5 things to know about Europe’s electric vehicle transition

The next decade is make-or-break for Europe’s automotive sector as it faces both pressure to decarbonize and fierce competition from China.
“Either they manage to launch products that are competitive overall, or they will not make it. It’s very simple,” said Pedro Pacheco, vice president of automotive research at consulting firm Gartner.
The previous European Commission launched the European Green Deal aimed at making the bloc climate neutral by 2050 — and slashing emissions from vehicles played a key part.
At the time, climate change was the top priority in Brussels, with commissioners scrambling to hold meetings with Greta Thunberg and other protesters.
The focus is very different now. Green policies are exacting an economic toll — and that’s leading to growing political resistance. The overwhelming narrative is still that all-electric vehicles are the future, but getting to zero emissions faces increasing hurdles.
The future of Europe’s car industry is a big deal — it accounts for 7 percent of the Continent’s GDP and 6 percent of all jobs, or about 13.8 million people. Europe dominated the internal combustion engine (ICE) for more than a century, but the Continent has no lock on battery technology.
Carmakers from Volkswagen to Mercedes-Benz, Renault and Stellantis are struggling to adapt to the new battery-powered ecosystem. There is also a new and powerful rival — China.
Let’s get into what’s facing Europe as its tries to makes its cars green without destroying its economy and sparking a political counter-revolution.
Road transport accounts for 16 percent of the EU’s emissions. As part of the Green Deal, the Commission pushed through a law ending the sale of new ICE vehicles from 2035.
The law has milestones along the way to keep automakers in line with emission targets. The next one comes up in 2025, when carmakers must reduce their emissions by 15 percent compared to a baseline established in 2021.
Brands that fail to meet the benchmark by the end of 2025 will be fined €95 per gram of CO2 per kilometer emitted above the target for each non-compliant vehicle sold in the bloc.
The easiest way to meet the new target is by selling more electric vehicles — but that’s more complicated than it sounds. Adoption rates are stagnating as carmakers target mainstream consumers instead of early adopters. Angst over driving range and a lack of infrastructure top the list of concerns, followed by price.
Western automakers have focused on luxury, and more expensive, electric vehicles to help fund the transition.
That’s opened the door to competition from China — now the world’s largest EV market. Chinese carmakers have gone all-in on EVs, creating an extensive supply chain with low production costs. Their battery-powered cars are cheaper and come fitted with glitzty tech features that make them an enticing option.
The companies are also looking to export to new markets, prompting policymakers in the EU and the U.S. to put up roadblocks in the form of tariffs.
Washington slapped a 100 percent tariff on made-in-China EVs, effectively closing off its market. Brussels, meanwhile, has levied duties ranging from 19 percent to 37.6 percent on the EVs.
But low production costs mean Chinese automakers can still make a profit in the EU, even with the additional levies. Several are setting up shop in the bloc to skirt the tariffs altogether, making the new duties a speed bump rather than a concrete wall.
By diversifying their offerings to consumers and focusing on hybrid models — cars that have both engines and batteries.
Hybrid-electric models were the only vehicles to grow in market share in May and June, according to data from the European Automobile Manufacturers’ Association (ACEA), bringing their overall market share to almost 30 percent.
In July, Stellantis announced it is producing 30 hybrid models this year and plans to launch six new hybrid vehicles in the European market by 2026.
But hybrids cannot meet the new emission targets, said Arun Kumar, a partner in the automotive practice at consulting firm AlixPartners.
“The only way they can meet those goals is by going full into EVs,” he said.
While the 2035 ban prohibits the sale of new combustion cars, it has no bearing on ICEs already on the road. The average vehicle in the EU is 12 years old, according to ACEA, and that means millions of ICE cars will keep spewing CO2 long after 2035.
And the 2035 ban itself is also looking shaky.
The center-right European People’s Party came first in this year’s European election and one of its key proposals is overturning the 2035 phase-out. Its MEPs are already pushing for exceptions to the ban, most notably for synthetic fuels.
Car power Germany backs e-fuels while Italy wants a loophole for biofuels — theoretically green ways of substituting for fossil fuels. That would allow new ICE cars to keep being sold after 2035.
Commission President Ursula von der Leyen — a member of the EPP — signaled she backs an e-fuels exception. Meeting the bloc’s emissions targets “will require a technology-neutral approach, in which e-fuels have a role to play through a targeted amendment of the regulation as part of the foreseen review,” she wrote in her election manifesto.
One final fuel type is being discussed: hydrogen. The most notable car brands to invest in hydrogen are Toyota, Hyundai and BMW.
Hydrogen is not taking off, though.
In Germany — the most enthusiastic market for hydrogen passenger cars — only 2,260 fuel-cell powered cars are on the road, compared to 1.5 million EVs, according to the National Organization for Hydrogen and Fuel Cell Technology.
Hydrogen would also require its own infrastructure — largely absent from European roads. That poses even worse range anxiety issues for drivers as all-electric vehicles.
All of that adds up to a very difficult time for Europe’s car industry — something that will be reflected in the bloc’s economy and politics.
Europe’s automakers “could have been doing a lot better, but they have chosen not to put the same emphasis on EVs as the Chinese and that reflects in their sales performance,” Pacheco said.