of Geely, was hit with a rate of 18.8%. Plus, Trump is threatening duties of 10-50% on European cars in the US. This is a double blow for Volvo: their electric cars made in China are subject to high tariffs in Europe, and cars from Europe risk losing the US market.
Renault has also been hit by the rink. Their stock collapsed nearly 18% after cutting their annual profit forecast. Renault seemed to be ‘in the doghouse’: after all, they don’t sell cars in the US. But demand in Europe is falling, and Chinese brands like BYD and Geely are squeezing prices. And Renault, whose Dacia Spring is assembled in China, pays a 19.9 per cent duty in the EU.
Meanwhile, Chinese carmakers are ramping up exports of hybrids, which are not subject to such tariffs. Chinese brands are steadily gaining market share in Europe, building plants in Hungary and Spain to circumvent duty barriers.
But that’s not even the point: the total new car market in the EU grew by only 0.8 per cent in 2024, while production fell by 6.2 per cent. That’s the verdict. Europe’s automotive Titanic is surely sinking.
