The European Commission on Wednesday unveiled an ambitious action plan aimed at strengthening the global competitiveness of the European automotive industry, with the sector facing rapid technological shifts and increasing competition from abroad.

The plan, which builds on a strategic dialogue launched by European Commission President Ursula von der Leyen in January, outlines a series of measures to boost innovation, secure supply chains, and support the industry’s transition to cleaner mobility.

“There is so much untapped potential in the global market when it comes to innovation and clean solutions. I want to see our European automotive industry taking the lead,” von der Leyen said. “We will promote domestic production to avoid strategic dependencies, especially for battery production. We will stick to our agreed emissions targets, but with a pragmatic and flexible approach.”

Investment in Battery Supply Chains

To reduce reliance on foreign suppliers and ensure a stable supply of raw materials for battery production, the Commission will allocate €1.8 billion ($1.95 billion) toward securing a competitive and resilient supply chain. The move is expected to support the growth of the European electric vehicle market while strengthening the region’s production base.

The Commission plans to establish a European Connected and Autonomous Vehicle Alliance to accelerate the transition to artificial intelligence-powered, connected, and autonomous vehicles. The initiative aims to coordinate industry stakeholders and develop standard software and digital hardware platforms for next-generation vehicles.

A series of large-scale testbeds and regulatory ‘sandboxes’ will also be introduced, allowing companies to refine autonomous vehicle technologies in controlled environments.

Joint public-private investments amounting to €1 billion, backed by the Horizon Europe Programme, will support these efforts over the 2025-2027 period.

Flexibility in Emissions Compliance

Acknowledging industry concerns over stringent CO2 regulations, the Commission proposed an amendment to the CO2 Standards Regulation allowing car manufacturers to average their emissions performance between 2025 and 2027. The adjustment provides flexibility while maintaining the EU’s long-term climate goals.

With the global automotive industry facing supply chain disruptions, the Commission pledged further support for Europe’s battery sector, including direct production incentives and resilience-focused procurement criteria.

The Commission will expand the European Globalisation Adjustment Fund for Displaced Workers and increase funding from the European Social Fund Plus to address labor shortages and skill gaps in the automotive workforce. These measures aim to help workers reskill and adapt to new technological demands in the sector.

Trade and Competition Safeguards

As European automakers face growing competition from foreign manufacturers, the Commission announced plans to deploy trade defense instruments, including anti-subsidy measures, to protect the industry from unfair trade practices. Negotiations with international partners will also continue to enhance market access and sourcing opportunities.

Additionally, measures will be introduced to ensure that foreign investments in the European automotive sector contribute to its long-term competitiveness. At the same time, regulatory simplifications will aim to reduce bureaucratic burdens on manufacturers.

The Action Plan is the culmination of an extensive consultation process involving industry stakeholders, government representatives, and working groups led by multiple EU Commissioners. The initiative seeks to position Europe at the forefront of automotive innovation while ensuring the sector remains competitive in an evolving global landscape.