The transition to electric vehicles (EVs) is not a straight road for Europe’s automotive sector, according to a new report from the Centre for European Policy Studies (CEPS), supported by the European Automobile Manufacturers’ Association (ACEA).
The report – Navigating the EV Transition: Barriers and Tools for Shifting Europe to Low-Carbon Mobility -offers a sobering look at the systemic challenges Europe faces as it attempts to move away from internal combustion engine vehicles (ICEV) and toward battery electric vehicles (BEVs), particularly in the light-duty vehicle (LDV) segment.
CEPS researchers and industry experts warn that while the shift is essential to achieving EU climate goals, the transition brings deep structural impacts, from supply chain overhauls and labour displacement to massive investment requirements and threats to Europe’s automotive value creation.
“This transition requires a significant transformation of existing supply and value chains,” the report states. “The shifting revenues and cost structures, as well as the competitiveness of the EU automotive industry, will determine whether EV sales can offset the anticipated decline in ICEV revenues.”
Key challenges identified in the report include:
- High EV production costs vs consumer willingness to pay: The report finds a sharp disconnect between BEV production costs and consumer expectations, with average BEV prices needing to be around €45,000 to sustain current industry pricing models, while the average consumer is only willing to pay about €20,000.
- Risk to European value added: The transition to BEVs could reduce EU value added in vehicle production from 85–90% (for ICEVs) to just 70–75%, due to shifting supply chains and component manufacturing processes.
- Battery supply dependence and investment needs: With up to 70% of battery cells used in the EU currently imported from China, the report estimates a €42 billion annual investment is needed through 2030 to establish a competitive domestic battery production ecosystem.
- Charging infrastructure bottlenecks: Despite a forecast need for €172 billion in infrastructure investment by 2030, deployment is being slowed by bureaucratic hurdles, such as slow permitting and grid connection delays.
- Skills mismatch and labour market risks: While EV production may create new jobs, the loss of employment in ICE-focused sectors may not be fully offset, making upskilling and retraining essential to avoid long-term labour disruptions.
A turning point for Europe
The report emphasizes that consumer confidence, affordability, and charging convenience are still lacking in many parts of Europe, contributing to slow EV uptake and a rising average vehicle age on the roads.
In response, CEPS outlines potential policy tools and financial mechanisms to support the transition. These include targeted subsidies for consumers, innovation funding, investment in local supply chains, and strategic support for skills development.
