Bruegel warns EU protectionism could raise EV prices 2,100 euros

EU Protectionist Policies Raise Electric Vehicle Costs

A new report from the Bruegel economic think tank in Brussels warns that European Union protectionist policies could raise electric vehicle prices by 2,100 euros for consumers.

The proposed requirement for EU-made battery cells would increase cell costs from 50 to 85 euros per kilowatt-hour inside the bloc. Additional rules on low-carbon steel would add 200 euros to each vehicle's price, while simplification saves only 61 euros per car.

The findings highlight a paradox where measures meant to protect domestic industry may instead slow the European Union's transition to electric mobility and raise costs for consumers.

The European Union has already activated additional tariffs on Chinese electric vehicles, with rates reaching up to 35.3 percent since October 2024 to protect domestic producers.

However, these tariffs only target battery electric vehicles from China and completely ignore plug-in hybrid models sold in the bloc. As a direct result, battery electric imports remained flat while hybrid vehicles surged rapidly into the European market during this period.

Tariff Loopholes and National Subsidy Policies

In France, tightening subsidy criteria to exclude imported brands caused sales of unsubsidized models to drop by 60 percent overall. This policy also significantly slowed the overall adoption rate of electric vehicles across the entire country and regions in recent years.

Chinese-made electric vehicles now account for more than 20 percent of European Union consumption, but over half of them carry Western brands, according to industry data.

The tariff loophole for plug-in hybrids has significantly weakened the European Union's goal of protecting its domestic automotive manufacturing base. Imports of battery electric vehicles remained nearly flat while hybrid models flooded the European market in large numbers over the period.

Volkswagen recently announced one-time costs of about 10 billion euros and cut its profit margin forecast to a maximum of just 1 percent for the year.

Earlier, Stellantis also left the Euro Stoxx 50 index, highlighting the broader financial challenges facing European automakers and industry across the continent today in this sector.

Industry Decline and Policy Recommendations

European Union car production has fallen by approximately 2.6 million vehicles, a 19 percent drop compared with 2019 levels, according to new data released this month.

The number of consumers purchasing new cars in Europe also declined significantly by 2.2 million units over the past year despite industry efforts to boost sales.

The European automotive sector still employs about 14 million workers, representing 6 percent of the EU workforce across the bloc. It maintains a large trade surplus and invests roughly 3 billion euros quarterly in electric vehicle and battery plant projects.

Bruegel recommends that the EU negotiate time-limited quota agreements and balance tariffs between battery electric and hybrid vehicles with automatic re-imposition if violations occur in trade.

South Korean companies currently hold 65 percent of operating battery cell production capacity in Europe, according to the report recently released. Chinese partners also account for 55 percent of battery cell capacity currently under construction on the continent within the European Union.