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Why European Taxpayers Will Soon Fund Chinese Jobs
Philipp Raasch
September 05, 2025
Welcome to Issue #83 of The German Autopreneur!
Last week, Mercedes CEO Ola Källenius wrote a letter to Ursula von der Leyen. He spoke for the entire European automotive industry.
His message is dramatic: The EU's climate targets for 2030 and 2035 are "no longer feasible." Europe faces industrial collapse.
On September 12th, Von der Leyen meets with CEOs for a "Strategic Dialogue." The industry calls it their "last chance.”
But behind this cry for help is another message. A message of fear. Of lobby. And of an industry desperately fighting for its future.
What the Letter Says
On August 27th, Ola Källenius and Matthias Zink signed the open letter.
Källenius represents all European automakers as ACEA president. Zink leads the supplier industry as CLEPA chief.
Their demands?
Drop the rigid CO2 targets. Replace them with "technology openness”
Extend incentives and tax cuts for EVs
Investment in batteries, semiconductors, and critical materials
Cheaper electricity prices for industry
Lower penalties for missing CO2 targets
Translation: Kill the "2035 combustion ban." Otherwise, 13 million jobs are at risk.
The EU Rules Are Brutal
Starting 2030, automakers must cut CO2 emissions by 55%. From 2035, new cars can't emit any CO2.
Miss the targets? Pay €95 per gram exceeded per car.
For big automakers still selling combustion cars, penalties hit billions fast.
The EU already relaxed rules last March. Manufacturers can now spread their CO2 targets over 3 years.
But that's not enough for the industry. They want more.
Why This Letter Comes Now
Multiple factors are creating a perfect storm:
The US fights back. The US imposed 15% tariffs on all EU cars. That's 6x higher than before. Meanwhile, they offer billions in subsidies for manufacturers who move production there.
Chinese competition is growing. By 2030, Chinese brands will hold up to 12% of the European EV market.
German brands are losing in China. Volkswagen lost its market-leading position. Mercedes and Porsche are hit even harder. This makes the European market more important.
Europe lags on batteries. 90% of all battery cells come from Asia. Recent news from Northvolt and Cellforce proves it: Europe has a problem.
EV demand disappoints. Only 15% of new cars in Europe are electric. Way below forecasts.
The result? German manufacturers invest billions in China and the US. Meanwhile, they’re cutting thousands of jobs in Europe. Volkswagen wants to eliminate 35,000 positions. Mercedes: 20,000.
Now these same companies are begging for EU subsidies.
Some find this hypocritical. But that would be too simple. Current conditions don’t give companies much choice.
German automakers learned this lesson in China: Local competitors win when they move faster and price lower on new tech. Chinese OEMs like BYD left them behind.
The biggest fear? The same thing happens in Europe.
So this is really about one thing: Buying time. They want to secure combustion profits while catching up on technology.
Not Everyone's On Board
Here's what's interesting: Not all automakers support this cry for help.
Kia Europe publicly disagreed: "We can handle the 2035 ban. No problem."
Toyota also supports the 2035 targets.
Why? These manufacturers see EU deadlines as a competitive advantage.
They prepared for this. Now they want to profit from it.
This shows something important: This is not about "the auto industry" as a whole. It’s about individual interests. Those well-positioned in EVs want hard rules. Those still trying to catch up want delays.
Europe's Difficult Choice
Scenario 1: Keep the rules as they are. This could trigger deindustrialization. Chinese and US manufacturers could take over the European market.
Scenario 2: Loosen the targets. Innovation pressure disappears. Europe invests longer in old technologies and business models. This weakens Europe in the long-term.
Scenario 3: Find a middle ground. Europe invests strategically in the future. With clear conditions: Want support? Create value in Europe.
My Take
I'm for scenario 3.
I get the industry's concerns. This transformation is brutal.
But Europe shouldn't simply give in. Instead, we need clear rules:
Link support to future technologies. Every euro must be tied to local production of batteries, chips, or software. Here’s the danger: European taxpayers end up subsidizing car sales. But value gets created elsewhere. Europe would then finance jobs in the US and China instead of its own.
Make Europe attractive. Make it attractive for companies to create jobs here. Cheaper electricity. Better charging infrastructure. Faster permits. That's better than buying incentives.
Think unbiased. From taxpayers' view, it doesn't matter if Mercedes or a Chinese company creates European jobs. What matters is keeping value creation here.
It’s not about more or fewer subsidies. It's about measurable results.
We need a simple test: Do subsidies actually create EU jobs?
My proposal: Track 3 simple metrics. Published every quarter:
Local-for-Local quota: What percentage of EVs sold in Europe are also developed and built here? This stops us from funding car sales while China gets the jobs.
EU battery independence: What percentage of our battery needs do we produce ourselves? Because batteries are the heart of modern cars.
EU energy cost gap: How much more does electricity cost here than in the US? Cheap power decides where factories get built.
So here's my message to Ola and Ursula: Europe should help. But only with measurable returns. Not to preserve yesterday. But to build tomorrow.
That's all for today.
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Until next week,
— Philipp
PS: If you find value in this newsletter, please share it with someone who might benefit. Your support helps me continue my independent work for the automotive industry.
