INFORMAL COMPET 8-9 July

Background paper on supporting the European electric vehicle (EV) market

1

Disclaimer: We aim to reach a decision on a pressing issue and are committed to engaging in

thorough negotiations. Our objective is to prevent any potential problems and

misunderstandings by approaching this process with humility and respect. To ensure our

negotiations are effective and inclusive, we are guided by the principles outlined in the Antwerp

Declaration, which emphasizes the importance of constructive dialogue with market

stakeholders. By adhering to these principles, we hope to foster a collaborative environment

that supports a fair and well-informed decision-making.

I. The current state of European electric vehicles (EV) market

Could you provide an overview of the current state of the European electric vehicle (EV)

market? Additionally, what are your projections for the future of the vehicle market?

The European Union has made a significant commitment to achieve carbon neutrality through

green transition, by taking part in the Paris Agreement since 2016 and contributing to the

climate goals to enhance green investments and transformation. Decarbonisation is a need for

all of us living in Europe, and there is no question, that if we do not change, the future of our

planet is at stake. To achieve carbon-neutrality, the EU pledged to significantly reduce emission

from cars and vans, which are responsible of the 15% of the total CO2 emissions in the EU1.

The automotive sector is experiencing one of the most profound changes in its history. Vehicle

production is currently undergoing a major transformation, driven by the imperative to reduce

carbon emissions and mitigate climate change. In 2022, transportation was responsible for 24%

of the total European Union's carbon dioxide emissions, with 71.2% originating from road

transport. Of this share, cars accounted for 59.2%, heavy-duty vehicles for 27.5%, and light

commercial vehicles for 12.1%. Over the past decade, the automotive industry has projected

the ascent of electric vehicles (EVs), identifying them as pivotal to achieving targeted

reductions in carbon dioxide emissions.2

The automotive industry is the engine of growth in Europe, contributing 7% of EU GDP and a

healthy trade balance of more than 100 billion EUR, and brings in well over 390 billion EUR

in government revenue, while employs directly and indirectly 13 million people. The EU is the

2nd largest automotive manufacturer in the world, and the automotive industry is the largest

private investor in research and development3.

In 2023, electric vehicles accounted for 14.6% of all car sales in Europe4, with fully battery

electric vehicles making up a significant portion of that market. However, the early figures for

2024 show a slight decline, with the share of new electric vehicle registrations dropping to

1 https://climate.ec.europa.eu/eu-action/transport/road-transport-reducing-co2-emissions-vehicles_en

In case of light duty vehicles. ca. 12% of emissions coming from road transport specifically, and the remaining

ca. 3% from non-transport sectors. 2 Source: https://www.transportpolicy.net/standard/eu-vehicle-definitions/, https://www.aecc.eu/passenger-cars-

light-commercial-vehicles/ 3 Source: ACEA European Automobile Manufacturers’ Association 4 Source: European Alternative Fuels Observatory

2

around 12%. Despite this, there was an overall 3.8% increase in the EV market in the first

quarter of 2024 compared to 2023, with significant growth in some European markets such as

Belgium and France, while Germany experienced a decrease. The market share of new zero-

emission trucks (>3.5t) is beginning to grow as well, from 0.8% (2022) to 1.5% (2023) and

2.0% (Q1 2024). More than 15.5% (2023) of all newly registered buses are zero-emission,

primarily battery-electric in the urban bus segment. However, this shift may be attributed to

changes in support schemes in certain Member States and delays in the introduction of new

models in the medium and small car segments. Additionally, the share of battery electric

vehicles saw a moderate increase of 2.5% in 2023, compared to larger increases in previous

years. Overall, electric vehicles, including both battery electric and plug-in hybrid vehicles,

held a market share of 22.3% in 2023, with the rise predominantly driven by increased sales of

plug-in hybrids.

Meanwhile, capacity expansion and technological development investments have been

advancing at a faster pace than actual demand, but due to deteriorating expectations,

adjustments can be already seen.

As the 2035 deadline for a complete transition approach in the European Union, mounting

concerns are evident. The withdrawal of the German electric vehicle (EV) subsidy scheme has

led to a significant decline in the growth rate of demand, underscoring the risks associated with

the green transition. Notably, since 2020, the growth rate of sales in Germany has steadily

declined, plummeting to 30.5% in 2022 and further to 10.6% in 2023. All of this points to

serious challenges in the European automotive industry and the achievement of environmental

goals. These trends clearly indicate that the green transition will not be smooth and may have

significant feedback effects on the automotive industry and the EU's green objectives.

It is without question that electric vehicles will play a dominant role in clean mobility, but

accelerated efforts are needed to make the green transition smoother. De-escalation of above

concerns and achieving smooth green transition should be the biggest priority of the European

community, which requires joint efforts. One of the major bottlenecks of EV demand, following

consultations with the industry, is the lack of sufficient charging infrastructure, which is

hindered by in many cases stable electricity network. There is a well-identifiable market friction

here, as without proper infrastructure, widespread usage of EVs will be in peril, while more

cars are need to make a larger infrastructure economical. To tackle the problem, we suggest an

EU-wide subsidy programme for charging infrastructure for all vehicle segments coupled with

stricter regulation on public charger deployment, to achieve a more comprehensive spread. In

addition, accelerating permitting procedures, enabling flexibility regarding new network codes,

standards and dynamic tariffs, as well as ensuring Distribution System Operators (DSO) make

anticipatory investments through a cooperation with Member States on capacity planning

(based on the charging infrastructure deployment plans under AFIR) would further assist the

infrastructural development.

The other major issue is to support competitiveness of European vehicle manufacturers. The

EU should further support R&D and innovation processes in carbon-neutral transport and

mobility, significantly simplify state aid rules in the value chain of such vehicle production,

while working together with the industry to ease meaningfully regulatory burden. Nevertheless,

3

given the global competition situation, we think that EU-level subsidy is needed on the demand

side as well that values short supply chains, bearing in mind that criteria must be similar across

Europe to ensure Original Equipment Manufacturers (OEM) can navigate the incentives

schemes easily.

Our following proposals focus on the most critical aspects of the EV market that need to be

addressed at the internal market level. They do not cover support measures at the individual

member state level, issues such as taxation require handling within the jurisdiction of each

member state.

4

II. Public and household charging - Developing the electric vehicle

infrastructure

Infrastructure is crucial because it provides the foundational systems and services necessary

for the efficient functioning of the EV ecosystem. What is your opinion on the importance of the

current state of charging infrastructure, how could it be improved? How can the decision-

makers of the EU make a more effort to promote green transition?

Proposal 1: Tightening AFIR regulation with mandatory EV charging infrastructure for light-

duty vehicles every 50km (by 2027) with at least 4 charging points, at least 150 kw each, but

preferably 300 kW, where the total power output for BEVs is at least 3 kW, for PHEVs is at

least 1,5 kW. The capacity of each recharging pool should be increased to 900 kW. The subject

matter scope of the regulation could be extended with the mandatory installation of charging

points outside the trans-European transport TEN-T network.

Proposal 2: EU level operators of 80% of all service stations to provide fast-charging options

with at least 150 kW, but preferably 300 kW for e-cars. Charging possibilities should be

introduced in publicly attractive areas as well.

Proposal 3: Establish a dedicated EU subsidy programme EUR 15-15 billion up to 2035

altogether for public charging for all vehicle segments, including trucks, buses and coaches,

and grid development, while further subsidy for household charging stations EUR 900-1500 or

60% of costs per stations with the total budget of EUR 20 billion. The programme should be in

line with the Commissions Electricity Grid Action Plan5.

Proposal 4: To help the electricity grid to faster develop, permitting procedures should be

simplified and enable flexibility. This proposal should be primarily focusing on the

administrative assistance of the sector.

The past three years have shown a notable increase in the EU's charging infrastructure. The

number of AC chargers has tripled (in mid-2024 to 610,000) and the number of DC-chargers

quadrupled (to 97,000 charging points). However, this growth may be insufficient. The Member

States are currently on track to meet the goals outlined in the Smart and Sustainable Mobility

Strategy from 2021. While the objective of having 1 million charging points by 2025 seems

achievable, the target of 3 million charging points by 2030 is overly ambitious. At the current

pace of deployment, it's unlikely that the criteria will be met until 2035. According to ACEA,

the EU needs around 8 million EV charging points by 2035 to adequately meet the demand for

electric vehicles and to have the desired impact on increasing demand. However, the

concentration of deployment in only a few Member States continues to present a significant

challenge.

Meaningful disparities exist among EU member states regarding publicly available charging

stations. To foster the demand for EVs, a capacity ratio of 7-8 EV/charging station should be

set as goal in the expansion period, while finally targeting 10 EV/station in order to maximize

the benefits of the infrastructure. EV charging should be available where there is a considerably

5 Commission sets out actions to accelerate the roll-out of electricity grids:

https://ec.europa.eu/commission/presscorner/detail/en/ip_23_6044

5

high number of cars parked (i.e., malls, P+R car parks), at petrol stations alongside motorways,

as well as also on the streets of smaller and bigger cities.

Despite early signs of infrastructure rollout dedicated to heavy-duty vehicles, the availability of

publicly accessible high-performance chargers with charging speeds high enough to serve the

electrification of heavy-duty vehicles remains one of the key bottlenecks in the decarbonisation

of commercial road freight and passenger transport.

A notable point is, that public charging stations must be available to charge all types of vehicles,

which is why we suggest tightening the AFIR. AFIR sets out uniform charging station

deployment obligations for all EU Member States along the TEN-T network to deploy e-

mobility infrastructure for light and heavy electric vehicles. The Regulation should be tightened

to incentivise the public charger infrastructure by setting more ambitious instalment targets,

standardising the charging cables and mobile apps for charging.

The tightening could be applied to regulation which stipulates that fast-recharging stations of

at least 150kW for cars and vans need to be installed every 60 km along the EU’s main transport

corridors, the trans-European transport (TEN-T) network. In the new regulation every 60 km

regulation could be modified to every 50km (by 2027) with at least 4 charging points which

individually can provide at least 150 kW charging capacity, but preferably 300 kW for future

needs and even faster charging. The power output provided through publicly accessible

charging stations should be elevated to at least 3 kW for BEVs and to at least 1,5 kW for PHEVs.

To ensure that each recharging pool offers adequate amount of power output and serves the

needs of the future, the power output should offer at least 900 kW of energy, with the mentioned

4 individual charging outputs per pool.

The subject matter scope of the regulation could be extended with the mandatory installation of

charging points outside the TEN-T network, including main roads, urban public areas, bus and

truck depots, shopping malls and hotels, campuses.

Besides we suggest a law which will force gas stations to install EV charging stations. For

example, a similar law to the Germans announcement from last year - which required operators

of 80% of all service stations to provide fast-charging options with at least 150 kW, but

preferably 300 kW for e-cars – would be appropriate to provide people suitable places for

charging their cars (usual places with adequate infrastructure). To ensure convenient charging

possibilities, publicly attractive areas (i.e. smaller and bigger shopping facilities) should be

equipped with fast-charging pools as well, with the adequate charging capacity.

In parallel with tightened regulation, an EU-level subsidy program for public infrastructures is

suggested until 2035, with funds allocated on a country level based on density. The budget

would include €15 billion for chargers, maintaining technological neutrality to support

alternative fuel stations, and an additional €15 billion for strengthening and developing the grid.

Many potential electric car owners can optimize their expenditures by charging at home, which

is a major advantage of electric vehicles. However, this convenience comes with significant

initial extra costs compared to traditional cars. Therefore, a subsidy scheme of €900-1500 for

home chargers is recommended to boost demand for BEVs, with a total budget of €20 billion.

The scheme includes private charging subsidies of €900 per normal charger and €1500-2000

6

for bi-directional chargers. Since private charging costs vary greatly, the subsidy can be

adjusted with a limit set at 60% of total installation costs. To address the specific needs of

heavy-duty vehicles (HDVs), a dedicated scheme to accelerate depot charging and dedicated

public charging infrastructures could be introduced. Similar to the infrastructure development

plans for passenger vehicles, HDVs should also have dedicated charging stations. However, to

facilitate transport for HDVs, these charging stations should be strategically located near

motorways and trunk roads.

Regarding the administrative easing, it should be highlighted, that simplification of permitting

procedures in Member States as well as ensuring the flexibility of the grid (charging with local

photovoltaic production and local Battery Energy Storage Systems) would further play a

decisive role in developing the infrastructural system.

Financial resources to promote both public and household charging can be found through the

Connecting Europe Facility (CEF) and the Recovery and Resilience Facility (RRF). The CEF

provides EU budget support for transport, energy and digital infrastructure development

projects between EU Member States, while the RRF is a temporary instrument that is the

centrepiece of NextGenerationEU - the EU's plan to emerge stronger and more resilient from

the current crisis.

It is crucial from an environmental standpoint that the European Union strictly adheres to the

2035 target date for phasing out the sale of petrol and diesel cars and the 2050 target date for

achieving carbon neutrality. The establishment of charging infrastructure will be vital in

reaching these goals.

7

III. Production – Supporting competitiveness of European automotive

industry

How can the competitiveness of the European automotive industry be improved? What

measurements should be implied?

Proposal 5: Easing of rules regarding state aid in case of R&D and their industrial

implementation and production of carbon neutral vehicles and its supply chain, including

initiatives of 100% state aid involvement and the significant reduction of administration

processes of state aid.

The competitiveness of the European vehicle industry is at stake. The previously globally

dominant automotive industry of the EU is being pushed back by the other countries gaining

ground. The industry is under pressure to keep up with the global market in battery electric

vehicle (BEV) technology and production, requiring heavy investments in research and

development. It is therefore crucial to preserve and enhance the competitiveness of our industry

on the global scale. It also means, that – in line with the climate goals – the demand for the EVs

has to be strengthen, thus increase their production. In addition, component dependency is a

strategic vulnerability for the automotive industry. Sourcing of semiconductors, printed circuit

boards, and other electronics components remains an increasing vulnerability, especially for

EVs who have a significant dependency on electronics to function. Hence the supply chain for

the whole electric vehicle industry should be handled with special attention, mining of raw

materials and battery production is therefore utmost important. Nevertheless, the importance of

recycling and reusing the batteries and other components of the used EVs, or the ability to repair

them has to be also emphasised. To enhance the competitiveness of the industry, the

manufacturing and recycling processes necessitate improvements.

Given the scale of the transformation challenges, The EU should support research and

development in carbon neutral mobility and significantly simplify state aid rules, minimize

administrative burdens. A common European solution is necessary to support the sector in its

transition, based on tax reductions. This includes reforming the EU internal market subsidy

scheme for better industry output and employment.

