Economic slowdown and rising inflation put pressure on the European auto market in March 2022. As the escalation of the Russia-Ukraine situation disrupted the supply chain and exacerbated inflation of raw materials, automakers such as Volkswagen Group and BMW Group were forced to suspend production at some European factories, severely impacting the European auto market. As such, sales in the European auto market got off to a bad start last year.

However, Europe's auto market has maintained its eighth straight month of growth as challenges such as parts shortages ease and automakers build up a large backlog of orders.

While parts shortages are easing, automakers are facing challenges from rising inflation and a slowing economy. Those headwinds are expected to weigh on sales as the auto industry attempts to transition to electric vehicles. "Easing supply constraints have accelerated automakers' deliveries to customers," an auto market consultancy said in a report this month. However, some countries are experiencing recession, and downside risks remain, which will affect underlying demand. "

However, as the world's major auto market, Europe is also accelerating the electrification process. The European Union is actively promoting the implementation of emission reduction policies, and automakers and suppliers are also expanding investment in electric vehicles to change their business structure. Therefore, the sales data of the European electric vehicle market was very bright at the beginning of this year. The Volkswagen brand recently unveiled the ID.7, an all-electric sedan that will compete with competing models from Stellantis and Tesla. Ola Källenius, chief executive of luxury carmaker Mercedes-Benz, said the company plans to double its global sales of electric vehicles this year. "The share of EVs in the European market is likely to grow this year as more models arrive and supply chain issues ease," Bloomberg Intelligence analysts Gillian Davis and Michael Dean said in a note.