Exploring the Reasons Behind Europe’s Limited Demand for American Vehicles
Large American pickup trucks pose significant challenges when navigating through Europes ancient towns and cities, which feature narrow, cobbled streets. US President Donald Trump has expressed dissatisfaction with Europeans lack of interest in purchasing more American vehicles, leading him to threaten imposing heavy tariffs on EU car imports.
The disparity between European and US preferences for vehicle sizes is partly due to the difference in fuel prices. Europe tends to have higher petrol costs compared to America, resulting in a preference for smaller, more fuel-efficient cars among Europeans. According to Hampus Engellau, a car industry analyst from Swedish investment bank Handelsbanken Capital Markets: “Try navigating Italy with an SUV; I’ve done it, and it’s incredibly difficult.”
Mike Hawes, CEO of The Society of Motor Manufacturers & Traders in the UK, adds that high fuel prices push Europeans towards smaller vehicles. Furthermore, petrol costs are substantially lower in the US due to the difference between gallons and litres. “They pay per gallon what we pay per litre,” says Engellau.
Despite these differences, European carmakers have gained a significant market share in the United States. In 2022, over 36bn worth of new EU-made cars were exported to America, while only around 5.2bn worth of US vehicles went in the opposite direction. Trump attributes this imbalance to unfair trading rules and has called for their correction.
Trump’s recent announcement of a 25% import tariff on steel and aluminium imports C materials essential for car production C appears to have prompted EU officials to consider reducing tariffs, aiming to protect Europes automotive industry from potential trade conflict.
Jim Farley, the boss of US automaker Ford, has criticized Trump’s moves: “What we’ve been seeing is a lot of cost and chaos,” he says. Automotive veteran Andy Palmer suggests that focusing on global trade might be misplaced; carmakers prefer manufacturing close to where customers are based.
Several European brands like BMW, Mercedes, and Audi manufacture vehicles in North America before exporting them back to Europe. Similarly, US automakers have historically pursued similar strategies in Europe but have recently divested from their local operations. General Motors closed Opel/Vauxhall and Saab manufacturing plants; Ford has exited Aston Martin, Jaguar, Land Rover, and Volvo.
Europe’s automotive market is competitive due to strong national brands like BMW, Mercedes-Benz, Volkswagen/Audi in Germany; Peugeot/Citroen/Renault in France; and Fiat/Alfa Romeo in Italy. These local brands benefit from a natural inclination towards purchasing homegrown products. However, the European market also welcomes foreign automakers such as Japanese and South Korean car makers.
Different taxation regulations and multilingual communication requirements add to Europe’s complexities for overseas automakers. Andy Palmer argues that tariffs stifle innovation within the industry: “Tariffs insulate beneficiaries from free markets,” he explains, which can lead to complacency and a lack of competitiveness.
