The plight of Europe’s automotive sector — and its impact on the economy and jobs — has become a hot political topic.
Elected officials in Europe are raising the alarm over a slowdown in the production of cars and electric vehicles, blaming overburdening regulation and stiff competition from global rivals such as China.
The automotive sector is one of the staples of Europe’s industry, accounting for 7% of EU GDP.
But carmakers are struggling to adapt to the production of battery-electric vehicles, a transition Brussels is betting on as it prepares to phase out the production of combustion engine cars by 2035, part of its ambitious bid to become the first climate-neutral continent.
A recent report suggested the 27-country bloc would need a €800-billion boost to support its clean energy transition and compete with increasingly aggressive global trading rivals.
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Transition to EVs rigged with difficulties
Car production in Europe slumped between 2019 and 2022 before it bounced back again marginally in 2023. But the number of newly registered EU cars is still lower than it was pre-pandemic in 2019.
Worryingly, the share of battery-electric and plug-in electric vehicles in European carmakers’ output is very low and has declined in recent months.
In August, registrations of electric cars dropped by 43.9% compared to the same month in 2023, driven by an astonishing 68.8% decline in Germany, considered the bloc’s industrial powerhouse.
Tariffs on the import of cheap, China-made EVs — which have recently flooded the EU market and driven down prices — are due to enter into forceon 31 October and last for at least five years.
The bloc hopes it will restore fair competition between Europe’s homegrown carmakers and its Chinese competitors.
Some believe that the EU’s new carbon emission standards, due to kick in next year, will also help scale up European production of electric cars.
The legal limit for cars’ CO2 emissions will fall by nearly a fifth to around 94 grams per kilometre from 2025. Manufacturers will also face new annual targets for the emissions their vehicles produce, a move Brussels hopes will incentivise the sale of zero- and low-emission vehicles.
“The car industry is not in crisis, actually, it’s in a transition,” Lucien Mathieu, cars director at Transport and Environment (T&E), told Euronews.
It’s important to understand that the electric car market in Europe is intertwined with CO2 targets, and today the targets have been the same as in the previous years so there’s no incentive for carmakers to sell more electric cars,” he added, stating that this will change “radically” next year when the next targets kick in.
However, Europe’s leading carmaker association, ACEA, is calling for an urgent review and two-year delay of the CO2 regulation, fearing it could further stifle the competitiveness of Europe’s EV sector.
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China’s domestic car industry has grown rapidly in recent years, and its electric car production has been buoyed by generous government subsidies across the entire supply chain.
In 2023, China registered 16.1 million new battery-electric vehicles, compared to Europe’s 6.7 million. Its increasing share of the global market currently shows no sign of easing.
