European regions and cities demand clear rules and solid financial backing to help Europe’s ailing car industry through the shift to electric vehicles (EVs). The European Committee of the Regions (CoR) on Wednesday adopted an opinion on the European Commission’s Automotive Package, arguing that the transition will only succeed if regions are adequately equipped to carry it.
Regions said electrification is crucial to achieving climate-neutral road transport, but that success depends on affordability and access. They called for charging infrastructure across regions, funded by European, national and regional budgets, as well as targeted demand support in lower-income regions.
“Europe’s regions and cities have spoken with one voice: competitiveness and electrification by 2035 go hand in hand,” said María Chivite, President of the Navarre region in Spain, who drafted the opinion. Europe can only lead the transition, she argued, if regions receive “real financing”.
The Commission proposed the Automotive Package in December. It suggests a 90-percent-cut in tailpipe emissions from 2035, with the remaining 10 percent offset through low-carbon steel or e-fuels and biofuels. The CoR welcomed these temporary flexibilities but warned that they must not delay zero-emission mobility.
Brigitte Torloting, Chair of the Automotive Regions Alliance (ARA) and Vice-President of France’s Grand Est region, warned that time is short and “global competition will not wait for us”. She called for a strategy that protects automotive production in the regions, backed by strong European instruments such as “European preference.” Without a clear framework and targeted investment, she said, Europe risks losing its industrial base, from small and medium-sized enterprises (SMEs) to major suppliers.
Made in the EU
“European preference” is an approach first introduced in the Commission’s proposal for an Industrial Accelerator Act in March and is designed to prioritise EU-based manufacturing. The Commission suggests public procurement contracts and state-subsidised industrial projects to source a minimum percentage of materials or components from European producers. For EV production, the Commission proposed that 70% of components for new cars – excluding the battery – must originate within the EU.
CoR members also welcomed the “Made in the EU” approach to strenghten European production but insisted it must be proportionate, so that SMEs and regional supply chains are not buried in red tape.
With automotive production concentrated in specific territories, the opinion also calls for targeted cohesion funding, skills and quality jobs.
According to EU figures for 2024, the automotive industry contributed 7 percent of EU gross domestic product (GDP), about EUR 170 billion in exports and supported around 13.8 million jobs, 3.5 million of them in manufacturing. According to CoR figures, the 41 regions organised in the Automotive Regions Alliance (ARA) generate more than 40 percent of EU GDP.
This story was produced by the European Newsroom (enr) in cooperation with the European Committee of the Regions (CoR). The editorial responsibility lies with the enr.
Beijing’s refusal to restrict shipments of Chinese hybrid vehicles has sharpened a dispute over Europe’s widening trade deficit, with EU Trade Commissioner Maroš Šefčovič seeking concessions during negotiations in China.
China has rejected a European Union request to restrict exports of hybrid cars to Europe, increasing the likelihood of new trade defence measures against Chinese manufacturers as negotiations continue in Beijing.
The disagreement comes during a visit by EU Trade Commissioner Maroš Šefčovič, who is seeking commitments from Chinese officials to address the bloc’s growing trade deficit and improve access for European businesses to the Chinese market.
According to accounts of the negotiations, Beijing has declined the EU’s proposal for voluntary restrictions. The European Commission is consequently considering safeguard measures that could limit hybrid vehicle imports or impose additional tariffs when shipments exceed specified thresholds.
No final decision has been announced, and the precise scope of any restrictions remains under discussion.
The dispute adds another difficulty to EU–China economic relations before European leaders meet in Brussels on 15–16 October, when the bloc’s commercial relationship with Beijing is expected to feature prominently.
Hybrid Vehicles Become New Trade Battleground
The latest confrontation follows the introduction of EU countervailing duties on battery-electric vehicles manufactured in China in October 2024.
Those measures, imposed after an investigation into Chinese state subsidies, did not cover hybrid vehicles.
Chinese manufacturers have since increased their presence in Europe’s hybrid market, offering competitively priced vehicles that combine combustion engines with electric propulsion.
The European Commission previously confirmed that its original anti-subsidy investigation applied specifically to battery-electric vehicles and could not automatically be extended to hybrids.
Consequently, any additional import restrictions must have a separate legal basis.
One option under consideration is a safeguard mechanism that would permit a defined quantity of imports before higher tariffs apply.
