EU launches strategic dialogue to support automotive industry

The European Commission announced on Thursday that the European Union will launch a strategic dialogue on the future of its automotive industry in January. The initiative aims to develop rapid support measures for the auto sector as it grapples with the accelerated shift toward electric cars and the regulatory standards on average fleet emissions.

The latest sales data for electric cars in the EU demonstrate the wound, as they plummeted by a further 9.5%. As governments all over Europe, including Belgium, are reversing their incentive schemes, carmakers are facing a lagging return on investment.

Audi Brussels embodies the crisis

The guns are aimed at the EU for its ban on the sales of ICE cars by 2035 and the tightening of average fleet CO2 emissions next year, which will accompany fines. Symbolically, Audi Brussels embodies the crisis as the first factory to shut down in the Volkswagen Group’s history.

The challenges for automakers are reverberating across the automotive supply chain. Major suppliers such as Michelin, Valeo, and Bosch have announced job cuts, site closures, or production downsizing.

In France, for example, Michelin is closing factories in Cholet and Vannes, cutting 1,254 jobs. Valeo is reducing operations at eight sites in France, and Bosch will close its Mondeville site by 2026.

Steelmakers have also felt the impact, as 19% of their production depends on the automotive industry. ThyssenKrupp plans to cut 11,000 jobs, while ArcelorMittal has delayed a €1.8 billion investment at its Dunkirk plant.

Keeping the car industry anchored

But the European administration is now reacting. “We must support this industry in the profound and disruptive transition ahead. And we must ensure that the future of the car remains firmly anchored in Europe,” said European Commission President Ursula von der Leyen on Thursday during a press briefing. A dialogue to spawn supportive measures was announced starting in January.

The dialogue will bring together car manufacturers, infrastructure providers, unions, and supply chain stakeholders to boost the industry’s competitiveness. Key priorities will include advancing innovation through artificial intelligence and self-driving cars, supporting decarbonization, preserving jobs, updating regulations, and stimulating demand for electric vehicles.

Delaying the fines?

The hottest plate on the table seems to be the fines for not meeting the 2025 average fleet emissions. These divide the industry captains, with BMW boss Oliver Zipsestatingd that the industry has been warned long enough in anticipation (since 2019) and Renault CEO Luca de Meo pointing to a bill of approximately €15 billion.

Member states are rallying to support their car industry. German Chancellor Olaf Scholz has warned that these fines could jeopardize liquidity for companies already investing heavily in the transition toward electric mobility. “Fines must not affect the financial liquidity of companies that now have to invest in electric mobility, modern products, and vehicles,” he said at an EU summit in Brussels. He has also lobbied for an electric car purchase incentive on a European level.

Opposition from the green side

Together with Germany, France, and Italy, several Eastern European countries, including Poland, Romania, and Slovakia, have also urged the Commission to delay the fines. They argue that penalties could exacerbate existing financial difficulties faced by automakers and lead to further job cuts.

The latter is a sensitive argument for the EU as it prepares for its strategic dialogue during the upcoming month. Industry players hope for regulatory flexibility. Meanwhile, environmentalists argue that loosening CO2 limits would undermine climate goals and disrupt competition. They say these fines are essential to drive the industry’s transition to cleaner vehicles.

“The pressure from the EU limits may be inconvenient for some manufacturers, but it is urgently needed for the climate and car manufacturers,” said Marion Tiemann, a spokesperson for Greenpeace. Finally, the EU will need to find a way to reward the efforts of car manufacturers who managed to meet the targets.