European new-car sales accelerated sharply in June, with registrations rising 13% year over year to 1.41 million units, according to the European Automobile Manufacturers' Association. This represented the region's strongest annual increase since October 2023, while battery-electric vehicle sales jumped 51%, pushing the share of cars with a plug above one-third of the market. France and Germany, Europe's two largest electric-vehicle markets, drove much of the increase after introducing new incentives, while every country except Poland reported higher EV sales. Persistently high fuel prices also appear to be discouraging buyers from choosing combustion-engine vehicles, potentially supporting further demand for electric alternatives.

The stronger market may provide some relief for Volkswagen (VWAGY), Europe's largest automaker, and Stellantis, the European carmaker behind Fiat, as both companies restructure their operations to address rising costs and intensifying competition from China. However, BYD (BYDDF), a Chinese automaker expanding across Europe, and Geely, a Chinese automaker seeking growth outside its domestic market, continue to increase pressure on established manufacturers. UK registrations for BYD and MG, the British-origin automotive brand owned by Chinese automaker SAIC Motor, each rose by more than one-third, while MG and BYD together captured 5.4% of the European market in June, up from 3.4% a year earlier. Chery Automobile's Jaecoo 7 also became the UK's top-selling car in March, suggesting Chinese brands are translating competitive offers into stronger European market share.

This pressure may remain elevated as Chinese manufacturers move more production into Europe, with BYD establishing a plant in Hungary and Stellantis allowing Zhejiang Leapmotor Technology, a Chinese electric-vehicle maker, and Dongfeng Motor, a Chinese automaker, to use its factories in the region. Bloomberg Intelligence said in late June that competition from Chinese brands was forcing European manufacturers to reduce prices and offer more incentives, a trend that could weigh on margins even as registrations improve. Volkswagen is also considering another 50,000 job cuts, potentially lifting total planned reductions to 100,000, while closing as many as four German plants and cutting its 150-model portfolio by half across brands including Porsche, Audi and Skoda. BMW, a German premium automaker, Mercedes-Benz Group (MBGAP), a German luxury vehicle manufacturer, and Renault, a French automaker, are also seeking deeper efficiencies, indicating that June's sales rebound may improve near-term sentiment without removing the sector's cost and competitive challenges.