The industry has already invested over EUR 200 billion in the process to make green transition

a reality by 2035. The damages of stepping backwards now would be estimated much higher,

if the smooth transition towards e-mobility cannot be ensured, and the future transition of the

market cannot be performed effectively.

The electric vehicle industry holds immense potential due to its environmental benefits

compared to internal combustion engine vehicles. However, challenges remain, particularly

regarding range and charging times. To unlock the full potential of EVs and enhance mass

expansion, significant R&D efforts are crucial on the fields of increasing battery capacity to

achieve 1000 km range on a single charge would significantly improve user experience and

eliminate "range anxiety." More importantly, developing faster charging technologies that are

close to the refuelling time of gasoline vehicles is essential for convenient long-distance travel.

Research on efficient and standardized battery swapping systems, which could be a practical

alternative to fast charging for certain applications should be considered as optional R&D

8

trajectory. In addition, it is worth creating new R&D projects or strengthening existing ones as

well (i.e., hydrogen fuelled vehicles, hood/roof-mounted solar panels, solar windscreen, etc.).

In addition to electric cars, we suggest to extend the support for other carbon neutral

technologies, although we believe that electric cars will be the dominant technology, it is

important to support other competing technologies and maintain technology neutrality.

The above-mentioned R&D activities and entrepreneurial incentives could be financed by the

Important Projects of Common European Interest (IPCEI). This special instrument is designed

for national funding of projects of European public interest in line with EU State aid rules. These

projects allow to use the project’s funding gap as the basis of State aid instead of the eligible

investment costs: they can receive up to 100% aid to bridge the funding gap. The support would

be extended to production developments of R&D results in the automotive industry, including

the supply chain, particularly battery industry. In addition, we suggest to consider whether State

aid rules are still fit for the purpose of ensuring smooth and timely green transition.

9

IV. Subsidies for EU citizens – Making carbon neutral vehicles available

to customers

Currently, the cost of an EV is significantly higher, than a vehicle with an internal combustion

engine. What other incentives would you suggest to promote these cars the public? How would

you depress the prices, to make them more affordable to the European citizens?

Proposal 6: A 4,500 EUR subsidy should be introduced to European citizens in case of purchase

of battery electric vehicles to enhance the demand. This EU-funded one-off subsidy can be

funded from the income of CO2 premium of automotive industry and from 2028 to 2034, in the

new budget cycle, EUR 50 billion from MFF.

Proposal 7: The purchase and leasing of used EVs should be promoted by launching specific

subsidies on the secondary user market.

Proposal 8: A European fleet renewal scheme dedicated to commercial road transport fleets

should be introduced to accelerate the transition of transport operators to zero-emission

medium- and heavy-duty trucks, buses and coaches.

Studies and statistics indicate that reducing the total cost of ownership can significantly boost

demand in both developed and developing countries. If electric vehicle prices are competitive

with internal combustion engine (ICE) vehicles, consumers are more likely to choose EVs.

Previous research shows that consumers are generally satisfied if they can buy an EV for the

same price as an ICE vehicle or even up to 20% more. European examples confirm this: the

demand for battery electric vehicles increases when public incentives like purchase subsidies,

tax reductions, and toll exemptions are provided, making the total cost of ownership

significantly lower.

The support for competitive vehicle industry coupled with the support of charging infrastructure

might be not sufficient for a smooth green transition as the long term benefits of buying an EV is

hard to measure by customers. Therefore, we suggest EUR 4,500 subsidy for the purchase of both

new and used battery electric vehicles (BEVs) by consumers, funded from the common EU budget,

with applications managed by Member States. We suggest that countries participate in the scheme

in proportion to their population size. It is important to promote purchases of electric cars in line

with international trade rules. In addition, we suggest to consider supporting used vehicles as well

in case of insurance and recycling of batteries. To make used EVs attractive to the public, the

purchase and leasing of used EVs should be promoted by launching specified subsidies as in

the recently announced Polish scheme or in the closed German program – although in the

German case with strict limits. The Polish scheme supports the purchase of used EVs up to 4

years old with a purchase price cap. Promoting used EV-s would also increase the demand for

new EVs considering the potential for future sales.

With the focus on primary and secondary user markets, the residual values of BEVs can be

stabilised. To further support the uptake of EVs, temporary toll exemptions could be introduced all

across the EU, which would be phased out gradually during the transition period until 2035.

The source of funding for the programme to support the final consumers could be the revenue

of the taxes that impose a burden on additional CO2 emissions (amended Regulation no.

10

2019/6316). The regulation sets target for emissions and if the average CO2 emissions of a

manufacturer's fleet exceed the specific emissions target each year, the manufacturer will have

to pay an additional emissions premium of EUR 95 per g/km for new vehicles registered in that

year that exceed the target. This would be the primary source labelled for the subsidy scheme.

Furthermore, we suggest in the next budget cycle from 2028 to 2034 in the MFF altogether

EUR 50 billion dedicated for the demand subsidy scheme. As far as possible, to maximise

impacts, it should be implemented from 2025 onwards.

6 This amendment confirmed the emission targets applicable from 2030 and set a 100% emission reduction target

for both cars and vans from 2035. EU CO2 emission targets for 2020-2024 are 95g CO2/km for cars and 147g

CO2/km for vans, falling to 93.6g CO2/km and 49.5g CO2/km respectively between 2025 and 2034.

11

V. Repair, replace, recycle and reuse – Thinking green & circular economy

What ecological and environment friendly measures would you apply to electric vehicles? How

can you ensure costumers that the used electric vehicle they bought still has a good functioning

battery pack?

Proposal 9: It is suggested to promote technology neutral procedures for the replacement of

batteries or parts of it, thereby supporting the longevity of used vehicles.

Proposal 10: The introduction of a mandatory recycling method for used batteries and a new

reliability certificate issued by state-supervised certification agencies is suggested for used

batteries.

Currently, two issues arise regarding the purchase of used EVs among consumers. On the one

hand, the older EVs have lower battery capacity than the new ones so the older EVs allow only

a shorter range (150-200 km). On the other hand, the used EVs’ batteries are no longer able to

run with full capacity that also shortens the distance range. Although the new Euro 7

requirements from 2027 necessitate lower battery degradation, there should also be solutions

for the replacement or reuse of old battery packages up to 2027. This should be in line with the

EUs reduce, reuse and recycle policy7, hand in hand with the Right to repair8.

A targeted solution to the battery problem could be to subsidise the replacement of battery

modules up to a maximum of 3,000 Euro (instead of replacing the whole battery pack) or

simplifying such process by establishing battery swapping stations. High-performance EVs use

highly integrated batteries, and there may be difficulties with the replacement of single

modules, since the new ones can interfere with the car, therefore reducing the vehicle’s overall

performance and safety. Also, future batteries will not use a module strategy to increase energy

density and reduce costs. The solution might be, that in case individual cells are degrading too

fast these cells are made passive and substituted by activation of reserve cells. This procedure

is from a technical and economical point of view the most feasible approach.

Batteries contain several heavy metals and toxic chemicals and disposing of them by the same

process as regular household waste has raised concerns over soil contamination and water pollution.

The new Battery Regulation (EU 2023/1542) mandates that the sourcing and manufacturing of

products marketed and sold in the Union must be conducted in a sustainable manner. Manufacturers

of portable batteries (or designated producer responsibility organizations) are responsible for

collecting all waste portable batteries. This includes establishing a take-back and collection system

with collection points, transporting the waste batteries to a waste management facility, and ensuring

that they are handled in compliance with the regulations. In line with the current legislation, we

suggest the introduction of a mandatory recycling method of used vehicle batteries, where 100% of

the battery should be recycled or reused. It is important to regulate the collection of used batteries:

end-of-life electric vehicles should be deregistered together with the battery so that the battery's

location can be tracked after deregistration.

7 On 24th April 2024, the European Parliament adopted new measures to make packaging more sustainable and

reduce packaging waste in the EU. The idea of reduce, reuse and recycle should be extended to areas like batteries. 8 The new rules reinforce the right to repair, aim to reduce waste and bolster the repair sector by making it easier

and more cost-effective to repair goods. European customers should have the right to fully repair their vehicles.

12

VI. Logistic – Improving the sustainability of the transportation in the

automotive industry

How would you ensure that the compartments of electric vehicles are distributed across the EU

in the most environment friendly way, inflicting the less pollution?

Proposal 11: Make transport more sustainable: in addition to prioritising rail transport, road

transport solutions should be made carbon neutral using the Multiannual Financial Framework

(MFF).

The transition to climate neutrality within the available timeframe demands decisive and

coherent action in all modes of transport. Sustained, massive investments must be made by

vehicle manufacturers, transport operators, providers of charging and refueling infrastructure,

and others. Upgrading and expanding existing infrastructures, including safe and secure truck

parking areas and combined transport terminals, is imperative. Placing limits on improving one

mode of transport to ensure relative competitive advantages of another mode will likely result

in Europe failing to meet its ambitious climate targets, particularly in the road transport sector.

All transport modes must innovate further and contribute to necessary CO2 reductions while

supporting the European economy. The expected growth of the European freight transport

market requires better intermodal transport solutions and more efficient use of existing

infrastructure capacities to meet the projected future demand.

The next Multiannual Financial Framework (MFF) should encompass provisions for clean

railway transportation alongside electric vehicle (EV) and battery production to effectively

address CO2 footprint goals. Integrating these elements into the framework is crucial for

achieving the objectives of the European Green Deal and significantly reducing carbon dioxide

emissions. While EVs and battery production are pivotal in this transition, the inclusion and

support of railway transportation within the supply chain is also essential.

Rail transportation offers a substantial advantage in emissions reduction, emitting 75% less

CO2 per tonne-kilometer compared to road freight transport. Despite this, its current share in

the EU freight transport landscape is only approximately 19%, with road transport dominating

at 75% and inland waterways at 6%.9 Therefore, integrating railway transportation into the MFF

is imperative to bolster sustainable transportation initiatives and effectively mitigate carbon

emissions.

This proposal is based on consultations with: ACEA, particular OEMs and key sector

representatives

9 Source: Association of American Railroads

Concept Paper

Informal Compet

July 8-9, 2024

Hungarian Presidency

Ministry for National Economy

Budapest

HU24EU

2

INTRODUCTION

The 2019-2024 institutional cycle will be completed under the Hungarian Presidency and the

new institutional period will begin, which is a major and complex task not only for the

Presidencies but also for the European Union as a whole. The primary objective of the

Hungarian Presidency is to facilitate a smooth institutional transition following the 2024

European Parliament elections, to ensure continuity of the Council’s work and to support the

smooth functioning of the Union through constructive cooperation and dialogue with Member

States and new institutional actors.

The increasing number of more complex challenges the EU is facing require a stable framework

to guide EU policies in the coming years for the period 2024-2029 and to start implementing

the priorities set out in the new Strategic Agenda. The European Union has been losing its

competitiveness in recent decades. This problem needs to be tackled not only in the short term,

but also in the long term. A strong emphasis should be placed on strengthening European

competitiveness by addressing this issue in a horizontal way.

The Hungarian Presidency aims to reach a new European Competitiveness Deal, for which a

good basis is the Antwerp Declaration for a European Industrial Deal and is to follow up on the

conclusions of the comprehensive report of Enrico Letta (“Much More Than a Market”), and

to draw conclusions on the forthcoming Mario Draghi report on the future of European

competitiveness.

HU24EU

3

Session 1: EV transition: How can we meet 2035 deadline?

Background:

The European Union has made a significant commitment to achieve carbon neutrality through

green transition by 2050. To achieve carbon-neutrality, the EU pledged to significantly reduce

emission from cars and vans, which are responsible of the 15% of the total CO2 emissions in

the EU1. From 2035 all new cars and vans registered in the EU are set to be zero emission. It

means a clear shift in investments and production towards electric vehicles as a dominant

technology.

The automotive industry is a key driver of economic growth in Europe, contributing 7% to the

EU's GDP and maintaining a healthy trade balance of over €100 billion. Moreover, it generates

more than €390 billion in government revenue and employs directly and indirectly 13 million

people. The EU is the 2nd largest automotive manufacturer in the world, and the automotive

industry is the largest private investor in research and development.2

According to the European Alternative Fuels Observatory 14.6% of all cars sold in Europe in

2023 were fully battery electric (BEV). The market share of BEVs increased by 2.5 percentage

points in 2023, which is less than the 3 and 3.6 percentage point increase observed in 2020 and

2021 respectively. However, early numbers for 2024 indicate that the share in new registration

has slightly gone down and was around 12% which is close to the registration numbers from

2022, reflecting changes in public support schemes in some Member States but also delays with

the market entry of new models in the medium and small cars market.3

As regards charging infrastructure, over the last three years, there has been a notable increase

in the number of AC and DC chargers in the EU, although with significant imbalances, since 3

Member States (DE, FR, NL) are accounting for 60% of charging points: the number of AC

chargers has tripled since the end of 2020, with over half a million points available at the end

of 2023. In the same timeframe, the number of DC chargers has quadrupled to almost 90,000.

Today (mid 2024) the numbers of increased to 610,000 AC and 97,000 DC recharging points.

Member States are roughly on track to meet the objectives stipulated in the Smart and

Sustainable Mobility Strategy from 2021, which is to have 1 million charging points by 2025,

although the target of 3 million charging points by 2030 is extremely ambitious, considering

todays pace of deployment, the criteria will not even be met until 2035. According to ACEA,

the right amount of EV charging points should be around 8 million across the EU in 2035, to

sufficiently cover the need and future demand of EVs and to have the expected demand

increasing effect. On the other hand, concentration of deployment in a handful of Member

States remains a challenge.

Context:

Against this background, the Presidency invites Member States and the European Commission

to discuss the status of the green transition of the automotive industry, particularly of electric

1 https://climate.ec.europa.eu/eu-action/transport/road-transport-reducing-co2-emissions-vehicles_en

In case of light duty vehicles. ca. 12% of emissions coming from road transport specifically, and the remaining

ca. 3% from non-transport sectors. 2 https://www.acea.auto/fact/facts-about-the-automobile-industry/ 3 https://alternative-fuels-observatory.ec.europa.eu/

HU24EU

4

vehicles market road to 2035. The automotive industry is currently experiencing one of the

largest transformations in its history. Over the past decade, we’ve seen a marked increase in the

production and demand of electric vehicles (EVs). However, there are concerning signs

emerging from the demand side, and there is an increasingly cautious sentiment over not

meeting previous expectations.

