European Automotive Leadership: Renault’s Vision for a Competitive, Green Future
The chief executive of Renault, Luca de Meo, circulated a letter to Europe’s top decision-makers this week. In it he assesses the current state of the automotive industry and outlines the near-term challenges, offering a roadmap to restore competitiveness against American and Asian markets, with particular focus on China.
De Meo clarifies that his aim is not to wade into politics during the run-up to European elections, but to contribute to the debate on the policy direction that best supports industrial renewal. The document calls for European mobilization to succeed in the energy transition of the automotive sector and to use this period of change as a launchpad for European industrial renewal.
The Sector’s Current State
De Meo notes that the automotive industry employs about 13 million people in Europe, accounting for roughly 7% of employment and contributing around 8% of European GDP. The sector also generates a trade surplus of about 102 billion euros based on 2023 data, and, according to European industry associations, supports approximately 392 billion euros in annual government revenue, roughly 20% of total tax income.
He emphasizes the sector’s role as an innovation engine, noting that it accounted for around 17% of total European investment in research and development last year, about 59 billion euros. He warns that without a strong manufacturing base, the share of GDP devoted to R&D could fall below 2%, widening the gap with the United States, which stands at about 3.4%.
However, the European automotive landscape remains fragile. Electrification has progressed slowly, and markets are shifting toward Asia. De Meo points out that about 51.6% of new passenger cars are sold within Europe, while the region trails behind the Americas in growth, with 23.7% versus 19.5% currently. In China, which has benefited from government support for the sector and favorable conditions for deploying electric vehicles, 2022 registrations reached 8.5 million electric vehicles, representing 60% of global EV growth. Chinese brands—BYD, MG, CATL and others—now hold a 4% market share in Europe as of 2022.
All this coincides with an industry evolution toward batteries, software, and new mobility services—areas where China also leads, presenting a potential market opportunity valued up to 200 billion euros.
Key Challenges Facing the Automotive Sector
De Meo laments that while China has pursued a proactive, investment-heavy industrial strategy since 2012, fostering competitiveness and collaboration with local brands, the United States has leaned into incentives like the Inflation Reduction Act to attract investment in electric transport. Europe, by contrast, has accumulated a dense web of regulations that often constrains companies and forces rapid adaptation. This regulatory environment, he argues, creates a disadvantageous setup for European carmakers.
He also warns that Europe faces a delicate balance: protecting its market while depending on China and Taiwan for critical raw materials. In addition, Europe lags in technological and software leadership, a gap that needs closing to stay competitive.
The report identifies several major hurdles: decarbonization, digital transformation, overregulation, rapid tech change, price volatility, and workforce development. He notes that while 500,000 combustion-engine jobs may be affected, 800,000 new roles will be created to meet the demand for battery production, software expertise, and electric infrastructure—a shift requiring extensive retraining and new skill sets.
The Path Forward
To move forward, De Meo argues for a European industrial strategy crafted with input from a broad spectrum of stakeholders—including policymakers, scientists, manufacturers, associations, suppliers, unions, and NGOs. The next step should minimize a flood of rules that restrict activity and push investment to other markets. A horizontal approach should be adopted that considers not just electric vehicles but the entire ecosystem, including renewable energy and related industries.
Simultaneously, he stresses the importance of re-establishing secure supply chains for raw materials and electronics to reduce dependence on Asian markets. He advocates a defensive posture against both Chinese and American advances, followed by a broader push to win markets worldwide. He also calls for revisiting the Green Deal’s implementation conditions rather than opposing it outright.
To achieve these aims, he proposes several concrete measures: embracing a neutral stance on technology and science, engaging Europe’s 200 largest cities in the decarbonization strategy, creating incentives for industries that participate in the transition while penalizing those that do not, and establishing green economic zones. He also recommends lowering energy costs for industry, accelerating the rollout of zero-emission vehicles, and involving citizens in the energy transition by improving access to sustainable mobility.
In addition, De Meo supports launching a new class of small, affordable, electric urban vehicles, modeled after popular compact cars from Japan, to lower the entry cost of electric mobility. He suggests incentives and discounts to accelerate adoption and to advance last-mile delivery through electrified projects. Upgrading the vehicle fleet should be accelerated with a European Marshall Plan for rapid renewal, dramatically reducing CO2 emissions, and building robust charging infrastructure powered by low-emission energy. Other initiatives include achieving raw material sovereignty, standardizing software technologies, unifying battery recycling, and tapping hydrogen potential.
Ultimately, he concedes that these proposals are ambitious but practical, underscoring that Europe’s automotive industry can be part of the solution to the continent’s challenges. He concludes by stressing that the region’s prosperity is at stake.