Overcapacity in Europe
European logistics providers brace for industry overcapacity
As up to eight automotive plants may be in jeopardy in Europe, and Chinese rivals are on the continent's doorstep, the logistics industry is preparing for fundamental changes. An overcapacity crisis in the European automotive industry is becoming increasingly likely in the coming years, though several factors will determine its severity for local brands and what it will mean for logistics providers.
The ongoing European automotive industry transformation could result in the closure of up to eight automotive plants in the next several years, according to a survey by AlixPartners, a New York-based consultancy.
On average, European factories are operating at only 55% capacity utilisation, gradually losing ground to Chinese rivals, the analysts said. Chinese brands are projected to see their share of the European market grow from 5% in 2025 to 10% in 2030, equivalent to 2 million finished vehicles.
Some companies have already rolled out restructuring plans. For example, Volkswagen last year announced a decision to shut down three plants in Germany, along with several other cost-cutting solutions, like staff redundancies and a cut in pay by 10% across its workforce.
Besides, automakers are already taking concrete steps to downsize operations. Stellantis, Volkswagen and Ford are pausing production at multiple plants across Europe amid falling demand and rising inventories.
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In particular, Ford is cutting jobs at its Cologne factory and will move production there to a one-shift operation from January 2026. Volkswagen has announced production halts for its EVs. Production at Zwickau will stop for a week, as will output at the smaller plant at Dresden. Production at Osnabrück will be cut by a day a week permanently, while output at Emden may also be stopped.
However, it might be too early to draw apocalyptic forecasts about the European automotive industry's future, AlixPartners analysts assured. "We do not believe that eight plants will be shut down in Europe – only that there will be overcapacity in Europe of that magnitude," commented Andrew Bergbaum, partner and managing director at AlixPartners.
According to some forecasts, EU car production could rise to 16 million annually in the coming years. Aside from plant closures, there are several other ways European automakers can mitigate the overcapacity crisis, including vertical integration and other forms of repurposing, such as exports, Bergbaum said.
However, it is not clear to what extent exports can help European factories, especially given a resurgence of protectionism on both sides of the Atlantic. "The years of globalisation seem to be at an end," said Mick Flanagan, president of the Society of Motor Manufacturers and Traders (SMMT), when discussing the growing trend of protectionism the recent SMMT Annual Dinner.
European automakers are being forced to downsize their capacities not only due to growing pressure from Chinese suppliers but also due to waning demand. According to data from the European Automobile Manufacturers' Association (ACEA), EU new car registrations in the first seven months of 2025 fell 0.7% compared with the same period last year.
ACEA representatives decline to discuss whether the negative trends can indeed force its members to resort to plant closures. "The decision of closing plants or not falling under a category of company specific issues and decisions ACEA cannot comment on," Camille Lamarque, ACEA policy communications officer, said.
Fundamental shifts
Aside from purely economic factors, European automotive sales are declining, with local carmakers bearing the brunt of this trend, as the continent undergoes profound changes.
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Altering customer expectations on the automotive market is one of the key factors putting pressure on European automotive factories, commented Dr Pal Negyesi, managing director at consultancy CE Auto.
"For an increasing number of people, cars are just like a washing machine, a device with a specific purpose. But there is no emotional attachment, which was a driving force for decades," Negyesi explained. In addition, the younger generation of European customers doesn't want a car at all, Negyesi noted.
Several factors are at play that will determine the future competitiveness of the European automotive industry, commented Krzysztof Szeligowski, chief sales officer at logistics provider Adampol S.A. Above all, this will depend on the EU decision about green mobility and the ban on combustion engines after 2030.
"In my opinion, if this regulation stands, European original equipment manufacturers (OEMs) could not be able to maintain the sales of their products," Szeligowski said. "Competition from Asia is technologically more advanced and has direct access to cheap raw resources, which is reflected in car prices, and over time, more and more customers in Europe can be convinced to resign from traditional brands".
According to Szeligowski, without maintaining a competitive edge, automotive plants of European automakers will inevitably shut down. "If there are no sales, the economy is brutal and production can be stopped or moved outside of Europe," he admitted. European OEMs and their suppliers are already struggling, analysts said.