The pace of capacity expansion and technological development investments for EVs has been

faster than the actual demand for them. However, due to deteriorating expectations, adjustments

can already be seen. This situation is more pronounced in the European Union since the 2035

regulatory deadline is approaching, from which only zero-emission vehicles can be sold. The

withdrawal of the German EV subsidy scheme and the subsequent drop in demand have

demonstrated the risks that Europe faces. The green transition may not be smooth, which can

have severe consequences on the automotive industry and the green targets. Therefore,

diminishing of the above concerns and achieving a smooth green transition should be the EU's

most significant priority, requiring joint efforts.4

Challenges to be addressed:

Following consultations with the automotive industry, one of the main bottlenecks for EV

demand is the lack of sufficient charging infrastructure while operators point to relatively low

utilisation rates of existing recharging infrastructure. This problem is hindered by a lack of

transparency of capacities in the electricity network and long permitting procedures for grid

connections. Without proper infrastructure, widespread usage of EVs will be in peril. However,

more electric cars are needed to make a larger infrastructure economical.

According to available studies and statistics, the reduction of total cost of ownership has the

greatest potential to increase demand in developed and developing countries. This may be

because the operational and direct financial benefits are often difficult to fully understand and

calculate, unlike fixed public subsidies, which reduce the purchase price and thus make car

purchases nominally less expensive for consumers. If the price of EVs is competitive with

Internal Combustion Engine (ICE) vehicles, consumers are more likely to buy an EV. Earlier

studies have shown that most consumers would be satisfied with the pricing of an electric car

if they could buy it for the same price as a car with an ICE, or if they had to pay up to 20%

more for an electric model. This is also confirmed on empirical facts from European examples:

the demand for Battery Electric Vehicles (BEVs) increased when public support (i.e. purchase

subsidy, taxation easing, toll exemption) has been given to citizens, therefore they could realize

a significant reduction of total cost of ownership.

Furthermore, the competitiveness of the European vehicle industry is at stake. The previously

globally dominant automotive industry of the EU is being pushed back by the other countries

gaining ground. The industry is under pressure to keep up with the global market in battery

electric vehicle (BEV) technology and production, requiring heavy investments in research and

development. It is therefore crucial to preserve and enhance the competitiveness of our industry

on the global scale. It also means, that – in line with the climate goals – the demand for the EVs

has to be strengthen, thus increase their production. In addition, component dependency is a

strategic vulnerability for the automotive industry. Sourcing of semiconductors, printed circuit

boards, and other electronics components remains an increasing vulnerability, especially for

EVs who have a significant dependency on electronics to function. Hence the supply chain for

4 The Hungarian Presidency wishes to draw attention to the attached Background Paper with initial proposals for

discussion how to boost electro mobility in consultation with the automotive industry.

HU24EU

5

the whole electric vehicle industry should be handled with special attention, mining of raw

materials and battery production is therefore utmost important. Nevertheless, the importance of

recycling and reusing the batteries and other components of the used EVs, or the ability to repair

them has to be also emphasised. To enhance the competitiveness of the industry, the

manufacturing and recycling processes necessitate improvements.

However, decisions are influenced by factors other than price. Consumers who are interested

in electric cars also place a high priority on aspects such as the vehicle's driving range and the

speed of charging. Electric vehicles should aim to provide equivalent comfort levels compared

to traditional internal combustion engine vehicles. This will help alleviate concerns about

convenience and practicality associated with electric cars, and encourage more widespread

adoption of sustainable transportation options.

Instruments to tackle these challenges:

The following factors should be considered when developing responses to the problems

mentioned above:

 Assess the efforts in Europe to create conditions for a green transition, discuss priorities,

and challenges. This includes the development of the infrastructure (both public and

household), the transformation of the EU electricity grid (increase the capacity and

number of chargers, as well as their installation density: 900 kW, 8 million and 50 kms

respectively) and the measures needed to achieve carbon neutrality, i.e. the tightening

of the existing legislation: AFIR5 should have more ambitious targets.

 Easing of rules regarding state aid in case of R&D and their industrial implementation

and production of carbon neutral vehicles and its supply chain, the significant reduction

of administration processes of state aid to support the competitiveness of the European

automotive industry.

 Extending the Alternative Fuels Infrastructure Facility (AFIF) under the Connecting

Europe Facility which has been successfully leveraging public and private investment

through blending of grants with loans for charging infrastructure (AC, DC) while also

considering a support scheme for private charging (households, office buildings, depots)

as well, coupled with stricter regulation on public charger availabilities and their

capacity. Besides, introduction of financial measures for EU citizens to decrease the

total costs of ownership of a battery electric vehicle.

 Improving the competitiveness of the European vehicle industry, putting emphasis on

the affordability and model availability of European vehicles, particularly to narrow the

price gap between electric and combustion engine cars. Furthermore provide skilled

workforce for the new challenges.

 Promote green thinking and the idea of the circular economy. Repairing, reusing and

recycling used battery cells of EVs has to be ensured in line with the EU’s corresponding

policy, and the Right to Repair.

 Explore advances in software-based vehicles and strengthen the role of digitalization

and artificial intelligence.

 Ensure flexibility in the supply chains of the automotive industry, especially for

batteries, and facilitate supply chain networks without compromising sustainability.

5 Regulation (EU) 2023/1804 of the European Parliament and of The Council of 13 September 2023 on the

deployment of alternative fuels infrastructure, and repealing Directive 2014/94/EU

HU24EU

6

Modern logistic solutions and the integration of railways into the supply chain model is

crucial to greening the economy and decrease emissions.

The Commission should be tasked to report to the European Competitiveness Council every

3 months on the state of progress on the five key dimensions for a successful transition to zero

emission mobility: access to resources, skills, deployment of charging infrastructure, and

readiness of the electricity grid, affordability and availability of vehicles.

To start the debate, we have proposed the following questions as a guideline

allowing the participants to choose which ones they would like to discuss:

 What do you think of stricter regulation and financial incentives to boost electric

vehicles charging infrastructure?

 What is your opinion on demand-side incentives of electric vehicle purchases?

 How can the competitiveness of the European automotive industry be improved? What

measures should be considered?

HU24EU

7

Session 2: Setting the scene for the competitiveness agenda (follow-up to

EUCO on the new competitiveness deal, Antwerp Declaration)

Background:

In order to achieve the EU’s green and digital transitions (twin transition) and the set climate

goals, EU leaders recognised the need for a new competitiveness agreement based on a fully

integrated single market. In this context, investment and access to capital are key, with a

particular focus on the need to improve access to private finance and de-risking investment for

key technologies and their industrial and commercial scale up. Equally important is the need

for the EU to monitor and address supply chain risks in sensitive sectors and reduce its strategic

dependencies in sectors such as energy, net zero industries, critical raw materials,

semiconductors, health, digital, food, critical technologies, chemicals, biotechnology and space.

A modern, well-functioning Single Market is a prerequisite for long-term competitiveness. The

Single Market has provided the EU with a strong economic basis: a market of more than 440

million consumers, economies of scale, diversified supply sources, opportunities for innovation

and increased production, while promoting strong social rights and decent working conditions.

The Single Market has proven to be a powerful tool for building resilient and sustainable

European integrated supply chains, by building own European production capacities and

diversifying supplies from third countries.

In order to implement the new European Competitiveness Deal, it is important to actively

consult with key players of various sectors and the Council should push for a decisive and rapid

move forward based on the guidance provided by the European Council 6this April, especially

the following:

 Significantly reduce the administrative and compliance burden on companies and

national authorities, prevent over-regulation and ensure the enforcement of EU rules

 Investments in key strategic sectors and infrastructures require a combination of public

and private funding. The EU budget and the EIB Group will continue to play an

important role, more can be done to support scale-ups and industrial deployment.

Deepening the Capital Markets Union is key to leverage private capital.

 Removing remaining barriers and fully implementing and enforcing free movement

rules, especially in the area of services;

 Improving interconnected transport /infrastructure and mobility;

 Reinforcing European connectivity and telecoms infrastructure

 Discontinuation of unfair practices, such as the production and distribution of dual-

quality of foodstuff.

 Developing a new horizontal strategy for a modernised Single Market by June 2025

addressing competitiveness challenges for businesses of all sizes, in particular SMEs

and start-ups.

 Building a fully integrated Single Market. This will require efforts at both EU and

Member State level and across policy areas to close the growth, productivity and

innovation gap between the EU and its main international competitors. To this end,

policy measures should be further geared towards strengthening the European

6 https://www.consilium.europa.eu/media/m5jlwe0p/euco-conclusions-20240417-18-en.pdf

HU24EU

8

economic, manufacturing, industrial and technological base, notably in the markets of

the future, thereby ensuring the Union’s economic resilience and industrial renewal,

global competitiveness, technological leadership and attractiveness as a business

location. In this context, it is essential to strive for a level playing field, both at global

level and within the Single Market.

On 20 February 2024, in Antwerp, Belgium, 73 leaders from almost 20 industrial sectors signed

the “Antwerp Declaration for a European Industrial Deal”7. To date, the declaration has

been signed by 845 companies and more than 342 trade associations (24 June 2024).

The dialogues, like the Social Partners Summit in Val Duchesse and the discussions at the

Antwerp Industrial Summit, showed that industry and social partners are firmly committed to

climate goals and are involved in the implementation of the European Green Deal. They also

demonstrated that our industry is firmly committed to prosperity in Europe while generating

growth through access to global markets and diversified value chains.

The “Antwerp Declaration” is a call to the governments of the Member States, the next

European Commission and Parliament, indicating the need for clarity, predictability and trust

in the EU and its industrial policy. Therefore, Europe should not only be a continent of industrial

innovation, but also a continent of industrial production. In difficult economic conditions, the

Declaration outlines 10 urgent actions to restore competitiveness and maintain jobs in Europe,

while making European industry more resilient and sustainable, further supporting the climate

goals set out in the Green Deal.

Industry must be kept in Europe because it will provide the solutions to the climate change and

digital transformation that Europe needs.

The statement highlighted, inter alia, the need for removing regulatory incoherence, complexity

and excessive reporting obligations, which would include corrective measures. It is also

essential to make better use of the Single Market, revitalise it and remedy its shortcomings. The

so-called “industrial deal” is a necessary condition for the successful delivery of the Green Deal,

but not in contradiction with it. Overall, it is considered necessary to develop a comprehensive

strategy. Energy infrastructure, in particular smart grids and interconnections, would deserve

much more investment. In addition, competition policy, including merger rules, should be

updated and state aid rules better aligned with EU’s strategic public policy goals and needs.”

Context:

Against this background, the Presidency invites Member States and the European Commission

to discuss and respond to the economic, trade and social challenges posed to the

competitiveness of the Single Market and the economic, trade and social challenges resulting

from climate change and geopolitical crises, and to explore ways to boost productivity and

sustainable and inclusive growth to build a robust, innovative and resilient economy.

While we witness the 31st anniversary of the Single Market in 2024, it is time to acknowledge

what has been achieved and to learn from the mistakes made in order to strengthen our

competitiveness. We must aim to create a more competitive Europe that respects the principles

of the Single Market and has an industry and agriculture capable of facing major international

challenges.

7 https://antwerp-declaration.eu/

HU24EU

9

A functioning and flexible Single Market is the cornerstone of Europe’s competitiveness. Both

the Commission and the Member States should play a key role in building a single and

internationally competitive European economy. Strengthening the Single Market is key to

maintaining the EU’s international competitiveness.

Preserving the achievements of the Single Market, competitiveness and security of supply

require the strengthening of EU industry and it is therefore in the common interest to align the

European industrial policy framework with the overarching long-term policy priorities of the

Union, with the broad involvement of stakeholders. We can only achieve the goals set along in

the twin transitions by not only supporting the future, but also developing the right answers to

the problems of the present.

Instruments to tackle the challenges:

We need to strengthen our joint work and commitment and pay special attention to the

following areas:

 Mitigating regularity burdens is crucial for the European businesses to remain

competitive. Targeted efforts should be made to improve and simplify the

implementation and enforcement of the agreed rules.

 The issue of promoting new technologies and markets of the future needs to be

addressed across industries, horizontally, in order to encourage their uptake, including

through a more agile standardisation system, valorisation of IP rights (Intellectual

Property rights) and swift adoption of the proposed regulation on standard-essential

patents, improved access to finance, more strategic use of public procurement, including

innovation public procurement subject to sustainability, resilience, cybersecurity and

social criteria.

 Industrial digitalisation needs to be stepped up in order to harness its potential and boost

industrial competitiveness.

 Industry and stakeholders need to contribute to the rapid implementation of strategic

actions, in all sectors, e.g. steel industry and automotive industry.

 Monitoring and reducing strategic dependencies as well as strengthening security of

supply is essential.

 The Union must be prepared for the future and equipped with the means that may be

necessary in a crisis situation with a serious impact on the Single Market. This requires

a swift implementation of IMERA.

 While reducing energy dependency, we must ensure that the European production

capacities of all economic activities that are essential to maintaining quality of life,

remain sufficient to deal with crises.

 The protection of European economic security and level playing field should be ensured.

 Promoting the European Union’s digital preparedness, overcoming the digital divides,

harnessing the potential of digital technologies and the use of artificial intelligence are

key competitiveness factors.

 The Commission and the Member States, bearing in mind the energy security of

individual Member States and the European Union, should step up their efforts to

promote a more efficient interconnection of energy systems as well as modernising and

adapting energy grids to new needs.

HU24EU

10

 The Commission and the Member States should continue to prioritise building a genuine

and deep Capital Markets Union in order to facilitate access to private finance, not least

venture capital, de-risk investments in key technologies so as to accelerate their

industrial and commercial scale up and to allow for further growth of European

companies, while responding to the specific needs of SMEs.

 In light of the Next Generation EU and REPowerEU, continued public investment is

needed to ensure Europe’s competitive advantage in key priority areas. Efficient use of

EU funds, such as cohesion policy funds, can contribute to a level playing field and

increase regional convergence within the Single Market, as well as help increasing

investment in strategic technology areas covered by the STEP Regulation.

 Steps should be taken to further prioritise research efforts, and strengthen the transfer

of research results into practical business applications and incorporate the development

of standards already into research and innovation.

 To ensure that EU businesses can continue to thrive in digital, clean technologies and

other strategic sectors, the EU should continue to support fair and open trade and use

trade defence instruments to protect the Single Market whenever necessary.

 To ensure smooth green transition towards a sustainable economy, and to successfully

achieve the zero-emission goals set for 20358, we urge the Member States to emphasise

the importance of individual industries helping to carry out these goals, with a special

attention on the electric-vehicle sector.

