EU playing catch-up: China leading the race for electric car investments

June 20, 2018

Mobility is at a crossroads and in each of the key three revolutions, automation, sharing and electrification of cars, Europe is falling behind. China has secured seven times more investments in electric vehicle manufacturing than the EU has in the last year only.  Based on public announcements, China has received over EUR 21.7 billion of investment to produce electric vehicles while the EU secured only EUR 3.2 billion, seven times less. Front runners the Volkswagen Group, Daimler AG and Nissan have provided the bulk of the investment in China, driven by the aggressive electric vehicle policy. This policy requires carmakers to obtain credits for the production of EVs that are equivalent to 10% of the overall passenger car market in 2019 and 12% in 2020.

Europe runs the risk that by 2030 a quarter of the jobs in automotive manufacturing could be lost if electric vehicles are imported rather than manufactured here.  But a new study also shows 200,000 jobs could be created across the EU economy through a shift to low and zero emission vehicles built here; and this is supported by a range of other published work including the European Commission’s impact assessment on the new car CO2 regulation. The market for batteries alone is estimated to be worth 250 million euros.

If Europe is to reap the economic, employment and climate benefits of the transition to e-mobility, it needs to adopt a progressive policy that actively encourages investment in manufacturing of plug-in vehicles here in Europe, just as China and California have done through their mandates.  The most effective way to achieve this is to develop a sizeable market for plug-in vehicles here in Europe. This is more likely to be met through local production of vehicles, as opposed to a niche market that can be more cheaply met by importing vehicles.

EU environment ministers gather in Luxembourg on 25 June to discuss the new EU CO2 rules for cars and vans, the key regulation that will define the pace of the e-mobility transition in Europe post 2020. A progressive 2025 target of 20% CO2 reduction, together with a sales target for low and zero emission vehicles will help drive the market in Europe that is currently stagnating through a lack of supply. Member states can also support the growth in plug-in vehicle manufacturing locally in Europe through investment in recharging and reform of vehicle taxes.  Strong policies can help Europe to retain its global leadership in the automotive industry. With weak targets it is likely the EU position and its key sector will be usurped by China.

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