A new Sure to Save the Automotive Sector in Italy and Europe

The European automotive sector is going through one of the most critical, if not decisive, phases in its history, with increasing tensions between environmental goals, commercial interests, and employment needs. The EU has set a target for car manufacturers to reduce average CO2 emissions to 95 g/km for new vehicles by 2025, followed by further ambitious targets to achieve carbon neutrality by 2050.

The necessary and significant increase in electric vehicle sales is struggling to materialize, especially in Italy and Spain where demand is low. To boost the competitiveness of the European industry, the European Commission has introduced a series of tariffs on electric cars imported from China and has accounted for commercial retaliations on upstream products in the value chain, such as lithium batteries, of which China is a major exporter, while the EU is dependent on critical raw materials for the transition to electric mobility.

The problems are therefore manifold and affect both demand and supply. Electric cars produced in Europe, combined with the high cost of electricity, currently represent an excessive economic burden for citizens who have seen their purchasing power drastically decrease in recent decades. Consequently, without demand for these vehicles, many plants will be forced to close, with dramatic losses of skilled labor. This process has already begun in many European countries, from Belgium to the Czech Republic, from Germany to Italy.

In addition to climate targets and tariffs, the EU has not accompanied the transition to sustainable mobility with adequate proposals. The initiatives launched so far are too fragmented: the European Battery Alliance in 2017 to build sustainable battery supply chains, the European Chips Act of 2022 to increase semiconductor production, or the Critical Raw Materials Act and the Net Zero Industry Act of 2023 to reduce dependence on strategic inputs and essential raw materials for the green transition. Now it is necessary to change and act decisively.

Our proposal involves the creation of a fund with at least 100 billion euros for the EU, with non-repayable grants structured on three pillars: social shock absorbers following the SURE fund during Covid to mitigate the loss of jobs that is already happening in many plants. It will last two years and will function like unemployment benefits for the suspension of employment contracts or reduction of working hours and will be subject to specific conditions.

Companies in crisis that receive support will indeed have to make the necessary investments required by the transition to electric vehicles, including the retraining of the workforce, with an additional obligation to focus production efforts on affordable car models for the low- to middle-income population. The second pillar is demand-side support, considering a series of incentives for purchasing electric vehicles with VAT
reductions, for example, for low-income families and public procurement measures where the state becomes a buyer of public mobility means into which component companies suffering from the automotive crisis can enter.

In Belgium, company incentives are reserved only for electric cars (no longer for combustion engine cars), and this is contributing to an exponential increase in demand. Finally, support on the supply side and cost reduction. While waiting for more decisive industrial policy interventions, which in Italy can rely for the moment on the Transition 5.0 tax credit system, more specific attention is needed for the technologies necessary for the transition to electric vehicles. The measures envisaged for the Automotive Fund would also be useful, but the government has recently cut 80% of the funding, equivalent to 4.6 billion euros.

This proposal is gaining interest in Europe following the submission of a budget amendment to the EU, under my first signature, to the European Parliament and could become one of the key measures of industrial policy for the coming years. We have entered a phase where we will soon know whether the European automotive industry will manage to save itself while preserving sustainability and jobs in an increasingly competitive global
context.

What we are proposing is a temporary measure that will allow us to safeguard the productive factories and the skills of workers, and giving us more time to formulate medium-to-long-term strategies in which entities such as the European Investment Bank can play a decisive role in guiding the trajectory of the European industrial system, starting from the automotive sector and mobility in general.

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