Europe’s automotive industry is losing competitiveness as manufacturers struggle with high energy prices, the cost of the technological transition and increasingly strong competition from Chinese producers.
Polish members of the European Parliament argue that restoring the sector’s competitiveness should become one of the European Union’s main economic priorities. In their view, financial support alone will not be enough. The EU also needs to reduce regulatory burdens, defend its market against unfairly subsidised competition and increase demand for products manufactured in Europe.
The automotive sector remains one of the pillars of the European economy. Current industry estimates indicate that it supports approximately 13.6 million jobs and generates more than 8% of EU gross domestic product. It is also closely connected to suppliers of components, steel, chemicals, electronics, logistics and business services across the bloc.
“We must fight to ensure that the automotive sector continues to develop in the European Union because it represents a significant share of the GDP of Europe and many countries operating within its extensive supply chain,” Piotr Müller, a Law and Justice MEP and member of the European Conservatives and Reformists Group, said.
He warned that the difficulties facing major German manufacturers could also have serious consequences for Poland.
“Automotive production across Europe is highly interconnected,” Müller said. “German companies play a major role, but Poland has a very large number of suppliers producing components for this supply chain. If the European automotive sector begins to contract, it will have an enormous impact on our economy. Unfortunately, this process has already started.”
European suppliers exposed to industry slowdown
Poland does not have a major domestically owned passenger-car manufacturer, but it is deeply integrated into the European automotive industry.
Polish factories manufacture engines, batteries, tyres, seats, braking systems, electronic components and other parts used by vehicle producers across Europe. This means that falling production in Germany, France, Italy or other major automotive markets can quickly affect orders, employment and investment at Polish plants.
Müller referred to warnings that restructuring by German automotive companies and their suppliers could eventually result in as many as 100,000 job losses.
He argued that such a scenario would be unprecedented and would represent a direct threat not only to Germany but also to companies operating throughout the European supply chain.
The pressure on manufacturers comes from several directions. European factories face relatively high energy and labour costs, major investment requirements connected with electrification and digitalisation, and increasingly complex environmental and reporting obligations.
At the same time, Chinese producers have developed strong positions in battery manufacturing, electric vehicles, software and control over parts of the critical raw-material supply chain.
Dispute continues over the 2035 emissions rules
The transition away from conventional combustion-engine vehicles remains one of the most controversial elements of EU automotive policy.
Under the legislation adopted before the latest proposed changes, new passenger cars and vans registered in the EU from 2035 would have been required to achieve a 100% reduction in tailpipe CO₂ emissions. The rule concerned new registrations rather than the production or use of existing combustion-engine vehicles.
In December 2025, the European Commission proposed revising that framework. Under its Automotive Package, manufacturers would instead be required to achieve a 90% reduction in tailpipe emissions from new cars from 2035. The remaining 10% could be compensated through measures including the use of low-carbon steel produced in the EU, sustainable renewable fuels and other eligible solutions. The proposal still requires approval through the EU legislative process.
The proposed flexibility could allow some plug-in hybrids and combustion-engine vehicles using eligible low-carbon fuels to remain on the market after 2035.
Müller believes the changes do not go far enough.
“Several years ago, regulations were adopted that were intended to prohibit the registration of combustion-engine cars in Europe from 2035,” he said. “This forced automotive companies on the continent to bear major costs and completely reorganise their production lines.”
“China used that period to move several lengths ahead of European companies. As a result, European manufacturers are less competitive, particularly when compared with the automotive industries of China and the United States.”
The MEP called for a wider reassessment of EU climate and industrial policy, including the bloc’s emissions-reduction targets and the cost of the Emissions Trading System.
He argued that the Commission’s proposed 90% target could still make the production of some combustion-engine vehicles commercially unviable, even without an explicit ban.
Consumers should retain a choice of technologies
Elżbieta Łukacijewska, a Civic Coalition MEP, also supports a more technologically flexible transition.
“As consumers, we have the right to choose which means of transport we want to use,” she said. “Not everyone can afford an electric car, and we do not yet have a sufficient number of charging stations.”
She argued that technologies capable of reducing emissions, including hybrids and plug-in hybrids, should not be excluded prematurely.
Her position reflects a broader debate about whether EU climate objectives should be based primarily on battery-electric vehicles or allow a wider range of technologies.
Supporters of technology neutrality argue that hybrids, renewable fuels and other solutions could reduce emissions while protecting industrial capacity and offering more affordable vehicles.
Critics respond that weakening electric-vehicle targets could delay investment, create regulatory uncertainty and leave European manufacturers further behind Chinese competitors in the rapidly growing global EV market.
Chinese manufacturers increase their European presence
China’s automotive expansion has become one of the most important challenges facing EU policymakers.
