European Automakers Urgently Seek EU Policy Change Amid Plummeting EV Demand

Volkswagen electric cars are parked in a storage tower in Dresden, Germany, on June 8, 2021. Sean Gallup/Getty Images

Plummeting electric vehicle sales and carbon dioxide (CO2) target requirements for new cars in 2025 raise the prospect of multibillion-euro fines, production cuts, and job losses, according to the European auto industry.

On Sept. 19, the European Automobile Manufacturers Association (ACEA) urged Brussels to take action amid European Union green targets.

“A continuous trend of shrinking market share for battery electric cars in the EU sends an extremely worrying signal to industry and policymakers,” stated the ACEA, which represents 15 major European automotive manufacturers, including BMW, Ford, Mercedes-Benz, and Volkswagen, among others.

Europe’s Industrial Future

Recent data from the auto industry body found that European EV sales are plummeting as companies face intense competition from Chinese manufacturers of electric vehicles (EVs).

Sales of fully electric cars slumped by 43.9 percent in August, as the bloc’s biggest EV markets, Germany and France, recorded drops of 68.8 percent and 33.1 percent respectively, according to numbers from the ACEA.

The ACEA stated that it still supported decarbonization targets but needed short-term relief to “secure Europe’s industrial future.”

Starting in 2025, EU targets will require a 15 percent reduction in CO2 emissions for both cars and vans from 2021 levels. The law also stipulates that from 2035, all new cars that come on the market cannot emit any CO2, making it illegal to sell new fossil fuel-powered vehicles in the bloc.

Emerging Concerns

As EU CO2 reduction targets draw near, the appetite to revise or reconsider the legislation is growing stronger.

Earlier in the month, the Italian government warned about its own industry being affected by the new petrol car ban.

Italian Energy Minister Gilberto Pichetto Fratin criticized the policy at the TEHA business forum in Cernobbio, Italy, saying that “the 2035 ban on new combustion engine cars is absurd and needs to be revised.”

Germany’s Volkswagen also recently announced that it is considering factory closures in the country for the first time amid growing pressure from cheaper Chinese EVs. The automaker is targeting $11 billion in savings by 2026 to navigate the transition to electric cars.

‘Incredibly Damaging’

However, despite calls for the EU Commission to change course, an EU policy expert says it’s unlikely that the body will back away from its climate legislation.

“This isn’t something that the EU can backslide on,” an analyst and a research fellow at the think tank UK in a Changing Europe, told The Epoch Times before the ACEA’s call for short-term relief.

“It would be incredibly damaging to its credibility as an international climate leader if it were to push back on these things. So as much as there’s going to be big pressure from member states, there’s also a very, very strong incentive from the commission not to budge.”

Following the laws set out is a “basic principle” of EU membership, he said.

The analyst said that there are occasionally exemptions “but broadly speaking, you follow the rule book, and that’s non-negotiable.”

He said the commission has compromised with member states on the legislation, noting that Europe’s low-volume car manufacturers, making fewer than 1,000 to 10,000 new cars annually, will be exempt from meeting a specific emission target. 

“There’s been quite a lot of debate around exemptions for allowing the building of cars that use E-fuels,” he said, which still leaves the door open to the combustion engine.

He added the rule requiring the complete phase-out of CO2-emitting new cars by 2035 was a key part of European Commission President Ursula von der Leyen’s European Green Deal and is “absolutely essential to the net zero transition.”

Profound Shift

Despite this, Europe’s auto industry is warning that a stringent push to net zero and EV vehicles are about to threaten investment, jobs, and competitiveness.

The ACEA board stated that it is missing crucial conditions to “reach the necessary boost in production and adoption of zero-emission vehicles.”

Some of the issues it listed included problems related to charging and hydrogen refilling infrastructure, a competitive manufacturing environment, “affordable green energy,” purchase and tax incentives, and a secure supply of raw materials, hydrogen, and batteries.

It stated that “economic growth, consumer acceptance, and trust in infrastructure have not developed sufficiently either.”

“As a result, the zero-emission transition is highly challenging, with concerns about meeting the 2025 CO2 emission reduction targets for cars and vans on the rise,” the ACEA stated.

It stated that the current rules “do not account for the profound shift in the geopolitical and economic climate over the past years and the law’s inherent inability to adjust for real-world developments further erodes the competitiveness of the sector.”

“This raises the daunting prospect of either multi-billion-euro fines, which could otherwise be invested in the zero-emission transition, or unnecessary production cuts, job losses, and a weakened European supply and value chain at a time when we face fierce competition from other automaking regions,” the trade body stated.

EU Law

A commission spokeswoman told The Epoch Times by email that it had received the letter and will reply in due course.

Prior to the ACEA’s call for relief, a commission spokeswoman explained to The Epoch Times the framework that commits EU countries to the 2035 legislation.

She said all new cars sold in Europe from 2035 must be zero-emission at the tailpipe and noted that the legislation is “technology neutral,” characterizing this as meaning there is no ban on combustion engines.

“The transition to zero-emission vehicles is an important part of the European Green Deal and our commitment to climate neutrality by 2050. The CO2 standards for new cars are an important part of our ‘Fit for 55’ package of sectoral legislation to implement our overall targets,” the spokeswoman said.

She said there is a review clause to review progress on how countries are transitioning toward the phase-out of CO2-emitting new cars by 2035. The clause states that in 2026, the commission will assess the progress made toward achieving the targets.

Reuters contributed to this report.