The European Union on 30 January launched its Strategic Dialogue on the Future of the European Automotive Industry, an initiative aimed at safeguarding a sector under growing pressure. With EU Commission President Ursula von der Leyen convening industry leaders and social partners, the ambition is to develop an action plan by 5 March that addresses the existential threats facing European carmakers—from the transition to carbon neutrality to fierce competition from China and potential trade disputes.
Von der Leyen’s message was clear: European manufacturers must remain globally competitive while navigating a cleaner future. But the real question is whether Brussels can truly help—or whether it risks entrenching the very obstacles that have already put the continent’s automotive sector at a disadvantage.
The reality is harsh: it will be extremely difficult, if not impossible, for the EU to shield its car manufacturers from further decline—especially if it continues to send mixed signals on policy. Europe should learn from Norway’s approach—a carefully planned and consistently executed transition that offers legal certainty for investors and compelling incentives for consumers.
Europe is falling behind
While the global car market is growing, Europe’s relative position is weakening. European manufacturers now account for just 17% of global vehicle production, trailing far behind China (33%). Germany, Europe’s automotive powerhouse, still leads within the EU, but its dependence on EU and international supply chains has grown, with 70% of its cars being produced abroad.
Meanwhile, the future is electric—and yet, European manufacturers remain highly reliant on combustion-engine vehicles, while Chinese brands are leading in EV affordability, production efficiency, and battery technology.
A massive shift in China’s consumer market
Europe’s struggles in the EV sector are compounded by a major shift in Chinese consumer preferences. Traditionally, European brands commanded strong loyalty in China, but this is no longer the case. Chinese consumers are now younger, more tech-savvy, and increasingly proud of their own brands. As a result, China is on track to surpass a 50% share of EV sales by 2025, far ahead of previous government targets.
Chinese car buyers expect integrated software ecosystems, AI-powered vehicle functions, and seamless connectivity, areas where domestic brands now excel. European manufacturers, by contrast, have been slow to innovate in these domains, often clinging to legacy business models that prioritise hardware over digital integration. Unless they adapt swiftly, their position in the world’s largest car market will continue to erode.
Lack of political will and policy fragmentation are holding Europe back
The EU’s response so far has been fragmented. In Germany, for instance, the abrupt end of EV subsidies led to a sharp decline in demand. Charging infrastructure remains uneven across the bloc, with a significant disparity between countries like the Netherlands (with approximately 817 public charging points per 100,000 residents) of Norway (the second highest, with 447 per 100,000). Meanwhile, Germany lags significantly behind, offering just 145 charging points per 100,000 residents, highlighting the fragmented nature of Europe’s EV infrastructure.
While Norway is the clear leader in EV adoption, with some 13,000 battery-electric vehicles (BEVs) per 100,000 inhabitants, the Netherlands has taken the lead in charging infrastructure per capita. Meanwhile, several other European countries, including Iceland, Luxembourg, Sweden, and Denmark, have surpassed the Netherlands in EV adoption. By contrast, much of Southern and Eastern Europe remains significantly behind in both EV adoption and charging infrastructure. This fragmented landscape is hardly a solid foundation for a thriving e-mobility sector. Norway, however, has pursued a consistent and well-defined electrification strategy, achieving an 82% market share for EVs in 2023—without the policy uncertainty and regulatory shifts seen in the EU.
Regulatory certainty and technology openness are key
If Europe wants to regain competitiveness, it must first fix a fundamental problem: policy uncertainty. Investment in new automotive technologies requires long-term commitments, but EU decision-making has been erratic. Fluctuating subsidy schemes, inconsistent emissions regulations, and the inability to provide clear incentives for technological innovation have deterred investment. The industry needs clarity, not political zigzags that discourage manufacturers from taking risks.
At the same time, maintaining technology openness must be a fundamental principle—especially in the realm of sustainability, where innovation and competition are key to driving progress. The EU’s push toward battery-electric vehicles should not come at the expense of other promising innovations. Hydrogen, e-fuels, and hybrid solutions could play a crucial role in a diversified clean mobility strategy—especially in regions where charging infrastructure remains weak, e.g., large parts of Southerrn and Central and Eastern Europe. The EU should not repeat the mistakes of the past by imposing a one-size-fits-all approach that ignores regional differences and consumer needs.
Deviating from emissions targets won’t help
Some in Brussels are now entertaining the idea of weakening emissions targets to ease the burden on struggling carmakers. This would be a strategic mistake. Europe’s global credibility and consumer trust hinge on the ability to maintain ambitious climate goals while ensuring realistic pathways for industry adaptation. Lowering the bar would do nothing to address Europe’s underlying competitiveness problem—it would merely postpone the inevitable reckoning with global market forces.
Instead of relaxing targets, the EU should focus on making it easier for manufacturers to meet them competitively. This means prioritising critical infrastructure investments—such as a fully interoperable, EU-wide charging network—and ensuring non-discriminatory trade and global market access for EU carmakers. It also means cutting the regulatory fragmentation in e-mobility that slows down progress and hinder manufacturers from scaling innovative solutions across member states.
Abolishing fleet targets or postponing fines would not help Europe’s car industry; rather, it would allow inefficiencies to persist. Some estimates suggest that Volkswagen may face EUR 1.5 billion in fines this year due to missed fleet emissions targets. But in the context of the company’s annual staff costs of around EUR 50 billion and its significant profits, a 10% reduction in labour expenses would more than offset these penalties while simultaneously improving its global competitiveness. This approach—focusing on internal efficiencies rather than relying on regulatory relief—could serve as a template for other manufacturers, including those in the premium segment, to better position themselves in an increasingly competitive global market.
Europe needs a coherent strategy—not more short-term fixes
The Strategic Dialogue in Brussels may have noble intentions, but it will fail unless it moves beyond rhetoric and into consistent, long-term policymaking. Europe should take inspiration from Norway’s model—a stable and well-communicated transition strategy that provides both legal certainty for investments and clear incentives for consumers.
Brussels cannot and should not try to shield European carmakers from global competition. What it can do is stop making the problem worse with incoherent policies. Sticking to emissions targets, maintaining technology openness, and ambitiously addressing charging infrastructure gaps are the real keys to safeguarding Europe’s automotive future. If the EU fails to provide this clarity, European carmakers will continue to lose ground—regardless of what Brussels decides at its upcoming auto summit.