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The European Commission published its Automotive Industrial Action Plan (AIAP) on March 4, with weakened targets for 2025 that would allow original equipment manufacturers (OEMs) three years to comply with emissions standards by averaging their approach, inclusive of 2027.
Groups such as the European Automobile Manufacturers Association (ACEA) have acknowledged that the plan “holds the promise of some breathing space for car and van makers” in terms of zero-emissions vehicle development.
But Fastmarkets’ electric vehicle (EV) battery raw material demand analyst Connor Watts has warned that the averaging of emissions standards from 2025 to 2027 would “set an unwelcome precedent for further concessions to be made in weakening the bloc’s electrification incentives.”
Investment in key sectors such as the battery and charging industries could now be at risk, experts have said. “Demand may now not be there at the speed required, worsening investment conditions,” Chris Heron, secretary general of E-Mobility Europe, said.
“The decentralization of funding could reshape the European battery supply chain,” Duo Fu, vice president of battery market research at Rystad Energy, told Fastmarkets. “Certain countries may emerge as preferred destinations for gigafactories based on investment incentives, labor costs and regulatory environments.”
Watts noted that “individual EU states remain the primary driver of their own infrastructure development at a time when finance for green infrastructure is a luxury.”
Careful coordination between the AIAP’s central strategy and national-level policies will now be required, Fu said, “to avoid market fragmentation and to ensure a balanced distribution of production capacity across Europe.”
In terms of charging, the Commission’s revised plan “primarily focuses on ensuring the enforcement of existing legislation, rather than committing to new funding,” Fu added.
The weakening of the rules could also have a negative effect on EV sales across Europe. “Ensuring that zero-emission EVs remain affordable amid high production costs and rising energy prices is another challenge,” Fu said.
Brussels-based E-Mobility said that while there was a risk of lower EV sales this year than otherwise would have been predicted, sales growth will remain healthy compared with 2024, because there were a number of new EV models coming onto the market.
“Growth in 2025 won’t be as significant [because] we expect that several OEMs will back off and use those flexibilities to postpone sales efforts,” Heron told Fastmarkets, adding that the Commission’s proposed amendment to the targets was “unfair for the front runners who have already invested in being ready and compliant.”
Brussels-based lobby group Transport & Environment, meanwhile, expected the amended targets to result in EV sales being reduced by as many as 880,000 vehicles over 2025-27, compared with the current target, as well as removing the pressure on the industry “to roll out cheaper EV models.”
The “overall direction of travel has not changed,” and the Commission’s messaging made it “clear that the [overall] 2035 target is still in place and that the interim goal of 2030 is still the same.” But Heron warned that it would be crucial to “not make this the first of many adjustments” to the bloc’s clean-car rules.
“It is in our interest [at E-Mobility] to make sure it’s a stable enough adjustment so we can meet the next set of targets,” he said.
“We are confident,” Fu added, “that the EU will continue to provide guidance and implement measures to achieve its emission reduction targets.”
Fastmarkets understands that the proposed changes were now being reviewed by the European Commission’s Directorate-General for Climate Action (DG CLIMA), and they will then be put forward to both the European Parliament and Council for fast-tracked approval.
Meanwhile, a formal review of the 2035 emissions limits will be started by the end of this year.
“It is critical that the direction remains toward electrification,” Heron said, adding that the trade body was “concerned about the voices pushing for technology neutrality – the push for e-fuels – when the priority should be all-in on electrification.”
In the week ended March 7, FuelsEurope – one of many organizations to react to the AIAP – said that while electrification was a “key pillar” of road sector decarbonization, “it should not be imposed by mandate.”
“Sustainable fuels, including advanced biofuels and e-fuels, provide a complementary solution to the decarbonization of road transport, while preserving the choice for automotive manufacturers and consumers,” the organization, which represents European refiners, said.
In 2023, Europe’s largest automotive producer, Germany, reached agreement with the European Commission to allow cars to run on climate-neutral fuels, provided they were made with clean energy. But some feared that this could create a ‘domino effect’ and set a precedent for member states to question the decision-making processes of the EU.
The Commission had previously encountered significant resistance to its plans to ban polluting vehicles from Germany, along with fellow EU member states Poland, the Czech Republic and Italy, and there was still an underlying fear that this could continue to affect the bloc’s plans to decarbonize transport.
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