How the European Union is supporting the automotive industry

Translated by Erica Cervellera

In the past, one could have stated that the big European economies were rich partly because of the automotive industry. Currently, the drastic fall of veichles sales and the closure of plants (with their related mass redundancies) show a very different picture. Indeed, the European automotive industry is facing a major crisis whose roots are various but all sharing the same outcome: the loss of competitiveness in a key sector of the European Union. 

Causes of the crisis

Firstly, people hold to be true that the transition to a green and digital economy implemented by the European countries didn't foster the automotive industry which had to diversify its production in a few years in favor of an electric approach: this resulted in a small portion of consumers who were willing to bear the very high costs of the zero-emission vehicles. As a matter of fact, the legislation in force requires that car companies reduce their CO2 emissions by 15% within 2025. This goal was highly criticized, mainly because of the restricted amount of time that the companies had to comply with such standards. Together with other reasons, these pressures led the Commision to give two more years to the companies to comply with the rules, thus postponing the deadline to 2027.

Secondly, it should be stressed the major impact of some other competitor countries, such as China, whose car industry is less constrained by strict rules and regulations - particularly emission-wise - and holds the record in the battery production field. 

The European reaction

In such a context, the EU reaction was timely for sure. In January 2025, the European commission launched an initiative named "Strategic Dialogue with the European automotive industry" which aims to directly bring together all the main industrial leaders and stakeholders in a dialogue focused on the actions to be taken to emerge from the deep crisis of the european automotive industry.  

A broader Action Plan reports all the conclusions resulted from the dialogue between institutions and the business world, a plan presented by the European Commissioner for sustainable transports Apostolos Tzitzikostas in March 2025.  

Particularly, the Action Plan highlights a precise strategy aimed at ensuring an adequate access to resources and at increasing the technologic research also through the definition of a clear regulatory framework. 

There are five cornerstones which are the basis of the project: on one hand, they relate to the process of digitalization and transition to a greener economy and, on the other hand, they stress the need to ensure the competitiveness of an industry which, according to recent figures, employs more than 13 millions of workers and accounts for almost a gazillion euros to the European gross domestic product. 

One could state that the plan moves on two different lines which are tightly interconnected. 

Its first focus is the investments in the batteries and softwares production field which should respect the environment and be low-cost at the same time.  

Then, as the Regulatory Authority, the European commission highlights the regulatory importance of the phenomenon, anticipating the will to present proposals on legislation where the conditions of such fundings, the expected results and the compliance requirements shall be specified.

Beyond the strictly technical and financial aspects, great attention is being paid to the sensitive issue of job retention. It is estimated that due to the high level of specialization required by the technological transition—and thus the need for skilled labor—a significant number of people could lose their jobs.

In this regard, the European Union already has important support tools in place, such as the European Social Fund, and is also determined to act swiftly should such a situation arise, including by promoting initiatives aimed at acquiring new skills in a sector currently undergoing profound and historic change.

Criticism of the Plan

After the presentation of the Action Plan, European parties and trade unions immediately spoke up by mainly criticising the lack of several aspects, which were debated during the previous months, and the difficult coexistence of the real project's effectiveness - in terms of employment and competitiveness - and the sustainable development goals which are now considered to be a cornerstone of the European agenda. 

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