Portugal Overtakes Italy in EU Car Production for First Time as Autoeuropa Plant Hits 240,000 Vehicles
A Quiet Industrial Milestone Portugal produced 240,400 vehicles in 2025, overtaking Italy to become the ninth-largest car manufacturer in the European Union. The achievement, recorded in data from the European Automobile Manufacturers' Association...
A Quiet Industrial Milestone
Portugal produced 240,400 vehicles in 2025, overtaking Italy to become the ninth-largest car manufacturer in the European Union. The achievement, recorded in data from the European Automobile Manufacturers' Association (ACEA), marks the first time Portugal has outranked Italy in automotive output — a country with a storied car industry that includes Fiat, Alfa Romeo, Maserati, and Lamborghini.
The numbers tell a story of divergence. Portugal's output grew 1.9 per cent year on year, driven almost entirely by the Volkswagen Autoeuropa plant in Palmela, south of Lisbon. Italy's production, meanwhile, fell 22.9 per cent to its lowest level since 1954 — a collapse driven by Stellantis shifting production to lower-cost plants in Eastern Europe and North Africa.
The Autoeuropa Factor
Any discussion of Portuguese car production is, in practice, a discussion about a single factory. Volkswagen's Autoeuropa plant in Palmela accounts for approximately 90 per cent of all vehicles assembled in Portugal. The plant produced over 236,000 cars in 2024 — its best year since the pandemic — and followed that with the 240,400 figure in 2025, its second-best performance ever.
The plant currently produces the T-Roc SUV, one of Volkswagen's best-selling models in Europe. In 2025, Autoeuropa began transitioning to a new hybrid variant of the T-Roc, a move that is expected to sustain production volumes as the European market shifts toward electrified powertrains. At peak output, the Palmela line assembles roughly 1,000 vehicles per day.
Autoeuropa employs around 5,000 workers directly, with thousands more in the surrounding supply chain. It is the single largest private-sector exporter in Portugal, and its output represents a significant share of the country's manufacturing GDP. When the plant sneezes — as it did during the semiconductor shortage of 2021-2022 — Portugal's industrial statistics catch a cold.
Closing the Gap With Sweden
Portugal is not only looking back at Italy. It is also closing in on Sweden, which holds eighth place in the EU ranking. The gap between the two countries narrowed from 48,278 vehicles in 2024 to just 7,572 in 2025. If current trends hold, Portugal could overtake Sweden within the next year or two, entering the EU's top eight for the first time.
Sweden's position is anchored by Volvo's plants in Gothenburg and Torslanda, but Volvo — now majority-owned by China's Geely — has been diversifying its production footprint across Asia and Eastern Europe, which may further erode Sweden's output advantage.
Italy's Industrial Crisis
Italy's fall is the more dramatic half of this story. The country produced fewer cars in 2025 than at any point in seven decades. Stellantis — formed from the merger of Fiat Chrysler and PSA Group — has systematically moved production away from Italian plants, citing higher labour costs and energy prices. The Mirafiori plant in Turin, once the heart of European car manufacturing, now operates at a fraction of its capacity.
Italian unions and politicians have protested the shift, but the economics are stark: labour costs in Italy are roughly double those in Poland, Romania, or Morocco, where Stellantis has expanded. For Portugal, which competes on a different basis — Autoeuropa's advantage lies in workforce quality, logistics proximity to Western European markets, and an efficient port in Setúbal — Italy's decline is an opportunity only in the statistical sense. The two countries are not competing for the same production.
What It Means for Portugal
The ranking is symbolically significant but economically fragile. Portugal's car production is effectively a single-plant story, which means a change in Volkswagen's strategy — a model shift, a production reallocation, or a downturn in T-Roc demand — could reverse the gains quickly. The country has no second major assembly plant to provide a buffer.
That said, the Autoeuropa plant has been in Palmela since 1995 and has survived multiple model transitions, the 2008 financial crisis, and the pandemic. Volkswagen has continued to invest in the facility, and the transition to hybrid production suggests a commitment that extends at least through the current model cycle.
For Portugal's broader industrial ambitions, the milestone is a reminder that the country can compete in advanced manufacturing when the conditions are right: a skilled workforce, competitive logistics, stable labour relations, and a supportive investment environment. Whether that formula can be replicated beyond a single factory remains the bigger question.
Sources: ACEA, Notícias ao Minuto, Jornal de Negócios, ECO, Público
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