Few anticipate that 2025 will bring relief to the auto industry, which has faced intense challenges this year.

• A range of challenges, including the absence of affordable models, delayed rollout of charging infrastructure, fierce competition from China, stringent carbon standards, and the possibility of U.S. tariffs, have posed difficulties for automakers.
• Next year, the industry will face challenges, according to analysts.
• Deutsche Bank analysts predict that the industry will face another year of volatility and challenges in various regions.

The European automobile industry is facing a relentless barrage of difficulties, according to analysts.

The automotive industry has faced challenges in achieving full electrification, including limited availability of affordable models, slow deployment of charging infrastructure, intense competition from China, stricter carbon standards, and the possibility of U.S. tariffs.

Next year, the industry will face challenges, according to analysts.

The outlook for European automakers is "quite bleak," according to Julia Poliscanova, senior director for vehicles and e-mobility supply chains at the campaign group Transport & Environment.

Poliscanova stated via video call to CNBC that their products are not as good as the formidable Chinese competition, they are behind on electrification, and this is not anyone's fault but the carmakers.

Despite the industry's efforts to adapt to higher interest rates, car sales in Europe are still below pre-Covid-19 levels, as Poliscanova pointed out.

Some European OEMs have expressed concern about the next tightening of carbon regulations, particularly as electric vehicle demand decreases.

The European Union is set to reduce the average emissions from new vehicle sales to 93.6 grams of CO2 per kilometer (g/km) starting next year, which is a 15% decrease from the 2021 baseline of 110.1 g/km.

Failing to adhere to the agreed limits, established in 2019 as part of the 27-nation bloc's goal to achieve climate neutrality by 2050, may result in significant penalties.

The ACEA has urged the EU to reduce the costs of complying with the 2025 regulations, while maintaining the progress of the green mobility transition.

In late November, the car lobby group, comprising BMW, Ferrari, Renault, Volkswagen, and Volvo, stated that urgent action is required to bolster the industry due to sluggish EV demand and a worsening economic climate.

What next for Europe's car giants?

It is "really frustrating" to see some advocating for the European Commission to weaken its carbon regulations, according to Transport & Environment's Poliscanova.

Poliscanova stated that the car CO2 target is not linked to selling more cars in China or helping them in any way. However, the vehicle CO2 target is crucial in making them more competitive and transitioning faster.

She stated that although it may negatively impact some of their short-term profit margins, the company is pushing them to produce products that will be profitable in the future.

Poliscanova stated that a delay in fines would be equivalent to abandoning the regulation entirely, and warned that this would only postpone the inevitable, which is the decline of the European industry.

Behind on electrification, Poliscanova questioned how delaying the target and falling further behind would aid the industry's transition.

The European Commission is aware of the difficulties faced by carmakers and is considering providing regulatory relief from next year, according to a previous statement by an EU spokesperson.

The big five European auto industry companies, including Volkswagen, BMW, and have experienced a significant decline in shares this year, except for France's Renault.

Stellantis, listed in Milan, has led the losses among carmakers, with Volkswagen and BMW, both headquartered in Germany, also experiencing significant declines.

Despite not having significant presence in China and U.S. markets, Renault has experienced a 19% increase in gains.

'Not expecting much improvement'

According to Deutsche Bank's research note published Dec. 9, analysts stated that automotive stocks are facing challenges worldwide.

Unfortunately, it seems that the industry is likely to face another year of volatility and challenges across regions. There will be more potential policy implications in the US, further restructuring announcements in Europe, muted demand from China, and pricing pressures.

ING's senior sector economist for transport and logistics, Rico Luman, expressed a negative outlook for Europe's OEMs.

Luman stated via video call that from a financial standpoint, it won't be beneficial because EVs are less profitable models in the end.

The profitability of conventional hybrids and plug-in hybrids is what they tend to focus on, but if they are forced to shift more towards electric vehicles (EVs), it will negatively impact their profitability. From a financial perspective, I don't anticipate much improvement at this time.

'What people need is cheaper EVs'

In October, at the Paris Motor Show, several major European car manufacturers introduced a range of affordable electric vehicles in an attempt to revive sales and regain market share from Chinese brands.

At the time, there was hope that the new models would mark a turning point for the auto industry in the region.

Bank of America's European automotive research head, Horst Schneider, stated that European lawmakers may need to provide some flexibility in order to assist carmakers in adapting to the new carbon regulations, despite the fact that the companies have had ample time to prepare.

According to Schneider, who spoke on CNBC's "Street Signs Europe" on Dec. 6, most carmakers are falling behind schedule, with the exception of BMW and Stellantis. Volkswagen, being the largest carmaker and most exposed to Internal Combustion Engines, has the biggest gap. Despite the EV launches not meeting expectations, Renault is also under pressure.

Schneider stated that all mass market carmakers, except Stellantis, are under pressure due to the high prices of EVs, which are around 20% to 25% higher than ICE prices.

"Giving carmakers more time is beneficial because consumer acceptance of EVs is not yet there, despite the launch of cheaper EVs in 2025, according to some carmakers," he stated.