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In recent months, almost all European countries with an automotive industry have been engaged in intense discussions on a topic that will radically change the future of transportation: the European Union’s plan to completely ban the sale of gasoline and diesel cars starting in 2035. Although supported by many governments and environmental organizations, this idea has sparked a storm of reactions from both the auto industry and ordinary consumers. Among the most vocal critics is the head of one of the world’s largest auto groups, Mercedes-Benz. Ola Kaellenius, CEO of the German company, has repeatedly warned that such a decision could cause huge imbalances in the European car market and could even lead to the collapse of the automotive industry if the transition is not carefully managed.
To understand the context, it should be noted that the European Parliament already adopted a law in 2023 that establishes a gradual reduction in the production and sale of cars with internal combustion engines. The ultimate goal of this law is that by 2035, only carbon dioxide-free vehicles will be available on the automotive market. This decision is part of the European Union’s broader plan to achieve climate neutrality by 2050. In other words, by the middle of the century, Europe aims to no longer contribute to the increase in pollutant emissions. The European Union, viewed as a regional bloc, accounts for around 6.1% of total global greenhouse gas emissions (3.2 GtCO₂e), ranking fifth worldwide. China ranks first with approximately 30% of global greenhouse gas emissions, the United States 11% of the total, India 7.8% of the total, and the Russian Federation 5% of total global greenhouse gas emissions. These percentages should give pause for thought first and foremost to the leaders of polluting countries and only then to EU representatives. However, the measure adopted by the European Parliament has not been without criticism. Many experts and industry representatives say that electric cars, seen as the main alternative to petrol and diesel cars, are not yet sufficiently efficient or affordable. In fact, sales of electric vehicles have begun to show signs of stagnation recently, and in some countries they have even declined, a sign that the initial enthusiasm of buyers has cooled.
In a recent interview with German business newspaper Handelsblatt, Ola Kaellenius (CEO of Mercedes-Benz) said that a “wake-up call” was needed before the European Union took the decisive step. He pointed out that a review of the targets is scheduled for the end of this year and that until then, the consequences of a total ban should be carefully analyzed. From Kaellenius’ perspective, there is a risk that banning the production of internal combustion engines could have the opposite effect to that desired: instead of accelerating the transition to electric cars, it could encourage people to buy gasoline and diesel vehicles en masse before the deadline. In other words, if people know that after 2035 they will no longer be able to purchase such a car, many will try to secure one before that time.
Moreover, the director of Mercedes-Benz, who also heads the European Automobile Manufacturers’ Association (ACEA), proposes a different approach. Instead of radical bans, he advocates incentives and encouragement for both manufacturers and buyers. Among the solutions suggested are tax breaks for those who choose electric vehicles or lower rates at charging stations. Thus, the adoption of zero-emission cars could become attractive to a larger number of people without creating artificial pressure on the market. Kaellenius also insists on the idea of “technological neutrality.” In his opinion, decarbonizing transport should not mean eliminating a single technology, but developing several options. If batteries are not yet sufficient for all types of vehicles, perhaps solutions based on hydrogen or synthetic fuels could play an important role. It is important that the European economy does not suffer in the process.
The European Union’s CO₂ emission reduction targets
The European Parliament has set a clear timetable for reducing emissions. Road transport is responsible for around 20% of the EU’s total CO₂ emissions, and reducing these emissions is essential to achieving the goal of climate neutrality. According to the plan, by 2030, emissions from passenger cars must be reduced by 55% compared to 2021 levels, and those from vans by 50%. In just a few years, by 2035, all new cars and vans (i.e., those leaving car factories) will have to be completely pollution-free.
For many EU citizens, the natural question is: “What will happen to the cars we already have?”
The response from European officials is that these rules do not apply to existing vehicles already in circulation. In other words, if someone already owns a gasoline or diesel car, they will be able to drive it after 2035, until the end of its life. Economic experts also argue that the second-hand car market will not disappear, and internal combustion cars will still be able to be sold and bought after the ban comes into force. However, maintenance costs, fuel, taxes, and insurance could become more expensive, making these cars less attractive to citizens in the long run from a financial point of view. As for the types of zero-emission cars that will dominate the market, the current trend is clear: battery electric vehicles. They are considered more advantageous in terms of total cost of ownership, even if the purchase price remains high. Other alternatives, such as hydrogen or synthetic fuels, are still in their infancy, mainly due to high production costs. However, they could become viable solutions for heavy transport, aviation, or the shipping sector, where batteries are not a practical option.
The automotive industry, a market at a crossroads
Although, in theory, the transition to electric vehicles promises medium- and long-term benefits, the economic and technological reality is much more complicated. Currently, electric cars are much more expensive than combustion engines, and the charging infrastructure is underdeveloped in many European Union countries. Especially in rural areas, where distances are long and charging stations are rare, people are skeptical about this transition to non-polluting cars. The European Union is banking on the idea that, as production and competition increase, the prices of electric cars will fall. At the same time, investments in infrastructure should make their use more accessible. But until then, one question remains open: how ready is Europe for such a radical change? Critics such as Ola Kaellenius do not reject the idea of reducing pollution and transitioning to zero emissions, but they point out that the process must be gradual and balanced. A decision made too quickly, without taking into account economic and technological realities, risks affecting millions of people, from auto industry employees to ordinary consumers.
