Good morning, and welcome to our rolling coverage of business, financial markets, and the global economy. The European automotive sector has presented a mixed picture for 2025, with overall growth tempered by significant shifts in consumer preference and intense competitive pressures.
European Union Car Market Shows Modest Growth in 2025
Sales of new cars across the European Union registered a modest increase of 1.8% last year, according to the latest data from the European Automobile Manufacturers’ Association (ACEA). This growth culminated in a total of 10.8 million vehicles sold throughout 2025. A stronger performance was noted in December alone, with sales rising by 5.8% to reach 963,319 units. However, the industry body cautioned that these volumes remain substantially below the levels seen before the pandemic, indicating a market still in recovery.
Electric Vehicle Adoption Accelerates Across the Continent
The most striking trend within the figures is the rapid acceleration of electric vehicle adoption. Registrations for battery-electric cars reached nearly 1.9 million units in 2025, constituting 17.4% of all new car sales. This marks a significant rise from the 13.6% market share held just a year earlier. The momentum continued into December, with battery-electric car sales surging by an impressive 51% compared to the same month in 2024.
Hybrid electric vehicles, however, retained their position as the most popular low-emission choice among European consumers. They accounted for 34.5% of the total market. Plug-in hybrid electric cars also saw robust growth, jumping 36.7% in December. This collective shift has come at the direct expense of traditional internal combustion engines. The combined market share for petrol and diesel cars fell sharply to 35.5% in 2025, down from 45.2% the previous year. By the end of the year, petrol car sales alone had declined by 18.7%.
Major Markets Drive Electric Growth as Traditional Fuels Falter
The transition is being led by the EU's four largest automotive markets—Germany, France, the Netherlands, and Belgium—which together account for 62% of all battery-electric car sales. Germany led the charge with a remarkable 43.2% increase in electric car registrations, followed by the Netherlands (+18.1%), Belgium (+12.6%), and France (+12.5%). Conversely, these same markets experienced some of the steepest declines in petrol car sales. France saw the most dramatic drop, with registrations plummeting by 32%, followed by Germany (-21.6%), Italy (-18.2%), and Spain (-16%).
Market Dynamics Shift: Tesla Stumbles as BYD Charges Ahead
Within the electric vehicle segment itself, a major competitive realignment is underway. Tesla, the pioneering US automaker led by Elon Musk, suffered a severe setback in 2025. Its sales fell by 37.9% over the full year to 150,504 vehicles. The decline was particularly sharp in December, with sales dropping 31.9% to 21,485 units, reducing Tesla's market share to 2.2% from 3.5% a year earlier.
This loss of ground coincided with the dramatic rise of Chinese manufacturer BYD. BYD's sales in the EU nearly tripled in December to 18,008 vehicles, more than doubling its market share to 1.9% from 0.7%. Over the course of 2025, BYD more than tripled its sales to 128,827 units. This performance helped cement BYD's position as the world's largest electric carmaker in 2025, a title it took from Tesla. Analysts point to several factors behind this shift, including the withdrawal of key electric vehicle subsidies and emissions regulations in the US under the Trump administration, which had previously incentivised Tesla's production. Tesla also faced consumer backlash in some markets following Elon Musk's public embrace of far-right political figures at the end of 2024.
Financial Markets and Broader Economic News
In related financial news, gold has continued its historic rally, rising 1.5% this morning to $5,091.64 an ounce for spot gold. Looking ahead, there may be positive developments for the UK's hospitality sector. Chancellor Rachel Reeves is expected to unveil a support package worth approximately £100 million per year for pubs later today. This intervention comes after warnings of widespread closures and job losses stemming from controversial changes to business rates introduced in the late November budget. Officials have reportedly admitted they did not fully foresee the total financial impact of the rates shake-up in England and Wales.
The Agenda for today includes:
- 11.30am GMT: UK Chancellor Rachel Reeves gives a speech.
- 1.15pm GMT: US ADP Employment Change report.
- 3pm GMT: US Conference Board Consumer Confidence index for January.
- 5pm GMT: European Central Bank President Christine Lagarde delivers a speech.
