In the 1955 Pulitzer winning play by Tennessee Williams, and the 1958 movie, Cat on a Hot Tin Roof, a wealthy family struggles to confront uncomfortable truths about its relationships, inheritance, and survival. Its members have powerful reasons to preserve their arrangements, even as those arrangements become increasingly difficult to sustain.

The story offers an unusually useful way to understand the situation facing Europe’s automobile industry. I have pulled quotes from the movie for this article.

European automakers possess extraordinary brands, engineering capabilities, manufacturing assets, and supplier relationships. But those assets do not guarantee that the companies controlling them will remain competitive. Industrial leadership must be earned repeatedly, especially when competitors change what customers expect and what they are willing to pay.

The strongest Chinese automakers present precisely that challenge. They compete through a combination of product capability, technology, manufacturing economics, and price. Their success cannot responsibly be dismissed as a temporary consequence of subsidies, nor should legitimate concerns about subsidies be ignored.

Europe must confront both realities. Its leaders must decide whether they are prepared to restrict imports where justified while demanding fundamental changes from the domestic companies those restrictions would protect.

They must also abandon the comforting assumption that Chinese capital will eventually arrive to preserve Europe’s automotive champions.

Chinese companies have their own customers, shareholders, competitors, and strategic ambitions. Saving Volkswagen on terms acceptable to Volkswagen’s existing stakeholders need not serve any of them.

“Laws of silence don’t work”

Europe cannot develop an effective response while treating every explanation for its difficulties as politically unacceptable to someone.

Executives may prefer to emphasize regulation and Chinese subsidies. Labor representatives may emphasize management mistakes and shareholder distributions. Governments may celebrate industrial employment while pursuing policies that manufacturers argue increase their costs. Shareholders may demand returns while underestimating the investment required to rebuild competitiveness.

Each constituency can identify failures elsewhere. An effective strategy requires them to examine their own.

The first obligation is an honest assessment of the competitive gap. How much comes from subsidies? How much comes from battery sourcing, vehicle architecture, development speed, purchasing, factory utilization, software, energy, or organizational complexity? Which problems can manufacturers solve themselves, and which require government action?

The answers will differ by company, vehicle segment, and country. Treating Europe as a single manufacturer facing a single Chinese competitor obscures the decisions that actually need to be made.

It is equally misleading to assume that an established brand can indefinitely compensate for a product that customers consider too expensive for what it delivers. Reputation influences a purchase, but it does not eliminate the customer’s alternatives.

Europe needs a diagnosis detailed enough to guide investment and uncomfortable enough to challenge entrenched interests. Without it, restrictions on imports risk protecting weaknesses that domestic leaders remain unwilling to address.

“The charm of the defeated”

There is a particular danger in being an admired incumbent: decline can be presented with such dignity that it begins to resemble a strategy. This is one of the best lines I’ve ever written. I wrote it to describe the way executives and the press in Europe explain failure as a virtue. It isn’t. It’s failure, and no amount of massaging can change the facts.

A company can announce restructuring programs, defend its heritage, promise future breakthroughs, and explain why conditions are unusually difficult. Those statements may be sincere. They still do not establish how the company will produce vehicles that customers prefer at prices that support profitable manufacturing.

From a game theory perspective, a Chinese automaker with a sustainable competitive advantage has little reason to interrupt its expansion to rescue a struggling European rival.

It can continue introducing vehicles, strengthening distribution, improving customer support, and building consumer trust. European competitors must then decide whether to reduce prices, accept lower sales, accelerate investment, or undertake a more fundamental restructuring.

None of those responses is costless.

The manufacturing economics can make the pressure cumulative. When sales decline and production follows, fixed costs are spread across fewer vehicles. Lower utilization can weaken profitability, reducing the resources available for the next generation of products. An incumbent can find itself confronting a stronger competitor with less financial flexibility.

That outcome is not inevitable. European manufacturers retain substantial capabilities and can respond successfully. But the mechanism explains why apparently manageable losses of market share can have consequences beyond the vehicles immediately lost.

Volkswagen provides a useful example because its difficulties raise a question that extends beyond the company: could a Chinese automaker eventually acquire a struggling European manufacturer and finance its recovery? For policymakers concerned about factories, employment, and suppliers, such an investment might appear to offer a way to preserve an automotive champion.

But the prospect must be examined from the potential buyer’s perspective. Volkswagen’s importance to Europe does not make acquiring it the most attractive strategy for a Chinese competitor. The buyer must compare the benefits of ownership with what it could achieve by continuing to win customers from Volkswagen.

