INDUSTRY REPORT
Graphic: ACEA( European Automobile Manufacturers’ Association). cars from existing inventory, with the effect of delivering a better than expected first half, although faltering growth in the second half suggests that the impact of growing trade friction is starting to bite,” commented analyst, ABI Research.
“ Going into 2026, automakers should not anticipate a rapid return to growth ……. As some OEMs once again find themselves having to reduce manufacturing output due to a lack of essential, mature-node components, it is clear that the industry has yet to properly absorb and respond to the lessons learned from the 2021 semiconductor shortage crisis, and serves as an important reminder that tariffs are far from the only supply chain disruptor that automakers must navigate. Overall, we expect modest growth of 1.6 % for passenger vehicles in 2026,” it continued.
ACEA( the European Automobile Manufacturers’ Association) released its Economic and Market Report in September 2025( for the first half of 2025) with data on
EU-Mercosur FTA vehicle sales, production and trade in Europe and globally.
“ Global car markets showed mixed trends in the first half of 2025. Worldwide registrations rose 5 % to 37.4 million units, led by China’ s 12 % surge, supported by scrappage incentives and new energy vehicle policies. North America recorded modest growth of 2.5 %, although concerns remain about weakening demand later in 2025. In contrast, Europe trailed behind, with overall registrations falling by 2.4 % and the EU market down 1.9 % although Turkey, the EFTA countries and the UK provided some stability,” said the report.
“ The EU’ s car production landscape remained highly concentrated, with Germany producing 20 % of cars sold in the EU followed by Spain, Czechia, France and Slovakia. Together, EU-based manufacturers supplied 74 % of the market. Meanwhile, cars made in China now account for 6 % of EU sales, highlighting both the rising competitiveness of Chinese brands and the growing role of imports,” it continued.
“ Global car production grew by 3.5 % to 37.7 million. Asia dominated with 60.1 % of total output while the EU represented 15.9 %. European production contracted by 2.6 %, hindered by stricter CO₂ targets, high energy costs and tariffs, whereas China’ s output soared by 12.3 % on the back of policy support and export gains. Despite the challenges, EU-made cars retained strong international demand, with over onethird sold outside the bloc. The United Kingdom, United States and Turkey remained leading destinations; on the other hand, sales in China
On 17 January 2026, the signing of the EU-Mercosur Trade Agreement created the biggest trading block in the world.
“ By opening access to over 270 million consumers via the elimination of trade barriers and the removal of tariffs on over 90 % of EU exports, the agreement [ provides impetus ] for European companies to export, invest and grow, as well as diversify their supply chains, sourcing essential products and raw materials from Mercosur. By 2040, according to DG Trade’ s calculations, the agreement is expected to add 77.6 billion euros to EU GDP, resulting in a 39 % increase in EU exports to Mercosur,” said the ACEA.
The European Parliament is next in line to ratify the agreement. continued to drop amid local competition and new energy vehicle trends,” added the ACEA report.
According to the report, Europe’ s commercial vehicle market faced a tough first half of 2025 with van, truck and bus registrations all declining. The downturn reflects both a normalisation towards long-term trends and ongoing challenges in fleet renewal and the transition to zeroemission powertrains. It confirmed that some markets, like Spain for vans, showed resilience but overall demand remained weak across major EU markets.
“ Commercial vehicle production showed clear regional differences in the first half of 2025. Global van production grew by 1 %, while Europe declined by 6.8 %, mainly due to sharp drops in the EU and the UK. Meanwhile, truck and bus production in the EU are expected to recover by 5.7 % and 6.2 %, respectively, by year-end,” added the report.
Trends and movements
Automotive digital transformation is accelerating. Innovations in safety, connectivity and fuel efficiency are making vehicles more appealing. The industry is experiencing structural shifts, with an increasing focus on digitalisation and sustainability.
Europe’ s automotive industry is committed to zero-emission mobility and has been actively engaging in the Strategic Dialogue with the European Commission on the future of the automotive industry in Europe. The package of legislative proposals(“ the automotive package”) includes the revision of the CO₂ standards for cars and vans, legislation on green corporate fleets and the automotive omnibus.
“ Innovations in AI-powered driver assistance, integration with IoT devices and the growing adoption of shared mobility services enhance user convenience and operational efficiency. Advances in real-time diagnostics, vehicle-to-everything( V2X) communication and software updates are improving user experience, vehicle performance and the transition towards sustainable smart mobility solutions,” commented analyst, Polaris Market Research.
Artificial intelligence( AI) has become a strategic driver AI on the road to the future of the automotive industry. It is accelerating development cycles, automating processes and promoting new ideas( including design and material construction). Applications include advanced driver assistance systems( ADAS), generative design, predictive maintenance and smarter, more personalised in-car experiences. n
ISMR February 2026 | ismr. net | 17