The Trade War Slows Global Vehicle Production with a 3.7% Decline by 2025

The global production of motor vehicles and their components is projected to shrink by 1.7% in 2025 and 2.1% in 2026 due to the impact of tariffs, which will disrupt supply chains, increasing the costs of components and materials.

This is according to the latest report on the current state of the automotive sector published by Crédito y Caución, which indicates that this is one of the sectors most affected by the trade war, particularly in Germany and Italy, where a 5% drop in exports is expected.

Countries with the highest risk levels include Austria, Belgium, France, Hungary, and Switzerland. Additionally, the Czech Republic, Poland, Portugal, Slovakia, Turkey, the United Kingdom, Brazil, and Canada also present a high credit risk level.

Regarding Europe, the credit insurer's report estimates that car production will contract by 3.7%, as the United States is one of the main export destinations for motor vehicles.

"The automotive sector is experiencing a period of turbulence mainly driven by the trade war. The consequences will be negative for producers and suppliers," the report states.

These forecasts align with the reality described by the Manufacturers Association Anfac for Spain. According to their data, despite the recovery seen in production last March, a new decline was recorded in the fourth month of the year, with a reduction of 7.4% and 193,541 vehicles produced in Spain. As for the annual total, it remains in negative figures compared to the previous year, decreasing by 9.2%, with a total of 784,423 units so far this year.

The German and Italian automotive industries, as well as the supply chains of Central and Eastern European countries like the Czech Republic and Slovakia, are the most threatened. In this regard, it is anticipated that German and Italian automotive exports could decrease by more than 5% in 2025 due to US tariffs.

The combination of reduced export demand, increased input costs, and reduced profit margins would severely harm the competitiveness of the German and Central and Eastern European automotive industries.

Another threat to the European market is China, where manufacturers offer cheaper models and tend to adapt more quickly to market conditions.

To protect the local automotive industry, the European Union has imposed tariffs on Chinese imports of electric vehicles. On one hand, this measure could help curb the momentum of Chinese imports, but it could also accelerate Chinese manufacturers' plans to move production to Europe.

Globally, the sector faces other challenges such as the demographic factor, with an increasingly aging population leading to a decrease in future demand.

On the other hand, as electric vehicles gain market presence, traditional combustion engine manufacturers are being forced to redirect their production to avoid closure. Finally, the Crédito y Caución study predicts that electric vehicle sales will reach 59% of total sales by 2030.