The future of EU vehicle manufacturing

The transition to battery electric vehicles (BEVs) challenges European automakers as existing internal combustion engine vehicle (ICEV) revenues decline. Achieving the EU’s 2035 zero-emission target requires an estimated additional consumer spending of EUR 66 to 95 billion in 2025 to meet deployment levels. BEV direct costs were 45% higher than ICEVs in 2020, though this gap is projected to narrow to 10% by 2030. To sustain current profit margins, average BEV prices of EUR 45,000 are necessary, which significantly exceeds the EU’s median consumer willingness to pay of EUR 20,000. New revenue streams, such as connected vehicle services and battery leasing, are emerging, but European manufacturers must navigate intensifying global competition and declining market shares.

Batteries

Meeting the domestic demand for BEV batteries requires substantial investment, with estimates reaching up to EUR 380 billion by 2030 for a self-sufficient European industry. Currently, 50-70% of battery cells used in the EU are imported, primarily from China. European BEVs currently retain only 70-75% of local value added compared to 85-90% for ICEVs. High energy prices and supply chain vulnerabilities for critical raw materials (CRMs) like lithium and cobalt threaten production economics. Scaling up domestic battery manufacturing and advancing new chemistries (such as lithium iron phosphate) alongside robust recycling programmes are crucial to mitigate these dependencies.

Charging infrastructure

Public charging infrastructure in the EU reached nearly 900,000 points by late 2024, but deployment remains uneven across regions. Estimated investment needs for passenger car and commercial vehicle charging range from EUR 98 billion to EUR 172 billion by 2030, with 81% allocated to private charging. Barriers to infrastructure roll-out include fragmented permitting processes, inconsistent local regulations, and insufficient electricity grid capacity. Upgrading distribution grids and implementing smart, bidirectional charging frameworks are recommended to reduce total ownership costs for EV users and improve grid flexibility.

Employment and skills

The broad automotive industry employs nearly 14 million people in the EU, and the shift towards electromobility, alongside automation, will restructure labour needs. BEV manufacturing generally requires less manual labour, raising concerns about job losses in ICEV-dependent regions. However, workers possess transferable skills applicable to adjacent sectors. Proactive labour market policies, including targeted upskilling and reskilling programmes, are essential to address structural employment impacts and emerging skill gaps in software and battery development.

Financing instruments

Accelerating the EV transition requires targeted public financing to complement private investments. Demand-side support, such as social leasing schemes backed by the Social Climate Fund, is recommended to bridge the affordability gap for lower-income consumers. On the supply side, the EU’s Innovation Fund and the Strategic Technologies for Europe Platform (STEP) should be leveraged to scale up clean technology manufacturing, particularly for batteries. Strengthening research and innovation (R&I) through European Partnerships and expanding European Investment Bank (EIB) instruments like venture debt will help de-risk investments and restore the global competitiveness of EU manufacturers.