- Europe’s automotive sector faces a pivotal decade as it struggles to meet stringent green targets despite fierce competition from Chinese EV manufacturers.
- Despite European efforts to accelerate electric vehicle adoption, high costs, limited charging infrastructure, and competition from affordable Chinese models are slowing progress.
Europe’s automotive industry is at a critical juncture, pressured to decarbonise and facing intense competition from China. The sector, which contributes 7% to Europe’s GDP and employs 6% of its workforce, must navigate significant changes to meet climate goals while grappling with new global rivals.
The European Green Deal, introduced by the previous European Commission, set ambitious targets for climate neutrality by 2050, focusing on reducing vehicle emissions. However, the transition to all-electric vehicles is proving challenging, with economic implications and implementation hurdles impacting progress.
Road transport is responsible for 16% of the EU’s total emissions, prompting the Commission to mandate the end of sales for new internal combustion engine (ICE) vehicles by 2035. Interim goals include a 15% reduction in emissions by 2025 compared to 2021 levels, with hefty fines for non-compliance.
Despite this, the shift to electric vehicles (EVs) is slower than anticipated. European manufacturers like Volkswagen, Mercedes-Benz, Renault, and Stellantis are expanding their EV offerings but face driving range concerns, inadequate charging infrastructure, and high vehicle prices. The focus on high-end EV models has further hindered broader adoption.
Adding to the complexity, Chinese automakers are making significant inroads into the global EV market. With substantial investments in EV technology and cost-efficient production, Chinese companies offer affordable vehicles packed with advanced features, posing a significant threat to European carmakers.
The US has imposed a 100% tariff on Chinese-made EVs to protect domestic industries, and the EU has implemented tariffs ranging from 19% to 37.6%. Nevertheless, Chinese firms are countering these barriers by setting up production facilities within the EU and maintaining their competitive edge.
In response, European car manufacturers are diversifying their strategies, with a notable shift towards hybrid-electric vehicles. These models, combining traditional engines with electric batteries, have gained traction and now represent nearly 30% of the market, according to the European Automobile Manufacturers’ Association (ACEA).
As the automotive sector adapts to the dual pressures of decarbonisation and international competition, European carmakers face a delicate balancing act to accelerate the shift to greener vehicles while managing economic impacts and responding to global market dynamics.