European electric vehicles are in a dilemma.
The European Federation for Transport and Environment (T & E for short) recently released a research report titled "European Automobiles at a Crossroads". The report points out that the European automobile industry is at a critical juncture. Whether the "combustion engine ban" proposal is advanced or delayed will have completely different impacts and directions on the entire industry.
On the one hand, there has been an obvious chain reaction of declining sales of electric vehicles in Europe. According to data from the European Automobile Manufacturers' Association (ACEA), the sales of electric vehicles in the EU decreased by 5.9% in 2024, and this year they also face the threat of additional tariffs imposed by the Trump administration. With pure electric vehicles not selling well for a long time, the plan to stop selling fuel - powered vehicles in the 27 EU countries by 2035 has cast a new shadow.
On the other hand, if no remedial measures are taken and the EU abandons the goal of banning the sale of fuel - powered vehicles within its territory by 2035, the entire European automobile industry may lose 1 million jobs. Most of the efforts made for "zero - emissions" will go to waste, and the investment losses in new energy sectors such as batteries will be as high as two - thirds.
It's a dilemma of neither advancing nor retreating.
In the strategy of electrification transformation, the EU has found itself in an awkward situation. Due to the sluggish sales of pure electric vehicles, many automobile manufacturers have successively lowered their short - and medium - term sales targets, forcing the EU to have room to relax the carbon dioxide emission targets. However, to date, the EU still adheres to the established plan of completely banning the sale of fossil - fuel vehicles by 2035.
This report from T & E clearly supports the continuous advancement of the "combustion engine ban". The report comments that if the EU adheres to the clean energy target for 2035 and implements the transitional policies, the European automobile industry is expected to return to the level of producing 16.8 million new vehicles per year, reaching the peak level after the 2008 economic crisis.
In a nutshell, if the "combustion engine ban" is abandoned halfway, the sunk costs will be extremely high, and there is also a risk of large - scale unemployment. T & E data shows that if the EU maintains the "combustion engine ban" target for 2035 and implements a package of policies to promote the development of emerging industrial chains, by 2035, the contribution of the automobile industry to the European economy will increase by 11%.
Employment and Industrial Chain Value
To support the continuous advancement of the "combustion engine ban", the T & E report presents several important data:
If the EU can implement the "combustion engine ban" until 2030, the job losses in the traditional automobile manufacturing field may be offset by more than 100,000 jobs created in new electrification fields such as batteries. By 2035, the number of jobs in the new energy field of the automobile industry will reach 120,000, mainly concentrated in industrial chains such as batteries and electric drives.
As long as Europe can ensure a battery manufacturing capacity of more than 900 GWh, it can create more than 100,000 new jobs, and the number of jobs created will reach 120,000 by 2035. In addition, the economic output of the battery industrial chain will increase to about five times, reaching 79 billion euros.
The report points out that if the established "combustion engine ban" target is weakened, or if the EU's policies waver and there is a lack of a comprehensive industrial transformation plan, by 2035, the economic contribution of the automobile industry may decrease by 90 billion euros (equivalent to about 758 billion yuan), and the economic contribution of the charging market will accumulate a loss of 20 million euros (equivalent to about 168 million yuan).
Regarding the sunk costs of the industrial chain, T & E conducted a study on 13 new electric vehicle projects in Europe. Among them, 5 projects are brand - new electric vehicle factories, and the remaining 8 are transformed from existing fuel - powered vehicle production lines.
If all the projects are successfully implemented, Europe will add at least 2.1 million electric vehicle production capacities annually, and the total production is expected to reach 5.1 million by 2027, which is sufficient to meet the growing market demand. This figure will be achieved on the basis of the 1.8 million production in the whole of Europe in 2024. According to T & E statistics, the sales of pure electric vehicles in Europe (including the EU, the UK, European Free Trade Association countries, and Serbia) were about 2 million in 2024, while the production was close to 1.8 million in the same year.
However, due to the uncertainty of the future market prospects and policies, some projects face the risk of delay or even cancellation. T & E evaluated all 13 projects based on four key criteria, including the project status (delayed/started/testing phase), construction progress (not started/under construction/completed), whether the factory site is determined, and whether there is a government subsidy commitment. According to the evaluation results, these 13 projects are divided into three risk levels: low, medium, and high, to reflect the possibility of investment implementation.
The low - risk projects include the BMW factory in Hungary and the Volvo factory in Slovakia, both of which are brand - new; as well as the Stellantis factory in Serbia and the Volkswagen and Chery factories in Spain, which are converted from existing fuel - powered vehicle production capacities to electric vehicle production capacities. These projects will form a total annual production capacity of 550,000 vehicles, drive an investment of about 4.8 billion euros, and create at least 5,550 jobs.
