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In recent years, the European Commission has stepped up its efforts to achieve the ambitious goals of the Green Deal, which aims to drastically reduce CO2 emissions and transition to a sustainable economy. At the heart of this plan is the decarbonisation of the industrial sector and the adoption of green technologies, with a particular focus on the automotive industry, one of the sectors most affected by new regulations and commitments to electric mobility.
The European Green Deal, introduced by the European Commission in 2019, is one of the most ambitious initiatives ever undertaken by the European Union.
This plan aims to transform the EU economy by reducing greenhouse gas emissions, promoting green technologies and achieving climate neutrality by 2050. Recently, the European Commission has stepped up its efforts to achieve these goals, focusing on the development of innovative technologies and the restructuring of Europe’s industrial sector. The European Commission has already put in place financial and regulatory instruments to support this transition, but it is essential that the process is carefully managed so that European companies can maintain their global competitiveness while contributing to the achievement of climate goals.
Indeed, this transition, while essential to the fight against climate change, is causing a deep crisis in the European automotive industry.
The crisis in the European car industry
The major European car manufacturers are facing an unprecedented challenge: on the one hand, increasing pressure to comply with emission limits and to invest in the production of electric vehicles, and on the other hand, increasingly fierce competition from non-European manufacturers, such as China, offering electric solutions at lower costs. This situation is leading to drastic structural changes, resulting in production cuts, plant closures and significant job losses.
One of the most emblematic cases is that of Volkswagen, which has announced the closure of two historic plants in Germany (in Osnabrück and Dresden) and the **Audi** plant in Brussels. This decision, which will result in around 70,000 job losses, was taken in order to reduce operating costs by around 10 billion euros and to respond to the fall in demand for electric vehicles, especially in the premium segment, as confirmed by Audi itself for the Q8 e-tron models.
Volkswagen: Union struggles and economic impact
Volkswagen has long been a pillar of the German economy, but it is suffering from a crisis aggravated by the *Green Deal* and increasing external competition. The carmaker has also decided to terminate the union pact that guaranteed job protection until 2029, signalling that the economic situation can no longer be managed by simply cutting costs. Restructuring is seen as a necessary step to maintain the company’s competitiveness in a context where Germany is losing ground to other nations in terms of industrial attractiveness.
Sales of Audi’s electric models, such as the Q8 e-tron, have fallen sharply due to increasing competition and structural problems related to high production costs and complicated logistics. In Brussels, the closure of the Audi plant is now a real prospect.
The Stellantis case: Crisis in Italy and impact on components
The Stellantis group, the result of the merger between FCA and PSA, is also facing similar problems, but with a particular impact on the Italian industry. The progressive reduction of production capacity in the former Fiat plants is having a devastating effect not only on the workers but also on the entire component supply chain. In Italy, suppliers dependent on Stellantis are suffering greatly from the drop in production, aggravated by the uncertainty about the future of mobility and the drop in sales of internal combustion cars.
Impact on manufacturing and the labour market
The impact of the Green Deal is not limited to vehicle manufacturers, but also hits the entire supply chain and the associated manufacturing sector hard. Increasingly stringent emissions regulations are forcing a radical transformation of industrial production, pushing towards rapid electrification and the adoption of cleaner technologies. However, the pace of change is so rapid that there is little room for incremental adjustments.
Rising production costs, the need for massive investment in research and development, and declining sales of combustion vehicles are leading companies to drastically cut jobs and reduce production capacity. This is particularly evident in countries such as Germany and Italy, where the automotive industry accounts for a significant share of employment and GDP.
The impact of Chinese competition and the challenge of electric mobility
Another key factor negatively affecting the European market is Chinese competition. Chinese electric car manufacturers are flooding the European market with cheap and competitive models, making it even more difficult for European car manufacturers to maintain their market share. China’s ability to produce electric vehicles at lower cost, thanks to easier access to raw materials and cheaper production, is putting pressure on European manufacturers who are already making an expensive transition to sustainable mobility.
The European Green Deal, which aims to achieve climate neutrality by 2050, is one of the most ambitious initiatives ever undertaken by the European Union. However, its short-term impact on the European automotive sector is devastating. Plant closures, job cuts and the economic difficulties of giants such as Volkswagen and Stellantis are worrying signs of an ongoing industrial crisis, exacerbated by competition from non-European countries such as China.
Unless Europe can strike a balance between environmental sustainability and industrial competitiveness, the green transition risks becoming an economic boomerang, with serious consequences for employment and the continent’s economic stability. In order to ensure a sustainable future, not only environmentally but also economically, stronger support from the European institutions is needed for companies facing this epochal change.
Industry is the main driver of the European economy and the lives of millions of citizens. However, in order to address urgent climate challenges, EU policymakers have created regulations without proper analysis and thorough assessment of their impacts. As a result, the EU has overshot many of its environmental targets by imposing overly ambitious standards on its industries. The combination of heavy bureaucracy, the huge investments needed to comply with the new rules and the high cost of energy has threatened Europe’s competitiveness and forced many companies to close or relocate.
We cannot allow entire industrial areas to be depopulated, followed by a migration of workers to a few areas of the continent, made attractive only by subsidies from states with greater fiscal resources. A balanced approach is needed that combines decarbonisation with economic growth, job preservation and global competitiveness, while strengthening resilience and resource security. Policies must preserve and develop the industrial potential of regions undergoing energy transition.
It is also crucial to maintain the competitiveness of the European automotive sector and to ensure access to private transport for all EU citizens. Car manufacturers and component suppliers face significant operational challenges in making the transition to electric vehicles in a relatively short timeframe. Moreover, despite tax incentives, electric vehicles remain more expensive than internal combustion vehicles, making it crucial to ensure affordable prices for low-income households, which are already affected by the rising cost of living.
The regulatory ban on internal combustion engines planned for 2035 is not acceptable, due to concerns about timing and wider socio-economic impacts.
At a time of unprecedented global challenges, with rising energy prices and carbon costs, there is concern about the timing of this ambitious climate target. The introduction of policies to drastically reduce emissions from energy-intensive, high-emitting industries could push companies and production chains to relocate outside the EU, where production costs are generally lower. This risk is already translating into severe economic hardship and job losses in several areas of the continent.