Executive Summary

The European Union’s ambitious climate goals hinge on a rapid transition to electric vehicles (EVs). However, the EU’s current approach is riddled with contradictions that undermine its own objectives. While Brussels mandates the phase-out of internal combustion engine (ICE) vehicles by 2035, it simultaneously imposes tariffs on affordable Chinese EVs and allows automakers to prioritize high-margin vehicles over accessible models. This misalignment creates a dangerous disconnect between climate ambitions and economic realities, fueling political instability and resistance to green policies. Key findings include:

• EU tariffs on Chinese EVs exacerbate affordability challenges for low- and middle-income households.
• Automaker profit strategies prioritize luxury vehicles, leaving a vacuum in the affordable segment.
• The Norwegian model demonstrates that aggressive incentives can make EVs accessible to all income levels.
• Current policies risk alienating citizens, turning climate action into a catalyst for populist backlash.

Policy Contradictions: A Self-Defeating Strategy

At the heart of the EU’s EV adoption crisis lies a fundamental contradiction: while demanding rapid decarbonization, the bloc actively makes affordable EV options less accessible. One of the most glaring examples of this misalignment is the imposition of tariffs on Chinese EVs—a move ostensibly aimed at protecting domestic industries but one that has significant unintended consequences.

Understanding the Tariffs

In 2023, the EU imposed tariffs ranging from 17% to 35% on Chinese EV imports, citing concerns about unfair subsidies and market dumping. These tariffs were framed as necessary to safeguard European automakers and ensure fair competition. However, the reality is far more complex.

Chinese EV manufacturers like BYD, NIO, and Xpeng have been producing affordable models priced between €20,000 and €30,000—well below the average cost of European-made EVs. For millions of Europeans earning median incomes of €25,000–€35,000 annually, these vehicles represented a viable pathway to electrification. By imposing tariffs, the EU effectively raised prices on these once-accessible models, pushing them out of reach for many consumers.

What This Means in the Scheme of Things

The tariffs shows a broader issue: the EU’s policies often appear designed to protect entrenched industry interests rather than accelerate EV adoption. Consider the following:

• Automaker Profits Over Accessibility: Between 2019 and 2022, European automakers increased their profits per vehicle from €1,920 to €8,940—a staggering rise driven largely by the sale of high-margin SUVs and luxury EVs. Affordable models like the Fiat Punto and Ford Fiesta were discontinued during this period, leaving a void in the budget-friendly segment.
• Affordability Gap Widens: With Chinese EVs now subject to steep tariffs, the already limited pool of affordable options shrinks further. Meanwhile, European manufacturers show little incentive to develop sub-€30,000 EVs when higher-priced models generate greater revenue.
• Missed Opportunity for Mass Adoption: Instead of leveraging global supply chains to bring down costs, the EU risks isolating itself from innovative solutions emerging elsewhere. China’s dominance in battery production and EV manufacturing can be an asset in driving down prices; instead, these measures create artificial barriers.

The result? A policy framework that demands rapid EV adoption while actively making it unaffordable for the majority of Europeans.

Learning from Success: The Norwegian Model

Norway offers a stark contrast to the EU’s approach—and a roadmap for success. In 2023, EVs accounted for 80% of new car sales in Norway, thanks to aggressive incentives that prioritize accessibility over industry profits. Key elements of Norway’s strategy include:

• Tax Exemptions: EVs are exempt from VAT (25%) and import taxes, reducing upfront costs significantly.
• Charging Infrastructure: Norway boasts over 20,000 public charging points for a population of just 5.4 million, ensuring convenience for drivers.
• Non-Monetary Perks: EV owners enjoy benefits like free tolls, reduced ferry fares, and access to bus lanes, enhancing the overall value proposition.

These policies have made EVs not only affordable but also practical and appealing to all income levels. They demonstrate that widespread adoption is possible when governments align incentives with real-world economic realities.

EU Tariffs on Chinese EVs: A Barrier to Affordable Electrification

The McKinsey report highlights that 27% of prospective EV buyers in Europe are considering Chinese EV brands, despite their relatively low brand recognition. These consumers expect Chinese EVs to be priced at least 15% lower than equivalent domestic models, reflecting a clear demand for more affordable options.

