While many of the articles written for GoodCarBadCar are centralized on the North American market, the truth is that the global automotive industry is highly interconnected. There are vehicles from Japan, South Korea, the UK, and the EU playing significant roles in markets worldwide, sometimes with models and entire brands that are not available in North America.
Those models, trims, and markets all have their own triumphs and challenges, with many of those having ripple effects into the local North American market in ways that may not be readily apparent. Today, we will investigate a few key factors that originate in these foreign markets that quite often have global effects.
Regulatory Issues & Emissions Standards: Euro 6 & Euro 7
While there are certain emissions thresholds that cars need to meet to be allowed on American roads, the truth is that these thresholds are incredibly lax. Not even California’s CARB emissions regulations come close to the European Union’s Euro standards.
Right now, the minimum standards that are in place for passenger cars are Euro 4, for light commercial vehicles over 2,500 kg Euro 5, and for all commercial diesel vehicles Euro 6. However, to understand what this all means, we need to first of all talk about what these Euro standards even do.
The Euro standards are maximum allowable emissions of several results of internal combustion in both petrol and diesel engines. These emissions are: nitrogen oxides (NOx), total hydrocarbons (THC), non-methane hydrocarbons (NMHC), carbon monoxide (CO) and traceable particulate matter (PM). There is also a subset of these standards for powersports vehicles including motorcycles and small leisure seacraft such as jet skis, which uses roman numerals, and are currently at Euro V+ (five plus) which was ratified this year.
Euro 4, which came into effect in January 2006, has as its most important limits: CO emissions of 1.0 g/KM for petrol and 0.5 g/KM for diesel; NOx emissions of 0.08 g/KM petrol and 0.25 g/KM diesel; and traceable particulate matter of 0.005 g/KM petrol and 0.025 g/KM diesel.
However, due to the constant rollover every 4 to 6 years of Euro standards, with Euro 7 having being reviewed and set to be ratified in September 2024, that means that cars built after that date will need to meet at minimum Euro 5 standards.
So how does this affect the market overall?
Ever Tightening Regulations
The Euro standards are set up so that all manufacturers based in the EU are investing in new technologies, developing new ways to reduce emissions, and to have the EU as a whole reduce pollution contributions in the face of climate change. It is because of these standards that many of the first hybrid vehicles from the EU started to emerge, and in a somewhat indirect way, they also influenced the rise of EVs.
They continue to influence decisions that many North Americans don’t hear of, such as the VW Group recently announcing that they have earmarked $80 billion for EV development and manufacturing. That’s just the money put aside for 2025 as well, with much more allocated over the next five years.
This is to meet the goal of the parent company and all subsidiaries (Audi, Porsche, Skoda, Lamborghini, SEAT, Bugatti Rimac, et al) having 80% of their lineup as fully electrified, or “mostly electric” with performance hybrids for the supercar and hypercar operations by 2030, when Euro 7 is set to become the overall standard across all vehicles.
The Euro 7 standard aims aims to reduce CO emissions to 0.5 g/KM, NOx emissions to as low as 0.03 g/KM, and lower traceable particulate matter emissions to less than 0001 g/KM. This is an incredibly stringent target to meet, and has finally put an actual identifiable target to what many manufacturers for the past five years have been unofficially calling “The Green Promise.” This is also why, at least in the Asian markets, a resurgence in interest into hydrogen fuel cell technology from Hyundai and Toyota has suddenly surfaced.
Market Trends In Foreign Markets
European Market Dynamics
While it may not have seemed all that important “Across the pond” here in North America, when the UK seceded from the EU in 2020 (aka “Brexit”), trade tensions between the UK and the EU immediately arose. Those tensions were mostly given form in terms of tariffs and extra value added taxes for imports to, and exports from, both parties.
While Brexit was just one cog in an incredibly complex machine, the knock-on effect has been that those tariffs and taxes have also appeared on vehicles coming from the USA and from Asia. This has driven many consumers to favor “domestically produced” vehicles that are from nations within the EU.
To avoid potential tariffs and support local economies, this trend has become so prevalent that in places such as Germany, Austria, and Switzerland (all German speaking nations), brands such as BMW, VW, and Mercedes-Benz have seen a market increase in sales. It has even given rise to a saying: “Deutsch kauft Deutsch,” or “Germans buying German.”
Similarly, French consumers are leaning towards French brands such as Renault and Peugeot. This shift was influenced in a large part by the French government’s incentives for purchasing locally manufactured vehicles, including large tax breaks, rebates, and subsidies to support and improve the local economy. As a result, in 2023, Renault’s market share in France increased by 5%, and it is set to increase another 6% to 8% in 2024 according to all projections.
A Case Study: Skoda’s Expansion in Northern Europe
One of the brands mentioned in the introduction that we do not get in North America, Skoda is a relatively small Czech automaker under the VW Group. They are still a major manufacturer, however, and have been making significant inroads in Northern and Baltic Europe. Often considered as one of the EU’s more economically stable areas, the truth is that Northern Europe also carries one of the highest levels of household debt not just for Europe, but globally.
Because of this, many consumers in the area are looking for high-quality, affordable vehicles that can handle the harsh Winters the area faces without compromising for Summer comfort either. Because of this trend, as well as favorable interest rates and some big sales pushes, in 2023, Skoda’s sales in Northern Europe rose by 15%.
