Last week the European Commission, automotive trade bodies and unions drew up plans to help Europe’s car industry to raise its game in the face of tougher competition from Japan. The European car market has been flat recently, but, despite one or two big corporate overhauls, Europe’s leading carmakers are not in need of significant roadside assistance.

The real strength of European carmakers is in the top end of the market, according to Garel Rhys, of Cardiff University: “Europe’s competitive advantage is as the global centre of upmarket cars. Lexus [made by Toyota] is good, but it is not yet in a position to challenge the European luxury brands.”

Europe is home to the top notch and the rungs immediately beneath, with Rolls-Royce, Bentley, Aston Martin, Porsche, Ferrari, Audi, Mercedes, BMW, Land Rover and Jaguar. Upmarket cars account for 10 per cent of the global market, are more profitable than volume-produced vehicles and are less sensitive to economic cycles. Revenues generated by the sale of 17,000 Aston Martins and Bentleys are equal to the sale of 210,000 small cars, Professor Rhys says.

Beyond the prestige end of Europe’s cars, several carmakers are undergoing transformations. The most remarkable is that of Fiat, which seemed beyond salvation only a few years ago. Now it is making a profit and producing new models to critical acclaim. Peugeot Citroën is undergoing a restructuring, while its domestic rival Renault has launched a range of cars on which its turnaround is staked.

Professor Rhys also believes that Europe, in particular Britain, has a strong reputation for design. He calls the UK the “Silicon Valley of European design” for its expertise in motor racing and related fields.

European carmakers have experienced stiff rationalisation in recent years and, in a still largely flat market, they are fighting each other for the same customers. But they are all in better shape to do that than they were a few years ago.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive