Economy 24 November 2025, 5:00pm

Europe is facing a crucial choice that will determine whether it remains a major car manufacturing power

Major András

One of the most important elements of European automotive climate and industrial policy, if not the most important, is the EU regulation on reducing carbon dioxide emissions from passenger cars and light commercial vehicles. The European Union's automotive industry is well on track to transition to electric vehicles and achieve its emission reduction targets for the period 2025–27. However, new data shows that manufacturers have slowed down the electrification of their model ranges following the relaxation of emission reduction requirements, and the premium for electric models has increased. A leading role in battery electric vehicle technology is essential for the global competitiveness of European industry. However, any reduction in the 2030–35 CO₂ emission targets would undermine all investment and efforts in electromobility, while China would further increase its advantage, according to a new report.

According to a report by Transport & Environment (T&E), data from the first half of 2025 shows that:

All European carmakers are on track to comply with emission targets over 2025-2027 thanks to a surge in their BEV sales - reaching 25% share over the 3-year period (18% in 2025). In January-July, 16.6% of new passenger cars registered in Europe were BEVs.
However, the relaxation of regulations relating to the 2025 target this spring — meaning performance assessments will now be based on a three-year average rather than annually, while emission reduction targets will remain unchanged — has given manufacturers a reprieve. With the EU’s delay of the 2025 target, carmakers took their foot off the gas, leading to a shortfall of two million BEVs (over 2025-2027).
Evidence shows that carmakers inflated BEV price premiums as CO₂ targets got relaxed.
Despite carmakers’ attempt to slow down the EV market, structural battery price decreases will continue to power the EV transition. By 2027, EV battery prices are expected to drop more than over the past three years.
Charging coverage is surging in line with BEV penetration: All EU countries have already exceeded their 2025 target for the total number of charging points and almost 80% of the core EU highway network is covered.
While the EU is discussing the 2035 target, global markets are going electric fast: Mexico (5% BEV share in H1 2025), Indonesia (13%), Thailand (24%), China (30%), Vietnam (42%). Europe is losing ground in the global EV race.

According to the analysis, Europe now faces a decisive choice: to either lead the global BEV race and confidently enter the electric age or risk falling behind in the fossil fuel era.

Weakening the 2030-35 CO2 targets would dismantle all investments and efforts on EVs while China would extend its lead on EVs,

T&E warned.

The report shows that, despite the unfavourable signs, 38% more new electric vehicles were registered in Europe in the first seven months of 2025 than in the same period last year. Between January and July this year, fully electric models accounted for 16.6% of new cars sold in Europe, compared to 13.2% a year earlier.

Sales of battery-electric vehicles by European automakers are also on the rise, with the EU experiencing an electric car boom. BEVs could account for 18% of the market by 2025, 25% by 2027, and over 55% by 2030.

As soon as the new, more lenient regulations for car manufacturers came into force in the EU, the price premium of electric cars over conventionally powered models increased.

According to Bloomberg,

the average price premium for BEVs decreased from 40% in January 2024 to 30% in January 2025, before rebounding again to 40% in June 2025.

Thanks to falling battery prices, car manufacturers are launching new "affordable" models with a starting price of under €25,000. Sales of affordable BEVs are expected to double by 2025 compared to 2024. For the first time since 2019–2022, affordable and mid-priced cars could account for almost half of all sales. Nine affordable BEV models are expected to be available on the European car market by the end of 2025, a figure which could rise to at least 19 by the end of 2027. More than two-thirds of these are expected to be manufactured in Europe.

Battery prices in Europe are expected to continue falling rapidly. After dropping by 27% between 2022 and 2025, they could fall by a further 28% between 2025 and 2027, and by 46% between 2025 and 2030, unlocking further BEV price reductions. This decline in price is also being driven by the increasing popularity of lithium iron phosphate (LFP) batteries. These batteries could account for 50% of the European market by 2030, having already reached a 67% share in China this year.

The EU charging network is growing in line with the BEV fleet penetration. The number of public chargers are expected to reach 1.1 million in 2025, five times more than in 2020. The netwok is set to grow by further 90% to 2.1 million by 2030, according to ChargeUp Europe.

All EU Member States have already met the electric vehicle charging station installation targets set by the Alternative Fuels Infrastructure Regulation (AFIR) for 2025 (based on the number of charging stations installed in the first half of 2025). Overall, the EU has exceeded the AFIR target by 174%, with 22 out of 27 EU countries having at least twice the required charging capacity. The coverage of the EU's main motorway network with e-chargers is progressing in line with targets in most Member States. In most western and northern countries, coverage of the EU's trans-European transport network (TEN-T) with e-chargers already meets the 2025 target. Although eastern countries still have gaps, their charging infrastructure is growing fastest.

77% of the core highway network is already covered with ultra-fast charging and meets the 2025 AFIR target.

Meanwhile, however, electric cars are spreading rapidly in emerging markets. Several countries have caught up with the EU in this regard in recent years, meaning the EU is losing ground in the global EV race.

Leadership in BEV technology is essential to the European industry's competitiveness globally,

the report warns.

Global prospects for European carmakers lie in the fast-growing EV market. With the US market closing to EU imports due to new 15% tariffs (up from 2.5%), the most accessible opportunities are now in Asia, South America, and Africa - regions that also host the fastest-growing BEV markets.