Driving Europe’s EV Future: EU to Boost Demand and Build Battery Independence

The European Commission was set to announce an automotive action plan on 5 March 2025 to boost electric vehicle (EV) demand and enhance local battery production within the EU. Key initiatives include encouraging the electrification of corporate car fleets, which comprise around 60% of all new vehicle registrations across the EU, and proposing exemptions from road charges for zero-emission heavy vehicles. Additionally, the EU intends to tighten rules around battery sourcing, requiring manufacturers to use increasing proportions of locally produced battery cells and components over time.

The significant representation of companies in the car market also influences the high demand for diesel and petrol vehicles, as they benefit from tax incentives, which make them more popular and decelerate the transition to EVs. For this reason, the EU considers it essential to remove these subsidies to encourage companies, as the largest participants in the car market, to buy EVs instead. According to the EU automakers’ association (ACEA), the new EV sales fell 5.9% in 2024, for which limited charging infrastructure was partly to blame. Although Germany's abrupt ending of subsidies and a shortage of cheap EVs until now have also contributed. The draft action plan highlights that Europe’s automotive sector is in danger of falling behind in the electric vehicle market, as it struggles with considerably higher production costs, especially in key components like batteries, which represent 30–40% of a standard vehicle’s total value, compared to global rivals.

The draft will make proposals to the Member States on actions they can take to accelerate the uptake of EVs in fleets of company cars. The Commission is set to explore ways to assist battery manufacturers operating within the EU, potentially extending this support to non-EU firms as well, provided that they collaborate with European companies to promote knowledge and technology exchange. Additionally, the Commission intends to introduce criteria for foreign investments in the automotive industry and consider funding for battery recycling infrastructure.

With factory shutdowns and looming U.S. tariffs already pressuring European carmakers, many have appealed for relief from CO2 emission penalties, which could reach EUR 15 billion in 2025 if the fleet targets are not met. While the draft does not specify what form this financial support might take, the Italian auto lobby group ANFIA has called for bolder measures, proposing for example the cancellation of the planned emissions fines.