Draghi. Draghi. Draghi.
There is no finishing 2024 without acknowledging the most influential report shaping the new EU cycle, from new commissioners to parliamentarians. (Also easily turned into a great drinking game for your work Christmas party).
Draghi’s conclusion on EU’s automotive policy resonated well with us at T&E: the problem is not the car emissions targets, but a lack of an industrial plan to achieve them.
And it is exactly such a plan that the new Transport Commissioner Tzitzikostas, alongside Von der Leyen’s dialogue with Europe’s automotive ecosystem, should develop in early 2025.
This is T&E’s new year wish (or three) for the plan.
Keep the certainty
First, this should not be an attempt to revoke the Green Deal transport agenda or weaken the 2025-2035 car CO2 standards. Changing goal posts in the compliance year will only create chaos, with many carmakers - including BMW and Volvo Cars - ready to meet the targets. Most affordable electric car models that comply have simply not rolled off the production lines yet. We don’t know how the market will react.
Weakening the standards will also put much of Europe’s battery factory pipeline at risk, with a record number of investments cancelled or delayed in 2024. T&E’s latest estimate puts close to 60% of all projects by 2030 at risk, many of whom are seeking EV market certainty.
Build locally
Second, the automotive industrial plan must make serious amends to the EU's trade and investment policy to make local manufacturing attractive.
Given the cheap high quality batteries coming from China with a laughable 1.3% import tariff, and a raft of battery factories scaling in the US under the generous IRA subsidies, it is anyone’s guess why any automaker would go through the ordeal of supporting battery manufacturers in Europe (scaling that will be tough).
But Europe remains a large attractive market, open to Asian companies that make the best batteries and components in the world. So it’s all about playing our cards right.
One such card is to require only clean locally made batteries, components and materials such as steel, to be eligible for EU and national subsidies. Clean should be defined simply, based on a harmonised ecoscore methodology that uses grid average emissions of batteries, steel, aluminium and other key materials. This is easy to implement with far reaching local industrial benefits.
Another major card is tariffs. Similarly to EVs, an anti-subsidy investigation should be launched into battery cells. Rather than lead to a trade war, the result of this can be the EU waiving tariffs for those Asian companies that transfer technology, skill local workers and enter joint ventures with >51% local ownership.
Enable drivers to make the switch
Third, the automotive plan must include measures on demand and charging infrastructure.
A major under-utilised lever to support EV demand are corporate fleets (both car and truck ones). Electric cars are already cheaper to run and would finish in the second hand market after just a few years. But corporate buyers have so far been slower to electrify than private buyers. In the goods business, Europe’s largest freight companies can lead the transition and subcontract carriers to go green. Tzitzikostas should present a regulation in 2025 for the biggest car, van and truck fleets to electrify.
A lot of Europeans would buy an electric car already today, but stop-go incentives - as seen in Germany - create disruption and uncertainty. While new money is tight, many regional and post-Covid funds remain unused. Here the Commission can help harmonise national EV incentives, and even launch a common platform to support governments who want to put in place low-cost leasing schemes as done in France.
The European charging law (AFIR) is already creating a minimum public charging network. But the fund supporting the roll-out (AFIF) will run out of money by the end of 2025. The Commission must swiftly reallocate funds from other pots to keep the progress, e.g. the Connecting Europe Facility or regional programmes. 2025 should also be the year the EU makes progress on distribution grids, from digitalising and simplifying connection processes to allowing high power truck chargers to connect swiftly.
These will be the areas we as T&E will be watching in the automotive space in 2025 as Europe hopefully turns the Draghi into action.
