Europe’s car industry risks jobs losses, growing inequalities and lost market share to China if it continues to abandon the lower-market segments of EVs, warns a new report from the European Trade Union Institute.

For more than a decade, Europe’s carmakers have adopted a high-end, low-volume strategy to maximise profits, leading to a decline in small car sales and an increase in SUVs, which sell for around 60% more on average, the report states. Manufacturers such as VW, Stellantis and BMW have all said they will not be changing their approach with electric cars, the authors note.

The report asserts that this trend towards luxury vehicles undermines broader mobility changes, especially given low investment in public transport, and may result in a class-based transport system.

Published this month, the book-length report provides a comparative overview of the primary carmakers and regions in Europe. Manufacturers across all regions have seen a decrease in the number of cars sold over the past 20 years, with significant job losses in France and Italy, while employment has remained stable in Germany. Central and eastern Europe, which benefitted the most from the post-EU enlargement expansion of the automotive industry, now face an uncertain future, states the report.

“Regulators should ensure European small cars do not disappear,” said the authors in a press statement. “Incentives for building small electric vehicles should be provided based on industrial policy initiatives, local content provisions and public procurement rules. Subsidies for electric cars should support entry-level models “made in Europe”. They contend that the EU is now “well placed” in the EV race, including, “after a late start”, in the battery value chain.

If Europe’s car industry fails to scale up the supply of battery EVs, this could result in foreign manufacturers such as China’s BYD and Great Wall Motor offering affordable models that capture a significant portion of the European mass market, the report concludes, potentially leading to a loss of EU economic sovereignty in the automotive industry.