The electric vehicle (EV) has become the main field of industrial competition in the automotive sector. Powerful new players are challenging once-dominant European manufacturers for market share and the viability of their production model.
The scale of change is visible in the global market. The International Energy Agency estimates that more than 20 million electric cars were sold worldwide in 2025 and expects that figure to rise to 23 million in 2026. In Europe, it expects one in every three cars sold in 2026 to be electric.
“The electric vehicle has shifted the industry’s centre of gravity: from engine to battery, from mechanics to software, from brand to scale, and from regulation to industrial policy”
China is well ahead as this new world order evolves: Chinese automakers supplied 60% of electric cars sold worldwide in 2025, while China accounted for more than 80% of global battery-cell production.
The United States, meanwhile, together with China, leads the commercial deployment of the car’s digital layer: proprietary software, data, over-the-air updates and autonomous driving.
Europe therefore faces double pressure. It must accelerate electrification so as not to lose the volume market, while also preventing the highest-value layer (batteries, operating systems, semiconductors, data and services) from slipping out of its control.
This prompted the European Union to produce an action plan allocating €1 billion from Horizon Europe to the automotive sector for 2025–2027, including €350 million for next-generation batteries, and announcing a separate €570 million for alternative fuels infrastructure for 2025–2026, particularly for heavy-duty vehicles.
“Europe wants this transition to translate into industry, investment and jobs on European soil”
The approach extends to raw materials. The Critical Raw Materials Act sets 2030 benchmarks requiring the EU to reach at least 10% of annual consumption through domestic extraction, 40% through processing and 25% through recycling, while limiting dependence on any single third country to 65% for each strategic material.
Europe wants this EV transition to translate into industry, investment and jobs on European soil, and there are encouraging signs.
Volkswagen commissioned the Salzgitter gigafactory in Germany to make batteries for about 250,000 electric vehicles and act as the blueprint for other cell factories. Renault has repurposed its Douai plant in northern France as part of the Ampere ElectriCity industrial hub which has two-thirds of its supplier base within 300 kilometres. Fiat owner Stellantis is partnering with China’s CATL, a leading battery producer, to build a lithium iron phosphate battery plant in Zaragoza, Spain, with an announced investment of up to €4.1 billion.
Yet execution remains the greatest risk: high energy costs, weak demand in some markets, fragmented incentives and charging provision, affordability challenges, software delays and some European battery projects falling short of their plans could hold back progress.
Single EU rules can speed things up. An isolated traceability requirement raises costs but an interoperable digital battery passport can create value in financing, maintenance, resale and recycling. A safety standard that is too slow can stymie the market, while one that is clear and predictable can facilitate public procurement and social acceptance.
Regulation can support competitiveness when it ceases to be a list of national obligations and becomes a common architecture for scaling up. Europe already has a strategy; in 2027, the priorities are to make electric vehicles more affordable, bring industrial capacity up to competitive volumes and productivity, and narrow the software gap through shared components and reliable over-the-air updates. Progress on these fronts would help turn scattered projects into a coherent industrial platform capable of competing with China’s scale and the technological speed of the US.