The fines and costs associated with non-compliance with CO2 emission reduction targets could reach €15bn for the European automotive industry by 2025, according to Clepa. Photo: Shutterstock

The fines and costs associated with non-compliance with CO2 emission reduction targets could reach €15bn for the European automotive industry by 2025, according to Clepa. Photo: Shutterstock

European automotive suppliers, including Luxembourg’s ILEA, are sounding the alarm over the sector’s loss of competitiveness, undermined by costs and regulations. Before the European action plan is presented, they are urging Brussels to adopt measures to protect the industry.

European automotive suppliers are sounding the alarm. On 28 February 2025, the European Association of Automotive Suppliers (Clepa), which includes the Luxembourg Automotive Suppliers Association (ILEA) as a member association, published a joint statement entitled “The European automotive industry is in danger--how can it get back on track?”

According to this publication, the automotive sector--with its 13m workers and which accounts for 7.5% of European GDP, according to Clepa--is in danger. “Over the past decade, demand for cars/vans has dropped 20%, global competition has intensified and restrictive regulations are stifling competitiveness,” says the statement.

One of the main challenges identified by the association is the cost of producing electric vehicles (EVs). They require more energy to make than combustion cars, which widens the cost gap between Europe and its main competitors, the United States and China: in the first half of 2024, the average price of energy in Europe was still twice that of its rivals. Combined with higher labour costs, says the document, these factors are undermining the competitiveness of the European automotive industry.

In view of this, Clepa and its partners are calling for a drastic reduction in energy costs and a reduction in the burden on EV production in Europe.

Overambitious targets?

Over the last 20 years, Europe has distinguished itself by adopting strict automotive regulations, says the association. “From imposing stricter emissions regulations, requiring the fitment of ever more sophisticated safety systems to demanding extensive reporting on sustainability or corporate due diligence, Europe has overtaken the United States and China in regulatory requirements.”

At the same time, for the uptake of electric vehicles, imposing sales thresholds on pain of . However, in 2024, sold were electric, according to ACEA, a far cry from the 25% required by 2025. The situation is no better for light commercial vehicles, with a market share of 6% in 2024, compared with a target of 17% for this year.

The concern is even greater for trucks and buses, which must achieve a 35% share of electric vehicles by 2030 and which were only at 2.3% in 2024.

“There can’t be many industries which are penalised for the forces of a free market failing to bend to the regulators’ will!” writes Clepa, which estimates the fines incurred by manufacturers in 2025 at €15bn. “Funds that would be better spent on developing even better, more affordable EVs.”

Rethinking Europe’s industrial strategy

Faced with this pressure, manufacturers are calling for a rethink of European industrial strategy. Clepa looks to China in its statement:

“The leading country on EV technology has no plans to mandate an internal combustion engine ban--China promotes NEVs (new energy vehicles) which are either battery electric vehicles (BEVs) or plug-in-hybrids (PHEVs) through registration limitation, and through this policy has not only enabled a mastery of BEV but also PHEV technology.”

“PHEVs are popular with customers,” the statement continues, “because of the usage flexibility they allow, but in Europe, because of the ICE ban in 2035, they have become a dead-end technology, with few fiscal or usage advantages compared to traditional petrol-engined vehicles. The Chinese example, where 20% of sales were PHEV in 2024 (compared to 28% BEV) shows that this technology which allows zero emission city driving and range extension outside urban areas could be a useful solution in the race to drive down greenhouse gas emissions.”

Concrete measures called for

Clepa is proposing several ways of boosting the competitiveness of the European automotive industry:

—Adapt CO2 regulations to stop the fines.

—Reduce energy costs and increase R&D incentives.

—Introduce long-term policies that are technology-neutral and market-driven to accelerate decarbonisation.

—Restore the technology-neutral approach in CO2 regulations.

—Reduce administrative burdens.

—Speed up the review of medium-term CO2 regulation.

“Decline is not inevitable, but we are at a tipping point: supporting or hobbling the automotive industry will make the difference between a prosperous, clean future and sustained economic self-harm which will impact the European way of life for generations to come,” says Clepa in closing.

Europe will present its automotive action plan on 5 March 2025.

This article in French.

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