\t\t\t\t\t\t\tThe EU\u2019s efforts to become climate neutral by 2050 can feel abstract, measured in intangible emissions and wrapped up in technical jargon. Yet on Europe\u2019s streets, the transition is already visible in a growing number of electric vehicles (EVs) and charging stations.<\/p>\n
But decarbonising the EU\u2019s transport sector is about more than bringing EVs onto the streets to achieve climate targets. It\u2019s become a question of European competitiveness, jobs, skills, affordability \u2013 and much more. As the EV transition arrives at a critical juncture, one central question is emerging: can the EU have its cake, eat it, but also bake it in Europe?<\/p>\n
Having the cake \u2013 or reaching climate goals<\/p>\n
For passenger cars and vans, battery electric vehicles (BEVs) are leading the shift towards low-carbon mobility. However, lower registration rates\u00a0in 2024\u00a0compared to the previous year triggered some concerns about supposedly wobbling demand. While numbers have picked up again, the mountain to climb remains steep.<\/p>\n
Aligning with \u2018Fit for 55\u2019 policies requires a sharp rise in uptake, from around\u00a01.5 million\u00a0BEVs in 2024 to over\u00a06 million\u00a0in 2030, according to some scenarios. To stay on track, consumers would need to spend some\u00a0EUR 66-95 billion\u00a0more in 2025 compared to 2024. This is a big leap of faith for consumers still spooked by the recent inflation shock, even as real wages have\u00a0begun to recover.<\/p>\n
And the challenges go even deeper. The EV transition isn\u2019t just about adding an \u2018E\u2019 to number plates. It means shifting costs and revenues, redefining jobs, skills and entire supply chains, alongside new dynamics such as the rise of the software-defined vehicle \u2013 all of which will ultimately determine how much economic value (\u2018value added\u2019) is created and retained in Europe.<\/p>\n
The transition also isn\u2019t happening in a vacuum. As shown by the\u00a0Global EV Outlook, European manufacturers\u2019 share of the EV market decreased from over 80\u00a0% in 2015 to 60\u00a0% in 2023, while Chinese producers increased theirs to 15\u00a0% (from 5\u00a0% in 2015).<\/p>\n
The stakes could hardly be higher, especially following\u00a0recent large-scale layoffs\u00a0in the car industry, particularly in Germany.<\/p>\n
Eating the cake \u2013 or making EVs affordable<\/p>\n
Prices remain a major barrier. According to surveys, EU consumers are willing to pay around\u00a0EUR 20\u00a0000\u00a0for a BEV. Yet\u00a0our scenarios\u00a0suggest that around EUR 45\u00a0000 is the minimum price for European compact-class BEVs to maintain current cost structures and gradually substitute declining revenues from combustion vehicles.<\/p>\n
Although the cost gap is expected to narrow, the timing remains uncertain and will depend on many factors, including supply chain dynamics, innovation and pricing structures along the value chain (Volkswagen\u2019s\u00a0plans\u00a0for small, more affordable BEV models, coming in 2026 and 2027, show progress but broader cost reductions are still essential for bringing competitive EU models across segments to market).<\/p>\n
For now, some cheaper alternatives already exist but they\u2019re not \u2013 at least not yet \u2013 rolling out of European factories, resulting in a gap that Europe must close if it\u2019s to reap the benefits of the transition.<\/p>\n
Baking the cake in Europe \u2013 or preserving value added<\/p>\n
This points to yet another dimension of the EV transition: European value added. For combustion vehicles, Europe retains\u00a085-90\u00a0%\u00a0of the value of each vehicle produced and sold in the EU. For BEVs, the figure falls to 70-75\u00a0%.<\/p>\n
The main reason: batteries.<\/p>\n
The EU\u2019s battery supply chain remains underdeveloped, even though batteries are likely to remain central to both costs and value added. In 2020, batteries accounted for\u00a0around 40\u00a0%\u00a0of the direct costs of a compact-class BEV, and while this share is expected to fall, some projections suggest they could still make up around 30\u00a0% in 2030.<\/p>\n
Alas, challenges for the EU battery industry persist. European battery prices remain roughly\u00a020\u00a0% higher\u00a0than China\u2019s and meeting EU demand with domestic production could require up to\u00a0EUR 380 billion\u00a0in investment by 2030. On the ground,\u00a0more than half\u00a0of previously announced investments were at risk of delay or cancellation in 2024.<\/p>\n
Recognising this, the European Commission has unveiled a\u00a0Battery Booster Package\u00a0to scale up production, with local content requirements (i.e. rules mandating that a certain share of materials or components be sourced from within the EU) also being considered.<\/p>\n
Scaling up European battery production is clearly justified if the EU wants to preserve value added during the transition. But the cost implications and their potential impact on prices and uptake mean local content rules need to be introduced with care. Blanket requirements risk addressing EU value-added concerns but could trigger cost increases, driving up prices and slowing adoption. That\u2019s why a nuanced approach could be worth exploring. One option could be to identify market segments that can better absorb higher costs without derailing the overall transition.<\/p>\n
So\u2026 what\u2019s the way forward?<\/p>\n
One path is to prioritise affordability by relying on cheaper \u2013 currently likely foreign \u2013 BEVs. This route supports climate targets but risks leaving much of the value and jobs outside Europe. Another approach is to double down on local content requirements, which could support retaining value added and employment but also lead to higher costs, slower uptake and, ultimately, missed climate targets. It goes without saying that neither option is particularly attractive.<\/p>\n
The challenge for EU policymakers is to find a \u2018third way\u2019 that safeguards European competitiveness and jobs while making BEVs affordable enough to sustain the transition.<\/p>\n
Given that European BEVs remain more expensive than combustion cars, targeted demand support \u2013 such as social leasing or purchase subsidies \u2013 will likely be needed in the short term.<\/p>\n
At the same time, supply-side measures should support scaling-up battery production, strengthening innovation and securing access to critical raw materials. This is because the transition requires not only bridging demand gaps but also mobilising EU financing instruments to de-risk investments and accelerate industrial deployment and scale-up.<\/p>\n
Done right, Europe can indeed have its cake and eat it \u2013 climate ambition, competitive industries and good jobs to boot.<\/p>\n
Done wrong, it risks hollowing out its value chains or missing climate targets due to the cake being only half-baked\u2026 or baked somewhere else entirely.<\/p>\n
About the author:<\/p>\n
Christian Dietz<\/strong> is a Researcher in the Energy, Resources and Climate Change (ERCC) Unit at CEPS.<\/p>\n","protected":false},"excerpt":{"rendered":"The EU\u2019s efforts to become climate neutral by 2050 can feel abstract, measured in intangible emissions and wrapped…\n","protected":false},"author":2,"featured_media":470824,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5174],"tags":[2000,299,5187,1699],"class_list":{"0":"post-470823","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-eu","8":"tag-eu","9":"tag-europe","10":"tag-european","11":"tag-european-union"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@uk\/115309711473672409","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/470823","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=470823"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/470823\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/470824"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=470823"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=470823"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=470823"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}