A study by the Bank of Italy analyses the evolution of the sector from before Covid to today

A careful examination of key elements of the economic system can help us to gain a better understanding of the situation facing businesses. This exercise, which has significant practical implications as well as being theoretical, was carried out by the Bank of Italy in relation to the global automotive industry. It tracked the industry’s evolution from before the start of the Covid-19 pandemic to the present day.  This is particularly useful for understanding the distinctive features, resources, and capacity for response of a sector that is fundamental to a significant proportion of manufacturing activity in Italy, Europe, and beyond.

‘The global automotive sector after the pandemic: key questions and answers’ is the result of work carried out by Lorenzo Bencivelli, Alessio Ciarlone, Emidio Cocozza, Andrea Gerali, Andrea Perin and Carmine Porello, economists working in the Directorate for Economics, Statistics and Research at the Italian central bank. The study has one objective: to examine the main structural changes that have reshaped the global automotive industry. Organised as a series of questions and answers, the study therefore analyses key developments in terms of market dynamics, electrification, trade policy, supply chains and digital technology.

The post-pandemic recovery – as highlighted in the conclusions – has been surprisingly uneven: whilst vehicle sales in China have exceeded pre-pandemic levels, advanced economies – particularly within the European Union – have remained significantly below 2019 volumes, due to reduced spending power and political uncertainty. Economists at the Bank of Italy also highlight a crucial point: China’s rapid rise as the world’s largest producer and exporter of electric vehicles has been driven by a robust industrial policy, dominance of the battery supply chain and an estimated 30–45 per cent advantage in production costs over its Western competitors, which has radically altered the competitive landscape. Conversely, European, Japanese and Korean original equipment manufacturers are facing increasing pressure due to China’s push towards electrification, the fragmentation of trade and the transition to software-defined vehicles – areas in which Chinese companies are estimated to have a lead of two or three years. The document also examines the so-called ‘defensive measures’ adopted by the United States and the EU, including prohibitive tariffs and countervailing duties, which have proved only partially effective, with imports of passenger cars from China into the EU set to rise by almost 30 per cent in 2025.

The analysis carried out by the Bank’s economists therefore reaches a further conclusion: divergent industrial, trade and environmental policies are fragmenting global automotive markets into distinct regional ecosystems, driving up costs, complicating investment and accelerating a structural realignment of competitive advantage. This situation and this trend – as described by the Bank of Italy’s research on the global automotive industry – may also apply to other parts of the local and global economic system, which is increasingly influenced by the complexity surrounding it.

The global automotive sector after the pandemic: key questions and answers

Lorenzo Bencivelli, Alessio Ciarlone, Emidio Cocozza, Andrea Gerali, Andrea Perin and Carmine Porello

Banca d’Italia, Questioni di economia e finanza, Occasional papers, Number 1030 – July 2026