In 2019, Volkswagen committed $185 billion to transform itself into an electric-first powerhouse. Almost five years later, the carmaker now faces threats from all directions.

As Fortune’s Vivienne Walt experienced firsthand at VW’s massive, dedicated EV factory in Zwickau, in the former East Germany, China now presents the biggest existential threat to the German giant’s future. Shenzhen-based BYD, China’s largest EV and battery maker, overtook Tesla in EV sales for the first time last year. And the Chinese giant already has its sights set on Europe, with plans to open a factory in Hungary next year—a move to avoid upcoming tariffs on Chinese EV imports imposed by the European Union.

I’ve experienced VW’s electric woes firsthand as well. Back in 2021, I looked to trade in my aging Audi A4 for the new Audi Q4 electric SUV, one of the first new models to roll out of VW’s new Zwickau plant. (Audi is a VW-owned marque, as are Porsche, Bentley, and others.) With supply chains already squeezed by the pandemic, I placed my order early, hoping for delivery in time for the upcoming birth of my son.

Months later, a salesman called to tell me the bad news: With critical microchip shortages and Russia’s war on Ukraine hitting Volkswagen’s wiring suppliers, my shiny new electric car was delayed by 18 months. Like hundreds of thousands of other Europeans, I put my feelings about Elon Musk aside and placed an order for a Tesla Model Y, which became not only the world’s bestselling EV, but also the bestselling car overall in Europe in 2022.

My Model Y arrived on time, and VW Group lost a loyal customer. In a further blow to Europe’s automotive workers, my first EV wasn’t even made in Tesla’s new factory in Berlin, which has been beset by “administrative delays.” It was shipped all the way from a plant in Shanghai—a true sign of the automotive world’s shifting center of gravity from Europe to the Far East.

Continuing the theme of Europe’s existential crisis, Fortune speaks exclusively in this issue to Nicolai Tangen, head of Norges Bank Investment Management, asset manager of the world’s largest sovereign wealth fund. Something he shared at a private CEO conference this year has stuck with me all summer: “The key to a successful life is to live in Europe and invest in America.”

Europe’s quality of life speaks for itself, especially during the summer months. But the longer-term challenge of making the continent an attractive place to grow business lingers on. Today, more than ever, promoting the needs of Big Business is a serious challenge to the continent’s governments as its citizens turn to populism and the far right.

This issue also features the Fortune Global 500, which boasts 123 companies from Europe this year. Ranking the world’s top companies by revenue, the list is a pulse check on the global economy. Automakers and energy companies dominate the eurozone economy more than is the case in the U.S., with Volkswagen (No. 11) retaining its title as the world’s biggest automaker. But China’s continued heft is undeniable—a trend European CEOs and policymakers can’t afford to ignore.

Alex Wood Morton
Executive Editor, Europe, Fortune
@alexwoodmorton

This article appears in the August/September 2024 issue of Fortune with the headline, “What VW’s China woes say about Europe.”

Chinese auto giants have their eyes set on Europe—can Volkswagen hold its ground?