The European Union is driving forward with a new plan to improve the global competitiveness of its automotive sector while accelerating the transition to electric vehicles.
The Industrial Action Plan unveiled in March focuses broadly on fostering innovation and creating more market flexibility, with a special emphasis on reducing Europe's reliance on external suppliers. At the core of the plan is a $3 billion "Battery Booster" package, sourced from the EU's Innovation Fund, which aims to support the development of local battery production.
The European Commission has already committed $1 billion to assist in scaling up that manufacturing, with the intention of reducing reliance on imports, particularly from China. Widely considered a global leader in EV adoption, China's domestic market is forecast to hit nearly $378 billion this year.
The European plan rests on five key pillars: innovation and digitalization, clean mobility, competitiveness and supply chain resilience, skills and social dimension, and level playing field and business environment. That last one also takes aim at China, where the government has poured money into subsidies to decrease the cost of Chinese-made EVs.
The plan could also provide greater flexibility on carbon emission standards that threaten to levy steep fines against European automakers. This would be a real win for the manufacturers, which otherwise face total penalties this year as great as $15 billion for failing to sell enough zero-emission vehicles.
While it remains to be seen if this new plan can help ramp up EU production, the step is a much-needed push at a time of fierce global competition.
Back in China, automaker BYD, which is the world's second-largest producer of batteries for electric vehicles, has already confirmed plans to roll out hotly anticipated all-solid-state batteries starting in 2027. This would represent a significant improvement over current lithium-ion batteries and another win for China's EV production.
As Europe plays catch-up, it must address some significant institutional challenges, chief among them high energy costs, strict regulatory systems, and an expensive labor market. Fortunately for the rest of us, the real winner of this race for EV primacy will likely be consumers, as they will have access to better options than ever before.
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