Europe's Electric Vehicle Industry in Trouble: Challenges to the Transition Path

Europe's Electric Vehicle Industry in Trouble: Challenges to the Transition PathA recent article in the UK's The Guardian highlights the grim reality facing Europe's electric vehicle (EV) industry. Despite the crucial role of EVs in Europe's green, low-carbon economic transition, their development is sluggish, investment is insufficient, and the cancellation of subsidies and incentives are harming this key industry

Europe's Electric Vehicle Industry in Trouble: Challenges to the Transition Path

A recent article in the UK's The Guardian highlights the grim reality facing Europe's electric vehicle (EV) industry. Despite the crucial role of EVs in Europe's green, low-carbon economic transition, their development is sluggish, investment is insufficient, and the cancellation of subsidies and incentives are harming this key industry.

Earlier this year, the French government launched a social rental program aimed at stimulating demand by subsidizing electric vehicle rental costs. While the plan initially saw an increase in demand, it also exposed the inability of French car manufacturers to cope with the rapid growth, leading to the program's eventual termination.

In the autumn, EU governments withdrew subsidies and incentives for electric vehicles, while failing to provide adequate funding to expand charging infrastructure and grid capacity. This has led to EV sales lagging far behind the pace needed to achieve the 2035 zero-emission target. Data shows that EV sales declined for the fourth consecutive month in August, with overall European car sales hitting a three-year low. Key markets like France, Germany, and Italy witnessed double-digit sales declines.

Volkswagen, a symbol of German industrial prowess, recently announced plans to close domestic factories for the first time in the company's history. In addition to the cost-of-living crisis and relatively high prices for electric vehicles, competition from Chinese car manufacturers has also put immense pressure on European carmakers. Chinese manufacturers are able to significantly reduce costs and are dominant in their vast domestic market. If European brands like Volkswagen cannot address these challenges, it could further erode confidence in Europe's green goals and intensify opposition to the green transition.

To counter competition from China, the European Commission plans to levy high tariffs on Chinese electric vehicles after an anti-subsidy investigation. However, this move carries risks. Imposing high tariffs on Chinese electric vehicles could trigger trade conflicts and disadvantage European exporters. Germany opposes this tax plan, arguing that it fails to address the fundamental problems facing Europe's EV industry.

In reality, even if measures are taken to prevent cheap Chinese electric vehicles from entering the European market, it won't truly boost consumer demand. For the electric vehicle industry, which is crucial to the green economic transition, what is urgently needed is an increase in consumer demand.

European Commission President Ursula von der Leyen has abandoned some of her first-term agricultural emission reduction and environmental goals due to protests from farmers. However, as the next phase of the green transition seeks to decarbonize essential aspects of everyday life, such as automobiles, the cost of the green transition must be affordable for all consumers, including low-income groups. Only then can it become a driver of European business and regional economic recovery and growth.

Mario Draghi, the former president of the European Central Bank, pointed out in last month's European economic outlook report that the EU and national governments should take the lead by providing large-scale subsidies and a series of investments to maintain confidence across the industry and among consumers. However, policy direction is restricted by the EU's reintroduction of strict fiscal rules on national spending, and a short-sighted focus on balanced budgets could exacerbate the difficulties faced by Europe's automotive industry as it navigates this transformative transition.

In conclusion, Europe's electric vehicle industry faces significant challenges, requiring more proactive measures from the EU and national governments. These measures include providing greater subsidies and investments, addressing consumer affordability concerns, and ensuring a smooth transition to a green European economy.