Uncertainty looms for automotive supply chains in Europe
Geopolitical instability, trade volatility, policy ambiguity and economic stagnation are amongst the key factors contributing to significant uncertainty for automotive supply chains across Europe in 2026, according the findings of Automotive Logistics’ ‘European Automotive Logistics Market Report 2026-2036’.
Ahead of the Automotive Logistics & Supply Chain Europe conference in Bonn, Germany on March 17-19, 2026, Automotive Logistics is exploring the sector’s biggest challenges and trends, and how Europe’s supply chain can be re-energised through value-added logistics – ensuring flexibility, resilience and efficiency amid tumultuous market conditions.
Automotive Logistics’ ‘European Automotive Logistics Market Report 2026-2036’, available online from March 2, analyses all of this, providing data and insights on market conditions today as well as key priorities for firms to navigate uncertainty throughout 2026 and over the next decade.
Supply chain disruption and trade volatility
It’s no surprise that geopolitical tension and tariff uncertainty is a top concern for those in the European automotive logistics sector in 2026, with the year already having seen US president Donald Trump threaten – and later retract– an additional 10% tariff on several European countries at the height of the Greenland ownership dispute.
This volatility can disrupt finished vehicle flows and make logistics planning difficult, emphasising the need for flexibility and agility in supply chain operations, to allow all relevant parties to adapt quickly and appropriately to sudden changes. Investment in digitalisation is also a key strategy for overcoming this issue, with access to real-time data proving invaluable when it comes to responding quickly to supply chain shocks and planning proactively to avoid disruption before its impact can be felt.
Furthermore, conflicts in Ukraine and the Middle East have disrupted key shipping routes and threatened access to critical components, with today’s logistics service providers needing to be involved in war scenario planning in order to best serve their automotive customers.
Nearshoring and localisation
With protectionism on the rise, relying on a dispersed global supply chain presents serious risk, leaving the whole chain vulnerable should issues arise in one key area. Instead, firms have been exploring nearshoring, localisation and regionalisation strategies.
Where usually one might assume when adopting these strategies that setting up new operations in close proximity to manufacturing plants would be the way to go, an alternative strategy has emerged, as seen with the beginning of construction of ProLogium’s latest gigafactory in France.
The decision by ProLogium to build its solid-state battery gigafactory in Dunkirk reflects a shift in industrial strategy – from proximity to final automotive assembly towards supply chain optimisation. Although there are a number of automotive plants within 150km of the Dunkirk site – Renault Group in Douai, Stellantis in Hordain, Toyota in Onnaing, for example – this manufacturing base is regional rather than local to Dunkirk.
What Dunkirk does offer, however, is access to key transport routes, proximity to upstream battery suppliers and availability of inexpensive renewable energy. As one of Europe’s major industrial-port complexes, Dunkirk has direct access to maritime shipping routes in the North Sea, as well as strong rail and inland waterway connections into mainland Europe. It sits within a newly emerging battery corridor in Northern France and the surrounding regions and offers competitive energy pricing thanks to Gravelines Nuclear Power Station just 20km west of Dunkirk, and a soon-to-be-built wind farm just 10km offshore in the English Channel.
ProLogium itself stated that it selected Dunkirk as the home of this new gigafactory for “its strategic position as a northern European industrial and logistics hub and its investment-ready environment”, recognising the area’s multimodal connectivity and access to carbon-free and competitive energy as strategic advantages.
This example highlights that localisation is far more complex than it may seem, and requires an understanding of what is most important in terms of location for each specific project, whether that be connections to manufacturing hubs or conditions that support reliability and cost-effectiveness in the supply chain.
It’s also worth noting that localisation has limits and takes time. While it can be an effective strategy to cut costs and boost resiliency, it is not a panacea and not an instant fix. Restructuring the supply chain can be a lengthy process, so it’s crucial to consider the long-term benefits and challenges that such a strategy may bring.
Policy and demand fluctuations surrounding electrification
Electrification remains a significant source of uncertainty in 2026. Consumer EV adoption has been slower than expected, and with some recent policy changes sending the message that a pure-electric overhaul of new vehicle production is perhaps less urgent than previously stressed, OEMs have difficult decisions to make balancing short-term profitability with longer-term electrification plans.
Most notably in Europe, the decision by the European Commission to water down its planned ban on the sale of new ICE vehicles in the EU from 2035 in December last year has divided the industry.
On one hand, a BMW spokesperson commented: “It is an important first step that the EU Commission no longer pursues technology bans as a guiding principle, but recognises the future viability of the combustion engine."
And on the other, a Volvo Cars spokesperson said: “Weakening long-term commitments for short-term gain risks undermining Europe’s competitiveness for years to come. A consistent and ambitious policy framework, as well as investments in public infrastructure, is what will deliver real benefits for customers, for the climate, and for Europe’s industrial strength.”
It is expected that the European Commission’s decision at the end of last year will delay the EV transition, combined with slowing consumer demand. Further policy decisions such as the announcement of a new “pay-per-mile” tax on EVs and hybrid vehicles in the UK Treasury’s 2025 budget could further reduce incentives for EV adoption.
Additionally, infrastructure gaps and the introduction of battery passport regulation in 2027 are likely to slow EV adoption in Europe in the coming years.
Rising logistics costs and economic uncertainty
Slowing consumer demand is constraining growth and the effects of inflation in Europe are resulting in higher vehicle prices, with affordability issues remaining significant. These economic headwinds, combined with tariff disruption, slower-than-expected EV demand and competition from Chinese OEMs entering the European market mean that the forecasted outlook for European light vehicle production is modest.
Figure 1 tells the story of an industry that has not yet fully recovered from the disruption of the Covid-19 pandemic at the beginning of the decade and is set for gradual growth over the next 10 years.
From a logistics perspective, rising logistics and transport costs have been identified by stakeholders as a central challenge, intensified by trade volatility, slower economic activity and EV‑related supply chain shifts. This is compounded by automotive OEMs also applying cost-cutting pressures onto their logistics partners.
With much of Europe experiencing low growth and economic stagnation, for example Germany’s GDP contracting in both 2023 and 2024, the region has seen lower investment and changing consumer behaviour.
Logistics service providers are also having to adjust to sales and production volumes that remain structurally lower than pre-Covid levels by around 3 million vehicles per year. According to the European Automobile Manufacturers' Association (ACEA), these lower volumes have led to job cuts of over 100,000 at tier suppliers across Europe since 2024.
Infrastructure constraints and labour shortages
On top of this, automotive logistics in Europe is seeing disruption across the majority of transport modes due to infrastructure constraints and labour shortages. Port congestion has become a regular concern at several major ports in Northern Europe, with 48–72‑hour delays becoming routine in Antwerp, Belgium and in Hamburg and Bremerhaven in Germany. Causes include staff strikes, labour shortages, technical restrictions, overloaded container yards and low water levels on the Rhine.
Furthermore, rail freight has continued to suffer from chronic undercapacity and aging fleets, while road networks have been increasingly constrained by emission zones limiting vehicle flows. Both road and rail operations are being affected by labour shortages across key roles, with 96% of ECG members having reported serious staffing concerns in finished vehicle logistics.
