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EU car industry faces high energy costs, EV transition, job losses, and US tariff threats. European Commission seeks solutions to boost innovation amid fierce competition from cheaper Asian manufacturers.
The European automotive industry is facing a perfect storm: high energy prices, fierce competition from cheaper manufacturers in the East, a very costly transition to electric cars, and the countless job losses associated with this transition. Adding to the uncertainty, the new Trump administration in the United States is threatening to impose tariffs, further complicating the sector’s outlook.In response, the European Commission has initiated a dialogue with key players in the industry to address these pressing issues. Ursula von der Leyen, President of the European Commission, stressed the need to unlock the innovative potential of European companies. “The fundamental question is what is still missing to unleash the innovative power of European companies,” she said.Sigrid de Vries, Director General of the European Automobile Manufacturers’ Association (ACEA), highlighted the urgency of making Europe more competitive on the global stage. “We need to ensure that Europe as a whole becomes more competitive globally so it can compete with China and the US,” she said. “This means unleashing the industry’s innovative capacity while making manufacturing in Europe more affordable and profitable. Reducing energy costs and regulatory burdens is crucial. We need to streamline permits and remove barriers that hinder progress, focusing less on dictating rules and more on incentivising growth.”The stakes have never been higher. The European car industry employs 13 million people across more than 250 production units, producing 15 million vehicles annually. It contributes 7% to the region’s GDP, making it one of the backbones of the European economy.The first round of consultations will be followed by further discussions, with the European Commission set to present an action plan on 5 March. However, de Vries stressed that plans alone are not enough. “We will have an action plan in a couple of weeks, but that’s still just a plan. We need real action,” she said. “We expect this plan to trigger concrete steps to address the problems we face.”One of the most contentious issues is the EU’s commitment to phase out new cars and vans with internal combustion engines by 2035. This ambitious target is now in question as the transition to electric vehicles involves significant economic and social costs.The conundrum of tariffs on Chinese EV productionAnother problematic topic is the tariff on electric cars manufactured in China. Although the intention is to protect European manufacturers, the tariffs will also impact European companies because many of them rely on Chinese components and production.The discussion extends beyond technical aspects. There are also political hurdles. Any proposed measures require agreement among the 27 EU member states and the European Parliament. Establishing a common ground will be essential for maintaining the industry’s competitiveness in the future.As the European Commission prepares its action plan, the car industry is calling for decisive measures to reduce costs, streamline regulations, and motivate innovation. The coming weeks will show whether Europe can take the necessary steps to overcome these challenges and maintain its position as a global leader in this sector.
