EU Action Plan for the European automotive industry

Extension of CO₂ emission compliance period

Central to the Action Plan is the adjustment of CO₂ emission compliance timelines. Originally, automakers were required to achieve a 15% reduction in CO₂ emissions by 2025, based on 2021 levels, with non-compliance resulting in fines of EUR 95 per gram of CO₂ per kilometre for each vehicle sold. Recognising the industry’s challenges, the Commission proposed extending the compliance period to a three-year average spanning 2025 to 2027. This modification offers manufacturers additional flexibility to meet targets without incurring substantial penalties.

Addressing labour challenges

The European Commission is taking several measures to address skills shortages, mismatches, and an aging workforce in the EU automotive sector and battery industry. The European Fair Transition Observatory will analyse employment trends to identify future skill gaps. The Commission will expand European Globalisation Adjustment Fund for Displaced Workers (EGF) support to make it faster and broader, allowing companies to trigger support and supporting workers threatened by immediate redundancy. 

Additional European Social Fund Plus (ESF+) funding will be directed toward reskilling and job transitions, with incentives for EU member states to allocate more resources to the sector. Finally, a reinforced initiative under the Pact for Skills will enhance upskilling and reskilling programs for automotive workers.

Support for battery production and raw material supply

The proposed plan aims to make electric vehicle battery cells and components produced in the EU cost-competitive in the short term. The plan includes several key measures, such as a comprehensive “Battery Booster” package, which aims to support the production of battery cells and components through direct funding, non-price criteria for components, and competitive loans. 

Legislation to be introduced later this year will specify the local content requirements for batteries and their components. To ensure a robust supply chain for electric vehicles (EVs), the Commission has earmarked EUR 1.8 billion to secure raw materials essential for battery production. This investment aims to reduce dependency on external sources and promote local manufacturing capabilities. 

Promotion of electric vehicles in corporate fleets

Corporate fleets account for approximately 60% of new car registrations in the EU. To accelerate the adoption of EVs, the Commission plans to eliminate tax incentives for fossil fuel-powered company cars. This measure is designed to encourage businesses to transition to electric alternatives, thereby increasing EV demand and supporting the broader goal of reducing transportation-related emissions. 

Legislative measures

To support the European car industry's global competitiveness, the European Commission is focusing on the development of software-enabled, AI-powered, connected and automated driving vehicles.

To support this, the European Commission will establish automated driving corridors, or CAV (Connected and Automated Vehicle) corridors; cross-border testbeds; and regulatory sandboxes starting in 2026. In 2025, amendments to the type-approval framework will enable mass approval of vehicles with automated parking, expanding to hub-to-hub freight transport in 2026. A harmonised permitting process for testing automated driving on open roads will launch in early 2026. 

Additionally, the European Connected and Autonomous Vehicle Alliance will be created in 2025 to advance AI, software, and hardware development. The Commission will also introduce vehicle data access measures in 2025 to accelerate digital automotive services like smart charging, remote diagnostics, and fleet management.

Conclusion

The European Commission's Action Plan represents a strategic effort to balance environmental imperatives with the economic realities of the automotive industry. By adjusting regulatory timelines, investing in local supply chains, promoting EV adoption in corporate sectors, and addressing data accessibility, the Commission aims to facilitate a smoother transition towards sustainable mobility while preserving the sector's global competitiveness.

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Bartosz Jankowski is a trusted advisor to companies navigating new tech, IP, and cybersecurity. He supports Polish and international clients in developing and implementing software solutions across finance, industry, and telecoms. With expertise in technology transactions, data privacy, and contracts, he helps businesses adapt to digital transformation while mitigating risks and seizing opportunities. This is augmented by his expertise in resolving disputes, business restructuring, and global mobility.