EU's Critical Raw Materials and Net-Zero Industry Acts: Potential Boons or Barriers for a Cutthroat European Industrial Policy?

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The European auto industry is gearing up for a significant shift towards net-zero technologies, with the Critical Raw Materials Act (CRMA) and Net-Zero Industry Act (NZIA) serving as key components of the EU's industrial plan.

The CRMA and NZIA, unveiled earlier this year as part of the EU's Green Deal Industrial Plan (GDIP), are seen as a step in the right direction by the European Automobile Manufacturers' Association (ACEA). However, ACEA emphasises that effective implementation and coordination with other EU regulatory initiatives are crucial for the EU to remain competitive in the global electric vehicle market.

The EU's auto industry is investing more than €250 billion in electrification, and ACEA supports proposed Key Performance Indicators (KPIs), benchmarks, simplified permitting, and approval procedures under both proposals. The association also recognises the importance of retaining and attracting auto investment in the face of growing challenges from other global regions.

Sigrid de Vries, Director General of ACEA, has emphasised the need for a secure and reliable European battery value chain for electrification, highlighting that relying on competitors for critical raw materials could hinder the transition to electrification. ACEA also supports KPIs and measures focused on tracking emissions reduction, electrification rates, and innovation investments to ensure effective implementation and coordination of CRMA and NZIA, aiming to enhance the EU automotive sector's industrial competitiveness and prevent investment leakage within the Union.

Effective coordination of the CRMA, NZIA, and other EU regulatory initiatives is necessary for the EU to remain competitive, according to ACEA. The association also believes that reducing administrative burden is one step, but the initiatives must also be backed up by credible financial resources for Strategic Projects. Further clarity on temporary state aid rules may help ensure a level playing field.

The US, China, and other countries are ramping up their ambitions in the electric vehicle market, and the European auto industry will face stiff competition. Vehicle electrification will be a key testing ground for the EU's industrial policy revision. A more ambitious enabling framework is needed to incentivise green investment and boost competitiveness, according to ACEA. An unstable regulatory environment and attractive investment opportunities outside the bloc risk putting green investment on hold.

ACEA applauds the EU's initiative as a move in the right direction, but the association stresses that the EU must remain vigilant and proactive in its approach to ensure the success of its green transition and maintain its position as a global leader in the automotive industry.