Article originally in the Financial Times.
Brussels has vowed to help Europe’s beleaguered car industry by using Europe-wide subsidies to boost demand for electric vehicles. European Commission Executive Vice President Teresa Riber told the Financial Times at the World Economic Forum in Davos that officials were still “shaping” the options for the stimulus program.
“It makes sense to find out how we could figure out from a pan-European perspective how to facilitate measures instead of dealing with it through national subsidies,” said Riberová. She warned against “a race in which we could pit national models against each other”.
A complicated balance
German Chancellor Olaf Scholz revealed on Tuesday that the Commission is considering an EU subsidy program he proposed. The German government abruptly canceled its own program in 2023, leading to a sharp decline in electric vehicle sales.
Many EU member states offer incentives for electric vehicles, but according to the European Automobile Manufacturers’ Association, conditions vary widely and several do not provide any purchase subsidies.
One of the challenges for Brussels would be to design a system that complies with World Trade Organization rules while avoiding the subsidies flowing to Chinese carmakers, whose market share is growing so rapidly.
Riberová admitted that there is a “complicated balance” to be found between rapid electrification and “a mismatch with the ability of European brands to provide what we would like in terms of quantity and quality to be on our roads”.
The commissioner, who is responsible for the EU’s “green industry” strategy, said a possible incentive scheme would be one of several measures to support the sector, which is considered key to the European economy.
European automakers “needed a comprehensive view of how to update their capacities and catch up with what is already required around the world,” said Riberová. Conversely, US President Donald Trump this week promised to end “unfair subsidies” for electric vehicles.
The year 2035 will not change
Ribera, a socialist and former vice-president of the Spanish government, has ruled out delaying the end of sales of new vehicles with internal combustion engines until 2035 because the car industry wants “predictability and clarity”.
“There’s no point in reopening the debate when it provides some certainty and would punish the pioneers who took it seriously, without any potential benefits for those who haven’t,” he says.
But she said she was open to a more flexible approach to annual electric vehicle sales targets and fines carmakers face for failing to meet them. Riber said there was an “open discussion” with carmakers about alternative commitments they could make in terms of investment.
Automakers have complained that paying the fines only hampers their electric vehicle investment plans, while buying credits from Chinese electric vehicle makers helps Chinese competitors.
A good example from China
Riberová said it was important to “ensure that this legislation is applied in a way that facilitates the achievement of the main objective” of phasing out petrol and diesel engines.
She also said she was open to expanding technology transfer requirements for foreign carmakers looking to set up production facilities in the EU. Brussels announced last year that it would require foreign companies that received EU grants to develop batteries to share some technology with local partners.
A “good example” can be taken from China, which imposed strict requirements on joint ventures and technology sharing when European carmakers set up factories there 30 years ago.
Riberová stated that, in addition to the automotive sector, she is willing to expand the available measures that the Commission could take in favor of European industry. It says it will address local content requirements to protect European turbine makers who face stiff competition from Chinese companies.
Shares in European wind turbine makers took a hit from Trump’s first policy announcements, including a freeze on leasing new offshore projects. Riber has insisted that the EU will continue to decarbonise despite Trump’s withdrawal from the 2015 Paris agreement to cut emissions. Riber is one of its creators.
According to her, the devastating fires in Los Angeles showed that the United States is already suffering from the consequences of climate change, which requires great costs. “The world is much bigger than the United States, and there are many other partners and players who understand why it’s important to stay united,” he says.
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