The Sound of Economics
Europe’s Electric Vehicle Conundrum
Why It Matters
Europe’s ability to meet its climate goals and secure energy independence hinges on a successful EV rollout, yet unchecked Chinese dominance could lock the continent into vulnerable supply chains. The discussion is timely as the EU finalises its automotive action plan and confronts new US policy shifts that will shape global EV markets.
Key Takeaways
- •EU transport emits half of EU transport sector emissions.
- •Over 70% of EU clean tech imports come from China.
- •EVs target 90% of new car sales by 2035.
- •German EV subsidy scheme allocates $3.27 billion, includes Chinese models.
- •Policy balances decarbonisation, competitiveness, and economic security.
Pulse Analysis
Europe faces a twin transition: a green shift that demands electrifying transport and an urgent need for energy security after the 2022 crisis and the 2026 Strait of Hormuz closure. Road transport still accounts for more than half of EU transport emissions, while electricity’s share of final energy demand has stalled at 23% since 2011. Accelerating electric‑vehicle (EV) adoption can cut emissions and shield Europe from volatile fossil‑fuel markets, especially as global oil prices rise when supply chains tighten. This context makes the EU’s renewable‑power expansion—up to 48% of electricity by 2025—critical for a resilient, low‑carbon mobility sector.
At the same time, Chinese overcapacity is reshaping the automotive landscape. By 2024, over 70% of EU clean‑tech imports, including 60% of EVs, originated in China, allowing Chinese firms to undercut local manufacturers on price. The United States’ recent removal of EV tax credits will cut projected sales by roughly 35 million by 2035, further squeezing European exporters. German policymakers have responded with a $3.27 billion subsidy package starting in 2026, offering up to $6,540 per vehicle—even for Chinese‑brand models—to boost low‑ and middle‑income adoption, while Spain and France impose local‑content rules to protect domestic supply chains.
EU policymakers are now juggling three objectives: decarbonisation, competitiveness, and economic security. The Net Zero Industry Act and the Industrial Accelerator Act introduce financing, deregulation, and conditionality on foreign direct investment, but risk limiting export competitiveness if overly protectionist. Proposals such as the emissions‑trading scheme extension to road transport (delayed to 2028) aim to price petrol and diesel, recycling revenues to support households. A balanced approach—leveraging cheap Chinese battery technology while fostering European production and charging infrastructure—appears essential to meet the 90% EV sales target for 2035 without sacrificing market dynamism.
Episode Description
In this episode of The Sound of Economics, host Rebecca Christie speaks about electric cars with Bruegel’s Ugnė Keliauskaitė, Antoine Mathieu Collin and Ben McWilliams. Europe is navigating its transition to green technology while facing energy shocks from the Iran war. How will the automotive sector adapt? Can the European Union make the most of its industrial and trade policy instruments to support industry with minimal protectionism? What do electric vehicle supply chains look like now? Who pays the costs to consumers and industry of making these changes, or funding the related government programmes? Bruegel’s clean tech tracker shows what manufacturing is happening in Europe and where the investment is coming from. How are these trends shaping the global auto trade, and what will be Europe’s best shot to secure jobs and growth? As the US and China ramp up industrial policy, the EU needs to stay competitive.
Relevant research:
Bruegel Dataset (2025) 'European Clean Tech Tracker'.
García-Bercero, I., A. Mathieu Collin, B. McWilliams, N. Poitiers and Simone Tagliapietra (2026) ‘Made with Europe’ not ‘Made in Europe’ should guide EU industrial policy’, First Glance, 10 February, Bruegel.
Keliauskaitė, U., B. McWilliams and G. Zachmann (2026) 'Dependence on fossil fuels, not on the United States, is Europe’s worry', Analysis 05/2026, Bruegel.
This podcast has been supported by the European Climate Foundation. Responsibility for the information and views set out in this podcast lies with the authors. The European Climate Foundation cannot be held responsible for any use which may be made of the information contained or expressed therein.
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