On 5 March 2025, the European Commission unveiled its Industrial Action Plan for the European Automotive Sector (the “Action Plan”). Prior to this, on 30 January 2025, the European Commission had initiated a strategic dialogue with the European automotive industry, social partners and other key stakeholders. Led by President von der Leyen, the strategic dialogue involved regular meetings attended by industry representatives (including manufacturers and suppliers), social partners, Commission members, and other stakeholders, including from the general public.
I. Introduction and background
Recognising the automotive industry as a cornerstone of the EU’s prosperity and identity, the Action Plan acknowledges that the sector is undergoing a rapid shift towards clean mobility, digitalisation, and automation. This transition presents both opportunities and challenges, including global supply chain risks, competition for talent, and geopolitical volatility. The Euro-pean Commission is committed to implementing a comprehensive action plan to support the industry through this transition. The purpose of the Plan is to help secure global competitiveness of the European automotive industry and sustain a strong European production base through action in five key areas: 1) innovation and digitalisation, 2) clean mobility, 3) competitiveness and supply chain resilience, 4) skills and social dimension, and 5) level playing field and business environment.
Below is a brief overview of these five key areas of the Action Plan, along with some of their flagship initiatives.
II. The five pillars of the Action Plan
1. Innovation and digitalisation
The Action Plan focuses on a number of key aspects in the key area of innovation and digitalisation, including:
- Promoting autonomous driving and boosting the Single Market for autonomous vehicles. This includes the flagship actions of establishing large-scale cross-border testbeds for autonomous vehicles starting in 2026 and further developing the regulatory framework and Single Market integration for European Autonomous Driving.
- Boosting the development of the European connected and autonomous vehicle of the future. The EU will support research and innovation in this field, including the launch of the European Connected and Autonomous Vehicle Alliance in 2025 as a flagship action.
- Supporting next-generation battery technology. The EU will invest in research and innovation to accelerate the development of next-generation battery technology as a flagship action.
- Supporting joint public and private investments. The activities of the European Connected and Autonomous Vehicle Alliance as well as next-gen battery technology will receive funding under relevant partnerships of Horizon Europe. The programme will make EUR 1 billion available to the automotive sector for 2025-2027, including relevant activities financed by the European Innovation Council.
- Strengthening cybersecurity. The EU aims to develop economic security standards without stifling innovation and commercialisation.
- Catalysing private investments for scaling up Innovation in Europe and vehicle data access. The Commission’s key flagship actions include measures to improve access to vehicle data, functions and resources, including a legislative proposal on access to vehicle data in 2025 and a review of the Motor Vehicle Block Exemption Regulation (MVBER) and Supplementary Guidelines.
2. Clean mobility
To reach its CO2 reduction goal, the Commission intends to promote clean mobility by:
- Amending CO2 emission performance standards for cars and vans. A key flagship action involves allowing some flexibility in meeting emission targets. Car manufacturers will be permitted to compensate for having exceeding targets in one or two years by overachieving in other years, thus ensuring long-term predictability for investors and manufacturers.
- Boosting demand for zero-emission vehicles. This includes recommendations on addressing transport poverty, including social leasing schemes for zero-emission vehicles for vulnerable groups, a communication and legislative proposal to decarbonise corporate fleets, and measures to accelerate the uptake of zero-emission heavy-duty vehicles.
- Investing in charging infrastructure. The Commission plans to make EUR 570 million available under the Alternative Fuels Infrastructure Facility in 2025/2026 as a flagship action and proposes further flagship actions on providing guidance and recommendations on shortening grid connection procedures and prioritising grid access.
- Strengthening consumer trust in electric vehicles. Measures include improved information on the broader issue of battery reparability and increasing the usability of charging infrastructure by strengthening price transparency at publicly available recharging points.
