In May 2025, the European Commission introduced the Industrial Action Plan for the automotive sector. This initiative did not emerge in a vacuum. It followed several years of unprecedented technological disruption, geopolitical instability, and rapidly shifting consumer and market expectations. As a result, Europe’s automotive industry finds itself navigating a new competitive landscape—one defined by electrification, digitalization, supply chain fragility, and a global race for technological leadership.
The Commission’s message in 2025 was unambiguous: the European automotive industry is at a critical turning point. Electrification is advancing, but unevenly. Global competitors are scaling innovation at unprecedented speed. Supply chains remain exposed to raw material dependencies. And software, data, and artificial intelligence are increasingly determining the competitiveness of global automotive manufacturers. The Industrial Action Plan responds to these pressures by outlining a strategic vision built around long-term competitiveness, sustainable mobility, and technological autonomy.
At the center of the Plan lies Europe’s ambition to define the next generation of mobility. This ambition rests heavily on the ability of the automotive sector to innovate in autonomous driving, AI integration, digital infrastructure, next-generation batteries, and cybersecurity. The Commission acknowledges that the European Union lags behind other major markets when it comes to creating favorable testing and deployment environments for automated vehicles. Fragmented regulations across Member States continue to slow industrial development, hinder investment, and discourage cross-border deployment of new technologies. To address this, the Action Plan foresees the creation of large-scale cross-border test environments and regulatory sandboxes designed to foster real-world experimentation and commercialization of automated mobility systems. These initiatives are coupled with a broader effort to strengthen European capabilities in both software development and the production of key semiconductor and IT hardware components essential for connected vehicles.
A significant part of the Plan also focuses on cybersecurity. As vehicles become more connected and autonomous, cybersecurity is no longer a purely technical concern—it is a regulatory obligation. The Commission is preparing concrete measures under the NIS2 framework to ensure that connected vehicles meet stringent cybersecurity and risk‑management requirements. For manufacturers and suppliers, this heralds a future in which compliance with cybersecurity standards will be as fundamental as compliance with safety standards.
Clean mobility continues to be a defining theme. While sales of electric vehicles are steadily increasing, the Commission warns that 2025 CO₂ emission targets may place manufacturers at risk of substantial penalties if the pace of electrification does not accelerate. Infrastructure gaps, disparities in consumer incentives, and fragmented national policies remain obstacles. The Action Plan therefore introduces a more nuanced approach to supporting the transition, including mechanisms to ease compliance pressure, initiatives to encourage electrification of corporate fleets, and strategies aimed at making zero-emission vehicles more accessible to lower-income consumers. The Commission also places renewed emphasis on ensuring transparent and reliable access to information on battery health through the emerging battery passport framework and on improving the repairability and sustainability of batteries throughout their lifecycle. The next stage of clean mobility requires not only technological readiness but regulatory clarity and consumer trust.
The issue of supply chain resilience receives extensive attention. Europe’s dependency on imported raw materials and foreign battery production has become acutely visible since 2021. The Commission’s response includes the introduction of a Battery Booster package intended to support domestic battery manufacturing, potentially including direct EU financial support. In parallel, the Critical Raw Materials Act aims to secure access to essential materials through strategic partnerships and coordinated supply strategies. Starting in 2026, the newly established EU Critical Raw Materials Center will centralize efforts to match supply and demand. These measures reflect an understanding that Europe cannot afford to build its mobility future on vulnerable or unpredictable supply chains. Sustainability also plays a crucial role here. Recent regulatory actions under the Waste Framework Directive, including the classification of black mass as hazardous waste, aim to ensure high environmental standards and tighter controls over the movement and processing of battery-related waste.
A further dimension addressed by the Action Plan concerns workforce and skills. The transition to zero-emission mobility, autonomous driving, and software‑defined vehicles requires a workforce with significantly different competencies than the traditional automotive labor market offered. The Commission recognizes the need for large-scale reskilling and upskilling, especially in fields such as battery engineering, cybersecurity, functional safety, and advanced software development. Regions that have historically depended on internal combustion engine production will be disproportionately affected, and the EU intends to support these regions as part of a broader social and economic transition.
The final element of the Action Plan concerns the competitive landscape. Europe’s automotive sector faces increasing competition from global manufacturers operating under different market conditions, regulatory frameworks, and state‑aid environments. The Commission plans to enhance its trade enforcement tools, refine rules of origin, strengthen foreign investment screening, and streamline regulatory requirements to create a more coherent and predictable operating environment. Regulatory simplification is an important step toward reducing the administrative burdens that currently weigh on manufacturers and suppliers, especially those operating across multiple EU jurisdictions.
Why is all of this important?
Understanding why all of this matters requires looking beyond individual initiatives. For automotive businesses, the Industrial Action Plan is not a policy document to observe from afar; it is the foundation of the regulatory landscape that will shape strategic decisions, investment planning, research priorities, compliance obligations, and supply chain restructuring over the coming years. The changes arriving in 2026—including the launch of the Critical Raw Materials Center, strengthened cybersecurity obligations under NIS2, new sustainability criteria for essential components, and enhanced testing frameworks for autonomous vehicles—will directly influence the risks and opportunities facing the industry.
This is precisely why regulatory awareness and legal preparedness have become strategic priorities. Automotive companies today must navigate regulatory developments that affect everything from vehicle design to market access, from software updates to raw material sourcing, and from data governance to environmental obligations. The legal risks associated with non‑compliance have grown considerably, but so have the opportunities available to companies that adapt early and align their strategies with the direction of EU policy.
Expert legal support
At our law firm, we advise on EV regulation, battery compliance, data and cybersecurity requirements, supply chain due diligence, competition law implications, and the legal challenges surrounding emerging technologies. Attorney-at-law Lucija Vranešević Grbić, delivered a webinar on electric vehicles and alternative battery technologies in 2023, and many of the issues then considered ’emerging topics’ are now at the heart of the European Commission’s industrial agenda.
The speed of regulatory evolution confirms what industry leaders already know: the future of automotive mobility will be shaped as much by law and regulation as by technology.
Looking ahead, the automotive sector faces both uncertainty and opportunity. The companies that thrive will be those that understand the broader policy context, anticipate regulatory developments, and implement compliance strategies that enable innovation rather than hinder it. The Industrial Action Plan offers a preview of what the next decade of European mobility will look like. Preparing for these developments today is essential to ensuring stability, competitiveness, and long‑term success in an increasingly complex global market.
If your organization is navigating these challenges or preparing for the regulatory shifts expected in 2026 and beyond, our team is ready to support you with strategic guidance tailored to the realities of the automotive industry.
Note: This text does not constitute legal advice but represents the author’s personal opinion.
