The European Commission is concerned about the future of the European Industry and has created a ‘Competivity Compass’ to address all related challenges. Meanwhile, Commission President Ursula von der Leyen has made the problems of the EU car industry a ‘Chefsache,’ a ‘chief concern’ that she will handle personally. She has already sat around the table with the car industry representatives.
She has called upon the car manufacturers to start a ‘strategic dialogue’ and steer Europe’s ailing car industry out of trouble. They will gather in Brussels this week to find a compromise between the EU’s ambitious environmental goals and the urgent calls for help from the embattled sector.
At the heart of the crisis is the EU’s drive to tighten CO2 emission limits on European carmakers and impose fines if they fail to meet their 2025 reduction targets, much to the industry’s displeasure.
European manufacturers are already struggling to boost EV sales and face stiff competition from China. China continues to drive the market, with 11 million vehicles sold in 2024, up 40% from the previous year.
In October, the EU imposed extra tariffs of up to 35% on Chinese-made electric cars after an anti-subsidy investigation concluded Beijing’s state support was unfairly undercutting European automakers. Brussels and Beijing have since engaged in a trade standoff.
Faced with the crisis at home, the European Commission promised to support the automotive sector, which employs 13 million people in the EU and represents around 7% of the gross domestic product (GDP).
France’s Stéphane Séjourné, European Commissioner for Prosperity and Industrial Strategy, promised at an automobile summit in mid-January that there would be a plan to “save the sector” and “boost European demand for clean cars.”
Industry in distress
Due to the weakness in the European car industry, announcements of job cuts have multiplied in recent months. A major example is the Audi plant in Brussels. The factory, which specializes in producing high-end electric cars and is part of the VW Group, will close at the end of February.
In Slovenia, where the automotive industry accounts for about 10% of GDP, companies facing difficulties are downsizing, either directly as part of the automotive manufacturers’ supply chains or indirectly due to the relocation of component production to lower-cost countries.
According to data from Bulgaria’s National Statistical Institute released in July 2024, Bulgaria saw a 40% drop in car production as orders for parts manufacturers fell sharply due to the slowdown in the automobile industry in countries such as Germany.
In addition, carmakers are nervously eyeing President Donald Trump’s announcements in the United States. Trump threatened higher import taxes on key trading partners, raising fears of an explosion of customs duties on European cars.
If they become reality, his protectionist policies could slash Germany’s GDP by 1% and destroy 300,000 jobs, according to a study by an economic institute cited by German media in mid-January. At the same time, European car manufacturers have called on the EU to avoid a “trade conflict” with the United States.
Countermeasures
So, on Thursday, the president of the European Commission, Ursula von der Leyen, opened the strategic dialogue in Brussels, fully aware of the situation’s urgency. The dialogue is expected to last for several months.
In February, the commission is also expected to announce initial measures to support the purchase of electric cars for company fleets or to secure supply chains for raw materials.
In this context, the European Commissioner for Transport, Apostolos Tzitzikostas, has pointed to Belgium as an example for everybody. “Belgian legislation for company cars has made sales of EVs triple the last two years, and I’m working on a new European-wide proposal for fleets and company cars inspired by these measures.”
Another idea from the Czech Republic and Italy at the end of last year was for the EU to relax the fines imposed this year on carmakers that fail to sell a sufficient proportion of electric cars. Supported by Austria, Bulgaria, Poland, Romania, and Slovakia, the two countries said in a joint paper that “the competitiveness of Europe’s automotive industry must remain a central focus of EU policy.”
The EU Commission has been temporizing on this matter until now. It pointed out that the sales and emission figures for 2025 have to be analyzed before discussing eventual penalties. Now, the pressure in the car industry is increasing.
Commission VP Stéphane Séjourné has declared in the French newspaper Le Figaro that he finds it bizarre “that Europe still wants to punish an industry it wants to help overcome the difficulties.”
On the other hand, Commission President von der Leyen pointed out that “the good pupils don’t deserve to be punished. Some manufacturers have already complied with the targets, but we need flexibility and pragmatism to solve this problem.”
Von der Leyen suggested that this problem will be integral to broader measures. “Speed is of utmost importance here, and we must cope with the expectations and uncertainties within weeks, not in a few months.”
First meeting
Yesterday, several CEOs of light- and heavy-duty vehicle manufacturers participated in a kick-off meeting hosted by European Commission President Ursula von der Leyen to strengthen the global competitiveness of Europe’s automotive industry.
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“The EU auto industry remains fully committed and economically invested in the transition towards zero-emission mobility,” says Ola Källenius, the current president of ACEA, the association of European car manufacturers.
“But the only way for this transition to succeed is to make it a market- and demand-driven transformation. The upcoming Action Plan must be built on this premise. The reality check to the current European Green Deal will not slow us down but rather propel this transition by removing bottlenecks and introducing necessary flexibilities,” he added.
Commercial vehicle manufacturers expressed their support for ambitious climate targets but underlined that targets alone are insufficient. “Rapid infrastructure deployment and other enabling conditions, such as total cost of ownership (TCO) parity and demand-side measures, are essential,” explains Christian Levin, CEO of Traton, Scania, and Chair of the Commercial Vehicle Board.
ACEA members stressed that for this dialogue to succeed, future meetings and discussions must actively involve all manufacturers and suppliers with substantial industrial footprints in Europe, and all thematic work strands must reflect the unique perspective of the heavy-duty segment. ACEA members will engage with relevant Commissioners on four thematic work strands to provide input into the upcoming Action Plan.
von der Leyen says the plan must be ready before March 5th. She will assign at least five of her commissioners to the job: Apostolos Tzitzikostas (durable transport) is the coordinator, Wopke Hoekstra (green deal), Stéphane Séjourné (industry), Henna Virkkunen (technological innovation), and Roxana Minzatu (social matters).
No unity
The European car industry itself shows a lack of unity in the matter. Regarding the extra import tariffs for Chinese EVs, Germany has shown that it is a very cool lover of starting a trade war with China, taking into account the interests of its car industry in the People’s Republic. On the contrary, countries like France and Italy fiercely advocate the measures.
Where the EU fines for manufacturers not complying with the CO2 regulations are concerned, the industry isn’t speaking with one voice either. Manufacturers that have done their utmost best to comply are pointing at the “laziness” of some competitors.
NGOs like Transport & Environment (T&E) argue, supported by thorough research, that the EU car industry can comply without fines if they really want to. The strategic talks that will be held in the coming weeks promise to be spicy and turbulent.
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