In this sense, the China shock did not create Europe’s automotive crisis. It exposed it.

• Chinese competition is not the root cause of Europe’s automotive crisis. “China Shock 2.0” has exposed structural weaknesses and strategic mistakes that European manufacturers had accumulated long before Chinese EVs became the political issue they are today.

• Europe’s carmakers did not enter this crisis starved of capital. Quite the opposite. In 2023, European manufacturers captured an astonishing 40.6% of total global automotive profits, generating €98.1 billion in combined profits. The problem was never a shortage of money. The question is what they did with it.

• After the pandemic, European manufacturers deliberately embraced a strategy of “fewer cars, higher prices, higher margins.” They moved upmarket, prioritising SUVs and premium vehicles while increasingly abandoning the affordable mass-market segments – precisely where the transition to electric mobility was creating a strategic opening.

• Much of the resulting price inflation had little to do with rising production costs. In France, average new-car prices increased by around €6,800, or 24%, between 2020 and 2024. Only about one-quarter of that increase can be attributed to higher energy, material and labour costs. The rest came from more expensive models and greater pricing power. Hence Tooze’s description of the sector as a textbook case of “greedflation”: post-pandemic scarcity became an opportunity to raise margins and profits at consumers’ expense.

• The counterfactual is striking. Had European manufacturers returned part of the roughly €5,000 embedded in higher margins and more expensive specifications since 2020 to consumers – and used their enormous financial resources to develop attractive EVs in the €10,000–20,000 range – Europe’s competitive position today might look very different.

• China pursued almost exactly the opposite strategy. Chinese manufacturers expanded capacity on a massive scale, invested aggressively in technology and supply chains, drove down unit costs and prices, and developed electric vehicles for the mass market. Europe maximised short-term margins. China maximised scale, technological capability and long-term market share.

• Most importantly, Europe’s extraordinary profits were not translated into a comparable investment offensive. Despite exceptional profitability, European manufacturers invested far less aggressively than their Chinese competitors in new production capacity and the technologies underpinning electric mobility.

Now that the consequences have become visible, Europe risks confusing the symptom with the disease.

Tariffs may buy European manufacturers some time. They cannot undo years of strategic choices. Nor can protectionism substitute for investment, technological upgrading, scale and affordable products.

The real China shock is not that Chinese carmakers suddenly became competitive. It is that Chinese competition has exposed how European carmakers used the years when they were extraordinarily profitable – and how little of that prosperity was converted into the capabilities needed to compete in the next generation of the automotive industry.