The European Automobile Manufacturers’ Association (ACEA) warns the European authorities of a Chinese dominance of the EV supply chain and the US government incentives for domestic automakers.

According to ACEA, the EU electric vehicle industry risks losing ground even more without a robust EU industrial strategy. It risks putting the EU on the back pedal in its efforts to shore up European electric vehicle manufacturing.

Competitiveness at risk

A new École Polytechnique report has revealed the immense challenges for the EU in developing an electric vehicle supply chain. The report warns that while other global regions march forward with ambitious industrial strategies that boost domestic industries, the competitiveness of European electric vehicle manufacturing is at risk of being eroded.

According to the report, China’s strategic and holistic policy encompassing mining, refining, manufacturing, charging networks, cheap energy, purchase incentives, and recycling across the electric vehicle lifecycle has significantly bolstered its competitive edge.

“In stark contrast, the EU has employed a piecemeal regulatory approach to industrial policy, regulating specific value chain steps,” ACEA complains. The association also points to the fact that the report also signals the growing momentum to establish a manufacturing hub for the EV value chain in the US.

“Ambitious sales targets in states like California and at the federal level, combined with unprecedented funding under the Inflation Reduction Act (IRA), are boosting the domestic auto industry, straining European auto makers’ competitiveness in one of its most valuable export markets for electric vehicles,” ACEA remarks.

“Unlike China and the US, the EU lacks a robust industrial strategy to shore up electric vehicle manufacturing,” stated Sigrid de Vries, ACEA Director General. “A vibrant European electric vehicle industry is vital to achieving climate goals. Europe wants to set the global pace for decarbonizing, but it must do more to bolster critical industries that are part of the solution synchronized and coherently.”

Continued dependence

While the report also highlights the progress in battery cell production in Europe, developing an upstream battery value chain is not keeping pace with demand, leading to continued dependence on China.

“We are encouraged by recent signals from the EU that recognize our sector’s immense challenges and competitiveness threats. The recent proposal to extend EU-UK rules of origin for electric vehicles indicates this. Too often, the EU puts the regulatory cart before the horse, to the detriment of its critical industries,” de Vries added.

She summarized: “The EU’s regulatory framework lacks a holistic approach to vehicle electrification. A patchwork of regulations, at an average pace of eight or nine per year, diverts vital funds and undermines competitiveness. To tackle climate change and provide impetus to Europe’s burgeoning electric vehicle industry, the EU must develop a tailored regulatory and financial framework to create a supportive business environment.”