 Skills and labour shortages need to be given increased attention in the context of broader

demographic trends, in particular through efforts in education and training, but also by

facilitating the mobility of skills and talents within EU and to the EU.

To start the debate, we have proposed the following questions as a guideline

allowing the participants to choose which ones they would like to discuss:

 What should be the main points of a new European Competitiveness Deal?

 What policy measures do you see to increase productivity, where do you see specific

intervention points?

 How to make sure that the green and digital transitions are balanced, fair and

contribute to competitiveness?

 What are the areas where the application of connectivity solutions is becoming critical

to productivity, how can their deployment be supported?

8 https://climate.ec.europa.eu/news-your-voice/news/fit-55-eu-reaches-new-milestone-make-all-new- cars-and-vans-zero-emission-2035-2023-03-28_en

HU24EU

11

Session 3: How AI affects European competitiveness?

Background:

Artificial Intelligence (AI) is considered as one of the most important and impactful

development of the recent years. Discussion on AI usually focuses on the technical, ethical,

legal and security aspects of the technology. Looking at it however from a competitiveness and

economic growth angle, we look at AI in a different way: AI is tool that can achieve

unprecedented efficiency in almost any field in the economy and society.

AI will be a very important driver of economic growth and competitiveness. According to

recent studies9 on the economic potential of AI, “conventional” and generative AI solutions

could add the equivalent of 17.1 trillion to 25.6 trillion USD to the global economy annually.

Those who are adapting to this technological change and are able to incorporate AI into their

internal processes will be more efficient, more productive and more competitive. On the other

hand, those who are lagging behind in this progress will struggle to compete with the adapters.

This potential of competitiveness and growth is in a strong relation with the labor market on

which AI will also have a significant impact. According to recent research10, almost 40 percent

of global employment is exposed to AI. However, it is important to underline that at the same

time AI will create new jobs as well – jobs which require higher skills and which potentially

will provide higher salaries. Jobs which will offer way more added value than the ones which

were supplemented by the AI. We think that the overall balance between the lost and created

jobs can be positive – skills and education will play, however, a significant role in the success

of this transition at individual level.

In order to be successful in the competing global market, European enterprises should utilize

all benefits of this technology. Member States recognized this and included the economic and

labor-market related aspects in their national strategies. For example Hungary’s recent AI

Strategy aims for 15% GDP growth and 26% productivity growth in the SME sector coupled

with 1 million AI related new workplaces11.

Context:

There is no doubt that at this point the United States are leading the global AI race, mostly

thanks to big tech. US is followed by China, which is quickly catching up in this race by already

surpassing US in some figures (most notably in adoption of AI systems12). Compared to these

competitors, the European Union is for the time being lagging behind, mainly in terms of

investment and enabling computing infrastructure such as the cloud. The EU however does

have some significant strengths, such as a large single market, strong industrial sectors,

computing capacity through a world-leading public network of supercomputers, a number of

9 https://www.mckinsey.com/capabilities/mckinsey-digital/our-insights/the-economic-potential-of-generative-AI-the-next-

productivity-frontier#business-value According to the study, the figures here are short to mid term estimates without

determining any specific timeframe. 10 Gen-AI: Artificial Intelligence and the Future of Work (International Monetary Fund – Staff Discussion Note of January

2024.) 11 https://mik.neum.hu/wp-content/uploads/2024/03/Magyarorszag-Mesterseges-Intelligencia-Strategiaja.pdf 12 https://datainnovation.org/2021/01/eu-drops-behind-in-the-global-ai-race-as-china-challenges-u-s-lead-new-report-finds/

HU24EU

12

innovative startups, as well as a very high number of (AI) scientists and and highly skilled

engineers.

The level of adoption of AI solutions varies greatly between Member States. For example

according to the latest Eurostat figures13 the gap between the first and last Member State in

terms of AI usage of European enterprises is more than 13 percentage points.

This means that, beyond strengthening development, the EU needs to speed up its adaptation

progress of the technology in both the private and public sectors.

AI Innovation Package: AI Factories and GenAI4EU

In this context, the Commission launched the AI Innovation Package in January 2024. This

initiative will support European startups and SMEs in the development of trustworthy AI,

including through providing them with privileged access to supercomputers; and, most

importantly, by substantially investing in AI optimized supercomputers and in AI factories,

bringing together the necessary resources around these supercomputers, namely computing

power, data and talent, to offer a wide and comprehensive range of services to European AI

start-ups.

AI Factories developed across Member States should be linked to the national AI strategies,

including providing access to public data, European data spaces as well as connecting talent.

AI factories in each Member State will be connected to those of other Member States and to

other relevant AI initiatives, such as testing and experimentation facilities and the “Digital

Innovation Hubs”, thus creating a closely interconnected AI ecosystem across the whole of the

EU.

In addition, the GenAI4EU initiative will stimulate the uptake of generative AI across a set of

different strategic industrial ecosystems of the Union, such as robotics, health, aerospace,

energy or mobility to mention just a few, thus supporting the transition pathways outlined in

the EU Industrial Strategy. Such an approach will boost the deployment of generative AI

technologies in the private and public sectors across key European industrial ecosystems. The

“AI Factories Act” was endorsed by the Competitiveness Council on May 23 and will be

implemented as of this summer.

AI Act for trustworthy AI

The recent adoption of the AI Act is an important step to enhance trust in the technology

across the EU.

At the international level, the Commission promotes its approach to trustworthy AI through

collaboration with its strategic partners in the context of the Trade and Technology Councils

and the digital partnerships, as well as in multilateral contexts with the G7, the OECD, the UN

and the safety summits. The objective us to ensure progress towards a human-centric,

trustworthy, and sustainable AI. Moreover, it is working with Member States on a risk

assessment exercise aimed at identifying AI-related risks and mitigation measures.

However, further, non-legislative measures may be necessary to fully exploit the AI-induced

competitiveness potential in Europe.

 Drafting and updating national strategies in AI allows the assessment of strengths,

weaknesses, opportunities and threats. It offers a structured framework for

13

https://ec.europa.eu/eurostat/databrowser/view/isoc_eb_ai__custom_10785496/default/table?lang=en

HU24EU

13

understanding the internal and external factors that can influence a country’s success in

AI development and deployment.

 Defining key assets helps in recognizing the nation’s existing strengths, such as a robust

tech industry, skilled workforce, strong research institutions, and supportive

government policies. Competitive advantage can be maximized by understanding what

the country excels in, the strategy can focus on areas where it already has a competitive

edge, ensuring resources are allocated efficiently and effectively.

 Identifying early internal weaknesses, such as skill gaps, inadequate computing and

cloud infrastructure, or lack of funding allows for targeted interventions to overcome

these barriers.

 A thorough mapping of opportunities can identify external opportunities, such as

emerging markets, potential partnerships, and untapped applications of AI. This helps

in shaping a forward-looking strategy that can capture new markets and drive

innovation.

 Understanding global trends and opportunities ensures that an AI strategy to boost

competitiveness is aligned with international developments, enhancing the country’s

position in the global AI landscape.

 Identifying external threats, such as third-country competition and dependencies,

regulatory changes, ethical concerns, and weaponisation of AI allows for the

development of strategies to mitigate these risks. This proactive approach ensures

resilience against potential disruptions. To facilitate the achievement of common goals,

join forces and avoid duplication of efforts, national strategies further need to be

consolidated at European level in line with the EU industrial strategy on AI as reflected

in the Innovation Package of January 2024.

Challenges to address:

Our main challenges are the development of a competitive offer of (generative) AI solutions

“made in Europe” and their integration into innovative applications across the European

economy. This includes the digitalisation/AI adaptation capabilities of European enterprises

and of the public administration and the upgrade of the skills of the European workforce.

1. A competitive offer of (generative) AI solutions “made in Europe”

Dedicated programs jointly funded by EU, Member States and industry/private sector, should

be carried out both at EU and MS level to swiftly implement AI Factories and support

GenAI4EU through:

 Development of advanced, state of the art AI models:

o Joint forces between national and EU efforts, including public and private

funding, to foster and facilitate European research and development in order to

strengthen the European technological sovereignty and reduce the dependence

on the US and Asian technology-import;

o Support the development of Large Language Model(s), ensuring coverage of all

national languages within the EU;

o Support the development of EU multimodal models as they are currently lacking

o Foster and facilitate the development and application of a shared computing

infrastructure, supporting and building on the AI Factories, and complement

with cloud to edge continuum.

HU24EU

14

 Development and deployment of AI-based solutions

o Create a strong pool of innovators around AI Factories ecosystems all over

Europe, developing (generative)AI-based solutions, based on EU models, for the

various sectors and use-cases.

 Creating a supportive environment for the development of AI infrastructure:

o Strong AI (cloud) infrastructure enables developers to effectively create and

deploy AI and machine learning applications. Enterprises of all different sizes

and across a wide range of industries depend on AI infrastructure to help them

realize their AI ambitions. Investing in strong AI infrastructure provides better

return on investment on AI initiatives than trying to accomplish them on

outdated, inefficient IT infrastructure.

2. More focus on the European competitiveness and SMEs

o We should put a special emphasis on the AI adoption by the European

enterprises, particularly by SMEs. The Digital Decade policy programme, which

guides Europe’s digital transformation, declares: by 2030 75% of EU enterprises

will have to use AI and/or Cloud and/or Big Data technology. This is not an

easily attainable target, by this indicator the EU27 value 7,9% was in 2021.

o Reinforce the entire AI value chain, from the semiconductors to the provision of

computing capacity to generative AI and industrial applications of AI;

o Foster the adaptation of AI technologies of European enterprises (especially

SMEs) through GenAI4Eu initiative; Hungary (and other member states) uses

EU funds, launches programmes (within the EDIOP Plus and DROP Plus

operational programmes) for the support of development / introducing AI based

business solutions by the companies, AI focused European Digital Innovation

Hubs (EDIH-s funded by Digital Europe Programmes and other sources

including national state budgets) are already contributing to this goal

3. Talent and human resources – cooperation in education

Besides the application of the technology the AI-induced transformation of the labor market is

also largely affecting European competitiveness. AI will both supplement existing jobs and

create new ones with higher added value. On the one hand it is possible that some European

jobs may disappear in the long run, but on the other hand there will be a demand for a skilled

(or maybe even more) workforce to develop, maintain and operate the new solutions derived

from this technology.

Having the necessary skills in time is the key to be successful in this transition – therefore the

possibility to gain these skills shall be provided. EU funded dedicated programs could support:

 Launching awareness campaigns on AI’s impact on the labor market and the future

possibilities.

 Creating and publishing on-line trainings and educational materials on the basics of our

best practice, an AI awareness-raising program called “AI Challenge”14. By reaching

more than 4.5 million individuals and more than 118k participants, we believe that AI

Challenge successfully passed the test – and we are working on its 2.0 version with

updated content and multi-language accessibility).

14 See more details here: https://neum.hu/en/mi/

HU24EU

15

 Creating an AI and technology oriented advanced course with unified exams and EU-

wide recognized certificates, whilst respecting Member States' exclusive competence

for education.

 Creating AI training modules for non-IT curricula (e.g., medicine, law, economy and

finance) to equip the specialists of the future with the knowledge on how AI can support

their professions, its risks and limitations.

 Upskilling and reskilling the present workforce in the private and public sectors to boost

the deployment of AI and promote its safe and responsible use.

To start the debate, we have proposed the following questions as a guideline

allowing the participants to choose which ones they would like to discuss:

 Focusing on the proposed instruments above, especially AI Factories and GenAI4EU

initiatives, what do you think about the actions proposed and which instrument(s) do

you see as most relevant? Which measures should be taken to achieve the goal of AI to

become a key driver of economic growth and competitiveness in the years to come?

 The AI Board gathers Member States’ high-level representatives to steer the EU policy

approach in the field of AI and has just started its operation. Would you see any merit

in the AI Board providing regular updates to the relevant Council configuration on

matters regarding competitiveness in AI?

Background paper on supporting the European electric vehicle (EV) market

1

Disclaimer: We aim to reach a decision on a pressing issue and are committed to engaging in

thorough negotiations. Our objective is to prevent any potential problems and

misunderstandings by approaching this process with humility and respect. To ensure our

negotiations are effective and inclusive, we are guided by the principles outlined in the Antwerp

Declaration, which emphasizes the importance of constructive dialogue with market

stakeholders. By adhering to these principles, we hope to foster a collaborative environment

that supports a fair and well-informed decision-making.

I. The current state of European electric vehicles (EV) market

Could you provide an overview of the current state of the European electric vehicle (EV)

market? Additionally, what are your projections for the future of the vehicle market?

The European Union has made a significant commitment to achieve carbon neutrality through

green transition, by taking part in the Paris Agreement since 2016 and contributing to the

climate goals to enhance green investments and transformation. Decarbonisation is a need for

all of us living in Europe, and there is no question, that if we do not change, the future of our

planet is at stake. To achieve carbon-neutrality, the EU pledged to significantly reduce emission

from cars and vans, which are responsible of the 15% of the total CO2 emissions in the EU1.

The automotive sector is experiencing one of the most profound changes in its history. Vehicle

production is currently undergoing a major transformation, driven by the imperative to reduce

carbon emissions and mitigate climate change. In 2022, transportation was responsible for 24%

of the total European Union's carbon dioxide emissions, with 71.2% originating from road

transport. Of this share, cars accounted for 59.2%, heavy-duty vehicles for 27.5%, and light

commercial vehicles for 12.1%. Over the past decade, the automotive industry has projected

the ascent of electric vehicles (EVs), identifying them as pivotal to achieving targeted

reductions in carbon dioxide emissions.2

The automotive industry is the engine of growth in Europe, contributing 7% of EU GDP and a

healthy trade balance of more than 100 billion EUR, and brings in well over 390 billion EUR

in government revenue, while employs directly and indirectly 13 million people. The EU is the

2nd largest automotive manufacturer in the world, and the automotive industry is the largest

private investor in research and development3.