The medium - risk projects have a total planned annual production capacity of 1.2 million vehicles, involve an investment of 9.3 billion euros, and can support 11,000 jobs. Among them, BYD's Szeged factory in Hungary, with an investment of 4 billion euros, accounts for nearly half of the total, making it the largest project on the list; followed by the transformation project of the Seat - Volkswagen factory in Spain, with a cumulative investment of 3 billion euros; and the upgrading production bases of Jaguar Land Rover and Nissan in the UK, which are expected to produce a total of 250,000 electric vehicles annually, similar to the plan of the Volvo factory in Gothenburg.
The high - risk projects include three, all of which are in the early development stage, or there are still uncertainties about the final investment decision or start - up date. Among them, there is the suspension of the 700 - million - euro electrification transformation of the Oxford MINI factory by BMW, and the plan to build a factory in Serbia through a joint venture between Renault and China's Jiangling.
Batteries and Supporting Facilities
What needs to be weighed between sunk costs and strategic shifts is not only the vehicle manufacturing but also the huge investment in key components such as batteries.
Previously, Bloomberg New Energy Finance (BNEF) statistics showed that China currently supplies about 80% of the world's lithium - ion batteries. Six of the world's top 10 electric vehicle battery manufacturers are from China. Europe has invested 36 billion US dollars (equivalent to 232 billion yuan) in the development of automotive power batteries, but 12 out of 16 local battery factories have encountered production delays or cancellations, and the situation is not optimistic.
Northvolt, once hailed as the "light of European batteries", applied for bankruptcy protection in Sweden. After burning through 14 billion US dollars (equivalent to about 100 billion yuan), it withdrew dejectedly, marking a huge setback for Europe's ambition to challenge China in the field of power batteries. However, Northvolt is just a typical example of the huge amount of money spent by the European battery industry. In addition to this well - known star company, Europe has also spent a lot of money on other battery companies in the past few years and gradually established its own battery energy storage industrial chain. If abandoned halfway, it will bring a heavier transformation burden to the European automobile industry.
Similarly, T & E evaluated the battery factories in Europe based on multiple key criteria, and the data shows that:
The low - risk battery factories have all received the necessary funds and have started construction. Some factories have even been put into production, which will bring an annual production capacity of 391 GWh to Europe, with an investment of 39 billion euros and the creation of up to 43,000 technical jobs. The ACC factory in Douvrain, France, and the Volkswagen PowerCo project in Salzgitter, Germany, belong to this category.
The medium - risk projects have not started construction mainly because the final investment decision has not been made. This is currently the largest category in the European battery field, involving an annual production capacity of 627 GWh, an investment of 48 billion euros, and 47,000 potential jobs. Compared with low - risk projects, there are many uncertainties in this type of factories. A representative project is Basquevolt in Spain, where most of the production capacity will be allocated to emerging fields such as solid - state batteries.
The high - risk projects are still in the conceptual or approval stage. Although they will include a total annual production capacity of 410 GWh, an investment of 21 billion euros, and 37,000 job opportunities, their advancement completely depends on subsequent industrial policies.
T & E analysis shows that in terms of actual expected output (not theoretical capacity), Europe's local production capacity may meet two - thirds of its local battery demand by 2030.
However, if only the low - risk projects are finally implemented, this proportion will drop sharply to 24%, far lower than the EU's 2030 target of 40% self - sufficiency rate. After including the medium - risk projects, the self - sufficiency rate can reach 52%, but this figure is also lower than the previous estimates of T & E and the EU. Affected by unfavorable global and EU factors (such as insufficient industrial support), many battery projects are at risk of cancellation or delay.
Taking Spain as an example, in terms of policy support, the country has shown great development potential and plans to achieve an annual production capacity of 244 GWh by 2030. However, only 13% of it belongs to low - risk projects, and the realization of most of the production capacity still depends on future policy directions.
In contrast, the development prospects of Poland and Hungary are clearer. The low - risk production capacities of the two countries reach 115 GWh and 125 GWh respectively. Although Poland has no plan to build new factories for the time being, Hungary is expected to add another 90 GWh of production capacity and may become a new center of the European electric vehicle industry in the future.
Major automobile economies such as France and Germany are in the middle position in the battery manufacturing field. The total production capacity of the two countries exceeds 350 GWh, of which 130 GWh belongs to low - risk projects.
Since last year, more and more European automobile manufacturers have slowed down the electrification process. The top priority for the EU is not only to re - examine its electrification strategy, find a balance between industrial policies, infrastructure, and market demand, but also to consider the input - output ratio of the original investment and how to calculate the sunk costs if the policy is slowed down or stopped.
This account is really hard to calculate because in addition to the huge investment of automobile enterprises, there are also huge "money - burning" pits in supporting facilities such as batteries. And behind it, there are millions of local jobs involved.
This article is from the WeChat official account "Automobile Commune" (ID: iAUTO2010), author: Jackfruit. It is published by 36Kr with authorization.