This expansion is supported by Skoda’s investment in local production facilities and partnerships with regional suppliers as well. By “keeping it local,” they can ensuring competitive prices for the region, as well as having a very short delivery chain, often with cars being delivered within 72 hours of leaving the factory.
Foreign Cars in the US Market: How Their Local Challenges Mean Better Cars For North America
Japanese and South Korean Vehicles
Japanese and South Korean automakers have made gigantic progress into the US market in the 21st century, with brands like Toyota, Honda, Hyundai, and Kia consistently ranking among the top-selling vehicles year-over-year. In fact, in 2023, Toyota and Honda together accounted for approximately 30% of the US automotive market share alone, with the Korean brands taking up another 10%.
This heavy favoritism towards imports in North America comes from both nations introducing new regulations in terms of quality and sustainability, while also feeling the effect of the Euro standards discussed earlier. This has led to both Hyundai and Toyota leading the charge in hybridization, with immensely efficient vehicles. This familiarity of a combustion engine paired with an electric motor has been so significant, and the technology advancing so rapidly, that hybrids are now the number one selling type of vehicle, period, in North America.
This has also been helped along with the implementation of the Corporate Average Fuel Economy (CAFE) standard recently introduced by the US Federal government. This new standard requires automakers to achieve an average fuel economy of 49 MPG for passenger cars by the end of 2026, which has made both Japanese and Korean manufacturers double down on their investments made for the Euro 6 standards. The result is that we are now seeing some of the best hybrids that have ever been designed, easily beating that efficiency target.
European Automakers in the US
European brands like BMW, Mercedes-Benz, Volkswagen, and Audi also have a strong foothold in the US market, they just haven’t dug their claws in quite as hard as the Asian brands have. Much more preferred among the luxury and performance demographic, the Europeans in 2023 took hold of roughly 8% of the US market share.
Even though European manufacturers are already complying with the Euro standards, one of the biggest challenges they face is the potential of having tariffs imposed on their vehicles. This, in turn, would raise prices and would likely cause sales to drop as a result. In mitigation of this risk, many EU brands have invested in production facilities in the US, Canada, and Mexico.
As a prime example of this, BMW’s Spartanburg, South Carolina plant is not only the company’s biggest factory in North America, its their biggest factory globally. So important is the North American market to the Bavarians that that one plant produces over 400,000 vehicles annually across their BMW, BMW Motorrad, and Mini brands. The only brand not produced at Spartanburg is Rolls-Royce.
The Future Outlook
The global automotive industry, in the simplest of terms, is at a crossroads. Tightening emissions regulations, potential tariffs, challenges and opportunities around every corner, it is becoming like the “Wild West” 1970s when the oil crisis hit and all of a sudden, highly efficient and reliable cars became the norm.
This is far from a bad thing. As the saying always goes: “Competition always benefits the consumer.” This competition for market shares around the world has led to some pretty amazing vehicles, as well as some companies even putting aside their differences to collaborate on vehicles.
One such alliance and partnership came when Subaru and Toyota put their heads together in an attempt to capture some of the affordable sports car glory of the early 1990s. The result of that was what was called at the time the Subaru BRZ, Toyota GT 86, and/or the Scion FR-S. Subaru developed the boxer four engine, while Toyota brought in their A-team to develop the handling and driving dynamics of the car.
The result was, and still is, one of the few cars that successfully did capture the feel of those 1990s cars. Reliable as a steam locomotive, razor sharp on handling, easy to drive in both casual and sporting styles, and best of all it’s priced very competitively.
We bring up the success of the GR86/BRZ because Toyota and Subaru have another project in the works, this time for the EVs that both companies will be making in the next five years. One of the biggest parts of that partnership is that they are working hand in hand to develop not only highly efficient EVs, but also spreading the workload of developing their own autonomous driving system across both companies as well.
In a similar vein in South Korea, Hyundai/KIA and Ireland-based tech company Aptiv have partnered to create a joint venture focused on autonomous vehicle development for the emerging stock of EVs from the area. As both Hyundai and subsidiary KIA are aiming to have 80% or greater of their models be fully electric by 2035, this is a major investment in the future of both companies.
Overall, these collaborations enable automakers to pool resources, share expertise, and develop tight partnerships to the benefit of everyone. In the face of regulations and emissions standards, they also help companies comply with the evolving demands of global consumers and governments.
Conclusion
Foreign automakers from Japan, South Korea, the UK, and the EU all have their role to play in the global automotive industry, with just as much at stake as US automakers do. Everyone is facing numerous challenges, including stringent emissions regulations, potential tariffs, evolving consumer preferences, new and evolving technologies, and so much more. However, through strategic investments, partnerships, and adaptations, the global markets, foreign and domestic, are looking to be quite stable for the time being.
We think that as the industry transitions towards a more sustainable and connected future, foreign automakers are well-positioned to not only participate, but in many aspects lead the way. The coming years seeing the EV resurgence, autonomous driving, and other things that today sound like science fiction, the truth of it all is that the future looks quite exciting, and we are looking forward to see what comes over the hill next.