An acquisition requires paying for control and assuming responsibility for the acquired business. The buyer would inherit the challenge of restructuring an organization whose costs, governance, manufacturing footprint, and development processes may contribute to its vulnerability.

Competing against Volkswagen leaves those obligations with Volkswagen.

The challenger retains the freedom to choose its markets, products, investment priorities, and manufacturing locations. It can pursue customers without accepting responsibility for preserving a competitor’s corporate structure.

Why China has little incentive to rescue Volkswagen

The distinction between an attractive transaction and a rescue is essential.

A European manufacturer seeking a rescue may want capital to preserve employment, maintain factories, fund product development, and retain managerial independence. A Chinese investor may want particular technologies, engineering teams, distribution relationships, or access to production capacity.

A transaction that satisfies the buyer could require precisely the changes the seller’s stakeholders hoped to avoid.

An acquisition could make commercial sense at the right price and under the right conditions. But the buyer would compare that opportunity with building its own operations, entering a partnership, or purchasing selected assets. Financial distress alone does not make an entire automotive group the best investment.

Waiting also preserves options. As European companies restructure, competitors may find opportunities to recruit engineers, sign dealers, secure suppliers, or purchase manufacturing assets. Those opportunities carry risks as another buyer could move first, or trade restrictions could make entry more difficult, but they do not require assuming responsibility for an entire group.

Chinese manufacturers also compete with one another. A company that spends heavily stabilizing a European rival would bear the acquisition and restructuring costs itself, while other challengers could continue expanding without that burden.

Nor are the Chinese government’s objectives identical to those of every Chinese automaker. Employment, exports, technological development, overseas investment, and diplomatic relationships can create competing priorities. None automatically produces an obligation to preserve a European automotive champion.

Chinese capital may participate in the restructuring of Europe’s industry. Europe has little basis for assuming that capital will preserve its leading manufacturers in their existing form.

Policymakers must not confuse the possibility of an investor with the existence of a recovery strategy.

The brutal truth is this: Chinese automakers have little incentive to rescue their European rivals. They can continue winning customers while Europe bears the cost of restructuring. If those rivals fail, Chinese competitors can pick through the carcasses, choosing which brands, factories, technologies, and talent to acquire…and which obligations to leave behind.

“We occupy the same cage”

Europe’s automakers, employees, suppliers, governments, and communities depend on one another, but their incentives do not automatically align.

An executive may want freedom to relocate production. Employees may want binding employment guarantees. A government may want domestic investment and affordable vehicles. Consumers may want better products at lower prices, regardless of where the parent company is headquartered.

Preserving every existing arrangement is unlikely to satisfy all those objectives.

This is why the policy choice cannot be reduced to unrestricted imports versus a blanket prohibition on Chinese cars.

Europe must first define what it intends to preserve: European ownership of major automakers, manufacturing employment located in Europe, domestic engineering capabilities, strategic technologies, or some combination of these.

Those objectives overlap, but they are not interchangeable.

A Chinese-owned company manufacturing vehicles in Europe, employing local engineers, and developing European suppliers presents a different economic proposition from a company supplying the market entirely through imports. BYD’s announced headquarters and research commitments in Hungary, alongside its manufacturing plans, illustrate why that distinction matters.

Local investment can change the political game. A foreign manufacturer can acquire domestic stakeholders (workers, suppliers, municipalities, and research partners) with an interest in its continued success. That does not automatically resolve concerns about subsidies, technology, or strategic dependence. It does mean that policy based solely on the nationality of a brand can conflict with the objective of preserving manufacturing employment.

Europe needs to define what constitutes a meaningful contribution to its industrial base, including the depth of local production, supplier development, engineering activity, and long-term investment.

Its own manufacturers must also remain willing to learn from competitors and enter commercially useful partnerships. Cooperation in technology can coexist with competition for customers.

The difficult task is to determine which relationships strengthen Europe’s capabilities and which create dependencies that could weaken them.

Deterrence through credible commitment

Europe’s response also requires a concept central to strategic bargaining: deterrence through credible commitment. This is one of my favorite concepts in game theory, and it fits perfectly in this article.

Announcing an intention to defend an industry does not necessarily influence a competitor. A warning matters when the other player believes a specified action will trigger a response costly enough to change its decision.

Credible commitment makes that response believable by reducing the defender’s ability, or incentive, to retreat when the moment arrives.

For Europe, this requires more precision than declaring that Chinese manufacturers are becoming too successful.

The European Union must identify the conduct it intends to deter, such as trade practices established through investigation to be unfair, and specify a lawful response. Competition earned through better products and more efficient manufacturing presents a different policy question. Every lost sale cannot persuasively be treated as evidence of misconduct.

