New car sales across the European Union experienced modest growth last year, rising by 1.8% in 2025 compared to 2024, according to the latest data from the European Automobile Manufacturers’ Association (ACEA). This positive trend was largely driven by a significant surge in electric vehicle registrations, although overall market volumes remain notably below the levels seen before the pandemic.
Electric Vehicle Adoption Accelerates Across Europe
The shift towards electrification continued to gain momentum throughout the EU last year. Nearly 1.9 million battery-electric cars were registered in 2025, representing 17.4% of total sales, a substantial increase from 13.6% the previous year. Hybrid electric vehicles maintained their position as the most popular choice among European consumers, accounting for 34.5% of the market.
In contrast, the combined market share for traditional petrol and diesel cars fell sharply to 35.5% from 45.2% a year earlier. By the end of 2025, petrol car sales had declined by 18.7%, with France experiencing the steepest drop at 32%, followed by Germany at 21.6%, Italy at 18.2%, and Spain at 16%.
December Performance Highlights Strong Electric Growth
The final month of the year demonstrated particularly strong performance for electric vehicles. In December, battery-electric car sales in the EU surged by an impressive 51%, while plug-in hybrid electric cars jumped 36.7% and hybrid electric vehicles recorded a 5.8% increase. Overall EU car sales rose by 5.8% to 963,319 vehicles in December.
Tesla's Market Position Erodes as BYD Gains Ground
While the electric vehicle market expanded overall, Tesla experienced a dramatic decline in its European performance. The US automaker's sales fell by 31.9% in December to 21,485 vehicles, reducing its market share to 2.2% from 3.5%. Over the entire year, Tesla sales dropped 37.9% to 150,504 vehicles.
This decline coincided with the remarkable rise of Chinese manufacturer BYD, whose sales nearly tripled in December to 18,008 vehicles, more than doubling its market share to 1.9% from 0.7%. Throughout 2025, BYD more than tripled its sales to 128,827 vehicles, overtaking Tesla as the world's largest electric carmaker.
Factors Behind the Market Shift
Several factors contributed to this significant market realignment. The withdrawal of electric vehicle subsidies and emissions regulations by the Trump administration in the United States removed key incentives for electric car production. Additionally, Tesla faced consumer backlash following Elon Musk's embrace of far-right politics at the end of 2024, which may have influenced purchasing decisions in the European market.
Regional Variations in Electric Vehicle Adoption
The four largest markets in the European Union, which together account for 62% of battery-electric car sales, all recorded growth in this segment. Germany led the way with a substantial 43.2% increase, followed by the Netherlands at 18.1%, Belgium at 12.6%, and France at 12.5%.
Despite the overall growth in electric vehicle sales, the ACEA has cautioned that total car sales volumes across the EU remain well below pre-pandemic levels, indicating that the automotive sector continues to face challenges in its recovery phase.
Broader Economic Context and Market Developments
In related financial market news, gold continues its historic rally, rising 1.5% this morning to $5,091.64 per ounce. Meanwhile, anticipation builds for potential support measures for the UK hospitality sector, with Chancellor Rachel Reeves expected to unveil a package worth approximately £100 million annually for pubs.
This intervention follows warnings about widespread closures and job losses resulting from controversial changes to business rates introduced in the November budget. The relief package is scheduled for announcement on Tuesday, after officials acknowledged they had not fully anticipated the financial impact of the rates shake-up in England and Wales.
