Boosting Europe's Automotive Sector: The EU’s Strategic Action Plan for the Future
The European car industry is not only a cornerstone of the EU’s economy but also a dynamic sector poised for transformation. With over 13 million jobs and contributing approximately 7% of the EU’s GDP, the automotive sector is integral to Europe’s economic fabric. However, the industry is currently navigating a series of challenges, including rapid technological advancements, increasing competition, and the evolving geopolitical landscape. To secure the future of this critical industry, European Commission President Ursula von der Leyen launched the Strategic Dialogue on the Future of the Automotive Industry in January 2025. This dialogue brings together industry leaders, social partners, and other key stakeholders to collaborate on solutions for a thriving, sustainable automotive ecosystem in Europe.
In addition to the strategic dialogue, the European Commission unveiled a comprehensive Action Plan designed to ensure that the EU automotive sector remains competitive, innovative, and sustainable. This ambitious plan outlines several key actions to drive economic growth, job creation, and environmental sustainability within the European car sector.
Key Elements of the EU’s Action Plan for the Automotive Industry
The Action Plan aims to address the most pressing challenges facing the automotive sector, focusing on innovation, digitalisation, sustainability, and competitiveness. Below are the core components of the Action Plan.
1. Innovation and Digitalisation
The European Commission is prioritizing innovation by launching a new European alliance for connected and autonomous vehicles. This collaboration will unite European automotive stakeholders to develop next-generation vehicles, including autonomous cars that are equipped with cutting-edge technologies.
In addition, the Commission is creating large testing areas and regulatory 'sandboxes', where innovators can freely test and improve autonomous vehicle technologies in a controlled environment.
The Commission is also planning to invest around €1 billion by 2027 in joint public-private partnerships, backed by the Horizon Europe Programme, to accelerate the development of autonomous vehicle technologies and further support the industry’s digitalisation.
2. Transition to Zero-Emission Vehicles
A central focus of the EU’s Action Plan is the transition to zero-emission vehicles (ZEVs). To facilitate this shift, the Commission will propose amendments to the CO2 Standards Regulation for cars and vans. These changes will allow manufacturers more flexibility by enabling them to average their emissions performance over a three-year period (2025-2027) while still working toward meeting the 2025 emissions targets.
In addition, the Commission aims to boost demand for zero-emission vehicles by offering various incentives for consumers to switch to cleaner alternatives. This includes accelerating the deployment of charging stations through the Clean Transport Corridor Initiative and enhancing consumer trust through measures like better battery repair services. Furthermore, the EU will support social leasing schemes to make zero-emission vehicles more accessible to everyone, including people who cannot afford to buy them outright.
3. Strengthening Supply Chain Resilience
For the European automotive industry to remain competitive, the EU must secure a self-sufficient supply chain, especially in the area of battery production. To support this, the Commission will focus on strengthening European battery production and ensuring that the continent can meet the demand for electric vehicle (EV) batteries.
The Commission has allocated a budget of €1.8 billion to secure and enhance the supply chain for battery raw materials. This investment aims to reduce dependence on external sources and create a sustainable and competitive supply chain for Europe’s automotive manufacturers.
4. Addressing Skills Gaps and the Social Dimension
As the industry evolves, there is an increasing need for a skilled workforce capable of adapting to new technologies and sustainable practices. The Commission plans to tackle the skills shortages and ageing workforce in the sector by:
• Expanding support through the European Globalisation Fund for workers affected by industry changes.
• Increasing funding through the European Social Fund Plus (ESF+) to help workers reskill and find new job opportunities within the automotive industry.
• Encouraging EU countries to reprogram ESF+ funding to better support the automotive sector, particularly in upskilling and reskilling programs.
• Using the European Fair Transition Observatory to gather data on future job risks and identify skills gaps in the sector.
5. Enhancing Global Competitiveness
The EU Commission is also focused on ensuring that the European automotive industry remains competitive on the global stage. To achieve this, the Commission will:
• Ensure fair trade by using trade defence instruments, such as anti-subsidy measures, to protect European manufacturers from unfair competition.
• Continue negotiations with partner countries to secure market access and sourcing opportunities for European carmakers.
• Propose measures to attract foreign investments that will bolster the industry’s long-term competitiveness and growth potential.
• Streamline and simplify regulations to reduce the administrative burden on manufacturers, allowing them to operate more efficiently.
Key Takeaways:
• EU Action Plan for the Automotive Industry aims to create a strong, sustainable, and competitive car industry in Europe.
• The plan focuses on innovation, digitalisation, zero-emission vehicles, and strengthening the supply chain.
• €1 billion by 2027 will be invested in autonomous vehicle technologies through a public-private partnership backed by Horizon Europe.
• A proposal will be made to amend CO2 Standards Regulations for cars and vans to increase flexibility for manufacturers in meeting emissions targets.
• The EU Commission will accelerate the roll-out of charging stations and implement incentives to increase the adoption of zero-emission vehicles.
• The EU Commission will allocate €1.8 billion to enhance the battery raw material supply chain in Europe.
• European Globalisation Fund and ESF+ funding will be used to upskill and reskill workers in the automotive sector.
• The EU will use trade defence instruments and foreign investment policies to ensure a level playing field and global competitiveness for European carmakers.
• The plan will support the transition to a greener automotive sector, with a focus on sustainability and job creation for the future of Europe.
By driving innovation, advancing sustainable transport solutions, and strengthening the industry’s global position, the EU’s Action Plan sets the stage for a new era in automotive manufacturing, ensuring that Europe remains at the forefront of global automotive development.
