A new SOMO study shows that Europe’s automotive sector is neither in crisis nor needs urgent state support. In reality, the EU’s car industry is highly profitable, politically influential, and a major obstacle to climate action.
For months, EU leaders and industry groups have warned of a “mortal danger” facing European carmakers, citing factory closures, job losses, and growing competition from China. Initiatives like the Antwerp Declaration, the Letta and Draghi reports, and the EU’s Industrial Action Plan all call for expanded subsidies and industrial support, particularly for battery production and digitalisation. But SOMO’s new investigation, Manufactured crisis, tells a different story.
For two decades, Europe’s auto giants have actively steered the so-called “green” agenda to serve their interests. Through well-funded lobbying and close ties to policymakers, they have weakened environmental regulations to protect their business models and delayed climate action, while presenting themselves as champions of “green” innovation.
Bowing to pressure from the auto industry, the European Commission has recently weakened(opens in new window) CO₂ emissions rules. Instead of enforcing strict annual targets, the new policy allows manufacturers to average their emissions over the 2025–2027 period, effectively reducing accountability and giving carmakers more room to delay meaningful climate action. While the European Commission maintains its commitment to phasing out new petrol and diesel cars by 2035, industry groups and aligned politicians continue to question the deadline.
The economic logic underpinning EU policy is clear: shield incumbents through subsidies, transitional buffers, tariffs, and flexible regulation. But this approach risks prolonging Europe’s dependence on fossil fuel infrastructure and undermining the EU’s Green Deal targets. Current regulatory leniency sets a dangerous precedent for potential policy backtracking.
Key findings:
Drawing on financial data from 35 global car manufacturers headquartered in China, the EU, Japan, Korea, and the United States, SOMO’s analysis shows that:
- Europe’s car industry is thriving, not struggling.
Far from facing hardship, European carmakers hold over €200 billion in financial reserves and have captured nearly half of global automotive profits since 2006. Yet, they continue to lobby for weaker regulations and more subsidies, using their political influence to delay genuine climate action. - EU industrial policy prioritises legacy automakers over real climate action.
Through state aid and weak CO₂ targets, the EU continues to prop up private car production, especially large and polluting vehicles, while sidelining public transport, cycling, and shared mobility solutions.
With this investigation, SOMO urges the European Commission and EU Member States to ensure that public funds support a genuine structural shift in mobility. A true just transition must go beyond electrification and break car dependence. Without robust social and environmental conditionalities on state aid and a shift towards inclusive, low‑emission transport systems, the EU risks locking itself into a resource‑intensive, car‑dependent future.
“The real crisis isn’t financial, it’s political and environmental”, said Jeroen Merk, researcher at SOMO. “European automakers have the resources to lead the mobility transition, but instead use their influence to slow it down while calling for state aid. The EU must urgently align its industrial policy with its climate goals.”
The publication coincides with the adoption of the CISAF, a framework designed to simplify state aid rules for the development of clean tech manufacturing capacity in the EU, including electric vehicle batteries, their main components and the necessary critical raw materials. In conjunction with the EU’s recent Industrial Action Plan for the automotive sector, CISAF aims to enhance Europe’s car industry competitiveness.
