Western car giants are battling crises on multiple fronts, with declining profits , layoffs and widespread cost-cutting measures showing their strain. From rising production costs to U.S. tariffs , intense competition , supply chain disruptions and regulatory pressures , as well as a bumpy electric vehicle transition — top original equipment manufacturers (OEMs) are caught in a perfect storm. As Mercedes-Benz Group CEO Ola Källenius recently put it: “Our industry is experiencing heavy rain, hail, storms and snow at the same time.” “It does feel like a polycrisis,” said Sigrid de Vries, director general of the European Automobile Manufacturers’ Association (ACEA), a car lobby group. The term polycrisis refers to simultaneous headwinds that become entangled and amplify each other, creating a situation that is more severe than the sum of its individual parts. “It was already going to be very challenging, the biggest transformation for the industry in its history, to move towards zero emission vehicles. And the dominant path there is electric vehicles — and that will remain the case,” de Vries told CNBC by video call. ACEA represents 16 major Europe-based automakers, including the likes of Volkswagen , BMW , Ferrari , Renault and Volvo. Several CEOs of car manufacturers are expected to meet with European Commission President Ursula von der Leyen on Sept. 12 for further talks on how to address the sector’s key challenges. “For us, politically, this is a very important moment,” ACEA’s de Vries said, noting that the EU currently has the world’s “most ambitious” and “strictest” carbon emission rules in place. “We want to make this work, that’s very important, but we feel we have our hands tied behind our backs. We cannot deliver on this objective alone. We need the other parts of the equation to be there as well,” de Vries said. The European Commission, the EU’s executive arm, did not respond to a CNBC request for comment. As part of the EU’s plans to reach climate neutrality by 2050, the 27-nation bloc has mandated a 55% reduction in carbon emissions from new cars by 2030, compared to 2021 levels. The EU has also set a target for all new cars sold from 2035 to have zero carbon emissions, effectively phasing out the sale of new petrol or diesel cars. It has since reaffirmed this target, despite intense political and lobbying pressure to water down its approach. ‘Globalization is in retreat’ Rella Suskin, equity analyst at Morningstar, said the Mercedes CEO was not alone in coming out with some “big statements” about the scale of the challenges facing the industry. “They are not directly speaking to government or the EU Commission but in my view, it is kind of hinting at greater support,” Suskin told CNBC by video call. “The one big thing is regulatory certainty. The EU regulations around reducing emissions has just been awful. In the way China has been so supportive of their auto industry, the EU regulations have done the exact opposite,” Suskin said. China, for its part, has supported its domestic automotive industry through robust industrial measures, such as subsidies, tax incentives and research and development funding, particularly for electric vehicles. The increasing dominance of the country’s EVs is sending shockwaves through many parts of the global car market. “Regulations have forced all the Europeans to go an invest billions and billions in new manufacturing processes, build capacity in electric vehicles, but then they take away incentives so that you have less demand. So, you’re sitting with this huge capex bill, and you don’t have the revenue coming through to support that,” Suskin said. Read more These charts show just how hard Trump’s tariffs are hitting Europe’s auto giants Car giants endured a torrid time of it this year — and few expect 2025 to be much better Automakers face some painful choices in the race to avoid hefty emissions fines Henner Lehne, vice president of competitive intelligence, market analysis, forecasting at S & P Global Mobility, said the Western automotive industry “is clearly undergoing a profound structural disruption,” with multiple systemic pressures converging at the same time. “This environment demands strategic recalibration across investment, product planning, and global operations,” Lehne told CNBC by email. OEMs have committed substantial capital to electrification and digital platforms, Lehne said, but market adoption has lagged, and volumes are falling short. It has led to a scenario in which expectations for return on investment are being strained, while internal combustion engine (ICE) platforms, which were previously slated for a phase-out, are being reconsidered . What’s more, robust competition from Chinese car manufacturers remains an ongoing concern for Western players, while the Trump administration’s tariff regime and broader protectionist trends are reshaping global trade dynamics. “Globalization is in retreat,” Lehne said. “What was once a unified global market is now fragmented, requiring localized production strategies, market-specific product portfolios, and revised margin models.” Innovation In response to the industry challenges, carmakers have typically pursued a value-over-volume strategy, prioritizing higher margin models over mass-market vehicles, according to Transport & Environment. The campaign group has previously said that the sales challenges facing Europe’s car market do not represent an industry-wide crisis, but rather a transitional phase as manufacturers adapt to a new market landscape. Western car giants have also sought to diversify their offerings by focusing on hybrid vehicles, as well as relocating production to lower-cost countries and pursuing strategic partnerships with Chinese firms. A spokesperson for the German Association of the Automotive Industry (VDA), which represents Volkswagen, Mercedes-Benz Group and BMW among hundreds of others, said that “without a doubt, these are challenging times for the automotive industry.” “Increasing geopolitical tensions, multiple crises, and the spread of protectionism are placing growing pressure on our globally positioned industry,” the VDA said. The VDA said Germany’s car industry would double down on innovation over the coming years, and will look to showcase its vision at the upcoming flagship IAA Mobility auto show. This means investing around 320 billion euros ($372.5 billion) in research and development between 2025 and 2029, with 220 billion euros allocated to capital investments.