EEarlier this year, a French experiment offered a startling glimpse of what progressive green policymaking can achieve. In an effort to boost demand, Emmanuel Macron's government introduced a social leasing program that allows low-income commuters to pay an affordable monthly fee for a new electric vehicle (EV). Within a month, the plan was suddenly halted as demand soared. According to ministers, French carmakers could not keep up with the sudden surge of interest.
This fall, companies like Renault and Peugeot are facing a different kind of problem. Governments across the EU have withdrawn subsidies and incentives and failed to deliver promising levels of investment in charging infrastructure and grid capacity. As a result, EV sales have been poor on the journey to 2035 zero-emissions targets. August marked the fourth consecutive month of decline in sales, according to new data from the Association of European Automobile Manufacturers. Overall, car sales were the lowest in three years, with double-digit declines in France, Germany and Italy. Executives at Volkswagen, a symbol of German industrial might, have announced an option. For the first time in the company's history, domestic factories will have to be closed.
A big part of the problem is competition from China, along with the cost-of-living crisis and the relatively high cost of EVs. State subsidies and access to essential battery materials allow Chinese manufacturers to significantly undercut European firms and, more importantly, dominate their large domestic market. The stakes couldn't be higher. If the difficulties of leading national brands and economic powerhouses like VW are not addressed, far-right parties like Alternative für Deutschland will be given more opportunity to attack green targets as a threat to national prosperity. Sensing the crisis, the European Commission plans to impose stiff tariffs on Chinese EVs after a year-long anti-subsidy investigation.
However, this path will create its own problem. A trade war with China will inevitably have dire consequences for European exporters. That is why Germany opposed the planned tariffs. Taking steps to keep cheap Chinese EVs off the European market will do nothing to boost consumer demand – a sector that is fundamental to the green transition.
In the face of opposition from farmers, Commission President Ursula van der Leyen has already backed back on some of the climate targets that defined her first term. As the next phase of change seeks to decarbonize essential elements of everyday life, including the cars we drive, going green must be seen as affordable for consumers, including the least affluent, and a source of economic renewal and growth. European businesses and regions.
Brussels and proactive national governments must take the lead through a combination of subsidies and investment to sustain industry and consumer confidence. It was the brainchild of Mario Draghi, former president of the European Central Bank, whose analysis of Europe's economic prospects was published last month. Yet, as the EU reintroduces tight fiscal rules on national spending, the path of policy is determined by a narrow focus on balancing the books. Without a change in approach, the car industry's woes will deepen as it negotiates an era-defining change.
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