Brussels, Jan 29 /Agerpres/ - On Thursday, the European Commission launches a strategic dialogue to steer Europe's ailing car industry out of trouble. With economic woes and China's fierce competition shaking this vital sector of the continent's economy, just how bumpy is the road through this crisis?

Concerned European carmakers are gathering in Brussels this week for talks with the European Union which will have to compromise between its ambitious environmental objectives and the calls for help from the important but embattled sector.

At the heart of the crisis is the EU's drive to tighten CO2 emission limits on European carmakers and impose fines if they fail to meet their 2025 reduction targets - much to the industry's displeasure as it already grapples with economic difficulties.

European manufacturers are struggling to boost sales of electric vehicles (EVs) and face stiff competition from China. China, a global pioneer, continues to drive the market with 11 million vehicles sold in 2024, a figure up 40 percent over one year.

In October, the EU imposed tariffs of up to 35 percent on Chinese-made electric cars after an anti-subsidy investigation concluded Beijing's state support was unfairly undercutting European automakers. Brussels and Beijing have since engaged in a trade standoff.

Faced with the crisis at home, the European Commission promised to support the automotive sector, which employs 13 million people in the EU and represents around 7 percent of the bloc's gross domestic product (GDP).

France's Stéphane Séjourné, European Commissioner for Prosperity and Industrial Strategy, promised a plan to 'save the sector' and 'boost European demand for clean cars' when attending an automobile summit in Stuttgart, Germany, in mid-January.

Germany: the EU's major car industry in distress
According to the latest figures compiled by the European Automobile Manufacturers' Association (ACEA), the share of newly registered battery-electric vehicles in the EU fell to 13.6 percent in 2024 as a whole, down one percentage point from 2023.

In December, new registrations of electric vehicles had dropped by 10.2 percent, according to ACEA figures - an EU-wide statistical crash driven by a plunge in registrations in Germany (-38.6 percent) and France (-20.7 percent).

According to the ACEA's figures, overall car sales - not just electric cars - grew slightly by 0.8 percent in the EU as a whole in 2024. Spain led the way with a 7.1-percent growth rate compared to declines in France (-3.2 percent), Germany (-1 percent) and Italy (0.5 percent).

Germany, the EU member state with the largest economy and a major automotive industry including brands like the Volkswagen Group (VW) and BMW, struggles with weak sales figures as well as the high costs of switching to electric drive systems'.

The EU's demand to drastically cut emissions is deepening the crisis. According to media reports last week, German car manufacturer Volkswagen expects it will have to pay about 1.5 billion Euro this year due to non-compliance with EU emission targets.

The German automotive giant plans to sell more electric vehicles than combustion engine vehicles to meet the new emission rules, which might impact its earnings, it was added.

Car industry leaders in Germany are calling on the next government, set to be formed after the February 23 elections, to cut taxes and bureaucracy for the sector and take steps to reduce energy prices.

In a newspaper interview published last week, German Chancellor Olaf Scholz called for direct subsidies for electric cars manufactured in Germany. He mentioned this as a way to boost the industry, which has struggled to switch over from internal-combustion engines.

Manuel Kallweit, chief economist at the VDA, said that sales of battery-powered vehicles alone would have to increase by around 75 percent compared to the previous year for German carmakers to comply with the rules. The increase would work out to sales of around 666,000 additional all-electric vehicles.

Downsizing and job cuts
As a result of the weakness in the European car industry, announcements of job cuts have also multiplied in Europe in recent months.

A major example is the Audi plant - part of the Volkswagen group - in Brussels. The factory, which specialised in the production of high-end electric cars, will close at the end of February as it fails to cope with high production costs in Belgium compared to other plants, according to its management.

After the closure of Audi in Brussels, the Volvo plant near Ghent will be the only car plant left in the country. The factory is however getting ready to build the EX30, a small electric model that is currently only being produced in China. At the moment, it has to be imported under the EU's high tariffs.

In Slovenia, where the share of the automotive industry in GDP is around 10 percent, companies facing difficulties are also downsizing, either directly as part of the automotive manufacturers' supply chains or indirectly as a result of the relocation of component production to lower-cost countries.

Similarly, troubles abroad are affecting Bulgaria's car parts industry as well.

According to data from Bulgaria's National Statistical Institute released in July 2024, industrial production in Bulgaria saw a year-on-year decline of 2.5 percent. The biggest drop was in car production, down more than 40 percent, as orders to Bulgarian parts manufacturers fell sharply due to the problems in the automobile industry in countries such as Germany.

Trump tariffs loom ahead
A major issue worrying carmakers going forward is the arrival in power of President Donald Trump in the United States, who threatened higher import taxes on key trading partners - raising fears of an explosion of customs duties on European cars.

German officials fear his protectionist policies could theoretically slash Germany's GDP by 1 percent and destroy 300,000 jobs.

European car manufacturers called on the EU to avoid a 'trade conflict' with the United States, just days before Trump's inauguration on January 20.

Already at the end of last year, the Czech Republic and Italy had urged the EU to relax the fines set to be imposed this year on carmakers that fail to sell a sufficient proportion of electric cars.

'The competitiveness of Europe's automotive industry must remain a central focus of EU policy,' they said in a joint two-page paper. Austria, Bulgaria, Poland, Romania and Slovakia are supporting this plea.

According to Czech Industry and Trade Minister Lukáš Vlèek, siphoning off money from car companies by fining them for not selling enough electric cars is not the right way to go.

Faced with 'the urgency and gravity of the situation', the President of the European Commission, Ursula von der Leyen, will open the strategic dialogue on Thursday, which is expected to last for several months.

The Commission is also expected to announce initial measures to support the purchase of electric cars for company fleets or to try to secure supply chains for raw materials in February.

ACT CHECK
Solar and wind power are the main sources of electricity for electric cars

As Europe's car industry struggles to meet the EU's demand for drastic cuts in greenhouse gas emissions, disinformation about how climate-friendly electric cars really are is adding fuel to the fire. An image circulating on social media in June suggested that electricity used for electric vehicles comes from coal power and is therefore anything but climate-friendly.

However, the fact-checking team of the German Press Agency dpa explained that in Germany, the majority of electricity used to charge EVs comes from renewable sources. In addition, data shows that coal power plays an increasingly smaller role in Germany's energy mix.

Read the full fact check in German here: https://dpa-factchecking.com/germany/240612-99-368321/

The content of this article is based on reporting by AFP, ANSA, Belga, BTA, CTK, dpa, EFE, STA as part of the European Newsroom (enr) project. AGERPRES (editor: Mariana Ionescu)