Von der Leyen's plan to revive the European car industry

BrusselsThe automotive industry Europe is in crisis and on the path towards the transition to electric cars it is lagging behind that of the United States and, in particular, China. In this context, the European Commission has outlined a strategy to revive the sector, which represents 7% of the gross domestic product (GDP) of the community block, and this Wednesday it has proposed various measures to boost the manufacture of the European car. Among others, it proposes a relaxation of the pollution limits of combustion vehicles, common aid to the entire European Union and the prioritization of Made in Europe ahead of components and cars with an American or Chinese accent.

The biggest legal reform proposed by Ursula von der Leyen is the three-year postponement of the entry into force of sanctions for car manufacturers that do not comply with CO₂ emissions standards. They were scheduled to start being applied from this year and required all car companies to reduce pollution by 15% compared to 2021. From then on, these emission reduction rates will increase: in 2030 it must be 55% and in 2035, 100%.

In this way, all the extra pollution produced by manufacturers will have to be recovered in 2026 and 2027, and over the course of these three years they will need to reduce emissions by at least 15% compared to 2021. With this modification, the member states will now have to approve 16 billion euros in fines that they should have paid to the European Commission for failing to comply with pollution limits.

In Catalonia this measure will especially benefit Seat and Cupra, since their production of electric cars is not yet sufficient to offset the emissions from combustion cars and, therefore, the two Catalan brands and their parent group Volkswagen risked significant fines this year, or reduced production and sales and employment.

Another of the most notable measures of this Brussels plan is the strengthening of the European industry throughout the value chain of car manufacturing, especially with regard to batteries for electric vehicles. In this regard, the European Commission assures that it will propose various initiatives to condition public aid to cars that have been largely made within the European Union or will give tax incentives to individuals and companies that choose to purchase vehicles from predominantly European companies. It must be taken into account that companies, with their fleets, are the largest buyers of cars.

Along the same lines, Brussels assures in the announcement it made this Wednesday that it will define stricter regulations on the origin of products to avoid unfair practices by competing powers, such as China in particular. Thus, the community executive warns that it will not hesitate to open new investigations if it sees that Beijing injects multimillion-euro subsidies to its companies so that they can offer more competitive prices. And, in fact, the European Commission has already opened different investigations against the Asian giant and last October approved raising tariffs on Chinese electric car imports up 35.3%.

Aid for the purchase of electric cars

The sale of electric cars in the European Union fell by 5.9% in 2024, and to boost demand, the European Commission is considering offering tax incentives, especially for companies. Specifically, Brussels is committed to presenting new legislative proposals by the end of 2025 to encourage the purchase of electric vehicles by companies, which represent up to 60% of the demand for new cars, and will withdraw the incentives that exist for the acquisition of combustion cars.

On the other hand, Brussels' plan also includes the injection of 3 billion euros of aid to the electric car production sector in the EU that was already budgeted. And, later, an additional 1.8 billion euros will be added for the next two years, another 1 billion euros to develop autonomous vehicle software and 570 million euros for green energy charging infrastructure.