A report released on Tuesday, September 22, 2026, by the Brussels-based think tank Bruegel highlights the challenges the European automotive industry faces, especially with the rising influence of Chinese car manufacturers. The report argues that while policies intended to protect European carmakers might not be effective, they could burden consumers with higher prices. Bruegel suggests that the costs to consumers and taxpayers should be balanced against the benefits of preserving industry jobs and manufacturing capabilities, while still pursuing ambitious environmental goals like reducing carbon emissions. It warns that slowing the shift to greener technologies or enforcing strict "Made in EU" requirements could be costly for consumers without making the industry more competitive. Instead, the report recommends temporary protective measures and a negotiated agreement with China. European car production has dropped by 19% since 2019, following a series of crises, and it is unclear whether this decline is temporary or permanent. However, European carmakers achieved their highest profit margins in 2023, partly due to a strategy of selling fewer, more expensive vehicles—particularly mid-sized SUVs. This focus on higher profits has led to neglect of the growing but less profitable market for affordable electric vehicles, an area where Chinese manufacturers are leading. Despite this, the European automotive sector still managed a trade surplus of 76 billion euros in 2025, with manufacturers remaining profitable and attracting significant investment, including 3 billion euros per quarter in factory investments. Proposed policies, such as the Industrial Accelerator Act (IAA), which would require the use of European-made components in vehicles, are expected to raise car prices and reduce competition. For example, using low-carbon steel, which the EU is pushing for in revised emissions standards for 2035, could add about 200 euros per vehicle in costs. Similarly, manufacturing batteries within Europe would increase battery costs from 50 euros per kilowatt-hour to 85 euros per kilowatt-hour. For an average electric vehicle with a 60 kWh battery, this would raise the price by around 2,100 euros—considerable in a market where price competition is fierce. Bruegel advises Europe to adapt to changing conditions rather than resist them. It recommends simplifying automotive policies, avoiding strict reliance on European-made components, and focusing on improving factors that boost competitiveness, such as energy costs, workforce skills, charging infrastructure, and battery recycling. The think tank also suggests treating Chinese investments as opportunities for technological advancement rather than threats. It supports temporary trade measures, such as export quotas for electric and plug-in hybrid vehicles, with provisions to cancel them if violated. A temporary agreement with China could provide European automakers with a buffer period to adapt, while allowing access to low-cost Chinese electric vehicles and investments that could help accelerate the European transition to greener technologies. Bruegel cites a past example from the 1990s, when Europe limited Japanese car imports through the "Elements of Consensus" agreement. Though this raised car prices, it gave European manufacturers time to strengthen their position and attracted Japanese investment to Europe, boosting innovation and competitiveness. The think tank hopes for a similar outcome with China, balancing the need to protect the European industry with the goal of minimizing harm to consumers.