EU leaders clash on 2035 engine ban, but experts warn subsidising demand is key

In a report published ahead of the summit by various think-tanks, including the Centre for European Reform, Redeker and colleagues Sander Tordoir and Lucas Guttenberg point to a different set of problems EU leaders should be trying to solve.

"Chinese car exports are surging, European producers are being squeezed out of global markets, US tariffs are rising, and domestic demand remains 20 per cent below pre-pandemic levels," they write.

"By focusing the political debate on the wrong issue, Europe's car industry may well turn into the next industrial policy train wreck," Redeker warned.

The automotive sector employs over 13 million people across Europe and accounts for a larger share of private R&D spending than any other industry. But it now faces what the authors describe as a "perfect storm" of exploding Chinese subsidies, US tariffs and weak domestic EU demand. 

...Rather than fighting over regulatory rollbacks, the authors argue leaders should focus on boosting demand for European-made electric vehicles.

Their central proposal: Europeanise the French 'eco-bonus model' and apply it to national EV-support schemes across the bloc.

...The report notes that Germany, France, Spain and Italy, accounting for 70 per cent of EU new car registrations, are all set to review their EV support schemes in the coming months. 

Most member-states already have support schemes for EVs in place, but they are “completely unco-ordinated,” they write. 

With Germany just committing to reintroduce EV subsidies, together they would have the “critical mass” to “kick start” EU coordination across all markets. 

"Future cars will be electric, not because of regulation, but because EVs will soon be substantially cheaper," the authors write. "If Europe's car industry is to survive, it must pivot faster to producing EVs that are high-quality, affordable and profitable."