European car residual value pressure continues: Electric vehicles are accelerating market share capture, internal combustion engine vehicles face structural adjustments.

The European automotive industry is in a complex period of transformation. The cautious optimism of the macroeconomic outlook and the persistent inflationary pressures are jointly shaping the entire industry, which is undergoing profound structural adjustments internally while navigating external uncertainties. The latest residual value (RV) forecasts indicate that major European markets will still face pressure by the end of 2026, but the performance of different powertrains reveals the drivers of future growth.

Constraints from Macroeconomics and Inflation The slowdown in European economic growth and the continuous rise in inflation have significantly impacted consumer confidence and business investment. According to Eurozone economic forecasts, economic growth expectations have slowed from 3.3% in 2025 to 0.8% in 2026, putting overall market confidence under pressure. High energy prices have further exacerbated inflation, making consumers more cautious in their vehicle purchasing decisions, which is directly reflected in the changing demand in the used car market.

Powertrain Differentiation Driven by Electrification On the demand side, the difference between electric vehicle (BEV) and internal combustion engine (ICE) powertrains has become a core variable affecting residual value and market performance. On one hand, rising fuel prices and increased energy costs have significantly accelerated consumer demand for BEVs, especially in countries with high EV penetration like Germany. Data shows that the average age of BEVs under four years has significantly decreased in Germany, and the number of inventory weeks has decreased year-on-year. This indicates that BEVs are rapidly transitioning from powertrains with low sales to the strongest performing segment in the market.

On the other hand, the combustion engine market faces structural challenges. Although residual values for ICE vehicles have seen significant corrections in some regions (like Italy), this correction is not merely a decline but is driven by high fuel costs and an economic downturn trend. At the same time, the price drops for ICE vehicles in the used car market show a distinct trend compared to BEVs, suggesting market sensitivity to changes in energy costs.

Nuances in Residual Value Adjustments and Market Segmentation The trend of residual value percentage (%RVs) adjustments is stabilizing in most European markets, but the specific performance depends on the market and vehicle age. It is noteworthy that there are significant differences in residual value performance across European countries; for example, Spain shows outstanding residual value rates for specific vehicle ages, while Italy has experienced more drastic corrections. This difference is not accidental; it deeply reflects the segmentation of regional economies, energy policies, and consumer preferences.

Deeper Logic of Industry Transformation From a macro perspective, the challenges facing the automotive industry have shifted from mere crisis management to structural transformation.The Deep Logic of Industrial Transformation From a macro perspective, the challenges in the automotive industry have shifted from mere crisis management to structural transformation. Enterprises and markets are moving from responding to external shocks to adapting to energy transition and technological change. The trend toward electrification is not just a choice of technological route, but a strategic response to increasingly stringent regulatory environments and the global competitive landscape. European automakers must maintain technological leadership while effectively managing price fluctuations brought about by energy costs and accelerating their product portfolio toward an electrified path with high demand and low risk to ensure their competitiveness in the future global market.