Update on Automotive Regulations in Europe

Despite the current trend towards a more conservative and business-friendly political climate, the EU remains committed to decarbonizing the automotive sector.  However, the EU’s approach to achieving this goal appears to be shifting from restrictive climate policies discouraging internal combustion engines (i.e., tightening CO2 fleet targets and emission regulations) to industrial policies incentivizing zero-emission vehicles (ZEVs) and strengthening European infrastructure and supply chains.  As a key step the EU Commission now published the Industrial Action Plan for the European automotive sector (Automotive Action Plan) on 5 March 2025 (press release, link, factsheet) and the broader Clean Industrial Deal of 26 February 2025 (press release, link, factsheet).

The Automotive Action Plan addresses the issues of reducing dependence on fossil fuels, lowering production costs to create a level playing field for international competitors and unleashing the industry's innovative power.  It mainly consists of five pillars:

Innovation and digitalization:

• Autonomous and connected vehicles: The EU Commission intends to establish at least three large-scale cross-border test beds for automated driving and streamline regulations for deployment of autonomous vehicles (step-by step introduction of unlimited series type-approval).  A European Connected and Autonomous Vehicle Alliance for Companies will be established in 2025 to develop shared software, chips, and autonomous driving technology. 
• Next-gen batteries: Development of next generation of battery technology through BATT4EU, with a dedicated budget of around 350 million EUR.
• Innovation support: Horizon Europe and TechEU will fund innovation and R&D in autonomous driving, digitalization, and battery tech.
• Cybersecurity and data access: The EU will enhance data access and ensure strong cybersecurity for connected vehicles.

Clean mobility

• Spotlight on corporate fleets: A legislative proposal is planned for 2025 to decarbonise corporate fleets (link).  The aim is to uptake ZEVs in this field to reach the goal of 90% transport emission reduction by 2050.
• Emission reduction: More flexibility in meeting the 2025 CO₂ standards while keeping the target.  Within 2025-2027 it is possible to compensate an exceedance of the target in one or two of these years by overachievements in the other year(s). 
• Battery repairability will be improved and the roll-out of charging infrastructure will be accelerated (+570 million EUR from the Alternative Fuels Infrastructure Facility in 2025-2026), including the promotion of smart/bi-directional charging.  Price transparency at recharging points shall be enhanced.
• Boosting ZEV demand:  There will be a recommendation on transport poverty (Q1 2025) including Social Leasing Systems to create incentives for consumers to buy ZEVs.  

Competitiveness and supply chain resilience

• Battery Production: ‘Battery Booster’investment package to boost Europe’s battery industry to support EU made batteries (+1.8 billion EUR in the next two years from the Innovation Fund).  In addition, the EU will streamline permits and support joint investments in raw material projects and refining to ensure secure access to low-cost materials.
• Circular Economy: Boosting circularity in the automotive supply chain will reduce raw material dependency.  The EU Commission will explore financing for battery recycling and look into industry cooperation for material recovery.  New regulations will ensure better control over hazardous waste, like black mass, and prevent its export to non-OECD countries.  It is intended to finalize the new End-of-Life Vehicle Regulation (ELV) quickly.
• Component Production: The European production of key components will be promoted as well, especially to ensure secure supply of critical parts for connected and automated vehicles or e-powertrains.

Skills and social dimensions

• To face challenges such as job losses or skill shortages and ageing workforce, the EU is enhancing support, e.g., workers will be supported by a European Fair Transition Observatory to track employment trends in the automotive sector, identifying potential “hot spots” of job displacement for proactive solutions (90 million EUR Pact for Skills fund to boost skills training in the automotive industry).

Level playing field and guaranteeing our economic security

• Market Access, Economic Security & Level Playing Field: It shall be ensured that European companies are protected against unfair competition.  Therefore, the EU Commission is committed to make use of Trade Defence Instruments and the Foreign Subsidies Regulation to investigate unfair practices.  It will also ensure that foreign investments in the EU automotive sector benefit European companies and contribute to the industry’s long-term competitiveness.  
• Regulatory Simplification: Regulations shall be simplified to improve coherence and consistency between different regulatory requirements.

