European car residual value pressure continues: Reshaping the market structure under the fork of internal combustion engine and electric vehicle paths

The European automotive market is at a crossroads of complex structural transformation. According to the latest market insights, despite the slowdown in global economic growth, the internal and external pressures on the European automotive industry remain significant, particularly evident in the pressure on residual values (RVs) in the used-car market. This pressure is not driven by a single factor but is a comprehensive manifestation of macroeconomic uncertainty, high inflation rates, and the acceleration of technological revolution.

Challenges of Market Resilience Under Macroeconomic Conditions Economic growth expectations from the OECD and the Eurozone both show signs of slowing, and European inflation remains high in the first half of 2026. This economic environment has a dual structural impact on the automotive industry: on one hand, demand for new cars is recovering gently, but economic divergence across different countries leads to differing demands for various powertrain systems. On the other hand, high energy costs directly affect consumer purchasing decisions, causing a sharp increase in price sensitivity.

Powertrain Divergence: Differences in Paths for Internal Combustion Engines and Electric Vehicles It is worth noting that the pressures on the European automotive industry are not uniform. Electric Vehicles (BEVs) and Internal Combustion Engine vehicles (ICE) are showing significant divergence in market performance. Research indicates that driven by rising fuel prices, demand for BEVs is accelerating, while demand for combustion engine vehicles is relatively under pressure. In ICE-dominated markets like Germany, the inventory turnover speed and pricing adjustment frequency for BEVs are changing dramatically, reflecting the market's rapid response to energy costs. This suggests that under the backdrop of volatile energy prices, companies must re-examine their product portfolios and pricing strategies to cope with rapidly changing consumer behavior.

Structural Adjustments in the Used-Car Market Residual value adjustments in the used-car market are also showing subtle but key trends. Overall, residual values in most major European markets are expected to see a mild year-on-year decline by the end of 2026 (2.0% or less). However, markets like Italy may face a sharp correction exceeding 5.0%, reflecting the adjustment period for the country's long-held high residual value levels post-pandemic. This adjustment is not only a reflection of macroeconomic cycles but is also closely related to the inventory structure and consumption habits of specific markets.

Reshaping the Competitive Landscape of Industry The continued existence of geopolitical risks and trade barriers further fuels the transformation of the European automotive industry from "crisis management" to "structural transformation." Chinese automakers, with their competitive pricing and advanced software features, are posing a more direct challenge to the European market. This is not just a price war but a comprehensive upgrade in technological and ecological competition, forcing European companies to accelerate the upgrade of their innovation ecosystem to ensure long-term competitiveness in new energy technology and digitalization.

Implications for the European Business Environment In summary, the current state of the European automotive industry reveals several core signals of the present European business environment: first, the slowdown in economic growth requires companies to focus more on cost control and efficiency optimization; second, the energy structure transition has evolved from a macro trend into a micro driver affecting specific products (such as gasoline and electric vehicles); and finally, the investment in innovation capabilities, especially in software and battery technology, has become the key variable determining future market share.Implications for the European Business Environment In summary, the current state of the European automotive industry reveals several core signals of the current European business environment: First, the slowdown in economic growth requires companies to focus more on cost control and efficiency optimization. Second, the energy structure transition has shifted from a macro trend to a micro driver affecting specific products (such as gasoline and electric vehicles). Finally, the investment in innovation capabilities, especially in software and battery technology, has become the key variable determining future market share. European companies need to view policy pressure as an external driving force to adjust their own strategies to achieve sustainable long-term development.