"I've recently spoken to a few smaller suppliers in Germany and Hungary. One German sub-supplier, which serves mostly ZF, has not seen profit in six years. For decades, it was very profitable, which is why it is still around, but this can't be sustained forever," Negyesi said.
The cold breath of the crisis is already felt along the supply chain. "Hungarian suppliers are bracing for impact as they can't shield themselves from the woes of the German auto industry, so the mood is very somber," Negyesi added.
According to Negyesi, Chinese OEMs usually appear in the context of electric vehicles, but the key focus in the coming years will be on the small and mid-size SUV and CUV segments, which are quite popular.
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"The Jaecoo 7 outsold the Nissan Qashqai and VW Tiguan in October in the UK. Both Jaecoo and Omoda are now available in Germany – true, only one dealership, but the writing is on the wall. It's not like Hyundai and Kia 20-something years ago. The Chinese are doing this a lot quicker and more efficiently," Negyesi said.
Market players find it difficult to assess which plants can be affected by the closures. In particular, analysts say that in the UK, the Nissan Sunderland plant and the Land Rover Solihull plants have electric futures, although the market is not there for such vehicles. Ford's Valencia plant is another with an uncertain future, as the company plans to replace the Kuga with electric vehicles by 2027.
Changing flows
European logistics providers will need to adapt to the changing landscape in Europe in the coming years. Despite the general turbulence, analysts currently expect total vehicle sales volumes in Europe to remain broadly stable, Frank Schnelle, executive director of the Association of European Vehicle Logistics (ECG), commented.
Growth is occurring mainly in other regions, though increasingly through localised production rather than exports from Europe. At the same time, ECG observes that Chinese manufacturers are establishing production facilities in Europe, partially offsetting reductions by traditional OEMs.
"Overall, this represents a structural adjustment, not an abrupt change," Schnelle emphasised.
In general, Europe's FVL sector is bracing for a challenging future marked by stagnant volumes and tepid growth prospects, according to ECG. However, European logistics providers have substantial opportunities both within and outside their region yet to be unlocked.
"We are intensifying cooperation with key and fast-growing regions – building bridges that enable our members to expand where new opportunities arise. In addition to our long-standing engagement with the United States, ECG has developed partnerships in China and, most recently, in the Middle East, where we see rising interest from our members," Schnelle added.
European logistics providers believe that, no matter how many plants are shut or opened in Europe over the next several years, trade flows will change significantly.
For example, BLG Logistics assumes that potential changes in the production landscape could fundamentally influence existing goods flows in Europe—for example, through slight shifts in production centres or adjustments in supply chains, said Britt van Delden, communication manager for BLG Logistics.
"New market participants, including Chinese manufacturers, could also change long-standing trade flows within the traditional triad. Overall, we are closely monitoring such developments – both with regard to intra-European goods flows and import and export movements to and from Europe," van Delden added.
Chinese automakers will likely continue to build vehicle assembly capacity in Europe, probably focusing more on Southern Europe, for example, Spain and Eastern Europe, including Hungary, due to lower costs in those areas, commented Steven Dyer, an analyst with AlixPartners.
Even now, without closures, the flows are changing as BMW, BYD and Volvo are opening plants in Hungary and Slovakia, Adampol's Szeligowski said.
"That will be a real challenge to balance the flows East-West-East. On the other hand, the rail and road infrastructure could be much overloaded – for example, highway M1 in Hungary, which is already now without new flows of cargo and cars, is extremely congested," Szeligowski said.
In case of closures, which will presumably primarily happen in Western Europe, logistics service providers will have to look to create a new network for their flows, using more distribution, more ports, used cars, and so on. "This could lead to lower available capacity, increase CO2 emission in finished vehicle logistics, and delays by pickups," Szeligowski added.
However, one of the key questions is whether Chinese OEMs will open plants in Europe to serve local markets and whether they will remain as competitive as traditional OEMs, Szeligowski questioned.
