The European Federation for Transport and Environment (T&E) recently released a research report titled "European Cars at the Crossroads", which points out that European cars are at a critical moment of success or failure, and the promotion or delay of the "ban on combustion" bill will have completely different impacts and directions on the entire industry.

On the one hand, there is a clear chain reaction of declining sales of electric vehicles in Europe. According to data from the European Automobile Manufacturers Association ACEA, EU electric vehicle sales will decrease by 5.9% in 2024, and this year they will also face the threat of tariffs imposed by the Trump administration. Pure electric cars have been unsold for a long time, casting a new shadow over the plan to stop selling gasoline cars in the 27 EU countries by 2035.

European electric vehicles are caught in a dilemma

On the other hand, if no remedial measures are implemented, if the EU abandons its goal of banning the sale of fuel vehicles within the EU by 2035, the entire European automotive industry may lose one million jobs, most of the efforts made for "zero emissions" will be in vain, and investment losses in new energy tracks such as batteries could reach up to two-thirds.

It's neither entering nor exiting.

In the strategy of electrification transformation, the EU has entered an awkward situation where it is difficult to get off the tiger. Due to the sluggish sales of pure electric vehicles, many car manufacturers have successively lowered their sales targets in the short and medium term, which has forced the EU to relax its carbon dioxide emission targets. However, so far, the EU still insists on its established plan to completely ban the sale of fossil fuel vehicles by 2035.

The report from T&E clearly supports the continued implementation of the 'no burning order'. The report comments that if the EU adheres to the clean energy target of 2035 and implements transitional policies, the European automotive industry is expected to recover to the level of producing 16.8 million new cars per year, reaching the peak level after the 2008 economic crisis.

European electric vehicles are caught in a dilemma

In short, once the "no burning order" is abandoned halfway, the sunk costs are enormous, and there is also a risk of large-scale unemployment. According to T&E data, if the EU maintains its 2035 "no fuel" target and implements a package of policies to promote the development of emerging industrial chains, the contribution of the automotive industry to the European economy will increase by 11% by 2035.

Employment and value of the production chain

To support the continued implementation of the 'no burning order', T&E's report provides several important data:

If the EU can implement the "ban on fuel consumption" until 2030, the loss of jobs in the traditional automotive manufacturing sector may be offset by the creation of over 100000 new jobs in electrification fields such as batteries. By 2035, the number of employment opportunities in the automotive new energy sector will reach 120000, mainly concentrated in the battery and electric drive industry chains.

As long as Europe can ensure a battery manufacturing capacity of over 900 GWh, it can create over 100000 new jobs, and the number of jobs created by 2035 will reach 120000. In addition, the economic output of the battery industry chain will increase by about five times, reaching 79 billion euros.

The report points out that if the established "ban on fuel" target is weakened, or if EU policies waver and there is a lack of comprehensive industrial transformation planning, the economic contribution of the automotive industry may decrease by 90 billion euros (approximately 758 billion yuan) by 2035, and the economic contribution of the charging market will accumulate a loss of 20 million euros (approximately 168 million yuan).

European electric vehicles are caught in a dilemma

Regarding the sunk costs of the industrial chain, T&E conducted research on 13 new electric vehicle projects in Europe. Among them, 5 projects belong to newly constructed electric vehicle factories, while the remaining 8 are transformed from existing fuel vehicle production lines.

If all projects are successfully implemented, Europe will add at least 2.1 million new electric vehicle production capacity each year, and the total production is expected to reach 5.1 million vehicles by 2027, which is enough to meet the growing market demand. This number will be achieved on the basis of the total production of 1.8 million vehicles in Europe by 2024. According to T&E statistics, in 2024, the sales of pure electric vehicles in Europe (including the European Union, the United Kingdom, European Free Trade Association countries, and Serbia) will be approximately 2 million units, while childhood production will be close to 1.8 million units.

However, due to the uncertainty of future market prospects and policies, some projects face the risk of delays or even cancellations. T&E evaluated all 13 projects based on four key criteria, including project status (delayed/start-up/testing phase), construction progress (not yet started/under construction/completed), site determination, and government subsidy commitments. According to the evaluation results, these 13 projects are classified into low, medium, and high risk levels to reflect the possibility of investment landing.

European electric vehicles are caught in a dilemma

Low risk projects, including BMW Hungary factory and Volvo Slovakia factory, both of which are brand new; There are also Serbian factories in Strantis, as well as Spanish factories in Volkswagen and Chery, which have transformed their existing fuel vehicle production capacity into electric vehicle production capacity. These projects will collectively generate an annual production capacity of 550000 vehicles, drive approximately 4.8 billion euros in investment, and create at least 5550 job opportunities.

