EU plans subsidies for EV car sales to fight China

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Brussels has promised to help Europe’s struggling car industry by using pan-EU subsidies to boost demand for electric vehicles.

Teresa Ribera, the European Commission’s vice-president, told the Financial Times at the World Economic Forum in Davos that officials are “shaping” options for the stimulus program.

Ribera said: “It makes sense to see how we can find out from a European perspective, how we can manage measures instead of using national subsidies.” He warned against “a race in which we can face one national model against another”.

German Chancellor Olaf Scholz announced on Tuesday that the commission is considering an EU aid program he has proposed. The German government abruptly abandoned its plan in 2023, causing a collapse EV sales.

Many EU member states offer incentives for EVs, but the wording varies widely and many member states offer no subsidies at all, according to the European Automobile Manufacturers’ Association.

Another challenge for Brussels will be to design a policy that will comply with WTO rules while avoiding subsidies flowing to Chinese carmakers, whose market share is growing rapidly.

Ribera admitted that there is a “complex balance” to be made between fast electricity and “inconsistency with the ability of European products to provide the quantity and quality that we would like to see on the roads of us”.

The commissioner, who is responsible for the EU’s “green industry” strategy, said the potential stimulus plan would be one of many measures to support a sector considered important to the European economy. European automakers “needed a comprehensive vision to renew their capabilities and meet global demand,” Ribera said. On the other hand, US President Donald Trump vowed this week to end “unfair subsidies” for EVs.

Ribera, a socialist and former deputy prime minister of Spain, decided to delay the 2035 deadline to end new sales of internal combustion engines because the car industry wanted “predictability”. and clarity”.

“It doesn’t make sense to re-open the negotiations when it presents some truth, and it would punish the first migrants who took it seriously without the possible benefits for those who still need it,” he said. to move.

But he said he is open to flexibility in annual EV sales targets and the penalties automakers face for missing them. Ribera said there is an “open dialogue” with the automakers about other commitments they can make in terms of investment.

Automakers complain that paying the fines will hamper their EV investment plans as they buy loans from Chinese EV makers to help Chinese competitors.

Ribera said it was important to “make sure this law is applied in a way that helps the main goal” of eliminating gasoline and diesel engines.

He also said he intends to expand technology transfer requirements for foreign automakers wishing to set up production facilities within the EU. Brussels said last year it would require foreign companies that received EU subsidies for battery development to share some technology and local partners.

There are “good lessons to be learned” from China, which imposed strict requirements on joint ventures and technology sharing when European carmakers set up factories there 30 years ago.

In addition to the automotive sector, Ribera said he intends to expand the existing measures that the commission can take for the benefit of the European industry.

Ribera said he would look at local content requirements to protect European turbine makers who face strong competition from Chinese companies.

Shares in European wind turbine makers were hit by Trump’s first policy announcements, including a freeze on new offshore project leasing.

Ribera insisted that the EU will remain the center of decarbonisation, even if Trump decided to abandon the 2015 Paris agreement on the reduction of emissions, of which he was one of the architects.

The devastating fires in Los Angeles showed that the US is already suffering from climate change at a huge cost, he said.

“The world is much bigger (than the US) and there are many other partners and players who understand why it is important to stay united,” he said.