An analysis by Transport & Environment found that vehicles manufactured in China represented 17% of battery-electric car sales in the EU in the first quarter of 2026. This was down from a peak of 22% in 2024, when the EU introduced additional duties on Chinese-made electric cars.
Much of the decline resulted from Western manufacturers, including Tesla, BMW and Volvo, moving some production from China to Europe. Chinese-owned brands, however, continued to increase their presence and accounted for more than half of China-made battery-electric vehicles imported into the EU during the first quarter of 2026.
Chinese manufacturers have also responded to the tariffs by expanding their sales of plug-in hybrid vehicles, which were not covered by the duties imposed specifically on battery-electric cars.
Müller said Europe may ultimately need to impose further restrictions on vehicle imports from China, but such measures must be accompanied by reforms that improve the competitiveness of European factories.
“We cannot restrict imports of cars from outside the EU while failing to draw conclusions about how to increase competitiveness within our own economic bloc,” he said.
EU imposed duties after subsidy investigation
The European Commission imposed definitive countervailing duties on Chinese battery-electric vehicles in October 2024 after concluding that China’s EV value chain benefited from state subsidies that threatened to cause economic injury to European producers.
The additional rates range from 7.8% for Tesla vehicles manufactured in Shanghai to 35.3% for SAIC and other non-cooperating producers. BYD is subject to a 17% duty and Geely to an 18.8% rate. These charges are added to the EU’s standard 10% import tariff on cars.
Müller described Chinese subsidies as an unfair competitive mechanism and said trade policy should respond to state-supported imports.
At the same time, he acknowledged that subsidies are not the only reason for China’s advantage.
“China has cheaper labour and energy, as well as fewer regulations,” he said. “These are genuine economic advantages over the European automotive industry.”
Chinese manufacturers have also benefited from scale, a developed battery supply chain, strong domestic demand and the rapid introduction of new models.
European producers therefore face a challenge that cannot be addressed solely through tariffs. They must also reduce production costs, accelerate innovation and offer more affordable electric vehicles.
Brussels launches new automotive initiatives
The European Commission has introduced several initiatives intended to strengthen the industry.
Its Action Plan for the Automotive Sector, presented in March 2025, focuses on innovation and digitalisation, clean mobility, competitiveness, supply-chain resilience and workforce skills. It includes measures intended to support autonomous and connected vehicles, battery production, charging infrastructure and the reduction of manufacturing costs.
The plan was supplemented by the Automotive Package presented in December 2025. The package combines proposed flexibility in emissions rules with measures relating to corporate vehicle fleets, batteries, supply chains and demand for European-made products.
In March 2026, the Commission also proposed the Industrial Accelerator Act. The initiative is intended to stimulate demand for European-made low-carbon technologies and industrial products, accelerate investment and strengthen strategic supply chains, including the automotive supply chain.
The proposed law includes mechanisms designed to give greater weight to resilience, sustainability and European production in selected public procurement and support programmes.
These initiatives reflect a broader shift in EU policy. Brussels is seeking to combine decarbonisation with measures intended to protect industrial capacity, reduce dependence on external suppliers and prevent investment from moving to other regions.
More action and less debate needed
Łukacijewska said supporting the automotive sector should be treated as essential by European policymakers.
“It is unfortunate that there is more discussion than real action,” she said. “We are all aware that the world and the circumstances are changing and that a transition to electromobility is expected.”
“But changes cannot be introduced in a way that results in the loss of thousands of jobs in Europe and reduces the competitiveness of the European automotive industry.”
She also expressed concern about Europe’s dependence on technology and components used in Chinese electric vehicles.
“I am pleased that the European Commission recognises the problem,” she said. “Europe is losing jobs and competitiveness. We can see that some of the continent’s flagship automotive brands are disappearing or experiencing increasingly serious difficulties.”
Competitiveness requires a broader strategy
The debate shows that there is broad political agreement that Europe’s automotive industry requires support, but significant disagreement remains over the form that support should take.
Some policymakers want the EU to weaken or delay environmental requirements. Others argue that regulatory predictability and faster electrification are necessary if European manufacturers are to compete successfully with Chinese companies.
A lasting strategy will probably require elements of both industrial protection and transformation.
Reducing energy and regulatory costs could make European factories more competitive. Trade-defence measures may limit the impact of unfair subsidies, while investment in batteries, software, charging infrastructure and affordable electric models will be needed to secure the industry’s long-term position.
Measures supporting demand for European-made vehicles could also encourage manufacturers to keep production and supply chains within the bloc.
For Poland, the outcome of this debate is particularly important. Any prolonged decline in vehicle production across Western Europe would affect thousands of Polish suppliers and employees, while successful modernisation could create new opportunities in battery production, electronic systems, software and low-carbon components.
The future of the sector will therefore depend not only on the amount of financial assistance available but also on whether the EU can create conditions in which European companies can invest, innovate and compete globally without abandoning its climate objectives.