How much does an electric vehicle cost “from mine to showroom”?
If you lift the hood of an electric car, you won’t find the usual orchestra of belts, injectors, and turbines. Instead, you’ll find a battery the size of a single mattress, a compact motor, and a network of electronics that make the magic of energy transition happen. Beyond the marketing and the promise of cleaner air, the key question remains: how much does it really cost to build an EV—from ore to polished showroom car?
The chain begins with the extraction and refining of battery materials (lithium, nickel, cobalt, graphite, or iron phosphate). Prices for these materials have been volatile, but one thing is clear: the battery remains the defining element in the cost of an EV. In 2024, the average price of lithium-ion battery packs fell to around $115/kWh, the lowest level ever (a drop of ~20% from 2023) – a leap that changes the economic equation for the entire industry. What does this mean in practical terms? For a 60–75 kWh battery, typical of a European hatchback/compact car, the cost of the pack can be approximately between $7,000 and $8,600 just from multiplying the kWh. In reality, at the manufacturer level, integration, thermal management, BMS, and other parts often push the price tag to $9,000–11,000, as detailed pack cost analyses conducted in 2024 show. On top of the battery, there is the electric powertrain (motor, inverter, on-board charger, reduction gearbox), body and chassis, interior and infotainment, ADAS systems, plus assembly, logistics, and warranties. Teardowns and cost studies suggest that once the battery “mountain” is lowered, the rest of the cost line looks increasingly similar to a modern combustion engine car: the motor + power electronics have reached costs in the range of a few thousand dollars and continue to decline as volumes increase and standardize. Various technical analyses of the inverter/motor show clear trends of unit cost reduction as production scales up. Putting everything together in an order of magnitude for a volume EV in 2024–2025: total production (BOM + manufacturing, excluding R&D, marketing, dealer, and taxes) could fall, depending on the segment and battery, somewhere in the range of $25,000–35,000 for small/medium classes, with notable variations depending on battery chemistry (LFP vs. NMC), pack size, and features. The continued decline in price per kWh—along with the accelerated shift to LFP and global excess capacity in the battery chain—suggests that cost pressure will remain downward.
Who are the global heavyweights in EVs?
Globally, China is unequivocally the market driver: in 2024, electric car sales in China grew by nearly 40% compared to the previous year, and the country accounted for nearly two-thirds of global electric car sales. Production and exports followed the same trend, with China maintaining its status as the largest exporter of EVs. Names such as BYD, SAIC, Geely (including Volvo/Zeekr), and GAC took the lead, alongside Tesla, still the Western benchmark in terms of volume and industrial efficiency. The IEA notes that global cell production capacity exceeded 3 TWh in 2024 (about three times the combined demand for vehicles and storage), and about 85% of this capacity is in China, with over 75% owned by Chinese manufacturers, which is a massive competitive advantage that directly translates into price and time to market.
Where does the European Union fit into this picture?
The European Union remains an industrial force in EVs, but the pace is no longer enough to dictate the global game. In 2024, EU production stagnated at around 2.4 million electric vehicles, still exceeding domestic sales (the EU remained a net exporter), with Germany as the main production center. At the same time, imports from China remained strong (over 400,000 units), and the share of Chinese brands in these imports rose. In terms of batteries, Europe has made progress, but still has some catching up to do. Reports show that approximately 190 GWh/year is the nominal cell capacity in 2024, with production concentrated in Poland and Hungary for 2023. However, dependence on Asian components and materials remains high. In addition, although there are plans for “gigafactories,” many are in ramp-up or experiencing delays, while China is already operating at full scale.
To protect local industry from distortions caused by foreign subsidies, the European Commission imposed provisional countervailing duties on EV imports from China in 2024, measures that were subsequently strengthened, reaching around 45% at the end of last year and the beginning of this year, in parallel with EU-China discussions, including the idea of minimum prices. Trade decisions will shape relative competitiveness in Europe in the short term.
Can Europe be competitive with China in the automotive market?
The answer is yes, but not overnight. China starts with structural advantages that are difficult to match quickly: vertical integration in the battery chain, overcapacity in cells (which puts pressure on prices), extremely fast industrial ecosystems, and a huge domestic market. The EU has its own strengths, such as engineering, global brands, mature technical platforms, perceived quality – and it remains a net exporter of electric vehicles. However, without accelerating localization (from materials to cells and modules), standardization, and volume, the cost gap is likely to persist. There is some good news: battery prices are falling, and European manufacturers are preparing models under €25,000 for 2025–2026, a psychological threshold for the mainstream market. There are also some question marks: cell capacity remains insufficient vs. demand on the horizon for 2030, and some strategic projects are experiencing delays or restructuring, which means that dependence on imports, including from China, will remain high in the coming years.