Published by Global Banking & Finance Review®
Posted on January 30, 2025
4 min readLast updated: January 27, 2026
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The EU has launched an initiative to support carmakers in electrifying fleets amid concerns over CO2 emissions fines and competition from U.S. and Chinese rivals.
By Philip Blenkinsop
BRUSSELS (Reuters) - European Commission chief Ursula von der Leyen hosted auto sector executives, unions and interest groups on Thursday to debate how to help EU car producers electrify their fleets and take on more advanced Chinese and U.S. rivals at the same time.
The sector, hit by factory closures and job cuts, including 54,000 job losses among auto suppliers last year, is also grappling with the threat of U.S. trade tariffs and a reliance on China for critical minerals and batteries.
The EU executive hosted 22 key players for its 'strategic dialogue' on Thursday, including the CEOs of BMW, Mercedes-Benz and Renault and suppliers Robert Bosch and Forvia. It will hold a public consultation and separate discussions, such as on key technologies, that will feed into an auto industry plan to be presented on March 5.
Forvia, Europe's third-largest car supplier, said it was encouraged by the Commission's focus on the sector and called the meeting a good first step, but wanted to see outcomes.
Automakers' chief focus has been for the EU to axe potential fines for auto producers that do not meet fleet CO2 emissions targets this year.
Renault boss Luca de Meo estimated these could reach 15 billion euros for European producers, with electric vehicles needing to push beyond a 20% market share to avoid them. The market share of EVs in Europe dropped to 13.6% last year after Germany abruptly ended subsidies for EV purchases.
European automakers could choose to meet the electric targets by reducing petrol or diesel car production or by buying credits from Tesla or Chinese competitors, industry sources say.
"Basically automakers would buy green credits from the country which is polluting the most in the world, and fund those Chinese EV makers on which EU has just imposed tariffs," said Gianluca Di Loreto, partner at consultancy firm Bain & Company.
Leaders of auto manufacturing hubs Germany, Italy and the Czech Republic have urged Brussels to waive penalties or have them calculated over a longer period. The Commission has hinted at some flexibility, but so far stood fast.
Pro-environment think tank T&E says this is with good reason. It says the industry has had since 2017 to prepare with many new cheaper models now hitting the market, that the 2025 targets are achievable and that carmakers are unlikely to face penalties, with some credit buying, but also increased EV and hybrid sales. In the worst case, it says, fines would be below 1 billion euros for the sector.
"If you postpone this by a year or by two years, you're not going to be in a better position. You're postponing something that is essential to your future success," said T&E executive director William Todts, who also attended the dialogue.
LONGER-TERM POLICIES
Todts argues that instead of debating fines for months on end, the dialogue should focus on longer-term policies to help the European car industry succeed.
These could include improving charging infrastructure and incentives for consumers to buy domestically produced EVs, in line with the tax credits the United States Inflation Reduction Act brought in. This could particularly apply to corporate fleets, which make up 50-60% of purchases of new vehicles.
Auto suppliers have argued the bloc should set a clear target of 70-80% for regional content, following the North American model, to protect the 13 million people the sector employs.
Then there is the issue of how to deal with potential U.S. tariffs, as threatened by President Donald Trump.
BMW CEO Oliver Zipse said he would propose the EU lower its standard car import duty for U.S. vehicles from 10% to 2.5%, matching the U.S. rate currently applied to EU car imports.
(Reporting by Philip Blenkinsop; Additional reporting by Gilles Guillaume in Paris, Victoria Waldersee, Christina Amann in Frankfurt and Giulio Piovaccari in Milan; Editing by Frances Kerry and Christina Fincher)
The EU's auto support plan is aimed at helping car producers electrify their fleets amidst challenges like factory closures and job cuts.
Renault's CEO estimated that potential fines for not meeting CO2 emissions targets could reach 15 billion euros for European producers.
Discussions include improving charging infrastructure and providing incentives for consumers to purchase domestically produced electric vehicles.
Automakers may meet electric vehicle targets by reducing production of petrol or diesel cars or by purchasing green credits from other manufacturers.
Auto suppliers argue that the EU should set a clear target of 70-80% for regional content to protect the jobs of the 13 million people employed in the sector.
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