Driving change
02 September 2025
The European automobile industry has been undergoing years of change, with EV mandates and global turmoil impacting the sector. Matt Chessum, director, Íø±¬³Ô¹Ï Finance, ETF and Benchmarking Services at S&P Global Market Intelligence, looks at the short selling reaction
Image: Shutterstock
The European automobile industry is experiencing various challenges. Shares out on loan — a proxy for short positioning — within the autos and components sector have increased by 35 per cent since the beginning of this year, according to S&P Global Market Intelligence data.
This increase peaked in April 2025, coinciding with the introduction of new US trade tariff policies. This trend may reflect investor sentiment regarding the industry's outlook, which is influenced by structural, economic, regulatory, and geopolitical factors.
Structural transformation and electrification pressures
The EU has mandated that all new vehicles must be zero-emission by 2035. This initiative requires European automakers to transition to electric vehicles (EVs). Some manufacturers are encountering challenges in producing EVs that are both affordable and profitable. High battery costs and limitations in battery technology have impacted progress, with only one of the world's top 15 battery electric vehicles produced in the EU.
Chinese car imports to the EU have increased nearly 40 per cent from 2022 to 2023. This growth in imports has intensified competition for European automakers.
Weak demand and market volatility
Consumer demand for EV technology has not aligned with investments made in the sector. EU battery-electric car registrations decreased by 43.9 per cent in August 2024. This decline has resulted in factory closures and job reductions at several major automakers, including Audi, Volkswagen, Porsche, and BMW. The increase in shares out on loan indicates a shift in investor confidence regarding the industry's recovery.
Regulatory shifts and compliance burdens
The regulatory environment in the EU is changing, with initiatives such as the Automotive Action Plan and Clean Industrial Deal aimed at supporting the transition to electric mobility. However, these regulations introduce additional compliance requirements. The Euro 7 standards, set to take effect in 2026, will impose stricter requirements on emissions, battery durability, and cybersecurity, which may increase operational complexities for automakers.
Additionally, the EU Battery Regulation introduces new recycling targets and supply chain obligations that manufacturers must meet. These regulations are intended to promote sustainability but may also increase compliance costs and complicate the manufacturing process.
Geopolitical tensions and trade disruptions
Geopolitical tensions have affected the European automobile industry. The ongoing conflict between Russia and Ukraine, along with the Israel-Hamas conflict, has created uncertainty that disrupts supply chains and contributes to inflation. Potential US tariffs of up to 25 per cent on EU auto imports could impact approximately €38.5 billion in exports.
In response to China's subsidised EV exports, the EU has proposed countervailing duties ranging from 17.4 to 36.3 per cent to protect domestic manufacturers. Such measures may lead to trade tensions.
Economic headwinds
The economic environment is a significant factor for the European automobile industry. High energy costs, persistent inflation, and slow economic growth have raised production costs, which are estimated to be around 30 per cent higher in the EU compared to China. These economic conditions have affected the competitiveness of European manufacturers and have led to discussions about automation, cost reduction, and industrial policy reform.
As production costs rise, automakers are reassessing their strategies. The need for innovation and efficiency is present, although challenges remain.
Financial and investment strain
The financial landscape for the European automobile industry has become strained. Geopolitical uncertainty has contributed to a reduction in investment, as companies adopt a cautious approach to financial decision-making. This caution is evident in increased precautionary savings and delayed corporate decisions, which may affect growth and innovation.
Volatility in financial markets has impacted asset prices and tightened credit conditions for automakers. As access to capital becomes more limited, manufacturers may encounter difficulties in funding necessary investments in technology and infrastructure.
The biggest European automobile shorts
Certain companies have become targets for short sellers. Major European automotive companies such as Nokian Tyres, Volvo Car, and Aston Martin have specific challenges, as indicated by the percentage of shares outstanding on loan — Nokian at 18.22 per cent, Volvo at 4.5 per cent, and Aston Martin at 8.7 per cent. The percentage of shares outstanding on loan for Nokian and Aston Martin has increased since the beginning of the year.
Nokian Renkaat Oyj:Â The company's position as a target for short sellers is most likely linked to its withdrawal from Russia following the invasion of Ukraine, resulting in a loss of 80 per cent of its passenger car tire production capacity. Nokian is constructing a new factory in Romania, but uncertainties remain about its completion timeline. The percentage of shares outstanding on loan is currently at 18.22 per cent.
Volvo Car:Â It is possible that short interest in Volvo is associated with its electrification strategy, and the company faces competition from Chinese EV brands. The commitment to becoming fully electric by 2030 is capital intensive. Currently, 4.5 per cent of Volvo's shares are outstanding on loan. Additionally, its relationship with Chinese parent company Geely raises questions regarding governance and market strategy.
Aston Martin Lagonda Global Holdings:Â The company's financial performance and production volumes are probable factors in its short interest. Currently, 8.7 per cent of Aston Martin's shares are outstanding on loan, with this percentage increasing since the beginning of the year. Partnerships with larger manufacturers like Mercedes provide some components but may also limit Aston Martin's design capabilities.
These metrics indicate shifts in investor sentiment regarding these automakers, particularly for Nokian and Aston Martin.
Figure 1
Challenges and opportunities for the future
The European automobile industry is facing various challenges. The increase in short positioning, reflected in the 35 per cent increase in shares out on loan, may indicate investor sentiment regarding the industry's outlook. Challenges include structural pressures related to electrification, weak consumer demand, regulatory burdens, geopolitical tensions, economic factors, and financial strains.
