San Francisco Frontiers - EU vows 'action plan' for beleaguered auto sector

The European Union is under pressure to help a sector that employs 13 million people and accounts for about seven percent of the bloc's GDP, as it seeks to revamp the continent's lagging competitiveness.

"The European automotive industry is at a pivotal moment, and we acknowledge the challenges it faces. That is why we are acting swiftly to address them," EU chief Ursula von der Leyen said, promising an "action plan" by early March.

Chaired by the European Commission president, the so-called "strategic dialogue" brought together carmakers, suppliers, civil society groups and trade unions.

Representatives of 22 industry "players" including Volkswagen, BMW, Mercedes and Renault, were in attendance, the commission said.

The get-together comes as the commission embarks on a pro-business shift, with firms complaining its focus on climate and business ethics has resulted in excessive regulations.

On Wednesday, it unveiled a blueprint to revamp the bloc's economic model, amid worries that low productivity, high energy prices, weak investments and other ills are leaving the EU behind the United States and China.

The car industry has been plunged into crisis by high manufacturing costs, a stuttering switch to electric vehicles (EV) and increased competition from China.

Announcements of possible job cuts have multiplied. Volkswagen plans to axe 35,000 positions across its German locations by 2030.

- Emissions fines -

Carmakers have been calling for "flexibility" on the steep emission fines they could face in 2025 -- something the bloc's new growth blueprint said should be in the cards.

"Penalising immediately the industry financially is not a good idea, because the industry is in trouble and... has to restructure itself, which will cost a lot of money," Patrick Koller, CEO of French parts producer Forvia, said ahead of the meeting.

"When you look back, we have heavy industries which disappeared from Europe completely because of lack of competitiveness."

To combat climate change, the EU introduced a set of emission-reduction targets that should lead to the sale of fossil fuel-burning cars being phased out by 2035.

About 16 percent of the planet-warming carbon dioxide (CO2) gas released into the atmosphere in Europe comes from cars' exhaust pipes, the EU says.

As of this year carmakers have to lower the average CO2 emitted by all newly sold vehicles by 15 percent from 2021 levels or pay a penalty -- with tougher cuts further down the road, according to advocacy group Transport & Environment.

The idea is to incentivise firms to increase the share of EVs, hybrids and small vehicles they sell compared to, for instance, diesel-guzzling SUVs.

But some manufacturers complain that is proving harder than expected as consumers have yet to warm to EVs, which have higher upfront costs and lack an established used-vehicle market.

"We want to stick to the objective... but we can smoothen the way," von der Leyen said on Wednesday.

Critics say lifting the fines would unfairly penalise producers who have invested to comply and remove a key incentive to speed up electric transitions.

- Sales and tariffs -

EV sales slid 1.3 percent in Europe last year, accounting for 13.6 percent of all sales, according to the European Automobile Manufacturers' Association (ACEA), an industry group.

A senior EU official said incentives for businesses to buy electric are an option.

"Company fleets" account for more than half of new cars purchased in Europe, the official said.

The 27-nation bloc could also seek to improve a patchy charging network, modernise grids to allow for faster charging, bring down energy costs, cut regulations and loosen China's grip on battery production, analysts say.

Meanwhile the market share of Chinese electric cars has ballooned in the EU to reach 14 percent in the second quarter of 2024.

Brussels has imposed extra import tariffs on China-made electric vehicles of up to 35.3 percent after concluding Beijing's state support was unfairly undercutting European automakers.

The move was opposed by Germany and other EU members, and it is the object of a lawsuit by BMW, Tesla and several Chinese automakers.

L.Ramos--SFF