In 2023, electric vehicles accounted for 14.6% of all car sales in Europe4, with fully battery

electric vehicles making up a significant portion of that market. However, the early figures for

2024 show a slight decline, with the share of new electric vehicle registrations dropping to

1 https://climate.ec.europa.eu/eu-action/transport/road-transport-reducing-co2-emissions-vehicles_en

In case of light duty vehicles. ca. 12% of emissions coming from road transport specifically, and the remaining

ca. 3% from non-transport sectors. 2 Source: https://www.transportpolicy.net/standard/eu-vehicle-definitions/, https://www.aecc.eu/passenger-cars-

light-commercial-vehicles/ 3 Source: ACEA European Automobile Manufacturers’ Association 4 Source: European Alternative Fuels Observatory

2

around 12%. Despite this, there was an overall 3.8% increase in the EV market in the first

quarter of 2024 compared to 2023, with significant growth in some European markets such as

Belgium and France, while Germany experienced a decrease. The market share of new zero-

emission trucks (>3.5t) is beginning to grow as well, from 0.8% (2022) to 1.5% (2023) and

2.0% (Q1 2024). More than 15.5% (2023) of all newly registered buses are zero-emission,

primarily battery-electric in the urban bus segment. However, this shift may be attributed to

changes in support schemes in certain Member States and delays in the introduction of new

models in the medium and small car segments. Additionally, the share of battery electric

vehicles saw a moderate increase of 2.5% in 2023, compared to larger increases in previous

years. Overall, electric vehicles, including both battery electric and plug-in hybrid vehicles,

held a market share of 22.3% in 2023, with the rise predominantly driven by increased sales of

plug-in hybrids.

Meanwhile, capacity expansion and technological development investments have been

advancing at a faster pace than actual demand, but due to deteriorating expectations,

adjustments can be already seen.

As the 2035 deadline for a complete transition approach in the European Union, mounting

concerns are evident. The withdrawal of the German electric vehicle (EV) subsidy scheme has

led to a significant decline in the growth rate of demand, underscoring the risks associated with

the green transition. Notably, since 2020, the growth rate of sales in Germany has steadily

declined, plummeting to 30.5% in 2022 and further to 10.6% in 2023. All of this points to

serious challenges in the European automotive industry and the achievement of environmental

goals. These trends clearly indicate that the green transition will not be smooth and may have

significant feedback effects on the automotive industry and the EU's green objectives.

It is without question that electric vehicles will play a dominant role in clean mobility, but

accelerated efforts are needed to make the green transition smoother. De-escalation of above

concerns and achieving smooth green transition should be the biggest priority of the European

community, which requires joint efforts. One of the major bottlenecks of EV demand, following

consultations with the industry, is the lack of sufficient charging infrastructure, which is

hindered by in many cases stable electricity network. There is a well-identifiable market friction

here, as without proper infrastructure, widespread usage of EVs will be in peril, while more

cars are need to make a larger infrastructure economical. To tackle the problem, we suggest an

EU-wide subsidy programme for charging infrastructure for all vehicle segments coupled with

stricter regulation on public charger deployment, to achieve a more comprehensive spread. In

addition, accelerating permitting procedures, enabling flexibility regarding new network codes,

standards and dynamic tariffs, as well as ensuring Distribution System Operators (DSO) make

anticipatory investments through a cooperation with Member States on capacity planning

(based on the charging infrastructure deployment plans under AFIR) would further assist the

infrastructural development.

The other major issue is to support competitiveness of European vehicle manufacturers. The

EU should further support R&D and innovation processes in carbon-neutral transport and

mobility, significantly simplify state aid rules in the value chain of such vehicle production,

while working together with the industry to ease meaningfully regulatory burden. Nevertheless,

3

given the global competition situation, we think that EU-level subsidy is needed on the demand

side as well that values short supply chains, bearing in mind that criteria must be similar across

Europe to ensure Original Equipment Manufacturers (OEM) can navigate the incentives

schemes easily.

Our following proposals focus on the most critical aspects of the EV market that need to be

addressed at the internal market level. They do not cover support measures at the individual

member state level, issues such as taxation require handling within the jurisdiction of each

member state.

4

II. Public and household charging - Developing the electric vehicle

infrastructure

Infrastructure is crucial because it provides the foundational systems and services necessary

for the efficient functioning of the EV ecosystem. What is your opinion on the importance of the

current state of charging infrastructure, how could it be improved? How can the decision-

makers of the EU make a more effort to promote green transition?

Proposal 1: Tightening AFIR regulation with mandatory EV charging infrastructure for light-

duty vehicles every 50km (by 2027) with at least 4 charging points, at least 150 kw each, but

preferably 300 kW, where the total power output for BEVs is at least 3 kW, for PHEVs is at

least 1,5 kW. The capacity of each recharging pool should be increased to 900 kW. The subject

matter scope of the regulation could be extended with the mandatory installation of charging

points outside the trans-European transport TEN-T network.

Proposal 2: EU level operators of 80% of all service stations to provide fast-charging options

with at least 150 kW, but preferably 300 kW for e-cars. Charging possibilities should be

introduced in publicly attractive areas as well.

Proposal 3: Establish a dedicated EU subsidy programme EUR 15-15 billion up to 2035

altogether for public charging for all vehicle segments, including trucks, buses and coaches,

and grid development, while further subsidy for household charging stations EUR 900-1500 or

60% of costs per stations with the total budget of EUR 20 billion. The programme should be in

line with the Commissions Electricity Grid Action Plan5.

Proposal 4: To help the electricity grid to faster develop, permitting procedures should be

simplified and enable flexibility. This proposal should be primarily focusing on the

administrative assistance of the sector.

The past three years have shown a notable increase in the EU's charging infrastructure. The

number of AC chargers has tripled (in mid-2024 to 610,000) and the number of DC-chargers

quadrupled (to 97,000 charging points). However, this growth may be insufficient. The Member

States are currently on track to meet the goals outlined in the Smart and Sustainable Mobility

Strategy from 2021. While the objective of having 1 million charging points by 2025 seems

achievable, the target of 3 million charging points by 2030 is overly ambitious. At the current

pace of deployment, it's unlikely that the criteria will be met until 2035. According to ACEA,

the EU needs around 8 million EV charging points by 2035 to adequately meet the demand for

electric vehicles and to have the desired impact on increasing demand. However, the

concentration of deployment in only a few Member States continues to present a significant

challenge.

Meaningful disparities exist among EU member states regarding publicly available charging

stations. To foster the demand for EVs, a capacity ratio of 7-8 EV/charging station should be

set as goal in the expansion period, while finally targeting 10 EV/station in order to maximize

the benefits of the infrastructure. EV charging should be available where there is a considerably

5 Commission sets out actions to accelerate the roll-out of electricity grids:

https://ec.europa.eu/commission/presscorner/detail/en/ip_23_6044

5

high number of cars parked (i.e., malls, P+R car parks), at petrol stations alongside motorways,

as well as also on the streets of smaller and bigger cities.

Despite early signs of infrastructure rollout dedicated to heavy-duty vehicles, the availability of

publicly accessible high-performance chargers with charging speeds high enough to serve the

electrification of heavy-duty vehicles remains one of the key bottlenecks in the decarbonisation

of commercial road freight and passenger transport.

A notable point is, that public charging stations must be available to charge all types of vehicles,

which is why we suggest tightening the AFIR. AFIR sets out uniform charging station

deployment obligations for all EU Member States along the TEN-T network to deploy e-

mobility infrastructure for light and heavy electric vehicles. The Regulation should be tightened

to incentivise the public charger infrastructure by setting more ambitious instalment targets,

standardising the charging cables and mobile apps for charging.

The tightening could be applied to regulation which stipulates that fast-recharging stations of

at least 150kW for cars and vans need to be installed every 60 km along the EU’s main transport

corridors, the trans-European transport (TEN-T) network. In the new regulation every 60 km

regulation could be modified to every 50km (by 2027) with at least 4 charging points which

individually can provide at least 150 kW charging capacity, but preferably 300 kW for future

needs and even faster charging. The power output provided through publicly accessible

charging stations should be elevated to at least 3 kW for BEVs and to at least 1,5 kW for PHEVs.

To ensure that each recharging pool offers adequate amount of power output and serves the

needs of the future, the power output should offer at least 900 kW of energy, with the mentioned

4 individual charging outputs per pool.

The subject matter scope of the regulation could be extended with the mandatory installation of

charging points outside the TEN-T network, including main roads, urban public areas, bus and

truck depots, shopping malls and hotels, campuses.

Besides we suggest a law which will force gas stations to install EV charging stations. For

example, a similar law to the Germans announcement from last year - which required operators

of 80% of all service stations to provide fast-charging options with at least 150 kW, but

preferably 300 kW for e-cars – would be appropriate to provide people suitable places for

charging their cars (usual places with adequate infrastructure). To ensure convenient charging

possibilities, publicly attractive areas (i.e. smaller and bigger shopping facilities) should be

equipped with fast-charging pools as well, with the adequate charging capacity.

In parallel with tightened regulation, an EU-level subsidy program for public infrastructures is

suggested until 2035, with funds allocated on a country level based on density. The budget

would include €15 billion for chargers, maintaining technological neutrality to support

alternative fuel stations, and an additional €15 billion for strengthening and developing the grid.

Many potential electric car owners can optimize their expenditures by charging at home, which

is a major advantage of electric vehicles. However, this convenience comes with significant

initial extra costs compared to traditional cars. Therefore, a subsidy scheme of €900-1500 for

home chargers is recommended to boost demand for BEVs, with a total budget of €20 billion.

The scheme includes private charging subsidies of €900 per normal charger and €1500-2000

6

for bi-directional chargers. Since private charging costs vary greatly, the subsidy can be

adjusted with a limit set at 60% of total installation costs. To address the specific needs of

heavy-duty vehicles (HDVs), a dedicated scheme to accelerate depot charging and dedicated

public charging infrastructures could be introduced. Similar to the infrastructure development

plans for passenger vehicles, HDVs should also have dedicated charging stations. However, to

facilitate transport for HDVs, these charging stations should be strategically located near

motorways and trunk roads.

Regarding the administrative easing, it should be highlighted, that simplification of permitting

procedures in Member States as well as ensuring the flexibility of the grid (charging with local

photovoltaic production and local Battery Energy Storage Systems) would further play a

decisive role in developing the infrastructural system.

Financial resources to promote both public and household charging can be found through the

Connecting Europe Facility (CEF) and the Recovery and Resilience Facility (RRF). The CEF

provides EU budget support for transport, energy and digital infrastructure development

projects between EU Member States, while the RRF is a temporary instrument that is the

centrepiece of NextGenerationEU - the EU's plan to emerge stronger and more resilient from

the current crisis.

It is crucial from an environmental standpoint that the European Union strictly adheres to the

2035 target date for phasing out the sale of petrol and diesel cars and the 2050 target date for

achieving carbon neutrality. The establishment of charging infrastructure will be vital in

reaching these goals.

7

III. Production – Supporting competitiveness of European automotive

industry

How can the competitiveness of the European automotive industry be improved? What

measurements should be implied?

Proposal 5: Easing of rules regarding state aid in case of R&D and their industrial

implementation and production of carbon neutral vehicles and its supply chain, including

initiatives of 100% state aid involvement and the significant reduction of administration

processes of state aid.

The competitiveness of the European vehicle industry is at stake. The previously globally

dominant automotive industry of the EU is being pushed back by the other countries gaining

ground. The industry is under pressure to keep up with the global market in battery electric

vehicle (BEV) technology and production, requiring heavy investments in research and

development. It is therefore crucial to preserve and enhance the competitiveness of our industry

on the global scale. It also means, that – in line with the climate goals – the demand for the EVs

has to be strengthen, thus increase their production. In addition, component dependency is a

strategic vulnerability for the automotive industry. Sourcing of semiconductors, printed circuit

boards, and other electronics components remains an increasing vulnerability, especially for

EVs who have a significant dependency on electronics to function. Hence the supply chain for

the whole electric vehicle industry should be handled with special attention, mining of raw

materials and battery production is therefore utmost important. Nevertheless, the importance of

recycling and reusing the batteries and other components of the used EVs, or the ability to repair

them has to be also emphasised. To enhance the competitiveness of the industry, the

manufacturing and recycling processes necessitate improvements.

Given the scale of the transformation challenges, The EU should support research and

development in carbon neutral mobility and significantly simplify state aid rules, minimize

administrative burdens. A common European solution is necessary to support the sector in its

transition, based on tax reductions. This includes reforming the EU internal market subsidy

scheme for better industry output and employment.

The industry has already invested over EUR 200 billion in the process to make green transition

a reality by 2035. The damages of stepping backwards now would be estimated much higher,

if the smooth transition towards e-mobility cannot be ensured, and the future transition of the

market cannot be performed effectively.

The electric vehicle industry holds immense potential due to its environmental benefits

compared to internal combustion engine vehicles. However, challenges remain, particularly

regarding range and charging times. To unlock the full potential of EVs and enhance mass

expansion, significant R&D efforts are crucial on the fields of increasing battery capacity to

achieve 1000 km range on a single charge would significantly improve user experience and

eliminate "range anxiety." More importantly, developing faster charging technologies that are

close to the refuelling time of gasoline vehicles is essential for convenient long-distance travel.

Research on efficient and standardized battery swapping systems, which could be a practical

alternative to fast charging for certain applications should be considered as optional R&D

8

trajectory. In addition, it is worth creating new R&D projects or strengthening existing ones as

well (i.e., hydrogen fuelled vehicles, hood/roof-mounted solar panels, solar windscreen, etc.).

In addition to electric cars, we suggest to extend the support for other carbon neutral

technologies, although we believe that electric cars will be the dominant technology, it is

important to support other competing technologies and maintain technology neutrality.

The above-mentioned R&D activities and entrepreneurial incentives could be financed by the

Important Projects of Common European Interest (IPCEI). This special instrument is designed

for national funding of projects of European public interest in line with EU State aid rules. These

projects allow to use the project’s funding gap as the basis of State aid instead of the eligible

investment costs: they can receive up to 100% aid to bridge the funding gap. The support would

be extended to production developments of R&D results in the automotive industry, including

the supply chain, particularly battery industry. In addition, we suggest to consider whether State

aid rules are still fit for the purpose of ensuring smooth and timely green transition.

9

IV. Subsidies for EU citizens – Making carbon neutral vehicles available

to customers

Currently, the cost of an EV is significantly higher, than a vehicle with an internal combustion

engine. What other incentives would you suggest to promote these cars the public? How would

you depress the prices, to make them more affordable to the European citizens?

Proposal 6: A 4,500 EUR subsidy should be introduced to European citizens in case of purchase

of battery electric vehicles to enhance the demand. This EU-funded one-off subsidy can be

funded from the income of CO2 premium of automotive industry and from 2028 to 2034, in the

new budget cycle, EUR 50 billion from MFF.

Proposal 7: The purchase and leasing of used EVs should be promoted by launching specific

subsidies on the secondary user market.

Proposal 8: A European fleet renewal scheme dedicated to commercial road transport fleets

should be introduced to accelerate the transition of transport operators to zero-emission

medium- and heavy-duty trucks, buses and coaches.

