The automotive industry is no stranger to turbulence, but the combination of pressures bearing down on it right now is something altogether different.

From the collapse of long-standing supply chains to the brutal economics of the electric vehicle (EV) transition, insolvency practitioners and restructuring advisers are finding themselves increasingly busy, and increasingly unwelcome in boardrooms that, until recently, had little need for them. 

The numbers tell a troubling story

The scale of distress is hard to ignore, and the latest data does nothing to soften the outlook. According to AlixPartners' 23rd annual Global Automotive Outlook, published in June 2026, demand is falling across the industry's major markets – simultaneously. US new-vehicle sales are forecast to fall 2.5% to 15.8m units in 2026, while China, currently the industry's growth engine and profit backstop for non-Chinese original equipment manufacturers (OEMs), is projected to see sales fall 10% to 24.6m vehicles. 

For European manufacturers, the competitive threat from Chinese brands is no longer a distant concern: Chinese-brand vehicles are forecast to capture a 17% market share in Europe by 2031. European sales have jumped 25% this year alone to 2.3m units, with particularly sharp gains in Germany and France. For businesses already navigating compressed margins and supply chain pressure, it’s a cash flow crisis in the making. 

The EV transition: Promise and peril

The shift to electric vehicles was supposed to be a managed evolution. It’s turned out to be anything but. Legacy manufacturers are facing a brutal margin squeeze: EV production remains significantly more expensive than internal combustion equivalents, yet consumer demand has softened considerably as government subsidies have been withdrawn or scaled back across key markets. In the UK, the Zero Emission Vehicle mandate continues to impose increasingly demanding targets on manufacturers, creating a compliance cliff edge for those who can’t move quickly enough. 

For suppliers, the disruption is even more acute. Traditional tier-one and tier-two suppliers, many of which are deeply embedded in combustion engine technology are watching their order books shrink in real time. Restructuring advisers, alongside Browne Jacobson, have noted a significant uptick in instructions from components manufacturers facing covenant breaches as EBITDA margins compress and refinancing windows narrow. 

Geopolitical headwinds

The imposition of EU tariffs on Chinese-manufactured EVs, introduced in 2024, has added a further layer of complexity. Rather than simply protecting European manufacturers, the tariffs have accelerated Chinese OEMs' efforts to establish European production footholds, intensifying competitive pressure at precisely the wrong moment. Meanwhile, the re-introduction of US tariff measures under the Trump administration in 2025 has disrupted transatlantic supply chains, forcing a painful reassessment of sourcing strategies across the sector. 

What this means for the sector

The restructuring toolkit is being put to work across the sector. Pre-pack administrations, accelerated M&A processes, and cross-border schemes of arrangement are all featuring heavily in adviser conversations. Directors and lenders alike are grappling with the tension between preserving going-concern value, which in automotive supply chains can evaporate overnight once a key contract is lost, and the need to take decisive action before cash positions become terminal. 

The automotive industry has reinvented itself before. Whether it can do so again, without leaving a trail of insolvencies in its wake, remains the defining question. 

If you are navigating insolvency risk or challenges in the automotive sector, contact our specialist restructuring and insolvency team today to find out how we can help.