The European automotive industry is struggling. Competition with China and a lack of investment are major obstacles.
China’s electric vehicles (EV) industry has been a longstanding success story, driven by subsidies, foreign investment and market scalability. It may be tempting to view China’s approach as a model the EU could follow, but this would be a mistake.
The conditions that enabled China’s EV sector to thrive do not apply to the EU, nor are they in pursuit of the same objectives.
In 2024, the EU introduced tariffs on EV imports from China in a bid to counter the country’s unfair, state-backed investments and boost Europe’s industry. These duties are set to expire in five years.
Meanwhile, Chinese companies have increased greenfield investments in the EU, as well as in countries such as Morocco and Turkey.
In an ideal world, the EU would leverage foreign investment in areas such as battery production, creating opportunities for innovation where the bloc currently struggles. However, these investments must lead to positive spillovers in the EU.
This is one of the reasons why the European Commission is considering resilience standards. Standards should include requiring assembly plants to hire EU workers, rather than foreign ones, and to prioritise regional suppliers where possible.
Foreign investments and tariffs alone are insufficient to support the EU’s automotive sector. Programmes like the Horizon Europe partnership BATT4EU and the “Battery Booster” focus on production and innovation in the battery sector, an area where China currently leads.
Meanwhile, the European Connected and Autonomous Vehicle Alliance brings together stakeholders to develop shared architectures and ensure a unified regulatory framework for connected vehicles.
The new Industrial Action Plan for the European automotive sector seeks to address red tape, improve co-ordination of approach and resources, and enhance incentives for battery manufacturing and demand.
The action plan also aims to tackle low demand for EVs by establishing a system for exchanging best practices on demand incentives among member states, with the potential to develop these into EU-wide incentives.
Read more on the automotive industry in The Parliament's latest policy report here.
The initiatives outlined in the action plan are commendable and represent valuable steps forward. And, they show that China’s narrative of success cannot serve as an appropriate blueprint for the EU.
Instead, the EU must clearly define its own priorities and stick to them to create the transparency and predictability needed to attract investments. The time for decisive action is now.
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