Studies and statistics indicate that reducing the total cost of ownership can significantly boost

demand in both developed and developing countries. If electric vehicle prices are competitive

with internal combustion engine (ICE) vehicles, consumers are more likely to choose EVs.

Previous research shows that consumers are generally satisfied if they can buy an EV for the

same price as an ICE vehicle or even up to 20% more. European examples confirm this: the

demand for battery electric vehicles increases when public incentives like purchase subsidies,

tax reductions, and toll exemptions are provided, making the total cost of ownership

significantly lower.

The support for competitive vehicle industry coupled with the support of charging infrastructure

might be not sufficient for a smooth green transition as the long term benefits of buying an EV is

hard to measure by customers. Therefore, we suggest EUR 4,500 subsidy for the purchase of both

new and used battery electric vehicles (BEVs) by consumers, funded from the common EU budget,

with applications managed by Member States. We suggest that countries participate in the scheme

in proportion to their population size. It is important to promote purchases of electric cars in line

with international trade rules. In addition, we suggest to consider supporting used vehicles as well

in case of insurance and recycling of batteries. To make used EVs attractive to the public, the

purchase and leasing of used EVs should be promoted by launching specified subsidies as in

the recently announced Polish scheme or in the closed German program – although in the

German case with strict limits. The Polish scheme supports the purchase of used EVs up to 4

years old with a purchase price cap. Promoting used EV-s would also increase the demand for

new EVs considering the potential for future sales.

With the focus on primary and secondary user markets, the residual values of BEVs can be

stabilised. To further support the uptake of EVs, temporary toll exemptions could be introduced all

across the EU, which would be phased out gradually during the transition period until 2035.

The source of funding for the programme to support the final consumers could be the revenue

of the taxes that impose a burden on additional CO2 emissions (amended Regulation no.

10

2019/6316). The regulation sets target for emissions and if the average CO2 emissions of a

manufacturer's fleet exceed the specific emissions target each year, the manufacturer will have

to pay an additional emissions premium of EUR 95 per g/km for new vehicles registered in that

year that exceed the target. This would be the primary source labelled for the subsidy scheme.

Furthermore, we suggest in the next budget cycle from 2028 to 2034 in the MFF altogether

EUR 50 billion dedicated for the demand subsidy scheme. As far as possible, to maximise

impacts, it should be implemented from 2025 onwards.

6 This amendment confirmed the emission targets applicable from 2030 and set a 100% emission reduction target

for both cars and vans from 2035. EU CO2 emission targets for 2020-2024 are 95g CO2/km for cars and 147g

CO2/km for vans, falling to 93.6g CO2/km and 49.5g CO2/km respectively between 2025 and 2034.

11

V. Repair, replace, recycle and reuse – Thinking green & circular economy

What ecological and environment friendly measures would you apply to electric vehicles? How

can you ensure costumers that the used electric vehicle they bought still has a good functioning

battery pack?

Proposal 9: It is suggested to promote technology neutral procedures for the replacement of

batteries or parts of it, thereby supporting the longevity of used vehicles.

Proposal 10: The introduction of a mandatory recycling method for used batteries and a new

reliability certificate issued by state-supervised certification agencies is suggested for used

batteries.

Currently, two issues arise regarding the purchase of used EVs among consumers. On the one

hand, the older EVs have lower battery capacity than the new ones so the older EVs allow only

a shorter range (150-200 km). On the other hand, the used EVs’ batteries are no longer able to

run with full capacity that also shortens the distance range. Although the new Euro 7

requirements from 2027 necessitate lower battery degradation, there should also be solutions

for the replacement or reuse of old battery packages up to 2027. This should be in line with the

EUs reduce, reuse and recycle policy7, hand in hand with the Right to repair8.

A targeted solution to the battery problem could be to subsidise the replacement of battery

modules up to a maximum of 3,000 Euro (instead of replacing the whole battery pack) or

simplifying such process by establishing battery swapping stations. High-performance EVs use

highly integrated batteries, and there may be difficulties with the replacement of single

modules, since the new ones can interfere with the car, therefore reducing the vehicle’s overall

performance and safety. Also, future batteries will not use a module strategy to increase energy

density and reduce costs. The solution might be, that in case individual cells are degrading too

fast these cells are made passive and substituted by activation of reserve cells. This procedure

is from a technical and economical point of view the most feasible approach.

Batteries contain several heavy metals and toxic chemicals and disposing of them by the same

process as regular household waste has raised concerns over soil contamination and water pollution.

The new Battery Regulation (EU 2023/1542) mandates that the sourcing and manufacturing of

products marketed and sold in the Union must be conducted in a sustainable manner. Manufacturers

of portable batteries (or designated producer responsibility organizations) are responsible for

collecting all waste portable batteries. This includes establishing a take-back and collection system

with collection points, transporting the waste batteries to a waste management facility, and ensuring

that they are handled in compliance with the regulations. In line with the current legislation, we

suggest the introduction of a mandatory recycling method of used vehicle batteries, where 100% of

the battery should be recycled or reused. It is important to regulate the collection of used batteries:

end-of-life electric vehicles should be deregistered together with the battery so that the battery's

location can be tracked after deregistration.

7 On 24th April 2024, the European Parliament adopted new measures to make packaging more sustainable and

reduce packaging waste in the EU. The idea of reduce, reuse and recycle should be extended to areas like batteries. 8 The new rules reinforce the right to repair, aim to reduce waste and bolster the repair sector by making it easier

and more cost-effective to repair goods. European customers should have the right to fully repair their vehicles.

12

VI. Logistic – Improving the sustainability of the transportation in the

automotive industry

How would you ensure that the compartments of electric vehicles are distributed across the EU

in the most environment friendly way, inflicting the less pollution?

Proposal 11: Make transport more sustainable: in addition to prioritising rail transport, road

transport solutions should be made carbon neutral using the Multiannual Financial Framework

(MFF).

The transition to climate neutrality within the available timeframe demands decisive and

coherent action in all modes of transport. Sustained, massive investments must be made by

vehicle manufacturers, transport operators, providers of charging and refueling infrastructure,

and others. Upgrading and expanding existing infrastructures, including safe and secure truck

parking areas and combined transport terminals, is imperative. Placing limits on improving one

mode of transport to ensure relative competitive advantages of another mode will likely result

in Europe failing to meet its ambitious climate targets, particularly in the road transport sector.

All transport modes must innovate further and contribute to necessary CO2 reductions while

supporting the European economy. The expected growth of the European freight transport

market requires better intermodal transport solutions and more efficient use of existing

infrastructure capacities to meet the projected future demand.

The next Multiannual Financial Framework (MFF) should encompass provisions for clean

railway transportation alongside electric vehicle (EV) and battery production to effectively

address CO2 footprint goals. Integrating these elements into the framework is crucial for

achieving the objectives of the European Green Deal and significantly reducing carbon dioxide

emissions. While EVs and battery production are pivotal in this transition, the inclusion and

support of railway transportation within the supply chain is also essential.

Rail transportation offers a substantial advantage in emissions reduction, emitting 75% less

CO2 per tonne-kilometer compared to road freight transport. Despite this, its current share in

the EU freight transport landscape is only approximately 19%, with road transport dominating

at 75% and inland waterways at 6%.9 Therefore, integrating railway transportation into the MFF

is imperative to bolster sustainable transportation initiatives and effectively mitigate carbon

emissions.

This proposal is based on consultations with: ACEA, particular OEMs and key sector

representatives

9 Source: Association of American Railroads

Concept Paper

Informal Compet

July 8-9, 2024

Hungarian Presidency

Ministry for National Economy

Budapest

HU24EU

2

INTRODUCTION

The 2019-2024 institutional cycle will be completed under the Hungarian Presidency and the

new institutional period will begin, which is a major and complex task not only for the

Presidencies but also for the European Union as a whole. The primary objective of the

Hungarian Presidency is to facilitate a smooth institutional transition following the 2024

European Parliament elections, to ensure continuity of the Council’s work and to support the

smooth functioning of the Union through constructive cooperation and dialogue with Member

States and new institutional actors.

The increasing number of more complex challenges the EU is facing require a stable framework

to guide EU policies in the coming years for the period 2024-2029 and to start implementing

the priorities set out in the new Strategic Agenda. The European Union has been losing its

competitiveness in recent decades. This problem needs to be tackled not only in the short term,

but also in the long term. A strong emphasis should be placed on strengthening European

competitiveness by addressing this issue in a horizontal way.

The Hungarian Presidency aims to reach a new European Competitiveness Deal, for which a

good basis is the Antwerp Declaration for a European Industrial Deal and is to follow up on the

conclusions of the comprehensive report of Enrico Letta (“Much More Than a Market”), and

to draw conclusions on the forthcoming Mario Draghi report on the future of European

competitiveness.

HU24EU

3

Session 1: EV transition: How can we meet 2035 deadline?

Background:

The European Union has made a significant commitment to achieve carbon neutrality through

green transition by 2050. To achieve carbon-neutrality, the EU pledged to significantly reduce

emission from cars and vans, which are responsible of the 15% of the total CO2 emissions in

the EU1. From 2035 all new cars and vans registered in the EU are set to be zero emission. It

means a clear shift in investments and production towards electric vehicles as a dominant

technology.

The automotive industry is a key driver of economic growth in Europe, contributing 7% to the

EU's GDP and maintaining a healthy trade balance of over €100 billion. Moreover, it generates

more than €390 billion in government revenue and employs directly and indirectly 13 million

people. The EU is the 2nd largest automotive manufacturer in the world, and the automotive

industry is the largest private investor in research and development.2

According to the European Alternative Fuels Observatory 14.6% of all cars sold in Europe in

2023 were fully battery electric (BEV). The market share of BEVs increased by 2.5 percentage

points in 2023, which is less than the 3 and 3.6 percentage point increase observed in 2020 and

2021 respectively. However, early numbers for 2024 indicate that the share in new registration

has slightly gone down and was around 12% which is close to the registration numbers from

2022, reflecting changes in public support schemes in some Member States but also delays with

the market entry of new models in the medium and small cars market.3

As regards charging infrastructure, over the last three years, there has been a notable increase

in the number of AC and DC chargers in the EU, although with significant imbalances, since 3

Member States (DE, FR, NL) are accounting for 60% of charging points: the number of AC

chargers has tripled since the end of 2020, with over half a million points available at the end

of 2023. In the same timeframe, the number of DC chargers has quadrupled to almost 90,000.

Today (mid 2024) the numbers of increased to 610,000 AC and 97,000 DC recharging points.

Member States are roughly on track to meet the objectives stipulated in the Smart and

Sustainable Mobility Strategy from 2021, which is to have 1 million charging points by 2025,

although the target of 3 million charging points by 2030 is extremely ambitious, considering

todays pace of deployment, the criteria will not even be met until 2035. According to ACEA,

the right amount of EV charging points should be around 8 million across the EU in 2035, to

sufficiently cover the need and future demand of EVs and to have the expected demand

increasing effect. On the other hand, concentration of deployment in a handful of Member

States remains a challenge.

Context:

Against this background, the Presidency invites Member States and the European Commission

to discuss the status of the green transition of the automotive industry, particularly of electric

1 https://climate.ec.europa.eu/eu-action/transport/road-transport-reducing-co2-emissions-vehicles_en

In case of light duty vehicles. ca. 12% of emissions coming from road transport specifically, and the remaining

ca. 3% from non-transport sectors. 2 https://www.acea.auto/fact/facts-about-the-automobile-industry/ 3 https://alternative-fuels-observatory.ec.europa.eu/

HU24EU

4

vehicles market road to 2035. The automotive industry is currently experiencing one of the

largest transformations in its history. Over the past decade, we’ve seen a marked increase in the

production and demand of electric vehicles (EVs). However, there are concerning signs

emerging from the demand side, and there is an increasingly cautious sentiment over not

meeting previous expectations.

The pace of capacity expansion and technological development investments for EVs has been

faster than the actual demand for them. However, due to deteriorating expectations, adjustments

can already be seen. This situation is more pronounced in the European Union since the 2035

regulatory deadline is approaching, from which only zero-emission vehicles can be sold. The

withdrawal of the German EV subsidy scheme and the subsequent drop in demand have

demonstrated the risks that Europe faces. The green transition may not be smooth, which can

have severe consequences on the automotive industry and the green targets. Therefore,

diminishing of the above concerns and achieving a smooth green transition should be the EU's

most significant priority, requiring joint efforts.4

Challenges to be addressed:

Following consultations with the automotive industry, one of the main bottlenecks for EV

demand is the lack of sufficient charging infrastructure while operators point to relatively low

utilisation rates of existing recharging infrastructure. This problem is hindered by a lack of

transparency of capacities in the electricity network and long permitting procedures for grid

connections. Without proper infrastructure, widespread usage of EVs will be in peril. However,

more electric cars are needed to make a larger infrastructure economical.

According to available studies and statistics, the reduction of total cost of ownership has the

greatest potential to increase demand in developed and developing countries. This may be

because the operational and direct financial benefits are often difficult to fully understand and

calculate, unlike fixed public subsidies, which reduce the purchase price and thus make car

purchases nominally less expensive for consumers. If the price of EVs is competitive with

Internal Combustion Engine (ICE) vehicles, consumers are more likely to buy an EV. Earlier

studies have shown that most consumers would be satisfied with the pricing of an electric car

if they could buy it for the same price as a car with an ICE, or if they had to pay up to 20%

more for an electric model. This is also confirmed on empirical facts from European examples:

the demand for Battery Electric Vehicles (BEVs) increased when public support (i.e. purchase

subsidy, taxation easing, toll exemption) has been given to citizens, therefore they could realize

a significant reduction of total cost of ownership.

Furthermore, the competitiveness of the European vehicle industry is at stake. The previously

globally dominant automotive industry of the EU is being pushed back by the other countries

gaining ground. The industry is under pressure to keep up with the global market in battery

electric vehicle (BEV) technology and production, requiring heavy investments in research and

development. It is therefore crucial to preserve and enhance the competitiveness of our industry

on the global scale. It also means, that – in line with the climate goals – the demand for the EVs

has to be strengthen, thus increase their production. In addition, component dependency is a

strategic vulnerability for the automotive industry. Sourcing of semiconductors, printed circuit

boards, and other electronics components remains an increasing vulnerability, especially for

EVs who have a significant dependency on electronics to function. Hence the supply chain for

4 The Hungarian Presidency wishes to draw attention to the attached Background Paper with initial proposals for

discussion how to boost electro mobility in consultation with the automotive industry.

