The biennial Paris Car Show used to be a time for some traditional hype and bluster from Europeans as they spotlighted all their shiny new machines and bragged about how they were going to conquer the world.

The trouble is China’s global emergence as a massive contender in the automotive market has changed all that. A report from global consultancy AlixPartners said urgent action needs to be taken soon to avoid an existential crisis.

“Europe’s car industry is running out of time and carmakers and governments have a narrowing window to take the bold decisions necessary to remain competitive into the 2030s,” the report said .

AlixPartners summed up the problems with four main points -

-There is structural cost gap between European and Chinese manufacturers and tariffs alone cannot fix it.

-There is a widening gap in time-to-market between European and Chinese carmakers.

-Unused car plant capacity is increasing across Europe and Chinese manufacturers have already started to acquire it.

-Regulatory divergence has effectively ended the era of the global car. In other words, until recently, one car could be sold in most global markets, but new local rules now make this an expensive impossibility.

AlixPartners also increased its forecast for Chinese brand share of European auto sales in 2030 to 20%, up from 16% made only three months ago. For 2026, the share is likely to be close to 10%.

“AlixPartners finds that a Chinese-branded electric vehicle costs around $20,000 to produce compared with roughly $31,000 for a European equivalent - a gap that the analysis describes as structural rather than temporary, and one that is widening at a time when European consumers are under financial pressure,” the report said.

“The analysis identifies software as an equally serious challenge. Value in the car is shifting from hardware to code yet Chinese carmakers have built software-defined architectures from the outset, updating and iterating at a pace European manufacturers have yet to match.”

“Europe’s established carmakers are taking far longer to bring new models to market - deriving on average less than a third of their sales from models launched in the last three years, compared with 76% to 100% for their Chinese rivals. The analysis also identifies the significant investment required to develop the next generation of electrified, software-defined vehicles - running to billions of euros per platform - as a further pressure on European carmakers at the moment they can least afford it,” according to AlixPartners.

Even BMW and Mercedes are suffering

Volkswagen , Europe’s biggest automaker, is struggling to slim down its production to reflect its falling market share as Chinese share accelerates. Other mass market manufacturers are also in jeopardy and even premium performers like BMW and Mercedes are suffering.

The AlixPartners report sounds the alarm, but Europeans have already begun a fightback, and other forecasts suggest the Chinese incursion won’t be quite as severe.

Investment researcher Bernstein expects China’s market share in Europe to reach 18.7% by 2035. Investment banker UBS also says 20% by 2030. Schmidt Automotive Research doesn’t think Chinese share will exceed 15% for a sustained period in Western Europe. That includes the five big markets of Germany, France, Britain, Italy and Spain.

The EU has already tried to curb Chinese electric vehicle sales with anti-subsidy duties of up to 35.3%, on top of the standard 10% car import duty. It is currently considering extending this to plug-in hybrid electric vehicles.

According to European Automobile Manufacturers Association data, in the first 8 months of 2026 Geely sold just under 290,000 vehicles, including its Volvo, Polestar, Smart and Lotus brands. BYD came next with 234,000, SAIC’s MG 230,000, Chery and its Jaecoo, Omoda and Jetour brands 208,000, and Stellantis affiliate Leapmotor 73,000. 9.2 million sedans and SUVs were sold in all of Europe in the period.

Rush to beat expected PHEV tariff curbs

Schmidt Automotive Research founder Matt Schmidt sees much of this is down to exceptional circumstances. Chinese market share is currently being inflated because the EU is expected to soon decide to place harsh tariffs on PHEVs and there’s a rush to beat that deadline.

Schmidt says Chinese growth will be halted by EU protectionism, while the Industrial Accelerator Act, now making its way through the European Parliament, sets a “made in the EU” threshold for EVs, including vehicles which must be physically assembled within the EU and include at least 70% EU-made components, excluding the battery.

Others say Chinese growth will be curbed by the sparse dealer networks, poor spare parts availability and a lack of financial services to help provide competitive leasing deals.

Meanwhile, Europe is rapidly improving its offering of affordable and impressive EVs including the Renault 5, Renault 4, Renault Twingo and Dacia Spring, VW’s ID.Polo, T-Cross, Cupra Raval and Skoda Epiq. Cupra and Skoda are VW brands. Dacia is Renault’s value brand. Many of these new vehicles will be on display at the Paris Car Show, from October 12 to 18, at the Porte de Versailles.

Nevertheless, AlixPartners said urgent action is required, whether by consolidating operations, or closing plants. Any delay will mean decisions may be forced, rather than chosen. Governments must reduce energy costs and provide long-term certainty on EV regulation. Currently, the EU has a mandate that all new cars sold after 2035 must be EVs, but this is under possible revision. Manufacturers want an extension for combustion engines, with perhaps a 10% concession.

Still time to save Europe

Andrew Bergbaum, Global Co-Leader of the Automotive & Industrial Practice at AlixPartners, said there is still time for Europe to save its auto industry

“The good news is that this is not a story with a predetermined ending. The companies and governments that make bold commitments now will define European automotive for the next decade. Those that continue to defer will find those decisions made for them, on someone else’s terms. The path forward is clear, but what remains to be seen is which companies - and which governments - are prepared to take it,” Bergbaum said.