Such a measure would differ from the existing anti-subsidy duties, which target alleged unfair financial support provided to manufacturers.
Safeguard restrictions are designed to address injury caused by increased imports. They may also create difficulties for Brussels because measures directed at a particular product can affect suppliers from countries other than China.
Japan, South Korea and Britain could therefore face consequences depending on the structure and legal basis of any proposed restrictions.
Trade Deficit Exceeds €360 Billion
The dispute is taking place against a widening imbalance in goods trade between the European Union and China.
The EU’s annual merchandise trade deficit with Beijing has reached approximately €360 billion, equivalent to almost €1 billion per day.
European officials are particularly concerned about Chinese industrial overcapacity and the export of manufactured goods at prices that European producers struggle to match.
During the latest trade negotiations, Brussels has sought commitments concerning market access, import volumes and restrictions affecting European companies.
Chinese exports of plug-in hybrid vehicles to the EU have reportedly increased by 86 per cent over the past year, while battery-electric vehicle imports have risen by approximately 40 per cent.
This expansion has intensified pressure on European manufacturers already confronting high production costs, weak demand in some domestic markets and substantial expenditure on electrification.
EU Today reported in September that Brussels had requested voluntary restrictions on Chinese hybrid exports as part of a broader effort to rebalance commercial relations.
Beijing’s refusal has now brought the possibility of unilateral European measures closer to consideration.
Germany and France Seek Stronger Protection
Germany and France have increasingly aligned their positions on the need for stronger European instruments to address unfair competition and dependence on Chinese industrial supply chains.
France has long advocated a more interventionist European industrial policy, while German manufacturers have traditionally placed greater emphasis on preserving commercial access to China.
That calculation is changing as Chinese competitors strengthen their position in the European automotive market.
The problem is particularly sensitive for Germany, whose automotive industry depends on extensive supplier networks, skilled employment and exports.
German manufacturers also operate significant businesses in China, meaning that new European trade measures could expose them to retaliation in one of their principal overseas markets.
China has already responded to previous European restrictions with trade investigations and duties affecting agricultural products and alcoholic beverages.
Further measures against Chinese vehicle imports could therefore extend the dispute into sectors unrelated to the automotive industry.
Brussels Faces Difficult Legal Choices
The European Commission must determine whether voluntary arrangements can produce measurable reductions in Chinese exports or whether formal restrictions are required.
The legal distinction between anti-subsidy duties and safeguard measures will be particularly important.
The existing electric-vehicle tariffs were introduced following an investigation that examined subsidies and their effects on European manufacturers.
A safeguard mechanism would require a different assessment, including evidence concerning increased imports and injury to domestic producers.
It would also have to comply with the EU’s international trade obligations.
Meanwhile, Chinese manufacturers are developing production facilities within Europe, potentially reducing their exposure to tariffs imposed on imported vehicles.
The negotiations in Beijing are expected to influence whether the Commission proceeds with formal restrictions or continues seeking a negotiated settlement.
The immediate question is whether China is prepared to offer concessions sufficiently substantial to persuade Brussels that additional tariffs are unnecessary.
With EU leaders due to discuss relations with Beijing next week, the dispute has become a test of the Commission’s willingness to use trade defence instruments against one of Europe’s largest commercial partners.
Mexico's auto exports posted their biggest slump so far this year, data from statistics office INEGI showed on Wednesday, a decline analysts attributed to tariff policies from the US, the biggest market for the Latin American country's top industrial sector.
In the new print issue of Esses, a quarterly print magazine covering motorsports and the culture around it, Duncan Fyfe writes about the most bizarre Formula One video game ever made. Centered around Gerhard Berger, a former racing driver from Austria who competed in F1 from 1984 to 1997, Gerhard Berger’s Formula 1 Quiz is a quirky video game from 1993 that raises more questions than it asks. Fyfe digs into the mystery, investigating the quiz’s grammatically awkward questions and the game’s developer, Austria Soft, whose existence is questionable. (Esses subscription may be required—consider becoming a member.)
THE REAL QUIZ, it soon becomes clear, is not a test of one’s F1 knowledge, but figuring out what the game expects to hear. This only becomes more difficult, and even sinister. Question nine: FROM WHAT COUNTRY IS JEAN ALESI REALLY? The answer is not France, where Alesi was born and grew up, and under whose flag Alesi competed for over a decade. To progress in the quiz, the game forces one to submit that Alesi was born to Italian parents, and thus is “really” from Italy.