HU24EU

5

the whole electric vehicle industry should be handled with special attention, mining of raw

materials and battery production is therefore utmost important. Nevertheless, the importance of

recycling and reusing the batteries and other components of the used EVs, or the ability to repair

them has to be also emphasised. To enhance the competitiveness of the industry, the

manufacturing and recycling processes necessitate improvements.

However, decisions are influenced by factors other than price. Consumers who are interested

in electric cars also place a high priority on aspects such as the vehicle's driving range and the

speed of charging. Electric vehicles should aim to provide equivalent comfort levels compared

to traditional internal combustion engine vehicles. This will help alleviate concerns about

convenience and practicality associated with electric cars, and encourage more widespread

adoption of sustainable transportation options.

Instruments to tackle these challenges:

The following factors should be considered when developing responses to the problems

mentioned above:

 Assess the efforts in Europe to create conditions for a green transition, discuss priorities,

and challenges. This includes the development of the infrastructure (both public and

household), the transformation of the EU electricity grid (increase the capacity and

number of chargers, as well as their installation density: 900 kW, 8 million and 50 kms

respectively) and the measures needed to achieve carbon neutrality, i.e. the tightening

of the existing legislation: AFIR5 should have more ambitious targets.

 Easing of rules regarding state aid in case of R&D and their industrial implementation

and production of carbon neutral vehicles and its supply chain, the significant reduction

of administration processes of state aid to support the competitiveness of the European

automotive industry.

 Extending the Alternative Fuels Infrastructure Facility (AFIF) under the Connecting

Europe Facility which has been successfully leveraging public and private investment

through blending of grants with loans for charging infrastructure (AC, DC) while also

considering a support scheme for private charging (households, office buildings, depots)

as well, coupled with stricter regulation on public charger availabilities and their

capacity. Besides, introduction of financial measures for EU citizens to decrease the

total costs of ownership of a battery electric vehicle.

 Improving the competitiveness of the European vehicle industry, putting emphasis on

the affordability and model availability of European vehicles, particularly to narrow the

price gap between electric and combustion engine cars. Furthermore provide skilled

workforce for the new challenges.

 Promote green thinking and the idea of the circular economy. Repairing, reusing and

recycling used battery cells of EVs has to be ensured in line with the EU’s corresponding

policy, and the Right to Repair.

 Explore advances in software-based vehicles and strengthen the role of digitalization

and artificial intelligence.

 Ensure flexibility in the supply chains of the automotive industry, especially for

batteries, and facilitate supply chain networks without compromising sustainability.

5 Regulation (EU) 2023/1804 of the European Parliament and of The Council of 13 September 2023 on the

deployment of alternative fuels infrastructure, and repealing Directive 2014/94/EU

HU24EU

6

Modern logistic solutions and the integration of railways into the supply chain model is

crucial to greening the economy and decrease emissions.

The Commission should be tasked to report to the European Competitiveness Council every

3 months on the state of progress on the five key dimensions for a successful transition to zero

emission mobility: access to resources, skills, deployment of charging infrastructure, and

readiness of the electricity grid, affordability and availability of vehicles.

To start the debate, we have proposed the following questions as a guideline

allowing the participants to choose which ones they would like to discuss:

 What do you think of stricter regulation and financial incentives to boost electric

vehicles charging infrastructure?

 What is your opinion on demand-side incentives of electric vehicle purchases?

 How can the competitiveness of the European automotive industry be improved? What

measures should be considered?

HU24EU

7

Session 2: Setting the scene for the competitiveness agenda (follow-up to

EUCO on the new competitiveness deal, Antwerp Declaration)

Background:

In order to achieve the EU’s green and digital transitions (twin transition) and the set climate

goals, EU leaders recognised the need for a new competitiveness agreement based on a fully

integrated single market. In this context, investment and access to capital are key, with a

particular focus on the need to improve access to private finance and de-risking investment for

key technologies and their industrial and commercial scale up. Equally important is the need

for the EU to monitor and address supply chain risks in sensitive sectors and reduce its strategic

dependencies in sectors such as energy, net zero industries, critical raw materials,

semiconductors, health, digital, food, critical technologies, chemicals, biotechnology and space.

A modern, well-functioning Single Market is a prerequisite for long-term competitiveness. The

Single Market has provided the EU with a strong economic basis: a market of more than 440

million consumers, economies of scale, diversified supply sources, opportunities for innovation

and increased production, while promoting strong social rights and decent working conditions.

The Single Market has proven to be a powerful tool for building resilient and sustainable

European integrated supply chains, by building own European production capacities and

diversifying supplies from third countries.

In order to implement the new European Competitiveness Deal, it is important to actively

consult with key players of various sectors and the Council should push for a decisive and rapid

move forward based on the guidance provided by the European Council 6this April, especially

the following:

 Significantly reduce the administrative and compliance burden on companies and

national authorities, prevent over-regulation and ensure the enforcement of EU rules

 Investments in key strategic sectors and infrastructures require a combination of public

and private funding. The EU budget and the EIB Group will continue to play an

important role, more can be done to support scale-ups and industrial deployment.

Deepening the Capital Markets Union is key to leverage private capital.

 Removing remaining barriers and fully implementing and enforcing free movement

rules, especially in the area of services;

 Improving interconnected transport /infrastructure and mobility;

 Reinforcing European connectivity and telecoms infrastructure

 Discontinuation of unfair practices, such as the production and distribution of dual-

quality of foodstuff.

 Developing a new horizontal strategy for a modernised Single Market by June 2025

addressing competitiveness challenges for businesses of all sizes, in particular SMEs

and start-ups.

 Building a fully integrated Single Market. This will require efforts at both EU and

Member State level and across policy areas to close the growth, productivity and

innovation gap between the EU and its main international competitors. To this end,

policy measures should be further geared towards strengthening the European

6 https://www.consilium.europa.eu/media/m5jlwe0p/euco-conclusions-20240417-18-en.pdf

HU24EU

8

economic, manufacturing, industrial and technological base, notably in the markets of

the future, thereby ensuring the Union’s economic resilience and industrial renewal,

global competitiveness, technological leadership and attractiveness as a business

location. In this context, it is essential to strive for a level playing field, both at global

level and within the Single Market.

On 20 February 2024, in Antwerp, Belgium, 73 leaders from almost 20 industrial sectors signed

the “Antwerp Declaration for a European Industrial Deal”7. To date, the declaration has

been signed by 845 companies and more than 342 trade associations (24 June 2024).

The dialogues, like the Social Partners Summit in Val Duchesse and the discussions at the

Antwerp Industrial Summit, showed that industry and social partners are firmly committed to

climate goals and are involved in the implementation of the European Green Deal. They also

demonstrated that our industry is firmly committed to prosperity in Europe while generating

growth through access to global markets and diversified value chains.

The “Antwerp Declaration” is a call to the governments of the Member States, the next

European Commission and Parliament, indicating the need for clarity, predictability and trust

in the EU and its industrial policy. Therefore, Europe should not only be a continent of industrial

innovation, but also a continent of industrial production. In difficult economic conditions, the

Declaration outlines 10 urgent actions to restore competitiveness and maintain jobs in Europe,

while making European industry more resilient and sustainable, further supporting the climate

goals set out in the Green Deal.

Industry must be kept in Europe because it will provide the solutions to the climate change and

digital transformation that Europe needs.

The statement highlighted, inter alia, the need for removing regulatory incoherence, complexity

and excessive reporting obligations, which would include corrective measures. It is also

essential to make better use of the Single Market, revitalise it and remedy its shortcomings. The

so-called “industrial deal” is a necessary condition for the successful delivery of the Green Deal,

but not in contradiction with it. Overall, it is considered necessary to develop a comprehensive

strategy. Energy infrastructure, in particular smart grids and interconnections, would deserve

much more investment. In addition, competition policy, including merger rules, should be

updated and state aid rules better aligned with EU’s strategic public policy goals and needs.”

Context:

Against this background, the Presidency invites Member States and the European Commission

to discuss and respond to the economic, trade and social challenges posed to the

competitiveness of the Single Market and the economic, trade and social challenges resulting

from climate change and geopolitical crises, and to explore ways to boost productivity and

sustainable and inclusive growth to build a robust, innovative and resilient economy.

While we witness the 31st anniversary of the Single Market in 2024, it is time to acknowledge

what has been achieved and to learn from the mistakes made in order to strengthen our

competitiveness. We must aim to create a more competitive Europe that respects the principles

of the Single Market and has an industry and agriculture capable of facing major international

challenges.

7 https://antwerp-declaration.eu/

HU24EU

9

A functioning and flexible Single Market is the cornerstone of Europe’s competitiveness. Both

the Commission and the Member States should play a key role in building a single and

internationally competitive European economy. Strengthening the Single Market is key to

maintaining the EU’s international competitiveness.

Preserving the achievements of the Single Market, competitiveness and security of supply

require the strengthening of EU industry and it is therefore in the common interest to align the

European industrial policy framework with the overarching long-term policy priorities of the

Union, with the broad involvement of stakeholders. We can only achieve the goals set along in

the twin transitions by not only supporting the future, but also developing the right answers to

the problems of the present.

Instruments to tackle the challenges:

We need to strengthen our joint work and commitment and pay special attention to the

following areas:

 Mitigating regularity burdens is crucial for the European businesses to remain

competitive. Targeted efforts should be made to improve and simplify the

implementation and enforcement of the agreed rules.

 The issue of promoting new technologies and markets of the future needs to be

addressed across industries, horizontally, in order to encourage their uptake, including

through a more agile standardisation system, valorisation of IP rights (Intellectual

Property rights) and swift adoption of the proposed regulation on standard-essential

patents, improved access to finance, more strategic use of public procurement, including

innovation public procurement subject to sustainability, resilience, cybersecurity and

social criteria.

 Industrial digitalisation needs to be stepped up in order to harness its potential and boost

industrial competitiveness.

 Industry and stakeholders need to contribute to the rapid implementation of strategic

actions, in all sectors, e.g. steel industry and automotive industry.

 Monitoring and reducing strategic dependencies as well as strengthening security of

supply is essential.

 The Union must be prepared for the future and equipped with the means that may be

necessary in a crisis situation with a serious impact on the Single Market. This requires

a swift implementation of IMERA.

 While reducing energy dependency, we must ensure that the European production

capacities of all economic activities that are essential to maintaining quality of life,

remain sufficient to deal with crises.

 The protection of European economic security and level playing field should be ensured.

 Promoting the European Union’s digital preparedness, overcoming the digital divides,

harnessing the potential of digital technologies and the use of artificial intelligence are

key competitiveness factors.

 The Commission and the Member States, bearing in mind the energy security of

individual Member States and the European Union, should step up their efforts to

promote a more efficient interconnection of energy systems as well as modernising and

adapting energy grids to new needs.

HU24EU

10

 The Commission and the Member States should continue to prioritise building a genuine

and deep Capital Markets Union in order to facilitate access to private finance, not least

venture capital, de-risk investments in key technologies so as to accelerate their

industrial and commercial scale up and to allow for further growth of European

companies, while responding to the specific needs of SMEs.

 In light of the Next Generation EU and REPowerEU, continued public investment is

needed to ensure Europe’s competitive advantage in key priority areas. Efficient use of

EU funds, such as cohesion policy funds, can contribute to a level playing field and

increase regional convergence within the Single Market, as well as help increasing

investment in strategic technology areas covered by the STEP Regulation.

 Steps should be taken to further prioritise research efforts, and strengthen the transfer

of research results into practical business applications and incorporate the development

of standards already into research and innovation.

 To ensure that EU businesses can continue to thrive in digital, clean technologies and

other strategic sectors, the EU should continue to support fair and open trade and use

trade defence instruments to protect the Single Market whenever necessary.

 To ensure smooth green transition towards a sustainable economy, and to successfully

achieve the zero-emission goals set for 20358, we urge the Member States to emphasise

the importance of individual industries helping to carry out these goals, with a special

attention on the electric-vehicle sector.

 Skills and labour shortages need to be given increased attention in the context of broader

demographic trends, in particular through efforts in education and training, but also by

facilitating the mobility of skills and talents within EU and to the EU.

To start the debate, we have proposed the following questions as a guideline

allowing the participants to choose which ones they would like to discuss:

 What should be the main points of a new European Competitiveness Deal?

 What policy measures do you see to increase productivity, where do you see specific

intervention points?

 How to make sure that the green and digital transitions are balanced, fair and

contribute to competitiveness?

 What are the areas where the application of connectivity solutions is becoming critical

to productivity, how can their deployment be supported?

8 https://climate.ec.europa.eu/news-your-voice/news/fit-55-eu-reaches-new-milestone-make-all-new- cars-and-vans-zero-emission-2035-2023-03-28_en

HU24EU

11

Session 3: How AI affects European competitiveness?

Background:

Artificial Intelligence (AI) is considered as one of the most important and impactful

development of the recent years. Discussion on AI usually focuses on the technical, ethical,

legal and security aspects of the technology. Looking at it however from a competitiveness and

economic growth angle, we look at AI in a different way: AI is tool that can achieve

unprecedented efficiency in almost any field in the economy and society.

AI will be a very important driver of economic growth and competitiveness. According to

recent studies9 on the economic potential of AI, “conventional” and generative AI solutions

could add the equivalent of 17.1 trillion to 25.6 trillion USD to the global economy annually.

Those who are adapting to this technological change and are able to incorporate AI into their

internal processes will be more efficient, more productive and more competitive. On the other

hand, those who are lagging behind in this progress will struggle to compete with the adapters.

This potential of competitiveness and growth is in a strong relation with the labor market on

which AI will also have a significant impact. According to recent research10, almost 40 percent

of global employment is exposed to AI. However, it is important to underline that at the same

time AI will create new jobs as well – jobs which require higher skills and which potentially

will provide higher salaries. Jobs which will offer way more added value than the ones which

were supplemented by the AI. We think that the overall balance between the lost and created

jobs can be positive – skills and education will play, however, a significant role in the success

of this transition at individual level.

In order to be successful in the competing global market, European enterprises should utilize

all benefits of this technology. Member States recognized this and included the economic and

labor-market related aspects in their national strategies. For example Hungary’s recent AI

Strategy aims for 15% GDP growth and 26% productivity growth in the SME sector coupled

with 1 million AI related new workplaces11.

