Discover how the announced end of internal combustion vehicle sales in Europe in 2035 will potentially impact the European economy in terms of value creation.
The European automotive industry, a key economic pillar, contributed €1.75 trillion to gross value added in 2023, of which €570 billion came from technology and car exports. Electric mobility could add $220-270 billion to gross value added by 2035 thanks to after-sales support and services. However, the value of European production could fall by €370 billion over the next decade if current trends continue, assuming a decline in the global market share of European manufacturers from 60% to 45%.
Despite the potential losses, Europe and its manufacturers can benefit from the disruption of electric vehicles and potentially increase gross value added if they adopt innovative strategies, engage in global markets, strengthen industrial collaboration and implement effective policies. Europe is a leader in automotive innovation, safety and energy efficiency, winning the loyalty of consumers around the world.
The automotive industry is undergoing a significant transformation with the rise of electric vehicles (EVs). European sales of electric vehicles grew by more than 50% per year between 2020 and 2023, but have recently slowed due to reduced subsidies and growing interest in affordable electric vehicles. Nevertheless, the long-term outlook for electrification remains strong, driven by the growth of the global EV market, particularly in China.
To assess the impact of growing EV sales on the European automotive industry and economy, the shift in gross value added to EVs by 2035 was quantified. The transition will significantly affect upstream gross value added. Three scenarios were modelled by the 3 consultancy McKinsey & Company to show how current decisions by European automotive leaders could influence value creation over the next decade. Strategies for the European automotive industry to thrive in an electrification context were identified, based on a seven-pillar roadmap.
The scenarios highlight various outcomes for stakeholders. If European automotive leaders fail to capitalise on electrification, more than €370 billion of upstream gross value added could be at risk. Conversely, successfully managing the transition could generate around €270 billion of value added for the European economy, with positive effects on related industries. The McKinsey & Company report we link at the end assumes that all new cars sold in Europe by 2035 will be electric vehicles, in line with current regulations aimed at phasing out ICE vehicles.
For more details, the report in English here.