A Turning Point for Europe’s Automotive Industry: Commission Launches Strategic Action Plan for Global Leadership

Europe’s automotive sector stands at a crossroads—and the European Commission is driving the response.

The European automotive industry is navigating a pivotal moment. Confronted by rapid technological shifts, an intensifying global race for innovation, and the urgent need to decarbonise, the sector faces unprecedented challenges—and opportunities. In response, European Commission President Ursula von der Leyen launched the Strategic Dialogue on the Future of the European Automotive Industry in January 2025, a collaborative and inclusive initiative aimed at preparing Europe’s mobility sector for the next industrial era.

Building on the outcomes of that dialogue, the Commission has today unveiled a robust Action Plan designed to secure a sustainable, innovative, and competitive future for the European automotive sector. With targeted investments and regulatory flexibility, the plan provides a comprehensive framework for modernising Europe’s automotive landscape—while reinforcing industrial sovereignty and worker resilience.

Laying the Foundation for a Competitive, Clean, and Resilient Industry

At the heart of the Action Plan lies a €1.8 billion investment in strengthening Europe’s battery raw material supply chain. This funding will help establish a secure and competitive base for electric vehicle production—critical for avoiding strategic dependencies and maintaining a strong European industrial footprint.

“There is so much untapped potential in the global market for innovation and clean solutions. I want to see our European automotive industry take the lead. We will promote domestic production to avoid strategic dependencies, especially in battery production. We will stick to our agreed emissions targets—with a pragmatic and flexible approach. Our aim is a sustainable, competitive, and innovative car industry in Europe that benefits our citizens, our economy, and our environment.”

President Ursula von der Leyen

Accelerating Innovation and the Shift to Clean Mobility

Europe’s automotive sector has lagged behind in adopting key emerging technologies. The new Action Plan introduces a series of ambitious measures to reverse that trend and position Europe as a global leader in next-generation mobility.

The creation of a European Connected and Automated Vehicle Alliance will bring together industry, research, and policy actors to co-develop the essential software and hardware infrastructure for AI-driven, connected, and autonomous vehicles. Complemented by regulatory “sandboxes” and large-scale testing facilities, the initiative will help innovators test and refine emerging technologies under real-world conditions.

This work will be backed by €1 billion in joint public-private investment under the Horizon Europe programme between 2025 and 2027.

In tandem, the Commission is encouraging the decarbonisation of Europe’s corporate fleets, which represent nearly 60% of new car registrations. Through best practice sharing and incentives for Member States, the Decarbonise Corporate Fleets Communication aims to accelerate the shift to zero-emission business vehicles.

Flexibility in CO2 Compliance—Without Compromising Ambition

Responding to industry calls for more regulatory flexibility, the Commission will propose a targeted amendment to the CO2 Standards Regulation for cars and vans. The proposed change would allow manufacturers to average their emissions performance across a three-year compliance window (2025–2027), offering a pragmatic solution that preserves the overall 2025 targets while giving automakers more operational flexibility.

At the same time, new initiatives will aim to stimulate consumer demand for zero-emission vehicles through incentives and measures that improve battery durability, repairability, and transparency—thereby reinforcing public trust in electric mobility.

Strengthening Supply Chains and Supporting Automotive Workers

A key priority of the Action Plan is to build cost-competitive EU battery cell production capable of generating high value-added output along the entire supply chain. This will be supported by financing from the Innovation Fund, as well as potential direct production support and resilience-based procurement criteria.

Equally important is support for the workforce transition. The Commission will expand access to the European Globalisation Adjustment Fund for Displaced Workers (EGF) and channel additional funding through the European Social Fund Plus (ESF+). These tools will help workers reskill and find new opportunities within the evolving sector.

In coordination with the Pact for Skills, the Commission will also propose a reinforced initiative for upskilling and reskilling in strategic sectors, including automotive, to tackle skill shortages and prepare workers for future roles.

The European Fair Transition Observatory, launched under the Clean Industrial Deal, will play a key role in mapping emerging skill gaps and regions at risk of employment displacement—ensuring that support measures are targeted and data-driven.

Enhancing Global Competitiveness and Defending Fair Competition

To ensure Europe’s auto sector can compete on a level playing field, the Commission is prepared to activate trade defence instruments such as anti-subsidy investigations where necessary. These tools will protect European firms from unfair practices while the Commission continues negotiations to expand international market access and sourcing opportunities.

Moreover, a new focus on screening foreign investments in the automotive sector will ensure they contribute to long-term European competitiveness. The Commission will also work to simplify regulations and reduce administrative burdens, helping automakers stay agile in a highly competitive global market.

A Blueprint Built on Dialogue and Collaboration

This Action Plan reflects months of collaborative work, consultation, and strategic foresight. It is the culmination of the Strategic Dialogue launched in January 2025 by President von der Leyen, shaped through wide stakeholder engagement—including an open public consultation and the efforts of multiple working groups led by Commissioners Šefčovič, Hoekstra, Séjourné, Virkkunen, Mînzatu, and Tzitzikostas.

As the automotive sector undergoes its most significant transformation in over a century, this Action Plan positions Europe not merely to adapt, but to lead—with innovation, resilience, and sustainability at its core.

Europe now has a blueprint to not only keep pace—but set the pace—in the global automotive transformation. The road ahead is ambitious, but with collective commitment, Europe can steer its industry into a new era of clean, connected mobility.