The automotive industry is a major pillar of the modern global economy and Europe is one of the key players. It has a unique role to play in Europe in - ployment, manufacturing, R&D, transportation and investment, and there are crucial challenges and opportunities ahead. We shed light on a broad range of issues - globalisation and restructuring, trade and foreign direct investment (no- bly in China and Russia), innovation, regulation, and industry policy - and put a special focus on the new member states. While change may be inevitable, progress is not. This book shall serve as a map to all stakeholders: business executives, policy makers, investors and scholars. th The contents originate from the 8 European Competitiveness Report 2004 p- ject of the European Commission. They document the contribution made at the Zentrum fur Europaische Wirtschaftsforschung (ZEW) - Centre for European Economic Resarch - in Mannheim, Germany, in cooperation with several external researchers. We as editors wish to mention and sincerely thank the many persons and institutions who have helped us in this effort.Special thanks go to the c- tributors: Thomas Cleff (Professor at the University of Applied Sciences in Pfo- heim, Germany), Stefan Lutz (then researcher at the Centre for European E- nomic Resarch, Mannheim, Germany), Alfred Spielkamp (Professor at the U- versity of Applied Sciences in Gelsenkirchen, Germany) and Waltraud Urban (Vienna Institute for International Economic Studies in Vienna, Austria).