Europe’s leading carmakers are unveiling their latest models at the IAA Mobility show in Munich this week, as the continent’s auto industry confronts mounting challenges ranging from steep U.S. tariffs and the costly transition to electric vehicles, to intensifying competition from Chinese brands.
The four-day event, running September 9–12, comes at a critical juncture for companies like Volkswagen, BMW and Mercedes-Benz. Sales in China, their biggest single market, have slumped sharply. According to consultancy AlixPartners, global automakers held a 62% market share in China as recently as 2020, but that has since fallen to 46% and could drop further to 28% by 2030. Porsche, for instance, saw its Chinese sales tumble 28% in the first half of the year, leading to its imminent removal from Germany’s blue-chip DAX index later this month.
In Europe, Chinese firms such as BYD, Changan and GAC are rapidly gaining ground. Research from JATO Dynamics shows their market share nearly doubled to 4.8% in the first seven months of this year compared with the same period in 2024. McKinsey estimates that within a decade, Chinese automakers could secure a market share comparable to Japanese and Korean rivals, at 14% and 9% respectively.
Domestic manufacturers are scrambling to respond with new model launches but are also lobbying Brussels to reconsider the European Union’s planned 2035 ban on combustion-engine vehicles. BMW Chief Executive Oliver Zipse described the ban as a “big mistake,” arguing instead for emissions standards that factor in the full supply chain of vehicles. Auto executives are pressing for the law to be watered down or scrapped before its scheduled review in 2025.
However, industry lobbying has attracted sharp criticism. “They should put their energy into building the best, cheapest cars to out-compete the Chinese,” said Danijel Visevic, managing partner at World Fund, a climate tech-focused venture capital firm, calling the effort to reverse the EU ban “stupid.”
Meanwhile, trade tensions with the United States add another layer of uncertainty. Even with a transatlantic trade deal agreed in July, European automakers will face a 15% tariff on U.S. imports, up from 2.5%. Analysts warn this could force manufacturers to withdraw less profitable models from the American market altogether.
The turbulence has heightened pressure on industry leaders. Volkswagen Chief Executive Oliver Blume, who also serves as Porsche’s CEO, faces growing scrutiny over his dual role as the Stuttgart-based sports car maker struggles.
Despite the headwinds, the Munich show offers automakers a chance to signal resilience and showcase innovations. Yet, as consultant Phil Dunne of Stax put it, “Europe’s automakers have moved too late to counter this threat after years of complacency, and now, the Chinese are here to stay.”
