The European Commission (EC) has detailed a new plan targeting the struggling automotive sector in the EU. In the outline, the EC is to relax the 2025 emissions targets by two years and provide EUR1.8Bn (US$2.0Bn) in financial support to boost the European battery supply chain.

In the proposed changes, the EC will provide a two year grace period for the 2025 emissions targets, which originally stipulated that new vehicles must target an average of 93.6 g of CO2/km, a 15% reduction compared with 2021 levels. Heavy fines are currently levied against automakers that do not meet the requirements, further compounding the cost crisis that Western OEMs face when producing EVs.

The EC’s President, Ursula von der Leyen, also stated that OEMs that fail to meet the 2025 and 2026 targets could ultimately overperform in 2027, effectively averaging the carbon debt during those initial years. A relaxation of targets would therefore allow OEMs to get up to speed with EV production without the weight of additional cost pressures. With that, the emissions targets for 2035 (55% CO2 reduction) and 2040 (100% CO2 reduction) remain in place, although they are undoubtedly not untouchable further down the line.

The automotive action plan also includes some much-needed financial support in the form of EUR1.8Bn (US$2.0Bn) to secure domestic battery supply chains in Europe. Europe has seen a raft of delays and cancellations to projects up and down the supply chain, increasing the uncertainty of Europe’s position within the global battery landscape. This funding will be crucial to support new and existing projects and enticing new investment within Europe, although caution must be taken with the strategy to effectively support the industry. The Commission is also investigating how it can support the downstream supply chain with direct funding and non-price criteria for components.