EU auto suppliers, including Luxembourg’s ILEA, are warning about the declining competitiveness of the sector, highlighting mounting costs and stringent regulations as key obstacles. In advance of the European action plan set to be presented, they are urging Brussels to implement measures to safeguard the industry.
On February 28, 2025, the European Association of Automotive Suppliers (Clepa), which includes ILEA as a member, released a joint statement titled “The European automotive industry is in danger–how can it get back on track?” The statement warns that the automotive sector, which employs 13 million workers and contributes 7.5% of Europe’s GDP, is facing significant challenges. “Over the past decade, demand for cars and vans has dropped by 20%, global competition has intensified, and restrictive regulations are stifling competitiveness,” Clepa states.
A major concern is the cost of manufacturing electric vehicles (EVs), which is proving to be a substantial hurdle for European suppliers. EV production is more energy-intensive than that of traditional combustion vehicles, widening the cost gap between Europe and its competitors, the United States and China. In the first half of 2024, energy prices in Europe were still double those in these rival markets. Combined with higher labor costs, these factors are eroding the competitiveness of the European automotive industry.
In response, Clepa and its partners are calling for a substantial reduction in energy costs and a decrease in the regulatory burden associated with EV production in Europe.
Challenges of Overambitious Targets and Stricter Regulations
The European automotive sector has long been known for its stringent regulatory environment. Over the past two decades, Europe has implemented increasingly rigorous rules, including stricter emissions standards, mandatory safety features, and extensive reporting on sustainability and corporate due diligence. These regulations have set Europe apart from the United States and China, according to Clepa.
Brussels has also set ambitious targets for the uptake of electric vehicles. Manufacturers face penalties for failing to meet these sales thresholds, which have proven difficult to achieve. According to the European Automobile Manufacturers’ Association (ACEA), only 15% of cars sold in 2024 were electric, far below the 25% target set for 2025. Similarly, light commercial vehicles had only a 6% market share in 2024, compared to the 17% target for 2025.
The situation is even more concerning for trucks and buses, which are required to achieve a 35% share of electric vehicles by 2030. In 2024, however, the share of electric trucks and buses was only 2.3%.
Clepa expressed frustration with the regulatory approach, arguing that few industries face penalties for the market’s failure to meet regulatory goals. The association estimates that manufacturers will face fines of €15 billion in 2025, funds that Clepa argues could be better spent on developing more affordable and advanced EVs.
Reconsidering Europe’s Industrial Strategy
Faced with these pressures, automotive manufacturers are calling for a reevaluation of Europe’s industrial strategy. Clepa points to China as a model of success in EV technology. While China has taken a leading role in electric vehicle development, it has refrained from mandating a ban on internal combustion engines. Instead, China promotes new energy vehicles (NEVs), which include both battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs). Through registration limitations and targeted policies, China has not only excelled in BEV technology but also fostered the growth of PHEV technology, which remains popular with consumers.
Clepa notes that PHEVs offer flexibility for consumers, allowing for zero-emission city driving and extended range beyond urban areas. However, in Europe, PHEVs face limited fiscal and usage benefits due to the 2035 ban on internal combustion engines. Clepa suggests that, like China, Europe should consider PHEVs as a viable solution to reduce greenhouse gas emissions, especially as they accounted for 20% of vehicle sales in China in 2024, compared to 28% for BEVs.
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