Volvo chief warns Europe’s car industry could face a Detroit-style decline

Yesterday 12:15

By: Azzat Manal

Volvo chief warns Europe’s car industry could face a Detroit-style decline

Volvo CEO Håkan Samuelsson has warned that Europe’s automotive industry risks losing industrial capacity if manufacturers continue to face high production costs and struggle to compete with lower-cost locations. In an interview with German business daily Handelsblatt, Samuelsson compared the situation with the decline of Detroit’s automotive industry, while calling for measures to improve Europe’s cost competitiveness.

Samuelsson pointed to energy prices, taxes, labour costs and working hours as factors affecting the competitiveness of European factories. He argued that manufacturers need to reduce their cost base while increasing productivity and continuing to invest in new technologies and vehicles.

The Volvo chief recalled how U.S. carmakers gradually moved production away from Detroit toward southern states, where companies could benefit from lower energy and labour costs as well as a different tax environment. According to Samuelsson, the historical comparison illustrates the potential consequences of allowing industrial investment to migrate toward regions offering significantly lower operating costs.

Detroit became synonymous with the American automobile industry during the 20th century, but the city later suffered from factory closures, population losses and a shrinking industrial base. It filed for bankruptcy protection in 2013, with debt estimated at around $18 billion. Samuelsson used that history as a warning rather than suggesting that Europe is inevitably heading toward the same outcome.

His comments come as European carmakers navigate a major transformation in the industry. The sector is being reshaped by the shift toward electric vehicles, digital technologies, changing consumer demand and intensifying competition from manufacturers outside Europe, particularly from China. The European Commission has described the automotive sector as being at a critical turning point and has introduced measures aimed at supporting its competitiveness during the transition.

The scale of the industry makes the issue particularly important for Europe's wider economy. The European Commission estimates that the automotive sector provides around 13.8 million direct and indirect jobs across the EU and accounts for more than 7% of EU gross domestic product. The sector also has strong links with steel, chemicals, electronics, transport and other industrial activities.

Energy costs remain a particular concern for European industry. The European Commission said in its 2026 economic forecast that energy inflation was expected to rise sharply during the year following renewed energy-market pressures. It has subsequently proposed measures aimed at reducing energy costs and strengthening Europe's energy resilience, including greater investment in clean electricity and reforms affecting energy-intensive businesses.

At the same time, European manufacturers are being asked to accelerate the transition toward cleaner vehicles. Fully electric cars accounted for 20.6% of new EU registrations in April 2026, according to figures cited by the European Commission, highlighting the speed of the market transformation. The shift creates opportunities for new technologies but also requires major investment in batteries, software, charging infrastructure and production facilities.

Volvo itself is responding with a major product and manufacturing overhaul. The company plans to introduce 13 new models worldwide by the end of 2030 and is reorganising its production network as it seeks to lower costs and strengthen its position in the electric vehicle market. Volvo also plans to regionalise production more closely around key markets, including Europe, the United States and China.

Samuelsson's warning therefore reflects a broader debate over how Europe can maintain its manufacturing base while adapting to the automotive industry's technological transformation. Lower energy and production costs are one part of the equation, but investment in innovation, electric mobility, skills and productivity will also determine whether European manufacturers can remain competitive in a rapidly changing global market.