The European automotive industry entered 2025 on the hunt for a lifeline. Impending fines for failing to meet emission targets threatened to disrupt businesses, while competition from afar put pressure on European legacy manufacturers.
Against this backdrop, the European Commission published its Industrial Action Plan for the European automotive sector.
Released in March this year, the plan is spearheaded by European Commissioner for Sustainable Transport and Tourism Apostolos Tzitzikostas. It aims to revive the region’s faltering automotive sector.
“This is a plan to keep Europe’s carmakers, suppliers and related service sectors innovative, competitive and firmly anchored in Europe,” Tzitzikostas tells The Parliament. “It is also a clear signal that Europe is committed to supporting the sector in its transition.”
The transition has, so far, hit several speed bumps. The European Union’s automotive industry currently employs 13.8 million people across the bloc and generates a turnover accounting for seven per cent of the EU’s GDP, according to EU statistics. Despite this heft, the sector has faced significant layoffs and a wave of factory closures, with more expected in 2025.
Lack of EV demand
Part of the pullback may stem from a decline in electric vehicle (EV) sales, which were a central focus of EU policy in the previous mandate. Last year, the European Automobile Manufacturers' Association reported a 5.9% drop in EV market volume in the EU compared to 2023, reflecting a wider, global drop in demand for EVs.
This slowdown, coupled with the European Parliament’s shift to the right and subsequent disinterest in climate priorities, has given the Commission an opportunity to rethink its emission targets. Environmental groups have slammed the relaxation of targets, criticising manufacturers for not taking them seriously.
The commissioner was quick to rebuff any idea that these changes are a case of the EU reneging on its climate goals. “We are certainly not backtracking on the EU’s environmental goals. Our targets and our ambitions are unchanged,” Tzitzikostas says, adding that “climate change is an existential crisis, and reducing emissions has been written into EU law.”
Instead, Tzitzikostas sees the changes as the clarity that "any industry needs when it has to invest in change.”
A series of targets, including a 100 per cent reduction in CO2 emissions by 2035, set in 2021 as part of the EU’s Fit for 55 package, initially gave manufacturers the certainty and time needed to prepare for the green transition. However, those that have already started making changes now risk being placed at a competitive disadvantage.
It is not just at home that manufacturers committed to greener options are being penalised. Vehicle manufacturers from around the world are subject to tariffs on imports, designed to counteract unfair state investments and protect Europe’s own manufacturers.
A further weakness has been European manufacturers’ focus on more expensive, luxury EV models, while foreign competitors have been able to offer more affordable options to European consumers, many of whom now find themselves priced out of the market.
Some of these foreign manufacturers have since decided to set up shop in Europe, a development that Tzitzikostas views with cautious optimism.
“We will work to ensure that foreign investment in the automotive sector makes a stronger contribution than it has done in the past,” he says.
Data driving the transition
There is no disputing that European automakers know how to make a car. The issue, however, is that modern cars are now more software than hardware. Data, connectivity and other technologies have become further vulnerabilities.
The EU’s flagship data policy, the Data Act, soon to be enforced, will cover in-vehicle data. Tzitzikostas says additional guidance on in-vehicle data will be issued to ensure that this kind of information benefits innovation in the automotive industry and that sector-specific actions can be taken if necessary.
Read more on the automotive industry in The Parliament's latest policy report here.
“If needed, we will consider further action, including a legislative proposal on access to in-vehicle data,” he says. Access to this data could help with the development of the next generation of vehicles in Europe, which could prove to be a cornerstone of the auto sector’s competitiveness.
Learning from battery mistakes
Battery technology is another key to a competitive EV market, which is why the Commission has made €1bn in grants available for projects focused on manufacturing battery cells for EVs produced in the EU. The action plan also promises to free up an additional €1.8bn over the next two years to support battery producers within the bloc.
However, the record on this front is mixed. Swedish battery manufacturer Northvolt filed for bankruptcy in March 2025, potentially owing the EU hundreds of millions of euros. This is an expensive hit to the taxpayer, but Tzitzikostas believes appropriate lessons have been taken from Northvolt’s shortcomings.
“The Northvolt situation was the result of many factors combined,” Tzitzikostas says, including Chinese competition and the company's own missteps. “This was a very innovative and risky project, and some innovative and risky projects will inevitably fail.”
While he says the Commission sees the Northvolt collapse as a lessons-learned opportunity, it will not deter the EU from moving swiftly and taking chances in future. “Overall, this plan will help boost the internal market for clean, connected and automated vehicles, which I believe is a valuable support for Europe’s automotive manufacturers," he says.
Keen to avoid the traditional criticisms of slow, limited action and overt bureaucracy which haunt all of Europe’s legislative branches, Tzitzikostas appears ready to accelerate action. “We will certainly implement all of the actions outlined with speed and decisiveness,” he concludes.
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