![\"volvo](\"https:\/\/www.globalvillagespace.com\/tech\/wp-content\/uploads\/2026\/06\/fragmentation-reshapes-the-global-car-industry-as-regional-divergence-undermines-scale-and-profitability.jpg\" "\\"volvo")
<\/a><\/p>\n\n Volvo XC70 was developed for the Chinese market using a Geely platform<\/p><\/blockquote>\n
Car makers have for a long time developed models globally, but that is fast changing<\/p>\n
\nGlobal scale has always been the secret to success in\u00a0the global car industry but that is under threat as regions diverge in ways we\u2019ve not seen for decades.\u00a0<\/p>\n
The increasing gulf between regulation, buyer demands and state protectionism from market to market is forcing car makers to take a much more localised approach, and that\u2019s badly hurting their ability to use scale to sell cars profitability.<\/p>\n
\u201cOur industry is fundamentally more regional and fragmented,\u201d Stellantis CEO Antonio Filosa told investors at the company\u2019s capital markets day in May. He cited the firm’s two biggest markets, Europe and the US. \u201cEurope is moving faster into electrification, while the US\u00a0is easing the CO2 trajectory and redefining trade conditions,\u201d he said.<\/p>\n
The dream situation for car makers would be to sell their model line-up across global markets united by similar legislation and buyer preferences. Back in the real world, of course, that has never really happened. Crash legislation in the US, for example, was always out of kilter with Europe’s laws, while richer markets require more content than those with less buyer spending power.\u00a0<\/p>\n
But on the whole, the major markets could still be reached with common global platforms, an idea taken to its zenith by former Ford CEO Alan Mulally, who took over the top job in 2009. The former Boeing exec saw the world buying similar 777s \u2013 so why couldn\u2019t the same happen with cars?<\/p>\n
However, the mega-trends of electrification, the rise of the Chinese and the retreat of the US to a pre-electric, pre-globalisation era is dramatically altering the calculations for global car companies.<\/p>\n
Honda is among those revisiting strategies that have been in place for decades. \u201cIt has been our standard practice to develop and sell all products based on global standard performance specifications regardless of target countries and regions,\u201d CEO Toshihiro Mibe said on the company\u2019s earnings call 14 May. However, the global car market started to fragment, forcing a change of strategy. \u201cOur global standard approach may have been somewhat excessive,\u201d admitted Mibe, in reference partly to a failed attempt to crack the difficult Indian market.<\/p>\n
The mantra for car makers now is to think regional and develop models for local tastes. However, this\u00a0requires a fundamental rethink. \u201cFirst off, it\u2019s incredibly expensive just to develop vehicles, as everybody knows. But then, if you have to start regionalising them to the point where you cannot make a global platform, that gets even more expensive,\u201d said Rebecca Lindland, global head of automotive advisory at consultants HarrisX, on a recent webinar.<\/p>\n
Even the premium brands are being forced to think more local. European premium brands such as BMW and Mercedes-Benz in the past could largely rise above global barriers because regional differences mostly evaporated higher up the price bracket. Any remaining differences requiring re-engineering were easily absorbed by the higher profit margins, but not any more.<\/p>\n
A good example is in China, where tax changes and phenomenal technological leaps from local brands have this year almost entirely killed off the plug-in hybrid market for European premium marques. Instead, they are having lean on local partners to supply the technology missing from their armoury.\u00a0<\/p>\n
For example, Volvo had to reboot its PHEV strategy in China using a platform from owner Geely, which allowed it to launch the China-only XC70 SUV<\/a> with its 124-mile electric range, matching that of local rivals such as Li Auto.\u00a0<\/p>\n
\u201cSpecial products for China would be almost impossible for us to develop by ourselves,\u201d Volvo CEO H\u00e5kan Samuelsson told the Financial Times Future of the Car conference in May. \u201cNow we have a more regionalised world, we need stronger regional partners.\u201d BMW calls this approach \u2018think global, but act local\u2019.<\/p>\n
Global player Porsche knew what to do when emissions regulations in its three biggest markets \u2013 the US, Europe and China \u2013 were all heading in the direction of electric. When the US under president Donald Trump slammed on the brakes to return to combustion and Europe started wobbling, Porsche was left with no option but to shred much of its future EV plans in reaction, costing it \u20ac2.4 billion (\u00a32.1bn).\u00a0<\/p>\n
In total, car makers including Stellantis, Honda, GM and Ford have booked write-downs totalling more than $70bn (\u00a352bn)\u00a0this year, largely due to the US’s reversals on emissions requirements, according to research from Reuters<\/a>.<\/p>\n
Meanwhile, the increase in tariffs to import cars into the US to 10% for UK-built models and 15% from the European Union has made cars less competitive in what is now the biggest market for many European premium brands.\u00a0<\/p>\n
For those already localised with plants there \u2013 BMW, Mercedes and Volvo \u2013 that\u2019s not too much of a problem. For JLR, though, it only widens the gulf with its rivals \u2013 hence the news that it wants to partner with Stellantis specifically within the US. This is likely to include local production in Stellantis plants, almost\u00a0certainly with a new or heavily reworked model built to the new US standards, a costly process.<\/p>\n
Meanwhile, on the other side of the coin, Europe\u2019s dash to electric and its preference for smaller cars has forced Ford to turn to regional help with its EVs, first with Volkswagen for the Explorer and starting in 2028 with Renault, which will build two small EVs for the US giant.<\/p>\n
The rise of the Chinese and the astonishing pace at which they\u2019ve exported their low-cost, often electrified cars has forced markets with car industries of their own to abandon globalist principles and raise barriers, including tariffs. The US has shut the Chinese out entirely, while others have made it costlier for them to import electric cars, including the European Union, Brazil and Mexico.<\/p>\n
The EU has gone further with the proposed \u2018Made in Europe\u2019 Industrial Accelerator Act\u00a0that ring-fences certain benefits on cars made within its borders. This gives local brands breathing space from the Chinese onslaught but has obvious knock-off effects, including potentially excluding cars made in the UK.\u00a0<\/p>\n