While the global semiconductor crisis may seem like a thing of the past, its effects on the car market are still being felt. In 2021-2022, disruptions in the supply chain resulted in significantly fewer new cars being produced worldwide.
“The fluctuations in the new car market directly impact the used car segment. Currently, there's a noticeable shortage of vehicles produced in 2021-2022, and this issue will persist. The 3- to 4-year-old car category will simply lack options,” says Matas Buzelis, a car market expert at automotive data company CarVertical.
Lower interest rates will boost car sales
Both new and used car markets have been hit hard by inflation and rising interest rates. Many drivers have opted for cheaper cars or postponed their purchases for better times.
However, with interest rates stabilizing in 2024, the car market is expected to pick up in 2025. As rates fall, cars become more affordable, significantly influencing buyer behavior. Drivers who have been tightening their belts in recent years are likely to loosen their wallets this year.
The EV market will grow slowly
An underdeveloped public charging infrastructure and high costs are slowing down the growth of the EV market. While some drivers may want to buy an electric car, the higher prices compared to similar diesel and petrol models are discouraging. In most countries, the lack of charging stations means EVs are mainly chosen by those who can charge them at home.
“The demand for used EVs could also be significantly affected by the growing popularity of cheap Chinese electric cars in Europe. However, it's unclear if drivers will invest in these models, given the uncertainty around their reliability and after-sales service. Many buyers may stick with well-established brands,” explains Buzelis.
Diesel cars won't get cheaper in Eastern Europe
Diesel cars have long dominated the Western European market, but their reign is slowly ending. Buyers are increasingly turning to hybrids and petrol cars, while stricter emissions regulations are pushing diesel vehicles out of the market. The decline in new diesel car production in Western Europe is affecting the supply of used diesels in Eastern Europe.
Due to this limited supply, 1 to 5-year-old diesel cars will likely remain in high demand in Eastern Europe, slowing their depreciation significantly. This also means that buyers will face higher prices than they have expected.
A year of tests and tribulations for European car manufacturers
In 2025, the EU reduced the allowed CO₂ emissions level for cars from 116 grams per kilometer to 94 grams. If manufacturers fail to comply, they will face huge fines for each vehicle sold.
“As the EU tightens emissions regulations, major manufacturers are struggling to survive. Buyers are reluctant to switch to EVs, and the rising popularity of Chinese car brands poses another threat,” says Buzelis.
Low EV sales and consumer distrust create challenges for the whole car market. Austria, Bulgaria, Poland, Romania, Slovakia, the Czech Republic, and Italy have already expressed concerns over stricter emissions rules, asking the EU to delay them, arguing that fines will harm both manufacturers and national economies.
“European carmakers are forced to offer vehicles with weak demand. Besides, new cars are getting increasingly expensive, which naturally slows down sales and compromises their unsuccessful attempts to maintain the workforce. There should be a desperate development in the industry next year to steer away from the crisis that seems to be inevitable. Europe must act now or face the consequences of stringent regulations and just watch how competition from China casts a shadow on the industry in the continent,” suggests the used car market expert.
