Europe | Deep dive in the EU automotive industry

Summary

Europe's automotive sector, second-largest globally and key to the EU economy, faces urgent challenges: rapid decarbonization, China's EV dominance, and US trade protectionism. The EU’s innovation-driven Action Plan can preserve Europe's leadership if swiftly implemented.

Key points

• Key points:
• The automotive industry accounts for around 3% of employment and economic activity in the EU, with Germany leading by far, followed by Spain, Italy, Czechia, and Poland.
• The transition to electric vehicles (EVs) is progressing slowly due to high costs, insufficient charging infrastructure, and income-dependent adoption, risking the EU’s ability to meet its ambitious zero emissions target for new cars by 2035.
• Geopolitical tensions, particularly between the US and China, are reshaping global supply chains, compelling the EU automotive industry to diversify and reduce reliance on external suppliers, though this shift involves significant costs and strategic risks.
• To tackle these challenges, the EU launched in March 2025 an Action Plan focusing on clean mobility, innovation, workforce training, and strengthening supply chains, emphasizing rapid implementation to compete effectively on the global stage.

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