The automotive industry in Portugal 

The Portuguese automotive industry is one of the country’s most important industrial pillars and is strongly export-oriented. Although Portugal has no domestic car brands, it has developed into a significant production and supply location for Europe—particularly in the areas of vehicle assembly, component manufacturing, electric mobility, and automotive software .
More than 98% of vehicles produced in Portugal are exported, making the industry closely tied to European demand.

1. Structure & Importance of the Industry

Industry profile

The Portuguese automotive industry consists of three main sectors:

1) Vehicle production

• • Volkswagen Autoeuropa (Palmela)
    The largest car factory in Portugal and one of the country’s most important employers.
    Production mainly:

    • VW T-Roc (current core model, high export share)

    • VW Sharan (until the end of production)
      Autoeuropa is responsible for up to 1% of Portugal’s GDP .

  • Stellantis Mangualde
    produces light commercial vehicles:

    • Citroën Berlingo

    • Peugeot Partner

    • Opel Combo

    • The Toyota ProAce City
      plant is gaining increasing importance through electric van variants.

2) Components and supplier industry

Over 350 suppliers are active in the country, including high-competence clusters in:

• • Braga

  • Aveiro

  • postage

  • Setúbal

Key product groups:

• • Wiring harnesses & electronics

  • Chassis components

  • Automotive software

  • plastic and metal parts

  • Battery modules (increasingly)

3) Automotive Tech & Software

Portugal is strongly positioned in the area of:

• • Embedded Systems

  • Automotive software development

  • Testing & Quality Engineering

  • IoT solutions for mobility

Regions like Porto and Lisbon are developing into software hubs for automotive innovations.

2. Labor market & economic importance

• Over 130,000 people are employed in the automotive industry.

• The automotive industry accounts for approximately 11% of Portugal’s total goods exports .

• Wages and production costs are moderate compared to other EU countries, which attracts international OEMs.

• However, a high dependence on EU exports makes the country vulnerable to crises during periods of low demand.

3. Transformation pressures & challenges

1) EU phase-out of combustion engines (2035)

Portugal currently mainly produces:

• • compact crossovers/SUVs (VW)

  • light commercial vehicles (Stellantis)

The switch to electric platforms requires:

• • new production lines,

  • new qualifications in the labor market,

  • Extensive modernization of many suppliers.

2) Dependence on a few large-scale projects

Only two large vehicle manufacturers dominate — this poses risks:

• • Production relocations could have a massive impact on the region.

  • Investment decisions by parent companies are crucial for the future.

3) Skilled worker shortage

Thanks to the boom in IT, start-ups and nearshoring, the following are coming:

• • Software developer,

  • Mechatronics engineer,

  • Electronics technicians
    are under pressure as many skilled workers emigrate abroad or move to higher wage sectors.

  •  

4. Opportunities & Future Prospects

1) Electromobility as a growth engine

Portugal is investing heavily in:

• • Charging infrastructure,

  • Battery projects

  • Electrification of the Stellantis transport lines.

Particularly quiet commercial vehicles are considered a market segment with high growth potential.

2) Battery value chain

The lithium deposits found in Portugal offer prospects for:

• • Lithium mining (controversial, but strategic),

  • Battery recycling,

  • Battery component manufacturing.

3) Nearshoring trend in Europe

Portugal benefits from the desire of European OEMs:

• • Parts manufacturing to be brought closer to Europe

  • To build stable supply chains (post-COVID).

4) Strong software and IT sector

Portugal is developing into a software interface between:

• • classic automotive suppliers,

  • Electric vehicle manufacturers,

  • Mobility service providers.

  •  

5. Political & economic framework

The Portuguese government supports the industry through:

• Tax breaks for automotive investments,

• Funding programs for e-mobility projects,

• Infrastructure projects (ports, rail connections),

• Training programs in mechatronics and e-mobility.

6. Outlook 2025–2030

Portugal’s automotive industry is expected to develop as follows:

1) Growth in electric van production

Stellantis plans a significant expansion of its electric commercial vehicles.

2) Europe’s automotive industry faces strategic decisions

For 2026+, it remains to be seen which next models VW will locate in Portugal — this will significantly influence the course of the industry.

3) Expansion of development and software capacities

Portugal can further establish itself as a tech hub for mobility .

4) Suppliers must transform themselves

Companies that primarily produce combustion engine components face a significant need for investment.

Our conclusion:

Portugal is a highly relevant automotive location in Europe—strongly export-oriented, cost-effective, and increasingly technologically advanced. However, its dependence on a few large production facilities poses a structural risk. At the same time, the transformation towards electromobility offers significant opportunities, particularly in the commercial vehicle segment, software development, and potential integration into the European battery value chain.

If Portugal actively shapes the ongoing transformation, it can secure its role as an important European automotive hub in the long term.