Will the euro area car sector recover?

Roberto A. De Santis, Virginia Di Nino, Nina Furbach, Ulla Neumann and Pedro Neves

Economic Bulletin Boxes, 2024, vol. 4

Abstract: Since the start of 2018 automotive production and exports in the euro area have both contracted by about 20%, while they have fared better in China, Japan, Korea and the United States. The current weakness is mostly a result of declining demand for combustion engines in the context of net zero emission targets and hesitancy to purchase hybrid and electric vehicles. Other factors, such as supply chain disruptions, adverse energy supply shocks and monetary tightening have also negatively contributed to the drop in automotive production. Despite intensified foreign competition, the euro area automotive industry has defended its global positioning by focusing on profitable market segments. A recovery can be expected in the medium term as adverse factors related to supply bottlenecks and tight financing conditions fade away. However, risks to the outlook are elevated. These are associated with the digital innovation gap vis-a-vis the United States and China as well as geopolitical tensions, which can disrupt supply chains. JEL Classification: E3, F1, L62

Keywords: Automotive; electric cars; green transition (search for similar items in EconPapers)
Date: 2024-06
Note: 185689
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