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 now, 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.
Initial production at ProLogium’s Dunkirk gigafactory is expected to begin in 2028ProLogium
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.
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.