Beyond the Automotive Action Plan and the Clean Industrial Deal, several other regulatory changes will impact the industry:

• On 26 February 2025, the EU Commission published its initial Omnibus simplification package, which proposes a significant cut of red tape in ESG reporting and due diligence regulations (Corporate Sustainability Reporting Directive (CSRD), EU Taxonomy Regulation, and Corporate Sustainability Due Diligence Directive (CSDDD)) (link).  Since then, the EU Commission has expanded its simplification efforts to other areas (e.g., EU Battery Regulation, GDPR) through additional Omnibus packages, with the latest proposal dated 21 May 2025 (press release, QA).
• The new Euro 7 type-approval standard will be phased in from November 2026, and introduce even stricter and new requirements for, among others, emissions (including new non-exhaust emission limits for brake particle emissions and tire abrasion), efficiency and, (battery) durability, anti-tampering and cybersecurity and for on-board diagnostic (OBD) and on-board monitoring (OBM) systems.  On 15 April 2025, the EU Commission published a draft implementing regulation (link) for the Euro 7 standard, proposing increased scrutiny and documentation requirements for emission strategies and stricter testing in general.  In line with this, on 24 April 2025, the EU Commission also proposed a “roadworthiness package” that would introduce EU-wide mandatory emissions testing at periodic technical inspections using advanced methods for ultrafine particles and NOx and require annual inspections for vehicles older than 10 years (press release, link, QA).
• New requirements for the whole supply chain under the EU Battery Regulation will start to apply in 2025.  Batteries must be recycled to specific targets (65% for lithium batteries) and new waste management obligations are introduced.  With regard to the due diligence obligations for social and environmental supply chain risks, which were also originally set to apply in August 2025, the EU Commission on 21 May 2025 has proposed a postponement until August 2027 (link).
• The REACH revision may ban entire chemical groups, affecting PFAS use (link).
• The EU Data Act (application as of 12 September 2025) mandates data sharing for connected vehicles, balancing user consent, transparency, and competition.  This goes hand in hand with other information claims under EU type-approval regulations coming from independent operators, which are currently also increasingly occupying us in and outside of the courts, such as access to OBD information and RMI, for which there will also be legislative changes.

Meanwhile, emissions compliance of vehicles on the road remains a challenge.

• Advocate General Rantos stated in a recent opinion that a Euro 5 diesel vehicle did not comply with EU emission limits when it exceeded limit values in “normal use”, namely in real driving conditions as they are usually present in the EU.
• So far, the industry, German authorities (e.g., the Federal Motor Transport Authority (KBA) and the German Federal Ministry of Transport) as well as even the EU Commission assumed that emission limits must only be complied with within the set boundaries of the standardized test cycles.
• The European Court of Justice will not decide on this question now since the underlying German proceedings have been withdrawn.  Although the opinion of Advocate General Rantos has no legal effect, it remains to be seen whether authorities and courts will use it as a guideline for interpretation.

Recently, the Italian Competition Authority (AGCM) has launched investigations into potential unfair commercial practices by several OEMs concerning alleged misleading consumer information in relation to EVs and their batteries (Link). The key allegations are:

• EV driving range: Generic and sometimes contradictory information on advertised range, without sufficient clarification on key factors affecting actual performance.
• Battery capacity degradation: Lack of clear and complete information on how normal use impacts battery capacity over time.
• Standard battery warranty: Insufficient details on the terms and limitations on the standard battery warranty.

This development reflects the current increased scrutiny on these issues, which aligns with a broader trend towards stricter enforcement:

• Last year, we handled one of the first cases in front of a German court involving an OEM, where the claimant/purchaser alleged that the OEM’s EV was defective because its real-world driving performance in terms of battery capacity, range and consumption allegedly did not match the OEM’s specifications.  We successfully obtained a dismissal of the lawsuit by the claimant.
• There are increasing reports that other OEMs are also facing similar lawsuits and investigations.
• We expect that such investigations may take a variety of paths and extend beyond competition/consumer protection law or warranty aspects, potentially bringing regulatory or even criminal law implications into focus.