The Future of EU Leadership in the Car Industry: Still Global

This study considers how best to maintain a globally thriving EU car sector in the face of several interrelated challenges. The climate emergency necessitates a dramatic reduction in emissions to net-zero impacting across the economy, which leads to a fundamental shift in automotive products and therefore manufacturing, given electrification and digitalisation. Moreover, there is a greater emphasis on the need of preserving and restructuring the auto industry in the face of increased competition from the emerging markets, not least China and India. In trade policy, Europe feels the need for a more assertive and autonomous trade policy to protect against perceived imbalances in the current models of globalisation.

Much has been written about the individual building blocks of each of these points. Our aim is to consider the cumulative impact of the initiatives, the risks they may entail, and how these can best be managed, on a single industry that is often at the nexus of climate, trade and industry policy debates.

While individual policy areas will be scrutinised, they must also be considered as a package in terms of their combined impacts. The EU car industry is the most important manufacturing sector in terms of export revenues, and it is not clear whether those revenue streams will be ‘sustainable’ in both meanings of the word.

Current objections to openness will likely be supercharged by the overarching objective of carbon net zero in the medium term at very high costs, where the necessary private and public investments in infrastructure and the energy transition is still missing.[1] Meanwhile, there are worries about post-pandemic recovery in the short term. This leads to the question: How can the EU auto industry remain Europe’s most important source of export revenues in the long term?

The rest of this study is structured as follows. Section 2 discusses the EU car sector, and its importance to the EU; Section 3 summarises the risks to its future including key current EU initiatives affecting the sector; Section 4 concludes by considering how these risks can best be managed.

To view the full policy brief, please click here.