Europe urgently needs structured automotive industrial policy: ACEA

The European Automobile Manufacturers’ Association, or ACEA, has called for an ambitious and structured automotive industrial policy to rival that of other competitor regions.

In a Jan. 31 open letter to EU policymakers, ACEA President Luca de Meo said that the automotive sector has been a “key driver of Europe’s prosperity, competitiveness and innovation.”

To ensure it remains so, ACEA is “urgently calling on Europe to put in place an ambitious and structured automotive industrial policy, to rival those of other world regions — while safeguarding and promoting free trade across the globe,” de Meo said.

ACEA expects around 9.8 million new cars to be sold in 2023, up 5% year on year, although this is would still be 25% below 2019 pre-pandemic levels.

“In this context, it is of all the more importance that our industry strengthens its position on the global stage,” ACEA Director General Sigrid de Vries said in a statement.

The continent’s automotive industry has been gradually losing ground to global competitors in the past two decades, de Meo said in the letter.

“Car production and sales in China for instance have risen more than 25-fold since 2003, while they have dropped by some 25% in Europe,” he said, adding that automakers’ domestic market share had dropped to 70%, down 7 points over the same period.

“And recent political decisions risk putting Europe’s automotive industry in an even more unfavorable situation compared to its Chinese and American competitors,” de Meo said, referring to the US’s Inflation Reduction Act, or IRA, and the Made in China 2025, or MIC, plan.

He pointed out that Europe was also set to be at a disadvantage with the shift to electric vehicles and the associated value chain, especially compared to China, as by 2030, no more than 5% of the raw materials needed for battery production would be sourced in Europe.

Platts, part of S&P Global Commodity Insights, assessed seaborne lithium carbonate and lithium hydroxide at $70,500/mt CIF North Asia and $79,000/mt CIF North Asia Jan. 31, up 109% and 149%, respectively, since the start of 2022.

Decarbonizing road transport

De Meo also pointed out that, while other industries were being asked under the EU’s Fit for 55 climate package to reduce emissions by 50%-70% by 2035, passenger car emissions were being asked to reduce by 100%.

“Make no mistake, the auto industry is unequivocal and fully committed to decarbonize road transport as fast as possible, working with all partners… this puts us way ahead of most other industries,” de Meo said.

He called for the EU to adopt a consistent and holistic regulatory approach, saying that policies and regulations should align with and support this goal.

“We therefore need the regulator to speak with one coordinated voice, considering the specific rhythms of industry, research and investments,” de Meo said, adding that this was not the case with the recent Euro 7 proposal, which would force automakers to invest billions in engine and exhaust aftertreatment technology, for minimal environmental gains.

“This means moving substantial engineering and financial resources from battery and fuel-cell electric vehicles back to the internal combustion engine,” he said, adding that the funds would be better spent on zero-emission technologies that would tackle CO2 and pollutant emissions.

Charging infrastructure

De Meo also called for EU policymakers to ramp up private and public charging and hydrogen refueling infrastructure, saying more commitment and coordination was needed among member states and with other sectors.

There were only 2,000 public charging stations being installed EU-wide weekly, well below the 14,000 a week needed to ensure the transition to electric mobility, he said.

Another factor highlighted in the letter was affordability.

“The cost of batteries and electricity is bound to remain high, for reasons that we do not control,” de Meo said, citing heavily taxed electricity consumption, high battery costs, and reduced purchase incentives due to budgetary constraints.

“Notwithstanding all this, demand for electric cars already remains insufficient to reach the critical mass we need to make the system work in the time we are given,” he said, adding that only 1.5% of the 250 million cars on European roads were fully electric, with it estimated that this proportion should be around 25% by 2030.

“If we really want to have an impact on climate change, there is no doubt that we will also have to find solutions for the existing vehicle fleet, without limiting the mobility of our fellow citizens,” de Meo said in the letter.

— Jacqueline Holman