The EU plans to subsidize EV car sales to counter China

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Brussels has pledged to help Europe’s struggling car industry by using pan-EU subsidies to boost demand for electric vehicles.

European Commission Executive Vice President Teresa Ribera told the Financial Times at the World Economic Forum in Davos that officials were still “creating” options for the stimulus program.

“It makes sense to see how we know from a pan-European perspective, how to facilitate measures rather than passing national subsidies,” said Ribera. She warned against a “competition of one national model against another.”

German Chancellor Olaf Scholz said on Tuesday that the Commission is considering his proposed EU subsidy program. The German government abruptly scrapped its own plan by 2023, hitting EV sales hard.

Many EU member states offer incentives for EVs, but regulations vary widely and several member states do not offer any purchase subsidies, according to the Association of European Automobile Manufacturers.

One of the challenges for Brussels is to devise a plan that is compatible with WTO rules by removing subsidies flowing to Chinese carmakers, whose market share is growing rapidly.

Ribera admits there is a “difficult balance” between rapid electrification and the mismatch between European brands’ ability to “provide the quantity and quality of what we want to see moving on our roads”.

The commissioner, who is responsible for the EU’s “green industry” strategy, said the incentive scheme was one of several measures to support a sector deemed vital to the European economy. European car manufacturers “need a holistic view of how they can improve their capabilities and meet global demand,” Ribera said. In contrast, US President Donald Trump pledged this week to end “unfair subsidies” for EVs.

Ribera, a socialist and former deputy prime minister of Spain, has delayed the 2035 deadline to stop new sales of internal combustion engines because the car industry needs “predictability and transparency”.

“It doesn’t make sense to reopen the discussion when this provides some certainty, and it punishes the first movers who took the issue seriously without benefiting those who still need to move,” she said.

But she said she was open to flexibility on annual EV sales targets and penalties for automakers missing them. Ribera said there was an “open discussion” with the automakers about potential investment commitments.

Automakers have complained that paying penalties could hamper their EV investment plans while helping Chinese competitors buy credits from Chinese EV makers.

“It is important to ensure that this law is implemented in a way that facilitates the main goal” to eliminate gasoline and diesel engines, said Ribera.

She said she was open to extending technology transfer requirements for foreign car manufacturers looking to set up manufacturing facilities in the EU. Brussels said last year that the EU would require foreign companies that received aid for battery development to share some technology with domestic partners.

There is a “good lesson” from China, which set strict cooperation and technology sharing requirements for European carmakers when they set up factories 30 years ago.

Beyond the car sector, Ribera said the Commission is willing to expand its measures to benefit European industry.

Ribera said she would look at local content requirements to protect European turbine manufacturers, which are facing intense competition from Chinese companies.

Shares in European wind turbine makers took a hit from Trump’s first policy announcements, including a ban on new offshore project leases.

Trump in 2016 Ribera insists that the EU will continue to reduce carbon emissions even if they decide to abandon the 2015 Paris Agreement.

The devastating fires in Los Angeles show that the US is already suffering the high costs of climate change, she said.

“The world is much bigger (than America) and many other partners and players understand why it is important to be united,” she said.