A medium risk project with a planned annual production capacity of 1.2 million vehicles, involving an investment of 9.3 billion euros, and capable of supporting 11000 job opportunities. Among them, BYD's Szeged factory in Hungary, with an investment of 4 billion euros, accounts for nearly half of the total, becoming the largest project on the list; Next is the SEAT Volkswagen factory renovation project in Spain, with a total investment of 3 billion euros; Jaguar Land Rover and Nissan are also upgrading their UK production bases, which are expected to produce a total of 250000 electric vehicles annually, in line with Volvo's Gothenburg factory plan.   

There are three high-risk projects, all of which are in the early stages of development or have uncertain final investment decisions or start dates. Among them, there are BMW's postponed electrification renovation of the Oxford MINI factory worth 700 million euros, as well as Renault's joint venture with China's Jiangling Motors to build a factory in Serbia.

Batteries and supporting facilities

In addition to vehicle manufacturing, there is also a huge investment in key components such as batteries that need to be balanced between sinking Chen Ben and strategic shift.

Bloomberg New Energy Finance BNEF previously calculated that China currently supplies about 80% of the world's lithium-ion batteries, and 6 of the top 10 electric vehicle battery manufacturers in the world are from China. Europe once invested 36 billion US dollars (equivalent to 232 billion yuan) to develop automotive power batteries, but currently 12 out of 16 local battery factories have experienced production delays or cancellations, and the situation is not optimistic.

Northvolt, once known as the "light of European batteries," filed for bankruptcy protection in Sweden, burning $14 billion (approximately RMB 100 billion) before resigning in disappointment, marking a huge setback for Europe's ambition to challenge China in the field of power batteries. However, Beifu is just a typical example of the huge investment in the European battery industry. In addition to this highly anticipated star company, Europe has also spent a lot of money on other battery companies in the past few years, gradually establishing its own battery energy storage industry chain. Once it is abandoned halfway, it will bring even heavier transformation shackles to European cars.

European electric vehicles are caught in a dilemma

Similarly, T&E evaluated battery factories in Europe based on multiple key criteria, and the data showed that——

Low risk battery factories, with funds already in place and construction already underway, and some factories even put into operation, will bring an annual production capacity of 391 GWh to Europe, backed by a 39 billion euro investment and the creation of up to 43000 new technical jobs. The ACC factory in Duvelin, France and the Volkswagen PowerCo project in Salzgitter, Germany belong to this category.   

Medium risk projects, mainly due to the failure to reach a final investment decision and have not yet started construction, are currently the largest category in the European battery industry, involving an annual production capacity of 627 GWh, an investment of 48 billion euros, and 47000 potential jobs. Compared with low-risk projects, this type of factory has many uncertainties, represented by the Basquevolt project in Spain, where most of the production capacity will be allocated to emerging fields such as solid-state batteries.

High risk projects are still in the conceptual or approval stage, and although they will include a total annual production capacity of 410 GWh, an investment of 21 billion euros, and 37000 job opportunities, their progress depends entirely on subsequent industrial policies.

European electric vehicles are caught in a dilemma

According to T&E analysis, based on actual expected output (non theoretical production capacity), European domestic production capacity may meet two-thirds of domestic battery demand by 2030.

But if only low-risk projects are ultimately implemented, this proportion will plummet to 24%, far below the EU's goal of achieving a self-sufficiency rate of 40% by 2030; After including medium risk projects, the self-sufficiency rate can reach 52%, but this value is already lower than T&E and the EU's previous estimates. Due to global and EU unfavorable factors such as insufficient industry support, many battery projects are at risk of cancellation or delay.   

Taking Spain as an example, from the perspective of policy support, the country has shown great development potential and plans to achieve an annual production capacity of 244 GWh by 2030. However, only 13% of them belong to low-risk projects, and the realization of the vast majority of production capacity still depends on future policy directions.

In contrast, the development prospects of Poland and Hungary are more promising, with low-risk production capacities of 115GWh and 125GWh respectively. Although Poland currently has no plans to add new factories, Hungary is expected to increase its production capacity by another 90 GWh and may become a new center for the electric vehicle industry in Europe in the future.

European electric vehicles are caught in a dilemma

Major automotive economies such as France and Germany are in the middle position in the field of battery manufacturing, with a combined production capacity of over 350GWh, of which 130GWh is a low-risk project.

Since last year, more and more European car manufacturers have slowed down their electrification process. The EU's top priority is not only to re-examine its electrification strategy and find a balance between industrial policies, infrastructure, and market demand, but also to consider the input-output ratio of existing investments, as well as how to calculate the sunk costs once policies are slowed down or suspended.

This account is indeed difficult to calculate, because in addition to the huge investment of car companies, there is also a huge pit of "burning money" for supporting products such as batteries. And behind it, there are also millions of local job opportunities designed.