The game’s questions all have correct answers that cannot be submitted, and yet they are less difficult to answer than these ones: Who made this game? Why? And what was Gerhard Berger thinking?
Growing popularity of electric vehicles (EVs) from China is causing headaches for European carmakers – and for Brussels, with national governments clamouring for protection for their national champions.
The European Commission, which is in charge of trade policies for the bloc, has to square the circle between avoiding a trade war and injecting some life into the idling economy.
In one recent step the EU is attempting to introduce minimum prices for Chinese made EVs to offset subsidies instead of slapping on more tariffs.
The EU in 2024 had introduced tariffs of up to 35.3 percent on EVs imported from China after an anti-subsidy probe concluded that the country’s support undercut European automakers. Manufacturers in China benefit from unfair subsidies that give them a significant advantage in the European market. Since then, the two sides have been engaged in talks to find other solutions.
How cheap is too cheap?
Under new guidelines published by the Commission last week, companies can commit to setting minimum prices for vehicles exported to the European Union in order to avoid the price surcharges. In addition, in the case of a corresponding offer, commitments to invest in the EU or to limit exports would be positively taken into account.
Such offers would be assessed objectively and fairly by the Commission, according to the new guidelines. A prerequisite for acceptance is that the measures eliminate the damaging effects of subsidies and have an effect equivalent to the tariffs.
The published document was “intended to provide guidance to Chinese exporters who may be considering submitting price undertaking offers for exports of battery electric vehicles to the EU, which are currently subject to countervailing duties,” Commission spokesman Olof Gill said.
He said that at present, the Commission has received one price undertaking offer, without specifying which company or for which model. He added that the Commission is ready to consider other proposals, provided that they “adequately address the unfair competitive advantage” and demonstrate that they are “feasible in practice”.
Leading German automotive expert Ferdinand Dudenhöffer, head of the private institute Center Automotive Research (CAR), was sceptical of the effects of the minimum prices could have on competition.
According to EU calculations, manufacturers in China benefit from unfair subsidies that give them a price advantage of around 20 percent on the European market. For this reason, tariffs ranging from 7.8 to 35.3 percent were imposed from 2024, depending on the manufacturer. German and US companies that manufacture in China are also affected. In retaliation, China imposed special tariffs on EU goods such as spirits, pork, and dairy products.
According to CAR, Chinese manufacturers sell their models in the EU at an average markup of 118 percent on top of the domestic price. “Given the current price level in Europe, there should still be significant scope for Chinese manufacturers to reduce prices,” said Dudenhöffer.
Pressure from all sides
According to the latest report by the EU research agency Eurofound, the automotive industry in the EU directly employs around 6 million workers and another 6 million in related sectors.
Since 2019, the pace of job losses in the sector has clearly accelerated. In 2024 alone and at the beginning of 2025, layoffs announced by European companies affected around 100,000 jobs.
The largest employment losses have been recorded in countries with a strong presence of Europe’s biggest car manufacturers. In France, a structural decline is feared, while since 2019 job cuts have also affected Germany, Italy, and, to a lesser extent, Spain. Central and Eastern European countries – Czechia, Hungary, Poland, Romania, and Slovakia – are facing the relocation of production outside the EU to countries with lower labor costs.
This is happening because sales of cars originating from China, including electric vehicles (EVs), are increasing in the EU. In practice, some of these cars on EU markets are not only models of Chinese brands but also vehicles produced in China for Western brands.
ARCHIVE – November 20, 2025, Saxony, Leipzig: A Volkswagen electric vehicle is charging at a charging station using a yellow cable. Photo: Jan Woitas/dpa
German auto angst
Germany, for many years a global carmaking powerhouse, is facing a dilemma. Demand for EVs is rising, but it is not just the battery powered Volkswagens or BMWs customers are flocking to – and the long-term outlook is dire.
Electric vehicle sales rebounded strongly in Germany in 2025, according to official data from early January this year, with Chinese manufacturers making inroads from a low base in the EU’s largest economy despite tariffs.
EV sales rose 43.2 percent last year to 545,142 in total, the KBA federal transport authority said, representing 19.1 percent of all new cars sold.
