How phase-out policies strengthen Europe's automotive industry. EMPOCI Policy briefing, Issue 1, February 2025

Europe is committed to phasing out the sale of new petrol and diesel cars by 2035. Some assume that these net-zero sales targets are bad for business. This assumption is particularly prevalent in Germany, which relies heavily on its automotive industry. However, recent research suggests that relaxing or scrapping these phase-out policies would do more harm than good to Europe's struggling automotive industry. This is because the targets generate investment certainty and thus help companies compete in the global innovation race. This brief explains why credible phase-out policies strengthen the European automotive industry, rather than weakening it. It also covers additional key steps European policymakers could take that would bolster the industry's global competitiveness.

Key Messages

1. Phase-out policies strengthen Europe's automotive industry. They sharpen strategy, facilitate planning and reduce inertia.
2. Changing gears would be a mistake. Phase-out policy works best when it's stable and ambitious.
3. Complementary policies are equally crucial. Stimulating European demand for EVs is a key task now.
4. Supporting a just transition is critical. Policies should actively address disadvantaged regions.