Letter: US has set a challenge for Europe’s carmakers

The US Inflation Reduction Act is a wake-up call for Europe (“US subsidies for green technology ring alarm bells in EU capitals”, Report, November 21). It confirms batteries and electric cars, not engines, are the future. But if Europe wants to decarbonise its cars while avoiding becoming a net importer of batteries and electric vehicles made in China and the US, it needs to act now.

The EU’s plan should focus on boosting electric vehicle and battery supply chains, including critical mineral refining in Europe, by encouraging European investment as well as from China, the US and elsewhere. Success will require simpler procedures, more predictability but, above all, more money.

A European sovereignty fund, modelled on the Covid recovery funds, is needed to ensure generous funding is made available across the EU, not just in Germany and France.

Subsidies need to be backed up by local content requirements, and a trade policy that protects nascent industries.

European governments will dish out billions in electric vehicle purchase subsidies this year. Yet, supply of electric vehicles is constrained and waiting times are long. Additional support to carmakers should be conditional on carmakers committing to higher production, in particular in Europe’s company car market and entry-level segment.

Without guarantees on this, additional subsidies would increase carmaker profits with no benefits for consumers or the European economy.

William Todts
Executive Director, Transport & Environment, Brussels, Belgium

This post was originally published on Financial Times

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