The commitment must also be politically sustainable. A threat to restrict imports becomes less convincing if competitors expect European governments to retreat when consumers face higher prices, exporters fear retaliation, or member states disagree over the consequences.

Those costs cannot be wished away. Leaders must acknowledge them and explain why the capabilities being protected justify intervention.

Yet external deterrence addresses only part of the problem. Europe needs an equally credible commitment to reform its own industry.

If automakers believe public support will continue regardless of performance, the incentive to make difficult decisions weakens. If workers expect investment promises to be abandoned, they have less reason to accept productivity agreements. If shareholders expect governments to absorb losses while protecting distributions, assistance becomes a transfer rather than an investment in recovery.

A workable agreement must give each participant reason to believe the others will deliver.

Manufacturers should commit capital before receiving additional support and accept measurable obligations. Governments should establish review dates and conditions for withdrawing or recovering assistance. Labor agreements should connect productivity improvements with credible investment, retraining, and transition commitments.

The strongest arrangement would be a reciprocal commitment: public support tied to private investment, operational reform, and verified results.

Europe must also recognize the limits of deterrence. It cannot deter Chinese manufacturers from improving their vehicles or competing successfully elsewhere. Import restrictions cannot compel European companies to develop better products.

The purpose is to create conditions under which a defined recovery program can succeed, with obligations that survive the next earnings announcement, election, or labor negotiation.

“Have you got the guts to live?”

In the 1958 film Cat on a Hot Tin Roof, Harvey “Big Daddy” Pollitt, played by Burl Ives, is a wealthy Mississippi plantation owner confronting his mortality and the fractures within his family. His wealth and authority cannot resolve either. During a confrontation with his troubled son, Brick, played by Paul Newman, Big Daddy delivers the challenge that belongs at the center of Europe’s industrial debate:

“I’ve got the guts to die. What I want to know is, have you got the guts to live?”

Big Daddy is demanding more than endurance from his son. His question challenges Brick to confront painful truths and accept responsibility for what comes next.

Europe’s political leaders and automobile executives face a similar test. They possess industrial wealth, prestigious brands, and considerable political influence, but those advantages cannot spare them the difficult changes necessary to remain competitive. Survival requires a willingness to confront what continuing to live will demand.

I believe Europe must be willing to restrict Chinese vehicle imports where there is a defensible case that unfair competition threatens capabilities the continent cannot afford to lose. However, the assertion that restricting Chinese cars is the only way to save Europe’s automakers goes further than the evidence supports.

A restriction can change the competitive environment. It cannot, by itself, simplify an engineering organization, lower development costs, improve software, or repair a weak product strategy.

The European Union has already imposed countervailing duties on battery electric vehicles imported from China and developed a process for considering minimum-price undertakings. These are specific trade instruments rather than a general prohibition on Chinese automobiles.

The strategic question is what Europe intends to accomplish during any period of protection.

If the answer is to preserve existing arrangements and delay difficult decisions, protection risks making the eventual adjustment more painful. Consumers would bear higher costs without receiving a credible path toward a stronger domestic industry.

A serious recovery program must address the entire operating system.

Manufacturers need competitive vehicles, faster development, disciplined investment, and production economics that support sustainable prices. Boards must hold executives accountable for results. Shareholders must accept that restoring competitiveness may require lower near-term distributions.

Governments must examine energy costs, infrastructure, permitting, and the cumulative burden of policy choices. They cannot demand globally competitive manufacturing while refusing to assess the conditions under which that manufacturing takes place.

Labor agreements must support productivity and technological change, with credible provisions for retraining and adjustment. Workers should not carry the entire cost of decisions made by executives, boards, shareholders, or governments.

Europe must also accept that preserving an industrial capability does not require preserving every brand, factory, management team, or corporate structure. Consolidation, closures, partnerships, and changes of ownership may be necessary to maintain a viable industry overall.

These are difficult propositions for political leaders to defend. Pretending otherwise does not make them less likely.

Europe’s automobile industry deserves a serious strategy because its capabilities matter far beyond the companies themselves. But its importance cannot substitute for competitiveness, and its history cannot guarantee its future.

Chinese companies will make decisions according to their own interests. Europe must take responsibility for its recovery rather than wait for a transaction that conveniently preserves arrangements its competitors have no obligation to maintain.

If Europe restricts imports, it must explain what those restrictions will achieve, how progress will be measured, and what happens when protected companies fail to deliver.

The question raised by Cat on a Hot Tin Roof is therefore more demanding than whether Europe has the courage to protect its automakers.

It is whether Europe has the courage to make survival conditional on change.