Brussels is gripped by a fierce debate over the fate of Europe's automotive industry.
According to Reuters, a draft proposal from the European Commission obtained by Reuters shows that the "Automotive Industry Action Plan" to be released on March 5 will launch a combination of measures: forcing an increase in the localization rate of electric vehicle batteries, accelerating the electrification of corporate fleets, exempting zero-emission heavy trucks from road charges, and exploring new models of car purchase subsidies.
The background of these measures is that the European electric vehicle market will see a 5.9% decline in sales in 2024. However, the draft has not yet been released, but it has already triggered a heated debate about "industrial protectionism" and "transformation costs."
On March 3, 2025, local time, in Brussels, Belgium, at the European Commission headquarters in Berlaymont, European Commission President Ursula von der Leyen gave a media interview after the strategic dialogue on the future of the European automotive industry.
According to the draft, the EU intends to issue an order to accelerate electrification for "company fleets" that account for 60% of the new car market, which is regarded by Julia Poliskanova, vehicle policy director of the think tank Transport & Environment, as "a real lever to pry the market". But at the same time, the lesson of Germany's sudden cancellation of car purchase subsidies last year, which caused a 27% drop in local electric vehicle sales, has made the industry full of doubts about the continuity of the policy. The Italian Automobile Industry Association ANFIA has publicly called for the cancellation of the 2025 carbon dioxide emissions penalty mechanism, saying that the threat of a 15 billion euro fine faced by automakers "is stifling innovation investment."
"The cost of each power battery in Europe is 38% higher than in China." Data from consulting firm Benchmark Mineral Intelligence reveals one of the core reasons for Europe's slow electrification. The draft's clause on "European local content requirements for battery components" is seen as a defensive measure against China's supply chain advantages. However, CATL's Hungarian factory is about to start production, and Honeycomb Energy's German base has received EU subsidies - Europe's localization strategy relies on Chinese technology input.
More subtly, the draft allows foreign-funded enterprises to obtain support by cooperating with European companies. This "technology for market" model is quietly advancing in the cooperation between BMW and Great Wall's joint venture Beam Automotive, and Stellantis and Leapmotor.
When Chinese car companies' affordable electric cars began to land in European ports, a policy split emerged within the EU. France vigorously promoted the "Made in Europe" threshold and supported models below 20,000 euros such as Renault Dacia Spring, while Germany was worried that its local high-end brands would be affected and advocated resistance through a 45% tariff.
In 2024, the average price of electric vehicles in Europe will still be as high as 48,000 euros, while the price of similar products from Chinese brands is about 30%-40% lower. Industry analysts pointed out that "Europe needs 'price butchers' like BYD to force cost reduction, but is afraid of losing market share."
At the policy discussion table in Brussels, two scenes contrasted each other. On one hand, Volkswagen's profit margin dropped to 3% due to excessive investment in electrification, while on the other hand, Tesla made $1 billion a year by selling carbon credits to traditional car companies. This contradiction forced the EU to reserve space for "fiscal relief" in the draft. However, environmental organizations warned that any compromise to relax emission targets would shake the policy cornerstone of banning the sale of fuel vehicles in 2035.
The draft of the new EU electric vehicle policy is "jumping back and forth" between global competition and industrial protection. When China controls 75% of battery production capacity and the United States absorbs industrial chain investment with the "Inflation Reduction Act", Europe tries to build a defense line with "local content".
But the success of this action depends not only on the speed of charging station construction or the intensity of subsidies, but also on whether a balance can be found between openness and protection, environmental protection goals and business realities. As a German automotive engineer said in an interview before: "We are paying the price for our hesitation on electrification in the past decade. Now every policy is like answering multiple-choice questions in the emergency room."
