The electric vehicle industry faces a tsunami of challenges. But as the US sector slows, EU manufacturers could benefit from new opportunities<\/p>\n
At a glance<\/p>\n
President Trump\u2019s policies on electric vehicles will shape the trajectory of the US\u2019s industry and influence the sales and production of the sector in Europe, suggests analysis by Brussels-based policy think-tank Bruegel<\/p>\n<\/li>\n
Whether the EU decides to delay its 2035 ban on diesel and petrol cars will influence the competitiveness of the EU EV industry<\/p>\n<\/li>\n
There is also the question of making EVs affordable \u2014 the majority of EVs from China are deemed affordable, while most produced in the EU and the US are not<\/p>\n<\/li>\n<\/ul>\n
US President Donald Trump\u2019s policies will not only shape the trajectory of his country\u2019s electric vehicle industry, but will also influence the sales and production of the sector in Europe, according to analysis<\/a> by Bruegel, a Brussels-based policy think-tank.<\/p>\n EVs became a major point of contention during the 2024 presidential election campaign as Trump attacked then-President Joe Biden\u2019s focus on decarbonising the US economy, vowing to reverse many of the latter\u2019s policies \u2014 including the targets and incentives designed to expand EV adoption.<\/p>\n On his first day in office, Trump signed an executive order to quash the target of making 50 per cent of vehicles sold in the US electric by 2030, and froze $5bn in unspent federal funding reserved for building EV charging stations. <\/p>\n The president is now one step away from also withdrawing a consumer tax credit of up to $7,500 for purchasing US-made EVs, introduced by Biden in 2021 as part of the Inflation Reduction Act, the largest climate legislation in US history. Not content with simply eliminating the incentive, under his proposed \u2018big beautiful\u2019 tax bill, Trump is proposing an $250 annual fee for EV owners.<\/p>\n Growing costs<\/p>\n Even without such actions, the cost of EV production in the US is expected to rise significantly because of its tariffs on China, on which the US EV industry depends for raw materials and components such as batteries. <\/p>\n In terms of production capacity and adoption, the US already lags behind China and Europe. In the first quarter of 2025, half of the cars sold in China and almost every fourth car sold in Europe was either fully electric or hybrid, compared with 10 per cent in the US, according to data from market intelligence firm EV Volumes. <\/p>\n According to Bruegel\u2019s analysis, the withdrawal of federal EV-support policies, combined with increased production costs, undermines growth prospects for the US domestic market and threatens to reduce the competitiveness of US-made EVs abroad. These policy changes could also deter US consumers, limiting future growth prospects.<\/p>\n The broader reversal of decarbonisation policies by Trump is also creating uncertainty for future-facing industries in the US and the EU, which have closely integrated economies. In 2024, more than 20 per cent of vehicles<\/a> exported from the EU were to the US. Furthermore, tariffs, the threat of a trade war escalation and the potential reorganisation of global EV supply chains are all likely to pose further risks to Europe\u2019s industry.<\/p>\n Europe\u2019s EV industry sees prospects, but with caveats<\/p>\n \u201cAny slowdown in the US production of electric vehicles opens a significant window for other producers,\u201d says Ben McWilliams, a co-author of the Bruegel report. <\/p>\n If the US administration decides to reprioritise the EV industry in the future, which McWilliams suggests is a likely possibility, it would be left \u201cplaying catch-up, and when the market opens again, European producers could be well placed to compete, even in the US\u201d.<\/p>\n The adoption of EVs in the EU has been accelerated by 2019 legislation banning internal combustion engines by 2035. <\/p>\n \u201cBy far the largest impact will come from the upcoming review of the 2035 car CO\u2082 regulation, expected in early 2026. If the EU leadership keeps the 2030\u20142035 CO\u2082 standards, the EV transformation will continue,\u201d says Julia Poliscanova, a senior director at Transport & Environment, a non-profit advocating for the European green transition.<\/p>\n Under pressure<\/p>\n The EU has been under pressure from various car manufacturers to scale back its climate ambitions, which have struggled to accelerate EV production.<\/p>\n \u201cDemand for EVs is not yet strong enough in all customer groups and markets in Europe to make the ramp-up self-sustaining,\u201d says Felicia Fullbrecht, spokesperson for VDA, the German car industry association. \u201cIt requires affordable charging electricity, an ambitious expansion of the charging infrastructure and an expansion of electricity grids.\u201d<\/p>\n In May, the EU relaxed the 2025 CO\u2082 emission targets in response to mounting pressure. Two weeks later, the VDA called <\/a>for a reversal of the 2035 ban.<\/p>\n Not all car manufacturers agree with the VDA, however. \u201cWe believe it\u2019s important that the EU remains committed to the CO\u2082 tailpipe emission targets \u2014 challenging them will only delay the necessary transition,\u201d says a spokesperson for Swedish carmaker Volvo, one of the largest European EV producers.<\/p>\n Meanwhile, Transport & Environment\u2019s Poliscanova says: \u201cIf the targets are rolled back \u2014 as some in the engine and oil industry want \u2014 the EV gap with China will become irreversible and European carmakers will struggle to keep their global market share and their current European customers.\u201d <\/p>\n China is the real competitor<\/p>\n