Donald Trump’s past threats of imposing hefty tariffs on car imports from the EU stemmed from his frustration over the relatively low popularity of American vehicles in Europe, with Tesla being a notable exception. This raises a key question: why are American Cars not a common sight on European roads, besides the electric vehicles from Tesla?
One immediately apparent reason lies in the geography and infrastructure of many European countries. Imagine navigating the ancient, winding, and often narrow streets of Italian towns in a large American SUV. As car industry analyst Hampus Engellau points out, “Try to go around Italy in a big SUV. I’ve done it, and it’s very difficult.” The sheer size of many American vehicles, particularly pickup trucks and large SUVs, makes them impractical for everyday driving in many parts of Europe, where urban environments often predate the automobile itself.
Adding to the spatial challenges, the cost of fuel in Europe plays a significant role in consumer preferences. Mike Hawes, CEO of The Society of Motor Manufacturers & Traders (SMMT), highlights this economic factor: “We tend to have higher fuel prices than the Americans, so we prefer smaller, more fuel-efficient vehicles, while they generally prefer larger vehicles.” Europeans, accustomed to paying considerably more for gasoline than their American counterparts, naturally gravitate towards vehicles that offer better fuel economy. Engellau further emphasizes this point, noting the stark difference in fuel prices: “They pay per gallon what we pay per litre,” underlining the economic disincentive for Europeans to opt for gas-guzzling American cars.
Despite these challenges, European automakers have successfully penetrated the US market, a point often raised by critics of trade imbalances. As Trump himself noted, the US imports “millions of cars coming in – BMW, Mercedes, Volkswagen and many others.” In 2022, EU exports of new cars to the US reached 692,334 units, valued at €36 billion ($37 billion; £30 billion), while US car exports to the EU were considerably lower, with 116,207 new cars worth €5.2 billion making their way across the Atlantic.
This trade disparity fuels arguments about unfair trade practices. Engellau explains Trump’s concern: “Mr Trump is concerned because the terms of trade are not really equal,” referencing the EU’s 10% tariffs on imported cars from the US, which significantly exceed the 2.5% tariffs the US currently imposes on EU car imports. These tariff differences are at the heart of trade tensions and have prompted discussions about potential trade wars in the automotive sector.
However, focusing solely on trade tariffs might miss a more fundamental aspect of the automotive industry. Andy Palmer, a seasoned automotive veteran with experience at Nissan and Aston Martin, argues that geographical shipping of cars is inherently inefficient. “If you can help it, you don’t want to ship cars around the world. They’re big boxes of expensive air,” he states. The modern automotive industry operates on a global scale, with manufacturers strategically aiming to “manufacture close to where the customer is based,” as SMMT’s Mike Hawes observes.
This strategy explains why major European brands like BMW, Mercedes, and Audi produce some of their larger models in North America, with some even being exported back to Europe. Historically, American carmakers also adopted this approach in Europe. General Motors had a significant European presence through brands like Opel/Vauxhall and Saab, while Ford owned European marques such as Aston Martin, Jaguar, Land Rover, and Volvo. However, over time, both GM and Ford divested from these European operations, reflecting strategic shifts and financial challenges.
Ford, for example, is currently restructuring its European business, shifting its focus towards electric and commercial vehicles and moving away from smaller, affordable cars like the Ford Focus. This strategic realignment includes significant job cuts in Europe, signaling a contraction in their traditional European car business. While Tesla has established a factory near Berlin for its Model Y production for the European market, even they face increasing competition, particularly from the growing influx of lower-cost electric vehicles from Chinese manufacturers.
Jose Asumendi, head of European automotive research at JP Morgan, emphasizes the intensely competitive nature of the European car market. “Europe is a very tough marketplace for carmakers,” he notes. Success requires “the right products, and you need to run the manufacturing plants well.” Furthermore, he points to the strong preference for domestic brands in major European markets: “There’s a natural inclination for people to buy local champions, especially in Germany, France and Italy,” where brands like BMW, Mercedes, Volkswagen, Peugeot, Citroen, Renault, Fiat, and Alfa Romeo hold significant market share and cultural resonance.
Beyond these domestic preferences, the European market is characterized by its diversity and openness to various international brands, including Japanese, South Korean, and increasingly, Chinese automakers. This crowded marketplace leaves less space for American brands to gain significant traction, especially when considering the specific preferences of European consumers for smaller, fuel-efficient cars and the practical challenges posed by larger American vehicles in many European urban settings. Adding to the complexity, European markets are fragmented by different taxation regulations and linguistic diversity, creating further hurdles for overseas manufacturers.
Despite these obstacles, industry experts like Andy Palmer and Jose Asumendi believe that Europeans do not inherently dislike American cars. Asumendi suggests, “I think Europeans do like American brands, but there are many other brands available in Europe, so competition is fierce.” Palmer cautions against protectionist measures like tariffs, arguing that they stifle innovation. “Tariffs tend to ‘insulate the beneficiaries from the free market, and this merely makes them lazy, so they stop innovating and fail to remain competitive’,” he contends. Instead of trade wars, Palmer advocates for “investment and collaboration” as the path to a stronger and more competitive automotive industry.
In conclusion, the limited presence of American cars in Europe is not solely due to trade tariffs or protectionist measures. It’s a multifaceted issue rooted in practical considerations like vehicle size and fuel efficiency preferences, historical market dynamics, intense competition, and the inherent complexities of the diverse European market. While Europeans may appreciate American automotive brands, a combination of practical, economic, and competitive factors continues to shape their car buying choices, making it a challenging market for American automakers to fully penetrate beyond niche segments and electric vehicle pioneers like Tesla.
