The European automotive industry is a central pillar of the European economy. Its more than 13 million direct and indirect employees generate around seven per cent of the EU's GDP. But this industry is undergoing change: in order to achieve European climate targets and meet the requirements of the Fit for 55 package, CO2 emissions in the transport sector must be significantly reduced. A switch from combustion engine vehicles to those with CO2-neutral drive systems is therefore necessary. Added to this are the challenges posed by geopolitical changes and the resulting international pressure.

Industrial action plan for the European automotive sector

Although European manufacturers have posted large profits in recent years, they have fallen behind technologically. China has taken the lead in electric car technology and is pushing into the European market, while at the same time fewer and fewer European cars are being sold in China. In addition, the US is trying to push European cars out of its domestic market with high tariffs, which, according to reports, is already having an impact on European manufacturers' half-year earnings.

The EU Commission launched a strategic dialogue on the future of the automotive industry at the beginning of 2025. On 5 March, it presented its industrial action plan for the European automotive sector, which includes initiatives in five key pillars. These range from innovation and support for employees to ensuring fair competition in the international context. At the same time, it was announced that the emission standards for new passenger cars – designed to guarantee a gradual reduction in CO2 emissions from newly registered vehicles in Europe – would be relaxed for the period 2025-2027 and that preparations for the planned review would be expedited. In doing so, the EU Commission has complied with the wishes of the automotive lobby. However, the controversial end of new of fossil fuel-powered cars from 2035 onwards remained unchallenged for a long time.

Political weight of the automotive industry

The importance of the automotive industry is demonstrated by the fact that the summit meetings to date have been chaired by Commission President Ursula von der Leyen. In her latest State of the Union address, she repeatedly emphasised the importance of the automotive industry and announced an initiative for small, affordable electric cars to promote their development in Europe: " The future of cars – and the cars of the future – must be made in Europe."

Despite all these commitments by the EU Commission, one of the automotive industry's key projects was still to fight against the phase-out of combustion engines by 2035. At the important international motor show IAA Mobility, which took place in Munich at the beginning of September, not only were the latest models presented, but pressure on political decision-makers was also increased: Now would be the time to take a pragmatic and realistic look at the future. Although there is agreement that the future belongs to electric cars, the industry wants to keep other options open with technologies such as plug-in hybrids, range extenders and hydrogen.

Given the considerable pressure, the consultation on the review of emission standards for newly registered passenger cars was launched in July 2025, a year earlier than anticipated. It was concluded a few days ago. Meanwhile, another strategic dialogue between the automotive industry and the leaders of the EU Commission took place in Brussels on 12 September. In addition to the declared intention to accelerate innovation in the automotive sector and establish Europe as a leader in sustainable mobility, the Commission President appears to have agreed to present the legislative proposal planned for the second quarter of 2026 before the end of this year, thus setting the course for the future of the combustion engine.

Germany struggles to find a position

As the German economy is heavily influenced by the automotive industry, a car summit was recently also held in Berlin. On 9 October, representatives of the federal government met with manufacturers, suppliers and trade unions to discuss the future of the sector. The result: the German government is changing its position on phasing out combustion engines. Chancellor Friedrich Merz and Bavarian Minister-President Markus Söder are clearly siding with manufacturers and are against a "hard cut" in 2035. The SPD has long been divided, but considers plug-in hybrids, range extenders and the addition of new fuels to be a viable option. In addition, there are plans for a new electric car subsidy for low and middle-income earners. The IG Metall trade union is also willing to compromise, stating: "We now need a full offensive for electric mobility and, at the same time, greater flexibility in some areas of the CO2 regulations."

Further positions and outlook

AK welcomes that the EU Commission intends to address the current challenges facing the European automotive industry primarily through active industrial policy. However, AK is critical of any further reduction or relaxation of the agreed emission standards, as this would undermine the necessary planning security. Another problem is that the plans to date do not take sufficient account of socially fair implementation. While the first steps in the right direction have been taken with regard to skills development, the expansion of European value chains, and the emphasis on social dialogue, the plan remains non-binding on social policy issues, and the amount of funding allocated to it is insufficient.

European employee and consumer interest groups hold similar views. Agustín Reyna, Director General of the European Consumer Organisation BEUC, says: "Electric cars can be a good deal for consumers. [...] However, to stay on course and boost consumer confidence, policymakers should ensure that 2030 and 2035 car CO2 targets are maintained." In contrast, the umbrella organisation of industrial unions industriAll Europe takes a middle ground in an open letter, which is also in line with IG Metall's position: "Decarbonisation is non-negotiable. But the transition must be just. Climate legislation must be fit for purpose and adapted when necessary."

Ultimately, electric cars will prevail. Manufacturers are also aware of this. However, the industrial transition is a lengthy process and is proving difficult to get off the ground in Europe. A clear goal would give all parties involved planning security, even if details still need to be clarified. The coming months will show which path the EU Commission will take. In order to push ahead with electric mobility more decisively, Brussels is now eagerly awaiting the legislative proposal on the decarbonisation of corporate fleets. The discussion will continue to occupy us for some time to come.


Further information:

EU Commission: Industrial Action Plan for the European automotive sector
EU Commission: President von der Leyen chairs third Strategic Dialogue with the European Automotive Industry on 12 September
AK EUROPA: Industrial Action Plan for the European Automotive Sector
AK EUROPA: Industry, energy and automotive. New plans for the transformation
AK EUROPA: EU-US trade relations. An unequal ‘deal’ sets the direction
BEUC: Study shows electric cars are a good deal for consumers
industriAll Europe: Europe's automotive industry needs urgent action – not another diagnosis
POLITICO: German Cabinet splits over EU combustion engine ban letter
POLITICO: European automakers despair of dodging Trump tariffs
POLITICO: Commission agrees to water down automotive emission targets
IG Metall: Jetzt Arbeitsplätze in der Automobilindustrie sichern (German only)
ACEA: Third Strategic Dialogue on automotive convened: bold and fast action required
CLEPA: Europe must navigate its automotive transition – September’s Strategic Dialogue is last chance to correct course