Will the EU's road to electrification still be rocky with the imminent release of a new electric vehicle policy?

Brussels is gripped by a heated debate over the fate of Europe's automotive industry.

According to Reuters, a draft proposal from the European Commission obtained by it shows that the Automotive Sector Action Plan, due to be released on March 5, will deliver a combination of punches: a mandatory increase in the percentage of localized electric vehicle batteries, accelerating the electrification of company fleets, exempting zero-emission heavy trucks from the road charge and exploring a new model of subsidies for car purchases.

These initiatives come against the backdrop of a 5.9% sales decline in the European EV market by 2024. However, the draft has not yet been released, but has already triggered a heated debate on “industrial protectionism” and “the cost of transition”.

European Commission President Ursula von der Leyen gives an interview to the media after the conclusion of the Strategic Dialogue on the Future of the European Automotive Industry at the headquarters of the European Commission in Bellemont on March 3, 2025 in Brussels, Belgium.

According to the draft, the EU proposes to accelerate the electrification of the “company fleet”, which accounts for 60% of the new car market, which is seen by Julia Poliskanova, director of vehicle policy at the think tank Transport & Environment, as a “real lever to move the market “. But at the same time, Germany last year, the sudden abolition of subsidies for car purchases led to a 27% plunge in local electric car sales lessons, so that the industry is full of doubts about the continuity of the policy. ANFIA, the Italian automotive industry association, has publicly called for the abolition of the 2025 CO2 emissions fine mechanism, saying the threat of €15 billion in fines faced by car companies “is stifling investment in innovation.”

“The cost of each power cell in Europe is 38 percent higher than in China.” Data from consultancy Benchmark Mineral Intelligence uncovers one of the core reasons for Europe's slow electrification. The draft bill's clause on “European local content requirements for battery components” is seen as a defense against China's supply chain dominance. But with Ningde Times' Hungarian plant coming on stream and Hive Energy's German site receiving EU subsidies, Europe's localization strategy relies instead on Chinese technology imports.

More subtly, the draft allows foreign firms to gain support by partnering with European companies, a “technology-for-market” model that is being quietly advanced by BMW's joint venture with Great Wall, Beam Motors, and Stellantis' partnership with Zero Run.

When affordable EVs from Chinese carmakers began to arrive in European ports, there was a policy split within the European Union. France is vigorously promoting the “Made in Europe” threshold, supporting Renault Dacia Spring and other models under 20,000 euros; Germany is worried about the impact of local high-end brands, advocating resistance through 45% tariffs.

In 2024, the average price of electric cars in Europe is still as high as 48,000 euros, while the price of similar products of Chinese brands is about 30% -40% lower. Industry analysts point out that “Europe needs ‘price butchers’ like BYD to force cost reductions, but fears that the market will be eroded.”

At the policy discussion table in Brussels, two scenes stand in contrast. On one side, Volkswagen's profit margins have fallen to 3% due to excessive investment in electrification, and on the other side, Tesla is making $1 billion a year by selling carbon credits to traditional car companies. This contradiction forced the EU to set aside “financial relief” space in the draft. But environmental groups have warned that any compromise that relaxes emissions targets will shake the cornerstone of the 2035 policy to ban the sale of fuel cars.

The EU's draft new electric car policy, in the globalization of competition and industrial protection between the “back and forth horizontal jump”. When China holds 75% of the battery production capacity, the United States with the Inflation Reduction Act to absorb the industrial chain of investment, Europe is trying to use “local content” to build a line of defense.

But the success of this action, not only depends on the charging pile construction speed or subsidy strength, but also in the openness and protection, environmental goals and commercial reality to find a balance. As a German automotive engineer previously said in an interview: “We are paying the price for the past ten years of hesitation on electrification, and now every policy is like doing multiple choice in the emergency room.”