European automotive market: between stated caution and real transformation

The latest announcements from Renault and Stellantis, the debate around — and the postponement of — the Industrial Accelerator Act (IAA) under discussion in Brussels, together with overall European automotive sales figures (–3.5% in January 2026, source: ACEA), give the impression that electrification is under threat in Europe.

Yet, much like weather and climate, we should not confuse OEMs' electrification strategies with the actual electrification of the market.

The question worth asking is therefore this: is there genuine reluctance among manufacturers towards the electric transition today, or is this a French magnifying-glass effect driven by current events?

I – The "French model": two strategies towards electric

First of all, the electric market is doing well, and has been for several months. France was the second-largest European market in January 2026, with electric car sales up +52.1%, behind Germany and ahead of the United Kingdom (source: ACEA).

Data analysis (NGC-Data and Dataforce GmbH) by T&E

Turning now to the OEMs:

François Provost at the launch of the new electric Twingo.

For Renault, despite statements by François Provost, CEO of Renault SA, questioning the 2035 timetable set by the European Commission, the trajectory remains oriented towards electric. Recent news confirms it:

• Commercial success of the electric R5, which entered the European EV best-seller rankings immediately in 2025 (4th place for the year – source: Automotive News Europe).
• The Twingo E-Tech expected in spring 2026.
• Battery technology partnerships with players such as Basquevolt to integrate lower-cost LFP cells.

The nuance is that Renault's strategy is not monolithic: it rests on diversification across EV, hybrid and combustion for non-electrified markets (South America, for instance, where EV penetration remains marginal). Witness the announced creation of the joint venture "Horse Powertrain Limited" by Renault and China's Geely, to design, produce and sell petrol and diesel engines.

So this is a "yes, but": a trajectory aligned with 2035 in Europe, alongside a multi-energy response internationally.

Stellantis production site in Melfi, Italy, 2025

Stellantis, by contrast, is taking a noticeably different approach, marked by recent trade-offs under strong short-term profitability pressure. Historically, the Franco-American-Italian group relied on multi-energy platforms, combining an ambition to electrify its range with particularly strict financial discipline. However, the deterioration of its economic environment and several industrial difficulties (the PureTech engine, the embedded software ecosystem, production cost-rationalisation programmes) are now leading to a clearer repositioning in favour of combustion and hybrid powertrains.

On paper, this is not a complete abandonment of EV, but opportunistic steering — geographic and financial. In practice, it translates into:

• a reallocation of some investment to North America,
• the relaunch of combustion models in certain markets, including in Europe,
• withdrawal from several gigafactory projects, notably in the United States and Canada.

So within France alone, two industrial visions coexist.

II – Europe: reluctance or industrial strategy?

Zooming out to the European scale, the data contradicts the idea of a retreat from electric.

While the overall automotive market is down –3.5%, electric car sales rose +13.9% in January 2026 in Europe (source: ACEA). Market share now stands at 19.7%, or one car in five.

The sense of hesitation that can emerge in public debate stems largely from contrasting national situations — Germany being a case in point, where an apparent gap is opening between political discourse and the reality of industrial investment.

On one side, there are cautious public positions on the 2035 target, with the government and some manufacturers (Volkswagen, BMW) favouring a relaxed timetable.

On the other:

• Germany remains the largest European market by volume (+23.8% in January 2026),
• massive investment in dedicated platforms (MEB, SSP for Skoda and Audi; PPE for Porsche and Audi; Neue Klasse for BMW, MB.EA for Mercedes-Benz),
• disruptive technology choices, notably around 800V architecture (exclusive to BMW) in the saloon and premium segments.

Volkswagen ID.7 Tourer

Among manufacturers, the momentum is there too: the Volkswagen group became Europe's number one in electric in H1 2025, with EV sales up +78%, and Skoda ranked among the best-selling EVs of January 2026, taking second place (source: Best-Selling-Cars).

In Europe, as in Germany, the transformation is therefore under way — but under profitability and competitiveness constraints. It is precisely this balance that the future Industrial Accelerator Act (IAA) will have to address: fostering European production of EVs and batteries without holding back innovation or international partnerships (JVs, technology cooperation). Along those lines, one measure under consideration would reserve certain public subsidies and tax incentives for models incorporating at least 70% of components produced in Europe (excluding the battery) and assembled within the Union.

III – On a global scale: different logics

In the United States, the reduction of public incentives introduced by J. Biden (a $7,500 tax credit) following D. Trump's return is driving a partial return to combustion at Ford (recalibrating to 50% of its catalogue as hybrid or EV by 2030) and General Motors (a 50% reduction in activity at the Detroit plant, temporary halt to battery production). This shows that an electrification strategy remains heavily dependent on the political framework.

Japan, by contrast, is a structural counter-model. Driven by Toyota, its automotive industry remains resolutely oriented towards a "hybrid-first" strategy. That choice fits a long-term industrial trajectory, founded on the gradual improvement of existing technologies, cost control and the robustness of value chains, rather than on reactive adaptation to short-term market or regulatory shifts.

BYD

In China, two realities coexist:

• a multi-energy strategy for export (including combustion for markets such as India),
• massive electrification of the domestic market (>50% of sales).

Overcapacity explains the Chinese push into Europe. But despite the media visibility, the "wave" remains contained: even though BYD tripled its European sales in January 2026, Chinese OEMs' market share stood at around 2% at the end of 2025 (source: Reuters). We are not yet at the stage of industrial dominance, and European OEMs still have a card to play.

IV – Real reluctance or a cyclical illusion?

At Yusco, we believe it would be a mistake to draw hasty conclusions from short-term signals. Yes, manufacturers' strategies differ, and some are slowing their CAPEX in the electromobility segment.

But the underlying trend remains clear: one car in five is electric in Europe, and the electrification of mobility remains Europe's compass. The question is therefore less electric vs combustion than: who will master the EV value chain and its profitability in Europe by 2035?

To that end, European OEMs still have levers available:

• technological sovereignty,
• mastery of the battery chain,
• targeted joint ventures with industrial leaders,
• reducing the cost of EV platforms,
• multi-market and multi-energy strategies.

As with weather and climate, let us not confuse OEMs' industrial or financial strategies with the electrification of the market.

Tactical adjustments do not call the underlying trajectory into question.

Electrification is an industrial transformation, and it is under way.

It is in this context that strong regulation such as the future Industrial Accelerator Act will have to strike a delicate balance: fostering European production of EVs and batteries without holding back innovation or international partnerships.