There was a time when five-minute charging, full self-driving and ultra-fast development cycles would have been announced in Stuttgart, Wolfsburg or Paris. No longer. These days German and French carmakers are scrambling to catch up with technology—like cheap LFP batteries and software-defined vehicles—that China adopted years ago.
Amidst Trumpian chaos and war in Ukraine, Ursula von der Leyen managed to find the time to draft a plan to modernise Europe’s auto industry.
We criticised her weakening the 2025 standards. However, the plan also includes excellent actions to boost EV demand, digitisation and production of batteries. It combines some of the best elements of American, Chinese and European industrial policy. If enacted, it would actually put Europe’ auto industry back on track.
Alas, von der Leyen’s Commissioners are treating the action plan as a menu, picking the bits they like and slowwalking on things they (or their administrations) don’t like.
Let’s look at the three biggest promises the EU Commission chief made.
First, she promised European battery makers IRA style production aid. This is an absolute breakthrough. Production aid coupled with resilience criteria is the way to give European battery producers a chance and encourage dominant (Chinese) players to share technology. Unfortunately, Teresa Ribera just issued draft state aid guidelines banning production aid. Meanwhile Wopke Hoekstra’s team opposes production aid as part of DG Clima’s battery fund.
Secondly, von der Leyen promised rules to regulate Chinese foreign direct investment (FDI) in the auto industry. The goal is to get better and more joint ventures, and to prevent CATL, BYD and others from setting up “screwdriver” factories and Chinese enclaves in Europe. Again, an excellent idea but as it stands Commissioner Sefcovic is rumoured to be working only on non-binding guidelines, which Hungary, Spain, Germany and others will of course ignore.
Things look slightly more hopeful for VdL’s promise to require “European content” for batteries and EV components either in the fleets law, or in the so-called Industrial Decarbonisation Accelerator Act (IDAA). It remains to be seen whether the IDAA, once proposed and approved, will have more teeth than the Net Zero Industry Act (NZIA), and whether the fleets law will be worth the paper it’s written on.
Indeed, the action plan requires that EU transport chief, Tzitzikostas, delivers a law to decarbonise corporate fleets. This is another excellent idea and could easily be achieved by requiring big companies to only buy zero emission cars as of 2030.
The potential is even bigger for trucks. The EU should set targets for the likes of Amazon, IKEA and Heineken to procure zero emission kilometers from the hauliers that move their goods. It would have a negligible impact on the prices of our products but would create all the investment certainty truckers need to finance the trucks, and for truckmakers to comfortably hit their EV goals. The truck industry and shippers support this approach.
And yet, as it stands, the Commission’s transport directorate is working towards a directive with non-binding targets, potentially squandering the greatest regulatory opportunity of the action plan.
Meanwhile car lobbyists are focused on weakening the EU’s 2035 goal, pushing for the 100% target to be scrapped and for more plug-in hybrids.
And so despite the beautiful auto action plan, the EU is cruising towards weaker CO2 standards and an even weaker industrial strategy.
Von der leyen now faces a choice. She can let her team of Commissioners do the bare minimum, give car execs the weaker EV targets they want, and oversee what Mario Draghi called the “the slow agony of decline” of Europe’s once mighty car industry.
Or she can double down on her excellent plan, tell her Commissioners to get with the program, and be remembered as the woman that put Europe’s vehicle industry on the road to success.
