EU Parliament Divided Over Future of European Auto Industry
The European Parliament held a heated plenary debate on Tuesday in Strasbourg over urgent measures to rescue the bloc’s struggling automotive sector, exposing a fundamental rift between political factions on whether to go fully electric or maintain technological flexibility. The debate comes as the industry faces an existential crisis driven by Chinese competition, regulatory burdens, and the costly transition to electrification.
European Commissioner for Industrial Strategy Stéphane Séjourné warned lawmakers that the sector is “on the verge of collapse” and called for immediate intervention, according to Het Laatste Nieuws. “We must intervene,” Séjourné told the Parliament, urging MEPs to quickly approve the Commission’s proposed stimulus measures for the automotive industry.
The Political Divide
The debate revealed two sharply opposing camps. Right-wing and far-right parties oppose any ban on combustion engines, arguing that mandated electrification would “break the neck” of the European auto industry and destroy hundreds of thousands of jobs. Left-wing and green parties, by contrast, argue that the transition to electric vehicles must accelerate, warning that any delay will leave Europe permanently behind Chinese competitors.
As the European Parliament’s briefing noted, the discussion took place against a backdrop of structurally high energy prices, disrupted supply chains, and increased global competition, all while the sector invests heavily in digitalisation and electrification.
The 2035 Ban Reversal
The debate unfolded months after the EU’s landmark 2035 combustion engine ban was effectively withdrawn. Under intense pressure from European automakers and key member states like Germany and France, the full ban was replaced in late 2025 with a requirement that new cars achieve a 90 percent reduction in CO2 emissions compared to 2021 levels, as reported by NL Times. This change effectively allows hybrid vehicles and other technologies to remain on the market beyond 2035.
EU Perspectives described the compromise as a pragmatic attempt to reconcile ambitious climate targets with industrial realities, noting that the remaining 10 percent of emissions could be offset through measures such as using EU-produced green steel or sustainable renewable fuels.
Made in Europe: The Industrial Accelerator Act
Séjourné called on Parliament to swiftly approve the Commission’s proposal containing “Made in Europe” preferences, under which publicly procured electric vehicles must be from European companies, manufactured in the EU, and preferably built with European parts.
This proposal is part of the broader Industrial Accelerator Act (IAA), the Commission’s flagship legislative initiative to protect EU industries with strict local content rules for EVs and batteries. However, as POLITICO Europe reported in March, the IAA has sparked what it called an “industry civil war” between carmakers and parts suppliers.
An Unusual Industry Rift
The IAA has created a rare fracture in the normally unified automotive sector. European carmakers — including BMW, Renault, Stellantis, and Volkswagen — oppose strict local content rules, arguing they increase costs and disrupt highly integrated global supply chains. BMW stated that “instead of addressing the root causes of insufficient competitiveness, the EU Commission is continuing its protectionist course with the Industrial Accelerator Act — the expectation that this will create new industrial jobs is unrealistic.”
Parts suppliers, however, strongly support the rules. Geoffroy Peeters, head of government affairs at CLEPA (the European auto supplier lobby), told POLITICO that the IAA “is taking into account the reality of the business and the unfair competition that we are facing. It’s an important moment for us and a promising start.” Suppliers fear being undercut by Chinese competitors flooding the EU with components subsidized by overcapacity at home.
The China Factor
Chinese competition is the common thread running through every aspect of this crisis. For the first time, more Chinese cars were exported to Europe than vice versa, with Chinese EVs benefiting from state subsidies and allowing them to undercut European prices significantly. The European Commission has already responded with anti-subsidy measures, but the debate on whether protectionism or competitiveness is the right answer remains unresolved.
Honda’s head of government affairs, Patrick Keating, signaled that foreign automakers will lobby to ensure their EVs assembled in trusted partner countries like Japan can still count toward Europe’s sustainable mobility goals.
What’s Next
The Commission’s proposal still requires approval from both the European Parliament and the Council of the EU before becoming law. Tuesday’s debate was a Commission statement without a resolution, meaning no vote was expected, but it set the stage for the intense legislative battles ahead.
Key questions remain: How will the divide between carmakers and suppliers be resolved? Can the EU balance protectionism with its free trade commitments? And will European consumers embrace more expensive European EVs or opt for cheaper Chinese alternatives?
As the European automotive industry — which accounts for approximately 13 million jobs and 7 percent of EU GDP — navigates this critical juncture, the outcome of these debates will shape not just the future of mobility in Europe, but the continent’s broader industrial and climate ambitions for decades to come.