Stakeholders in the industry are observing these challenges as the sector navigates various issues. The industry is addressing these multifaceted factors, and there are instances of innovation and growth occurring.
This increase peaked in April 2025, coinciding with the introduction of new US trade tariff policies. This trend may reflect investor sentiment regarding the industry's outlook, which is influenced by structural, economic, regulatory, and geopolitical factors.
Structural transformation and electrification pressures
The EU has mandated that all new vehicles must be zero-emission by 2035. This initiative requires European automakers to transition to electric vehicles (EVs). Some manufacturers are encountering challenges in producing EVs that are both affordable and profitable. High battery costs and limitations in battery technology have impacted progress, with only one of the world's top 15 battery electric vehicles produced in the EU.
Chinese car imports to the EU have increased nearly 40 per cent from 2022 to 2023. This growth in imports has intensified competition for European automakers.
Weak demand and market volatility
Consumer demand for EV technology has not aligned with investments made in the sector. EU battery-electric car registrations decreased by 43.9 per cent in August 2024. This decline has resulted in factory closures and job reductions at several major automakers, including Audi, Volkswagen, Porsche, and BMW. The increase in shares out on loan indicates a shift in investor confidence regarding the industry's recovery.
Regulatory shifts and compliance burdens
The regulatory environment in the EU is changing, with initiatives such as the Automotive Action Plan and Clean Industrial Deal aimed at supporting the transition to electric mobility. However, these regulations introduce additional compliance requirements. The Euro 7 standards, set to take effect in 2026, will impose stricter requirements on emissions, battery durability, and cybersecurity, which may increase operational complexities for automakers.
Additionally, the EU Battery Regulation introduces new recycling targets and supply chain obligations that manufacturers must meet. These regulations are intended to promote sustainability but may also increase compliance costs and complicate the manufacturing process.
Geopolitical tensions and trade disruptions
Geopolitical tensions have affected the European automobile industry. The ongoing conflict between Russia and Ukraine, along with the Israel-Hamas conflict, has created uncertainty that disrupts supply chains and contributes to inflation. Potential US tariffs of up to 25 per cent on EU auto imports could impact approximately €38.5 billion in exports.
In response to China's subsidised EV exports, the EU has proposed countervailing duties ranging from 17.4 to 36.3 per cent to protect domestic manufacturers. Such measures may lead to trade tensions.
Economic headwinds
The economic environment is a significant factor for the European automobile industry. High energy costs, persistent inflation, and slow economic growth have raised production costs, which are estimated to be around 30 per cent higher in the EU compared to China. These economic conditions have affected the competitiveness of European manufacturers and have led to discussions about automation, cost reduction, and industrial policy reform.
As production costs rise, automakers are reassessing their strategies. The need for innovation and efficiency is present, although challenges remain.
Financial and investment strain
The financial landscape for the European automobile industry has become strained. Geopolitical uncertainty has contributed to a reduction in investment, as companies adopt a cautious approach to financial decision-making. This caution is evident in increased precautionary savings and delayed corporate decisions, which may affect growth and innovation.
Volatility in financial markets has impacted asset prices and tightened credit conditions for automakers. As access to capital becomes more limited, manufacturers may encounter difficulties in funding necessary investments in technology and infrastructure.
The biggest European automobile shorts
Certain companies have become targets for short sellers. Major European automotive companies such as Nokian Tyres, Volvo Car, and Aston Martin have specific challenges, as indicated by the percentage of shares outstanding on loan — Nokian at 18.22 per cent, Volvo at 4.5 per cent, and Aston Martin at 8.7 per cent. The percentage of shares outstanding on loan for Nokian and Aston Martin has increased since the beginning of the year.
Nokian Renkaat Oyj:Â The company's position as a target for short sellers is most likely linked to its withdrawal from Russia following the invasion of Ukraine, resulting in a loss of 80 per cent of its passenger car tire production capacity. Nokian is constructing a new factory in Romania, but uncertainties remain about its completion timeline. The percentage of shares outstanding on loan is currently at 18.22 per cent.
Volvo Car:Â It is possible that short interest in Volvo is associated with its electrification strategy, and the company faces competition from Chinese EV brands. The commitment to becoming fully electric by 2030 is capital intensive. Currently, 4.5 per cent of Volvo's shares are outstanding on loan. Additionally, its relationship with Chinese parent company Geely raises questions regarding governance and market strategy.
Aston Martin Lagonda Global Holdings:Â The company's financial performance and production volumes are probable factors in its short interest. Currently, 8.7 per cent of Aston Martin's shares are outstanding on loan, with this percentage increasing since the beginning of the year. Partnerships with larger manufacturers like Mercedes provide some components but may also limit Aston Martin's design capabilities.
These metrics indicate shifts in investor sentiment regarding these automakers, particularly for Nokian and Aston Martin.
Figure 1
Challenges and opportunities for the future
The European automobile industry is facing various challenges. The increase in short positioning, reflected in the 35 per cent increase in shares out on loan, may indicate investor sentiment regarding the industry's outlook. Challenges include structural pressures related to electrification, weak consumer demand, regulatory burdens, geopolitical tensions, economic factors, and financial strains.
Stakeholders in the industry are observing these challenges as the sector navigates various issues. The industry is addressing these multifaceted factors, and there are instances of innovation and growth occurring.
NO FEE, NO RISK
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Íø±¬³Ô¹Ï Finance Times
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Íø±¬³Ô¹Ï Finance Times
