The European Commission aims to strengthen the automotive industry by easing emissions regulations and supporting battery developers. The stakes are high, with millions of jobs across Europe on the line.
Extended Deadline for Carmakers
Even before officially presenting its action plan for the sector, the EU Commission has already made a key concession to car manufacturers. Commission President Ursula von der Leyen recently announced that companies would be granted extra time to comply with the stricter CO2 fleet limits that take effect this year. Automakers will now have three additional years to meet the targets. This means that if manufacturers like Volkswagen or Mercedes fail to comply with the limits now, they must make significant improvements by 2026 or 2027. Otherwise, they face the prospect of multi-billion-euro fines.
Is the Combustion Engine Ban Under Review?
The Commission’s move comes in response to calls from carmakers and suppliers who argue that the already challenging situation in the supply chain should not be exacerbated by additional financial penalties. Von der Leyen has also signaled a willingness to reconsider the EU’s planned phase-out of new petrol and diesel cars by 2035. She has promised a faster review of the decision, emphasizing a commitment to technological neutrality.
This means that no specific type of engine will be favored as long as it meets future emissions standards. However, from 2035, newly registered cars in the EU must be emission-free, effectively leaving electric vehicles (EVs) as the only viable option. A potential exception could be vehicles running on synthetic, climate-neutral fuels (e-fuels), a possibility that industry groups want more clarity on from the Commission.
Charging Infrastructure Still Lacking
To meet the EU’s climate targets, carmakers must significantly boost EV sales—by as much as 75% in Germany compared to last year. However, the market is struggling. In 2024, electric vehicle sales fell by 5.6% compared to the previous year, with their market share declining from 14.6% to 13.6%.
According to a draft of the action plan, the Commission is looking to stimulate EV sales through several measures. Brussels is urging member states to introduce government-backed leasing schemes for low-income drivers, similar to those already available in France. It is also working on recommendations to increase the number of electric vehicles in company fleets. At the same time, the Commission is calling for an expansion of charging infrastructure, which remains a key obstacle to wider EV adoption.
European-Made Batteries
Just as it has with green technology, the Commission wants to support European companies in manufacturing EV batteries. The goal is to reduce dependence on foreign suppliers while strengthening and expanding the European market.
Batteries account for at least a third of an electric vehicle’s value and are critical to determining its price and performance. The Commission has already pledged up to €3 billion from the EU Innovation Fund for battery production and plans to allocate another €1.8 billion over the next two years. The action plan also proposes creating an industry alliance for autonomous driving.
A Strategic Dialogue for the Future
The proposals are being presented by Transport Commissioner Apostolos Tzitzikostas and mark the first phase of a broader strategic dialogue on the future of the automotive industry, led by the Commission President. Representatives from the automotive sector, trade unions, the European Commission, and environmental groups are taking part in the discussions.
The automotive sector contributes 7% to the EU’s GDP and provides employment for 13 million people across Europe, both in manufacturing and supply chains. However, car sales have declined in nearly all major European markets over the past year. German manufacturers are also seeing sales drop in key markets such as China and the US. Many factories are underutilized, and at the same time, the industry is under increasing pressure to meet stringent climate targets.
Mixed Reactions
Initial reactions to the Commission’s action plan have been cautious. Hildegard Müller, president of the German Association of the Automotive Industry, described the measures as steps in the right direction. Meanwhile, the European Automobile Manufacturers Association (ACEA) has emphasized that the transition to clean mobility can only succeed if infrastructure is improved and consumer demand for EVs is stimulated.
However, some political figures have been critical. CSU Member of the European Parliament Markus Ferber argued that EVs are still not attractive enough for consumers. Meanwhile, Green Party MEP Michael Bloss criticized the Commission for backtracking by making concessions to the industry, warning that this could jeopardize the EU’s climate goals.