Chinese EV giant BYD – which last year overtook Elon Musk’s Tesla to become the worlds largest electric carmaker – saw its German sales rise over 700 percent to more than 23,000 cars, giving it 0.8 percent of the overall auto market.
“International vehicle manufacturers with affordable battery electric vehicles and plug-in hybrids have contributed disproportionately to growth in these segments,” said Imelda Labbé, head of the VDIK foreign carmakers’ lobby in Germany.
The rise in EV sales last year comes after a fall of almost 30 percent in 2024 following the withdrawal of government subsidies, and Germany’s electric car market is still smaller than optimists had hoped for. After the decline in the market in 2024, the government said in December it would introduce subsidies again.
Some motorists will be able to benefit from 5,000 Euro for the purchase of new EVs or hybrids so long as their components are largely made in Germany. But industry figures say that better charging infrastructure and cheaper power would be needed to really boost EVs and warned that the planned subsidy would have limited impact.
On the other hand, German carmakers have been reporting strong declines in vehicle sales in China. Volkswagen said in January its sales dropped by 8 percent in 2025 year-on-year, as it was facing intense competition on the Chinese market from local producers. Mercedes-Benz reported a 19 percent decline in sales for the year, while BMW sold 12,5 percent fewer cars in China.
German manufacturers like Mercedes or VW sell about 30 percent of their cars on the Chinese market.
The tug-of-war affects not just major players, but the automotive sector across the continent.
Bulgaria for example is not a major car producer, but it is increasingly important as a supplier of automotive components to European manufacturers. The sector has grown into one of the country’s strongest industrial branches, generating close to 11 billion Euro in annual turnover, according to business media and industry analyses.
This means that it is indirectly exposed to the EU-China trade dispute over electric vehicles: weaker competitiveness of European carmakers could reduce orders for Bulgarian suppliers, while a recovery in EV sales in core markets such as Germany would have the opposite effect.
At the same time, Chinese manufacturers are not only exporting cars to Europe but are also expanding production and partnerships within the EU, with Bulgaria being increasingly part of China’s automotive strategy in Southeast Europe according to analysts.
For Bulgaria, this creates a mixed impact: EU trade measures may protect European carmakers, but Chinese localization in Europe could also open new opportunities for Bulgarian suppliers.
Dudenhöffer expects the sector to shrink in the next years in Germany and Europe, as manufacturers shift their production to the US or Asia, he said in his market forecast for 2026.
“Growth is taking place in Asia, and Asian car manufacturers (Japan, Korea, China) are increasingly dominating the car business.”
Ferdinand Dudenhöffer, German Automotive Expert
Fading from Green to Petrol
And then there are of course the EU’s green policies: The EU in December rolled back a 2035 ban on new petrol and diesel cars seen as a milestone in the fight against climate change, as the bloc pivots to bolstering its crisis-hit auto sector.
Under proposals slammed by green groups as an act of “self-sabotage”, carmakers will have to cut exhaust emissions from new vehicles by 90 percent from 2021 levels – down from an envisaged 100 percent.
This means that in practice automakers will still be able to sell a limited number of polluting vehicles – from plug-in hybrids to diesel cars – beyond 2035, provided the resulting emissions are “compensated” in various ways.
The EU’s Industry Commissioner, Stéphane Séjourné, insisted the bloc’s green ambitions stood intact as he put forward a plan billed as a “lifeline” for Europe’s auto industry.
The combustion-engine ban was hailed as a major win in the climate fight and a key tool to drive investments in electrification when adopted in 2023.
The compromise plan was slammed by both environmentalists and industry groups.
While the EU had recognised that remaining open to different technologies was important, its proposal was “fraught with so many obstacles it threatens to remain ineffective in practice”, the president of the German Association of the Automotive Industry (VDA), Hildegard Müller, said. “In times of increasing international competition, in times when European economic power is crucial, this overall package from Brussels is disastrous.”
The future of German car manufacturers – and by extension automakers in other EU member states – is closely linked to the Chinese market.
According to Dudenhöffer, they must develop and build electric cars “in China for China”. In this context, he criticised the softening of the combustion engine phase-out. He said it was not possible to disconnect from developments, but that it is necessary to face competition in the tough Chinese market. “If you’re not in China, you’re not in the car business.”
This article is an ENR Key Story. The content is based on information published by ENR participating agencies.
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