European car market sales accelerated last month, extending this year's winning streak, and with consumers continuing to shift toward electric vehicles, a large portion of the incremental growth was captured by Chinese automakers.
The European Automobile Manufacturers' Association said on Thursday that new car registrations rose 10% in September to 1.36 million units, marking the eighth consecutive month of growth. Battery electric vehicles and plug-in hybrids together accounted for 43% of total sales, up from 32% a year earlier; battery-powered passenger car sales in France and Germany nearly doubled, driving that share significantly higher.
Since the start of the year, Middle East conflicts have pushed oil prices to new highs, further amplifying the economic advantages of electric vehicles, while incentives in France and Germany are helping to offset the drawback of high EV sticker prices. However, this energy shock could also squeeze household disposable spending, dampen consumer confidence, or weigh on purchases of big-ticket durable goods.
The improving market conditions offer some breathing room for European legacy automakers such as Volkswagen (VWAGY.US). These companies are currently under pressure: weakening Chinese demand, trade barriers, and domestic cost-cutting pressures continue to erode profits. But the electrification transition is a double-edged sword for them. Volkswagen, along with competitors like Stellantis (STLA.US) and BMW, still earn lower per-unit profits on EVs than on comparable internal combustion engine vehicles, meaning the transition comes with a profitability cost.
Meanwhile, BYD (01211) and Chery (09973) are steadily ramping up competition in Europe's home market. According to industry research data, Chinese brands' new car registrations in Europe have more than doubled so far this year, and institutions expect a substantial portion of the European market's future growth dividend to flow to Chinese automakers. Chery's popular model, the Jaecoo 7, is one of the breakthrough products, with many consumers choosing between this Chinese SUV and Volkswagen's Skoda Elroq.
In September, Tesla (TSLA.US) deliveries rose 73%, continuing its recovery momentum. Among Chinese automakers, Chery led gains, with sales nearly tripling and its overall European market share nearly doubling to 3.9%. As industry layoffs intensify, struggling European legacy automakers are receiving more policy support. France and Germany have also reached a consensus to jointly lobby the EU to further relax the strict carbon emission limits for new fuel vehicles starting in 2035. The two countries' unified stance is also expected to push forward regulatory proposals related to "made in Europe" to support the domestic auto industry.
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