As the EU reviews its targets for zero-emission vehicles by 2035, it faces a deeper question: how can it drive the green transition without losing its industrial strength?
Europe's economic engine – the automotive industry – faces a multitude of challenges that threaten its future. Externally, increasing protectionism and volatile trading conditions are making planning difficult. Internally, the EU's ambitious CO₂ regulatory framework is forcing a technology shift that is supported neither by the market nor by technological realities. This toxic mix is more than just a challenge for the automotive industry. It is a test of whether Europe can maintain its global significance during the transition to a more sustainable future.
Today's reality is sobering
Suppliers are facing declining margins, and small and medium-sized enterprises are increasingly threatened with insolvency. The costs of complying with CO₂ targets are rising and trade barriers are increasing. Investment is declining and companies are rethinking their presence in Europe in favour of more predictable and cost-effective locations. Job losses are no longer just a risk but a reality affecting thousands of workers across the supply chain, from skilled factory workers to certified engineers. As energy, labour and compliance become increasingly expensive, we must ask ourselves: what competitive advantages does Europe have to offer? Meanwhile, geopolitical tensions are escalating. A series of new US tariffs has already disrupted business operations, while relations with China are marked by concerns about a level playing field and supply chain dependencies. China's retaliatory measures in the form of export restrictions on critical raw materials, including rare earths that are essential for electric vehicles, underscore how vulnerable Europe's industrial autonomy really is. This is nothing less than a wake-up call. Without a well-coordinated response, Europe risks being caught between excessive political measures and disruptions to global trade.
Easing CO₂ penalties for car manufacturers
The recent easing of CO₂ penalties for car manufacturers is welcome, but only temporary. It cannot correct a regulatory course that jeopardises future innovation and investment. The action plan for the automotive industry presented by the European Commission in March recognises the strategic importance of the sector. But good intentions are not enough. The recent strategic dialogues must now lead to strategic measures. What is currently on the table lacks the perspective, scope and ambition needed to secure Europe's industrial leadership in the coming decades. This would mean fewer job opportunities for young Europeans, less value creation within the EU single market and, ultimately, less tax revenue for EU Member States.
Three things are crucial for a change of course:
1. Ratify trade agreements and reshape our most important trade relations We must restore a level playing field in trade relations with China and ensure mutual market access on fair terms. A balanced trade agreement between the EU and the US will be crucial for both sides. Retaliatory measures should be used in a targeted manner and only serve to increase the chances of a negotiated solution. A sustained escalation of tariffs will only lead to instability, and we must avoid retaliatory measures hitting European companies particularly hard. Finally, diversification must be supported through the ratification and negotiation of trade agreements, including the Mercosur agreement.
2. Pursuing a technology-neutral approach to CO₂ regulation This includes promoting sustainable fuels, hydrogen technologies and hybrid solutions alongside battery electric vehicles (BEVs). Prescribing a single technological solution risks overlooking other solutions. BEVs are indispensable, but they are not the only option. Overly stringent regulations ignore market readiness, restrict innovation and increase costs. Production of BEVs and PHEVs in 2025 is now expected to fall short of expectations from just two years ago by more than 1.25 million units, partly due to regulatory and fiscal uncertainties.
3. Anchoring climate targets in industrial reality The EU's climate targets must be achieved in line with securing industrial capacity and supply chains. This applies to batteries and EV motors as well as to modernised combustion engines. Strategic autonomy depends on technological diversity and resilience. CLEPA and its members are determined to work with the EU institutions to shape a green transition that is not only climate-friendly but also economically viable and globally competitive. The decisions taken now will determine Europe's position in the industrial world order. Let us ensure that in 2035 we do not look back and ask: Why did we lose what we could have protected?
Benjamin Krieger, Secretary General of CLEPA
