EU's approach to decarbonizing the automotive sector - What is at stake?

The EU automotive sector and its extended EV ecosystem stand at a critical juncture. The Strategic Dialogue held on September 12 highlighted the urgent need for a cohesive EU framework and unified action to accelerate the automotive transition to EV, support innovation and strengthen Europe’s position in sustainable mobility.

Viewpoint #1 - What is at stake?

Last Friday, the third “Strategic dialogue on the future of the Europea automotive industry” took place. If all stakeholders agree that the future of road transport is electric, several voices are calling for a more flexible and pragmatic policy approach. What is at stake? What are the challenges? How might the outcome affect the automotive and energy sectors?

1. The future of automotive & energy industry

• Millions of jobs across automotive, EV charging and energy sectors. The EU automobile industry alone accounts for c. 13 m jobs EUR 500 m, manufacturing 15 m vehicles, with a trade surplus exceeding EUR 81 bn last year

• Infrastructure investment efficiency: Billions of euros have been invested or committed to EV charging infrastructure, battery and vehicle manufacturing, power generation and grid upgrades. As of Q1 2025, Europe has surpassed 1 million public charging points - with a growing share of ultra-fast charging – and another million should be installed in the next five years to meet EV charging needs. Similarly, the power sector has launched huge investment plans – EUR 60 to 70 bn yearly to make the EU grid fit for net-zero emissions

• The competitiveness of European OEM: it has decreased over the last decade due to several factors: higher production costs, supply chain pressure, disruption by new entrants, slower innovation cycle / difficulty of managing the energy transition in a demanding regulatory context

2. Climate goals

• Road transport accounts for ~ 20% of EU GHG emissions. All decarbonization plans foresee that these emissions will decrease significantly in the coming years, given that other sectors (aviation, industry, agriculture) do not have clear decarbonization paths for the moment and will decrease more slowly

• Electrification appears as the only path to meet road transport decarbonization: other technologies are not as mature (H2) or do not have the same level of real-world emissions (PHEV, etc.).

3. Technological sovereignty

• Sales of European EV OEMs are surging, though not all of them have reached their fair market share in Europe, while China and the US are getting more and more complex to address and new entrants are dominant globally (Tesla, BYD and other Chinese OEMs)

• 99% of batteries come from non-European manufacturers. Europe is currently outpaced at every step of the value chain. Building domestic battery production and supply chain capacities is a strategic imperative

• Last but not least, the electric transition is a unique opportunity for Europe to reduce its dependency on imported crude oil while leveraging its low-carbon electricity capacities