Little Crisis
November 4, 2025
Jay RameyThe Nexperia chip crisis highlights Europe's fragile component supply chain, with few changes made since the pandemic.
Europe’s October Surprises
Europe’s auto industry is currently dealing with two early-stage crises that could dramatically alter the global automotive industry’s landscape in a short span of time.
So far this year, the continent’s automakers already had to contend with the headache of the Trump tariffs, which were enough to completely upend automakers’ financial forecasts early in the year through the rest of 2025. But something far different is unfolding at the moment that could see the western European automakers enter a darker period not seen in decades. And it’s moving quickly.
The first and more immediate crisis involves relatively mundane but still crucial chips produced by Holland-based chipmaker Nexperia. This supplier produces chips in Europe before they are sent to China for additional work before being reexported back to Europe. It was recently seized by the Dutch government over concerns of technology transfers to China, which kicked off a tug of war between its European and Chinese units. The latter halted reexports of ready chips to a number of markets, which immediately threatened vehicle production stoppages in Europe. Without a resolution, stoppages are expected to begin in the coming days.
“We suddenly find ourselves in this alarming situation,” European Automobile Manufacturers’ Association (ACEA) Director General Sigrid de Vries said days ago, echoing the shock of the current moment. “We really need quick and pragmatic solutions from all countries involved.”
The Nexperia chip crunch has already impacted factories closer to home, with Honda reportedly slashing production at its plant in Ontario this week, while putting serious doubts over Q4 production for major European carmakers including Volkswagen, Nissan, Volvo, and Mercedes-Benz.
But even before production halts materialize, the Nexperia crisis has already hiked the costs of these components for automakers, creating the conditions for shortages as automakers have scrambled to look for alternatives around the globe.
“The chips manufactured by the affected manufacturers are important parts used in electronic control units, etc., and we recognise that this incident will have a serious impact on the global production of our member companies,” the Japan Automobile Manufacturers Association (JAMA) said in a statement.
The second crisis concerns China’s upcoming export controls over rare earth elements, as well as materials used in lithium-ion batteries. As China controls the vast majority of the world’s refining capacity of these metals and has moved to restrict exports, automakers have scrambled to obtain export licenses ahead of a November 8 deadline that could reshape the world’s automotive industry virtually overnight.
While the Nexperia crisis is now showing faint signs of being managed through alternate chip suppliers, the rare earths rush is seen by some analysts as the starting point of a longer-term, industry-wide crisis that is unlikely to be solved overnight.
Both crises involve China, and both are symptomatic of a greater tug of war over supply chains and the scramble for high-tech components and raw materials alike, with the latter likely serving as a preview of what we could see unfold in the coming years.
What is increasingly evident is that Europe’s automakers are still reliant on a small and very finite number of suppliers in both cases, and have struggled to find alternative sources of relatively simple semiconductors used in climate controls and other basic systems like windshield wipers, despite the shortages observed during the pandemic.
“Automakers have taken steps over the last years to diversify supply chains but risk cannot be mitigated down to zero,” ACEA’s de Vries added. “This is a cross-industry issue affecting a large number of suppliers and virtually all of our members.”
To these two crises for Europe’s auto industry we can add slower-moving trends that include an EV sales slump in the US that gained momentum long before the demise of the $7500 tax credit, the likely-permanent disappearance of cheap Russian natural gas supplies in Europe, and the steady gains in market share by Chinese brands that have landed in Europe over the past few years.
Solutions to these three more gradual dilemmas are nowhere in sight, with European automakers largely reacting to the issues of the day while executing product plans set into motion earlier in the decade. These product plans, especially as they concern EV lineups, have already seen heavy modifications, while others are on the cusp of having EV cuts forced upon them by lackluster sales.
What the current moment shows us is that in the post-pandemic era, Europe’s auto industry is capable of handling one or two relatively confined, short-term supply chain breakdowns limited to specific components, but probably not five or six concurrent crises of much greater duration and scope.
In another month we could look back at October 2025 as the starting point of a wider, industry-wide scramble for materials that began early this year with threats of tariffs, and quickly snowballed into a series of crises that have put a chokehold on Europe’s auto industry.
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