However, the EU’s decision to impose tariffs on Chinese EVs to protect domestic automakers—risks stifling this demand by raising prices and reducing accessibility. This measure not only exacerbates the affordability gap but also undermines the broader goal of accelerating EV adoption.

Prioritizing Industry Over Consumers

By prioritizing industry profits over consumer needs, the EU risks alienating millions of potential EV buyers who are already deterred by high upfront costs. Well meaning policies, aimed at safeguarding local industries can ultimately harm the affordability and slow the transition to sustainable mobility.

Key Takeaways:

• Demand for Affordable Options: A significant portion of European consumers are looking to Chinese EV brands for more cost-effective solutions.
• Impact of Tariffs: Imposing tariffs raises the price of Chinese EVs, making them less competitive and accessible.
• Broader Implications: These measures risk undermining the EU’s climate goals by slowing EV adoption among budget-conscious buyers.

The Political Risk: When Climate Policy Alienates Citizens

The EU’s misaligned policies are creating fertile ground for political extremism. By mandating expensive transitions while failing to provide affordable alternatives, Brussels risks alienating the very citizens it seeks to mobilize. Here’s how this dynamic could play out:

• Populist Narratives Gain Traction: Far-right parties across Europe increasingly frame climate policies as elitist impositions that burden working people. For example, France’s National Rally and Italy’s Brothers of Italy have both used opposition to green measures as a rallying cry.
• Economic Anxiety Fuels Resistance: Polling shows a growing correlation between financial insecurity and skepticism toward climate initiatives. Working-class voters—who feel disproportionately affected by rising energy costs and inaccessible EVs—are particularly vulnerable to anti-climate rhetoric.
• Trust Erodes: When citizens perceive climate action as benefiting corporations and elites rather than ordinary people, trust in democratic institutions erodes. This opens the door to extremist alternatives that promise simple solutions to complex problems.

The stakes extend beyond climate goals—they encompass the very stability of European democracies. If the green transition becomes synonymous with economic hardship, it risks triggering precisely the political instability it aims to prevent.

Region-Specific Solutions

Addressing the affordability gap requires tailored approaches based on regional economic realities:

Western Europe (Median Income €25,000–€35,000)

• Focus on mid-range EVs through targeted incentives like tax breaks and subsidies.
• Develop a robust used EV market to lower entry costs.
• Expand charging infrastructure in multi-unit dwellings.

Southern Europe (Median Income €18,000–€25,000)

• Prioritize smaller, affordable EVs suited to urban environments.
• Enhance public charging networks to reduce reliance on home charging.
• Create programs supporting commercial vehicle electrification.

Eastern Europe (Median Income €10,000–€15,000)

• Allow tariff-free imports of affordable EVs to increase options.
• Invest in urban charging infrastructure to address density challenges.
• Develop innovative financing models, such as leasing or shared ownership schemes.

Policy Reset: Aligning Climate Goals with Economic Reality

To succeed, the EU needs a comprehensive policy reset that bridges the gap between ambition and accessibility:

• Prioritize Affordability:

  • Remove barriers to affordable EVs, regardless of origin.
  • Create targeted incentives for lower- and middle-income buyers.
  • Support development of sub-€25,000 EVs through grants or partnerships.

• Balance Industry and Consumer Needs:

  • Tie manufacturer support to affordable model development.
  • Provide incentives for European production of budget-friendly EVs.
  • Encourage collaboration with global players to drive down costs.

• Build Infrastructure for All:

  • Focus on apartment and multi-unit dwelling charging solutions.
  • Ensure rural areas aren’t left behind in the transition.
  • Promote workplace charging programs to expand access.

The EU stands at a crossroads. Its current approach to EV adoption risks not only failing to meet climate goals but also fueling political instability. By mandating changes while making them unaffordable for most citizens, the EU could create fertile ground for populist opposition to climate action.

Success requires aligning climate ambitions with economic realities. Norway’s example shows that rapid EV adoption is possible when policies prioritize accessibility over industry protection. The EU must choose: continue its current path and risk both climate goals and political stability, or reset its approach to ensure the green transition works for all Europeans.

The stakes couldn’t be higher. If climate policy becomes perceived as an elite project that ignores economic realities, it risks triggering precisely the political instability that could derail not just EV adoption, but the entire project of European cooperation on climate change.