3. Competitiveness and supply chain resilience
The Action Plan acknowledges that there are limitations to the European automotive industry’s competitiveness in terms of its zero-emission vehicle technology and production capacities. To address this, the Plan’s primary focus is on the development and production of batteries, with a declared goal of achieving more than 50% European value creation along the supply chain by 2030. Key measures in the Plan include:
- Supporting battery manufacturing – “Battery Booster” as a flagship action. The Commission has already announced up to EUR 3 billion of the Innovation Fund for electric vehicle battery cell manufacturing. The Commission will also look into EU direct production support to companies producing batteries in the EU. The Action Plan states that EU support could be combined with State aid.
- The Industrial Decarbonisation Accelerator Act and the Circular Economy Act. These Acts will include requirements for a minimum European share of battery cells and components used in electric vehicles sold in the EU.
- Through the Critical Raw Materials Act (CRMA), the Commission will present in March 2025 a list of Strategic Projects covering, first and foremost, the production of battery raw materials at all stages of the value chain.
- Enhancing recycling and domestic production. The EU will explore further actions to enhance recycling of end-of-life vehicles and batteries and promote European production of key vehicle components in line with resilience and sustainability criteria. This includes dedicated financing support for end-of-life vehicles and battery recycling facilities and measures to facilitate intra-EU shipments and impose further restrictions on exports.
4. Skills and social dimension
The Commission aims to manage job losses resulting from technological, economic and geopolitical shifts in a socially responsible manner, while addressing skills shortages and an ageing workforce. To support this, the Action Plan includes the following measures:
- Establishing a European Fair Transition Observatory as a flagship action. This observatory will collate and develop data on employment trends and demographic structures in the workforce to guide interventions for workers affected by the transition.
- Leveraging EU funding for workforce reskilling. Existing EU initiatives, such as the European Social Fund Plus (ESF+) and the European Globalisation Fund (EGF), will be used to support both workers in reskilling and finding new job opportunities as well as companies in restructuring processes to protect employees against the risk of unemployment. Legal amendments of EGF and ESF+ Regulations as flagship actions are also planned.
5. Market access, level playing field and economic security
- Free trade agreements. The EU will pursue free trade agreements to improve market access and sourcing opportunities for critical materials. This includes promoting the global harmonisation of technical vehicle regulations (UNECE) and working with trading partners to pursue regulatory convergence around international standards.
- The Commission will engage with the industry and Member States on the approach applied to preferential rules of origin to ensure that they contribute and support the long-term competitiveness of the EU automotive sector.
- Using trade defence instruments to counter unfair competition. The Action Plan makes reference to countervailing duties on Chinese electric vehicle imports and states that the Commission remains open to continuing its engagement with individual producers on price undertakings for the countervailing measures on battery electric vehicles from China, in line with the Basic Anti-Subsidy Regulation.
- Strengthening the contribution of foreign investments to EU competitiveness. The EU will ensure that foreign investments in the automotive sector contribute to the long-term competitiveness of EU industry, its technological edge, and economic resilience. As flagship actions: Explore conditions for inbound foreign investments in the automotive sector, including when public funding is involved.
- Simplifying automotive regulations. The Commission plans to introduce a package to simplify legislation for the automotive industry, ensuring greater coherence and consistency between the various regulatory requirements. Regulatory simplification is also planned as a flagship action.
III. Next steps and conclusion
The Commission will inform the European Parliament and the Council about the Action Plan and its proposed measures, urging them to enable swift implementation of the targeted amendments proposed. The European Commission plans to work closely with stakeholders to implement the measures outlined in the Action Plan, ensuring the European automotive industry remains competitive and resilient in the face of global challenges. Regular dialogues and consultations will continue for the purposes of gathering feedback and monitoring progress. A meeting with the automotive industry executives is planned before the summer break.
Given the large number and wide variety of measures and initiatives, key players in the European automotive sector are encouraged to closely monitor further (legal) developments and to assess any potential changes and opportunities, adapting their business strategies accordingly.
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