European Auto Industry Facing Challenges and Striving for Sustainability
On Thursday, European Commission President Ursula von der Leyen convenes a meeting with auto sector executives, labor unions, and other stakeholders to discuss strategies for the EU's automakers to electrify their fleets and remain competitive against advanced Chinese and U.S. rivals.
The industry, adversely affected by factory closures and layoffs, including 54,000 job losses among suppliers last year, faces economic headwinds such as U.S. trade tariffs and dependence on China for essential materials and batteries.
The Commission's "strategic dialogue" aims to inform an auto industry plan to be released later this year. Discussions will encompass key technologies, energy and input costs, trade, demand stimulation, and regulations.
The European Automobile Manufacturers' Association (ACEA) prioritizes the suspension of potential fines for automakers who fail to meet fleet CO2 emission targets this year. ACEA estimates penalties could reach €15 billion, necessitating an electric vehicle (EV) market share of over 20%.
EV market share in Europe declined to 13.6% last year, as sales plummeted in France and Germany. European automakers have options such as reducing gasoline or diesel car production or acquiring credits from Tesla or Chinese competitors to comply with electric targets.
"Automakers would essentially buy green credits from the world's most polluting country, funding the very Chinese EV makers the EU has just imposed tariffs on," cautions Gianluca Di Loreto of Bain & Company.
Germany, Italy, and the Czech Republic have urged Brussels to waive penalties or extend their calculation period. The Commission has hinted at flexibility but has thus far maintained its stance.
Environmental think tank T&E supports the Commission's position, arguing that the industry has had ample time to prepare since 2017. It believes the 2025 targets are achievable with increased EV and hybrid sales, and it anticipates fines, if any, to be below €1 billion.
"Postponing this by a year or two does nothing to improve your position. It prolongs an inevitability for your future success," says T&E executive director William Todts.
Beyond the fines debate, Todts suggests shifting focus to long-term policies for the industry's growth. These could involve enhancing charging infrastructure, providing incentives for domestic EV purchases, and establishing regional content targets to safeguard the sector's 13 million jobs.
Auto suppliers propose establishing clear regional content targets, similar to the North American model, to protect the industry. They also seek a resolution to potential U.S. tariffs, with BMW CEO Oliver Zipse suggesting the EU reduce its standard import duty on U.S. vehicles to match the 2.5% U.S. rate.