Portuguese Automotive Component Industry Faces Economic Strain Amid European Crisis

Decline in Exports and Growing Uncertainty

Portugal’s automotive component industry is facing a significant downturn. Exports are expected to drop in the final months of 2024, mainly due to the slowdown in new car sales across Europe. This decline is a major concern for component manufacturers, who have faced similar challenges in previous global disruptions like the pandemic. The Association of Manufacturers for the Automotive Industry (AFIA) reports that exports could fall by 4-5%. This decline follows the broader slowdown in car sales and the shift to electric vehicles (EVs).

Pressure on Portuguese Component Manufacturers

The Portuguese automotive sector is closely linked to the European car market. As car sales in Europe continue to drop, Portuguese manufacturers feel the effects. The sector employed over 64,000 people and generated €14 billion in 2023. The slowdown in car sales has caused a fall in demand for components. José Couto, president of AFIA, warns that this will lead to a significant economic setback. Reduced sales and production are a harsh reality for many companies in the sector.

Challenges in the Transition to Electric Vehicles

Portugal’s automotive industry also faces challenges with the shift to electric vehicles. The EU aims to phase out CO2-emitting cars by 2035, but several issues remain. The high cost of EVs and lack of charging infrastructure complicate the transition. Competition from Chinese manufacturers, who lead in EV production, also pressures European firms. To stay competitive, Portuguese manufacturers must invest in EV technologies and workforce training, but the sector is still catching up.

Global Competition and Regulatory Pressure

Stricter EU regulations on carbon emissions put European manufacturers at a disadvantage. Countries like the US and China are moving quickly with EV technologies. In the global market, China’s EV advancements pose a significant threat. José Couto emphasizes the need for greater investment in innovation and training. Without these, Portuguese manufacturers risk falling behind in the global automotive market.

Looking to the Future: Adjustments and Adaptation

Portugal’s domestic automotive market remains stable, with a 4% increase in sales over the past year. However, sales have not yet reached pre-pandemic levels. As the European industry faces mounting pressure, further declines in sales and exports are likely. Manufacturers may need to explore new markets outside Europe. Yet, the loss of production capacity will remain a challenge as demand decreases.