Europe’s automotive industry faces a critical challenge as it contends with intensified competition from Chinese electric vehicle manufacturers and structural shifts in global production, according to Francisco Riberas, chair of Gestamp, a leading European automotive parts supplier. Speaking from Gestamp’s Madrid headquarters, Riberas warned that Europe’s industrial base—and its broader economic prosperity—could be at risk if decisive action is not taken to preserve and revitalize the sector.

Riberas described the European car industry as being in “existential crisis,” highlighting how China’s rapid advances in electric vehicle technology and the imposition of US import barriers on Chinese cars have reconfigured the global landscape. Europe, he said, risks losing the manufacturing anchor that supports numerous related sectors including steel, aluminum, glass, and chemicals. “Losing the automotive industry could mean losing industry itself in Europe,” Riberas said, stressing the interconnected nature of the continent’s industrial ecosystem.

The European auto sector contributes about 7% of the region’s GDP and supports approximately 14 million jobs. Yet since 2017, European vehicle production has fallen sharply by 20 to 25 percent amid rising competition from cost-efficient and technologically advanced Chinese entrants such as BYD and SAIC Motor. Riberas urged a return to a model based on technological innovation combined with strong industrial foundations—the approach that historically underpinned Europe’s standard of living.

The presence of Chinese automakers establishing factories within Europe has sparked debate over whether such investments represent a lifeline or undermine local industry. Riberas acknowledged the potential benefits of welcoming Chinese firms, provided they produce vehicles locally and contribute to European employment. However, he cautioned that the value chain must extend beyond final assembly. Currently, many Chinese-made vehicles assembled in Europe rely heavily on components imported from China, a practice that risks hollowing out Europe’s component manufacturing base. Historically, every job in car assembly supports roughly three additional jobs in local suppliers, he noted.

Chinese manufacturers have begun vehicle production in Europe—Chery in Barcelona, Xpeng in Austria, and BYD planning to launch mass production in Hungary by 2027—with others like Leapmotor preparing to start operations in Spain. Despite these developments, Gestamp itself holds relatively few contracts with Chinese companies in Europe.

Riberas also raised concerns about financing disparities, pointing out that European auto firms often struggle to attract investment while Chinese competitors benefit from extensive government-backed funding, giving them a “zero cost of capital” advantage. This, he said, exacerbates competitive imbalances.

In response to these challenges, the European Union is advancing the Industrial Accelerator Act (IAA), permitting member states to block foreign direct investments exceeding €100 million in strategic sectors, including automotive. The legislation proposes a 70% local content requirement for component sourcing to qualify for subsidies or public contracts. While Beijing has criticized the IAA as protectionist, some Chinese carmakers have pledged to increase their use of European-made parts to comply with emerging “Made in Europe” standards.

European automakers are also deepening joint ventures with Chinese companies that encourage local supply chain integration, including partnerships like Stellantis with Dongfeng and Ford with Geely in Spain. Gestamp, which operates 13 factories in China, has expanded ties with Chinese producers globally but is watching closely to ensure European value chains remain intact.

Riberas described the IAA as a necessary “defensive” measure to protect the continent’s industrial base, warning that “once that industrial base is lost, it won’t come back.” Gestamp’s revenues have declined in recent years, underscoring the urgency for a coordinated industrial strategy. Looking forward, Riberas called for significant investment in new technologies, including digitalization and artificial intelligence, to enhance competitiveness while acknowledging that some existing capabilities may no longer be viable.

As European policymakers and industry leaders navigate this pivotal moment, the future of the continent’s automotive sector—and its broader industrial ecosystem—remains uncertain but pivotal to Europe’s economic resilience.