The European automotive industry is facing an inflection point as it navigates a multitude of existential threats, from escalating tariffs on cross-border trade and soaring energy costs to mounting difficulties in securing access to rare earth materials. Recent data underscores the severity of the situation: tens of thousands of jobs across the sector were lost last year alone, with many more at risk if decisive action is not taken by policymakers. The ongoing debate about the future direction of Europe’s green mobility transition has revealed deep fissures among EU member states, with some advocating for a technology-neutral approach to CO2 regulation, while others, notably France and Spain, maintain support for stringent existing rules with limited flexibilities.

In an urgent communiqué, a coalition of 19 European leaders petitioned the President of the Council to revisit economic reform strategies inspired by Mario Draghi, highlighting the critical need to simplify sustainability requirements and strengthen the Single Market. The Draghi framework explicitly calls for automotive policy to support all viable decarbonization technologies, moving beyond a rigid focus on battery-electric vehicles. This is more than a theoretical discussion: while China and the United States are driving ahead with open, consumer-oriented policies that still support hybrids and the development of AI and data-centric mobility models, Europe’s regulatory pathway risks becoming disconnected from consumer realities and global industrial trends.

Suppliers across the continent remain eager to invest in scalable solutions, but they need policy that enables, rather than constrains. A prime example is plug-in hybrid technology, which remains popular with European consumers for its balance of efficiency and convenience. The European Association of Automotive Suppliers (CLEPA) has proposed pragmatic measures such as adjusting the so-called utility factor (the proportion of electric kilometres required in hybrid vehicles), advocating for a more flexible, stepwise approach. The goal is to maximize electric driving where feasible, without prematurely penalizing both consumers and manufacturers who are eager to contribute to the transition.

Another acute concern centers around the future resilience of European value chains. The region’s experience in the solar industry—where EU investments ultimately enabled robust manufacturing growth outside Europe—serves as a cautionary tale. Without robust local content requirements and policies designed to anchor clean technology manufacturing in Europe, the continent risks becoming a mere consumer marketplace for advanced mobility technologies produced elsewhere. Localizing production is not only critical for employment and economic autonomy, but also for sustaining research, innovation, and supply chain integration across member states.

The debate over phasing out internal combustion engines by 2035 illustrates the gap between ambition and feasibility. Neither the US nor China has signaled a market-wide ban, instead preferring a gradual, technology-inclusive approach that supports ongoing industrial momentum and wider consumer adoption of green technologies. For Europe, such pragmatism could help avoid international competitiveness losses and prevent the offshoring of high-value manufacturing operations.

With pivotal regulatory decisions imminent, the next few months are set to determine whether Europe continues to lead in automotive innovation or cedes the driver’s seat to more agile global competitors. The Secretary General of CLEPA has called on the European Commission to seize this critical moment and implement a CO2 policy review that places Europe’s strategic industrial interests and societal priorities front and center. The industry’s message is clear: true sustainability and climate neutrality can only be achieved by anchoring the transition in European factory floors—not just in the showrooms.

As the clock ticks and political pressures mount, European industry leaders insist on matching climate ambitions with actionable, economically rational reforms that ensure the region’s automotive sector remains resilient, innovative, and globally competitive.

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