Context:

There is no doubt that at this point the United States are leading the global AI race, mostly

thanks to big tech. US is followed by China, which is quickly catching up in this race by already

surpassing US in some figures (most notably in adoption of AI systems12). Compared to these

competitors, the European Union is for the time being lagging behind, mainly in terms of

investment and enabling computing infrastructure such as the cloud. The EU however does

have some significant strengths, such as a large single market, strong industrial sectors,

computing capacity through a world-leading public network of supercomputers, a number of

9 https://www.mckinsey.com/capabilities/mckinsey-digital/our-insights/the-economic-potential-of-generative-AI-the-next-

productivity-frontier#business-value According to the study, the figures here are short to mid term estimates without

determining any specific timeframe. 10 Gen-AI: Artificial Intelligence and the Future of Work (International Monetary Fund – Staff Discussion Note of January

2024.) 11 https://mik.neum.hu/wp-content/uploads/2024/03/Magyarorszag-Mesterseges-Intelligencia-Strategiaja.pdf 12 https://datainnovation.org/2021/01/eu-drops-behind-in-the-global-ai-race-as-china-challenges-u-s-lead-new-report-finds/

HU24EU

12

innovative startups, as well as a very high number of (AI) scientists and and highly skilled

engineers.

The level of adoption of AI solutions varies greatly between Member States. For example

according to the latest Eurostat figures13 the gap between the first and last Member State in

terms of AI usage of European enterprises is more than 13 percentage points.

This means that, beyond strengthening development, the EU needs to speed up its adaptation

progress of the technology in both the private and public sectors.

AI Innovation Package: AI Factories and GenAI4EU

In this context, the Commission launched the AI Innovation Package in January 2024. This

initiative will support European startups and SMEs in the development of trustworthy AI,

including through providing them with privileged access to supercomputers; and, most

importantly, by substantially investing in AI optimized supercomputers and in AI factories,

bringing together the necessary resources around these supercomputers, namely computing

power, data and talent, to offer a wide and comprehensive range of services to European AI

start-ups.

AI Factories developed across Member States should be linked to the national AI strategies,

including providing access to public data, European data spaces as well as connecting talent.

AI factories in each Member State will be connected to those of other Member States and to

other relevant AI initiatives, such as testing and experimentation facilities and the “Digital

Innovation Hubs”, thus creating a closely interconnected AI ecosystem across the whole of the

EU.

In addition, the GenAI4EU initiative will stimulate the uptake of generative AI across a set of

different strategic industrial ecosystems of the Union, such as robotics, health, aerospace,

energy or mobility to mention just a few, thus supporting the transition pathways outlined in

the EU Industrial Strategy. Such an approach will boost the deployment of generative AI

technologies in the private and public sectors across key European industrial ecosystems. The

“AI Factories Act” was endorsed by the Competitiveness Council on May 23 and will be

implemented as of this summer.

AI Act for trustworthy AI

The recent adoption of the AI Act is an important step to enhance trust in the technology

across the EU.

At the international level, the Commission promotes its approach to trustworthy AI through

collaboration with its strategic partners in the context of the Trade and Technology Councils

and the digital partnerships, as well as in multilateral contexts with the G7, the OECD, the UN

and the safety summits. The objective us to ensure progress towards a human-centric,

trustworthy, and sustainable AI. Moreover, it is working with Member States on a risk

assessment exercise aimed at identifying AI-related risks and mitigation measures.

However, further, non-legislative measures may be necessary to fully exploit the AI-induced

competitiveness potential in Europe.

 Drafting and updating national strategies in AI allows the assessment of strengths,

weaknesses, opportunities and threats. It offers a structured framework for

13

https://ec.europa.eu/eurostat/databrowser/view/isoc_eb_ai__custom_10785496/default/table?lang=en

HU24EU

13

understanding the internal and external factors that can influence a country’s success in

AI development and deployment.

 Defining key assets helps in recognizing the nation’s existing strengths, such as a robust

tech industry, skilled workforce, strong research institutions, and supportive

government policies. Competitive advantage can be maximized by understanding what

the country excels in, the strategy can focus on areas where it already has a competitive

edge, ensuring resources are allocated efficiently and effectively.

 Identifying early internal weaknesses, such as skill gaps, inadequate computing and

cloud infrastructure, or lack of funding allows for targeted interventions to overcome

these barriers.

 A thorough mapping of opportunities can identify external opportunities, such as

emerging markets, potential partnerships, and untapped applications of AI. This helps

in shaping a forward-looking strategy that can capture new markets and drive

innovation.

 Understanding global trends and opportunities ensures that an AI strategy to boost

competitiveness is aligned with international developments, enhancing the country’s

position in the global AI landscape.

 Identifying external threats, such as third-country competition and dependencies,

regulatory changes, ethical concerns, and weaponisation of AI allows for the

development of strategies to mitigate these risks. This proactive approach ensures

resilience against potential disruptions. To facilitate the achievement of common goals,

join forces and avoid duplication of efforts, national strategies further need to be

consolidated at European level in line with the EU industrial strategy on AI as reflected

in the Innovation Package of January 2024.

Challenges to address:

Our main challenges are the development of a competitive offer of (generative) AI solutions

“made in Europe” and their integration into innovative applications across the European

economy. This includes the digitalisation/AI adaptation capabilities of European enterprises

and of the public administration and the upgrade of the skills of the European workforce.

1. A competitive offer of (generative) AI solutions “made in Europe”

Dedicated programs jointly funded by EU, Member States and industry/private sector, should

be carried out both at EU and MS level to swiftly implement AI Factories and support

GenAI4EU through:

 Development of advanced, state of the art AI models:

o Joint forces between national and EU efforts, including public and private

funding, to foster and facilitate European research and development in order to

strengthen the European technological sovereignty and reduce the dependence

on the US and Asian technology-import;

o Support the development of Large Language Model(s), ensuring coverage of all

national languages within the EU;

o Support the development of EU multimodal models as they are currently lacking

o Foster and facilitate the development and application of a shared computing

infrastructure, supporting and building on the AI Factories, and complement

with cloud to edge continuum.

HU24EU

14

 Development and deployment of AI-based solutions

o Create a strong pool of innovators around AI Factories ecosystems all over

Europe, developing (generative)AI-based solutions, based on EU models, for the

various sectors and use-cases.

 Creating a supportive environment for the development of AI infrastructure:

o Strong AI (cloud) infrastructure enables developers to effectively create and

deploy AI and machine learning applications. Enterprises of all different sizes

and across a wide range of industries depend on AI infrastructure to help them

realize their AI ambitions. Investing in strong AI infrastructure provides better

return on investment on AI initiatives than trying to accomplish them on

outdated, inefficient IT infrastructure.

2. More focus on the European competitiveness and SMEs

o We should put a special emphasis on the AI adoption by the European

enterprises, particularly by SMEs. The Digital Decade policy programme, which

guides Europe’s digital transformation, declares: by 2030 75% of EU enterprises

will have to use AI and/or Cloud and/or Big Data technology. This is not an

easily attainable target, by this indicator the EU27 value 7,9% was in 2021.

o Reinforce the entire AI value chain, from the semiconductors to the provision of

computing capacity to generative AI and industrial applications of AI;

o Foster the adaptation of AI technologies of European enterprises (especially

SMEs) through GenAI4Eu initiative; Hungary (and other member states) uses

EU funds, launches programmes (within the EDIOP Plus and DROP Plus

operational programmes) for the support of development / introducing AI based

business solutions by the companies, AI focused European Digital Innovation

Hubs (EDIH-s funded by Digital Europe Programmes and other sources

including national state budgets) are already contributing to this goal

3. Talent and human resources – cooperation in education

Besides the application of the technology the AI-induced transformation of the labor market is

also largely affecting European competitiveness. AI will both supplement existing jobs and

create new ones with higher added value. On the one hand it is possible that some European

jobs may disappear in the long run, but on the other hand there will be a demand for a skilled

(or maybe even more) workforce to develop, maintain and operate the new solutions derived

from this technology.

Having the necessary skills in time is the key to be successful in this transition – therefore the

possibility to gain these skills shall be provided. EU funded dedicated programs could support:

 Launching awareness campaigns on AI’s impact on the labor market and the future

possibilities.

 Creating and publishing on-line trainings and educational materials on the basics of our

best practice, an AI awareness-raising program called “AI Challenge”14. By reaching

more than 4.5 million individuals and more than 118k participants, we believe that AI

Challenge successfully passed the test – and we are working on its 2.0 version with

updated content and multi-language accessibility).

14 See more details here: https://neum.hu/en/mi/

HU24EU

15

 Creating an AI and technology oriented advanced course with unified exams and EU-

wide recognized certificates, whilst respecting Member States' exclusive competence

for education.

 Creating AI training modules for non-IT curricula (e.g., medicine, law, economy and

finance) to equip the specialists of the future with the knowledge on how AI can support

their professions, its risks and limitations.

 Upskilling and reskilling the present workforce in the private and public sectors to boost

the deployment of AI and promote its safe and responsible use.

To start the debate, we have proposed the following questions as a guideline

allowing the participants to choose which ones they would like to discuss:

 Focusing on the proposed instruments above, especially AI Factories and GenAI4EU

initiatives, what do you think about the actions proposed and which instrument(s) do

you see as most relevant? Which measures should be taken to achieve the goal of AI to

become a key driver of economic growth and competitiveness in the years to come?

 The AI Board gathers Member States’ high-level representatives to steer the EU policy

approach in the field of AI and has just started its operation. Would you see any merit

in the AI Board providing regular updates to the relevant Council configuration on

matters regarding competitiveness in AI?

INFORMAL COMPET – FINAL PROGRAMME

MONDAY 8th JULY 2024

1st day

14.30 – 17.30 MOL Campus (Budapest, Dombóvári út 28, 1117)

A Site Visit to MOL Campus

Enabling a smart transition – the role of industrial policy

14:30 Delegation members greeted by Mr. Zsolt Hernádi, CEO, MOL Group

14:45 - 15:00 Keynote speech by Marco Mensink, Director General, European Chemical Industry Council

15:00 - 16:00 MOL projects and innovations EXPO, Guided tour in small groups

16.00 Refreshments are served at the MOL CAMPUS Skybar, overlooking the southern banks of the Danube.

From the Campus transfer will be provided to Hotel, from where the Venue for the Gala Dinner is within a walking distance of 3 minutes.

19.00 – 22.00 Gala Dinner at Vigadó (Budapest, Vigadó tér 2, 1051)

19.00 – 19.30 Reception by Mr. Márton Nagy, Minister for National Economy, Hungary

19.30 – 22.00 Gala Dinner

Through the courses three Hungarian success stories of three unique Hungarian companies: BioTech, 4iG and Waberer’s.

TUESDAY 9th JULY 2024

2nd day

08.00 – 08.40 Transfer for the ministers and his/her delegation from the hotel to venue of the Plenary Session

Várkert Bazár (Budapest, Ybl Miklós tér 2-6, 1013)

08.40 – 9:00 Doorstep photo

Mr. Márton Nagy, Minister for National Economy, Hungary welcomes Heads of Delegations as they arrive consecutively.

09.00 – 11.00 Session 1 EV transition: How can we meet 2035 deadline?

The session will be chaired by Mr. Márton Nagy, Minister for National Economy.

11.00 – 11.10 Family Photo

11:10 – 11.30 Coffee Break

11.30 – 12.30 Session 2 Setting the scene for a competitiveness agenda (follow-up to EUCO on new competitiveness deal, Antwerp Declaration).

12.30 – 13.00 Press Conference

Participants not taking part in Press Conference simultaneously continue with Working Lunch.

12.30 – 14.00 Working Lunch

Working lunch for Heads of delegations.

Continuing session 2 debate, and debriefing from the sessions.

The lunch discussion will be chaired by Mr. Márton Nagy, Minister for National Economy.

The Venue of the lunch is next to plenary hall.

Lunch is served for other delegates in a separate room.

14.00 – 15.30 Session 3 How AI affects European Competitiveness?

The session focuses on AI from a competitiveness point of view.

15.30 End of meeting

Airport Transfer will be provided for the HoD and his/her delegation. Assigned Liaison Officers will be helping delegations at all times. Please find the “Concept Paper” for more information on the sessions of the 2nd day attached, and please note the “Background Paper” provided for Session 1.

INFORMAL COMPET – FINAL PROGRAMME

MONDAY 8th JULY 2024

1st day

14.30 – 17.30 MOL Campus (Budapest, Dombóvári út 28, 1117)

A Site Visit to MOL Campus

Enabling a smart transition – the role of industrial policy

14:30 Delegation members greeted by Mr. Zsolt Hernádi, CEO, MOL Group

14:45 - 15:00 Keynote speech by Marco Mensink, Director General, European Chemical Industry Council

15:00 - 16:00 MOL projects and innovations EXPO, Guided tour in small groups

16.00 Refreshments are served at the MOL CAMPUS Skybar, overlooking the southern banks of the Danube.

From the Campus transfer will be provided to Hotel, from where the Venue for the Gala Dinner is within a walking distance of 3 minutes.

19.00 – 22.00 Gala Dinner at Vigadó (Budapest, Vigadó tér 2, 1051)

19.00 – 19.30 Reception by Mr. Márton Nagy, Minister for National Economy, Hungary

19.30 – 22.00 Gala Dinner

Through the courses three Hungarian success stories of three unique Hungarian companies: BioTech, 4iG and Waberer’s.

TUESDAY 9th JULY 2024

2nd day

08.00 – 08.40 Transfer for the ministers and his/her delegation from the hotel to venue of the Plenary Session

Várkert Bazár (Budapest, Ybl Miklós tér 2-6, 1013)

08.40 – 9:00 Doorstep photo

Mr. Márton Nagy, Minister for National Economy, Hungary welcomes Heads of Delegations as they arrive consecutively.

09.00 – 11.00 Session 1 EV transition: How can we meet 2035 deadline?

The session will be chaired by Mr. Márton Nagy, Minister for National Economy.

11.00 – 11.10 Family Photo

11:10 – 11.30 Coffee Break

11.30 – 12.30 Session 2 Setting the scene for a competitiveness agenda (follow-up to EUCO on new competitiveness deal, Antwerp Declaration).

12.30 – 13.00 Press Conference

Participants not taking part in Press Conference simultaneously continue with Working Lunch.

12.30 – 14.00 Working Lunch

Working lunch for Heads of delegations.

Continuing session 2 debate, and debriefing from the sessions.

The lunch discussion will be chaired by Mr. Márton Nagy, Minister for National Economy.

The Venue of the lunch is next to plenary hall.

Lunch is served for other delegates in a separate room.

14.00 – 15.30 Session 3 How AI affects European Competitiveness?

The session focuses on AI from a competitiveness point of view.

15.30 End of meeting

Airport Transfer will be provided for the HoD and his/her delegation. Assigned Liaison Officers will be helping delegations at all times. Please find the “Concept Paper” for more information on the sessions of the 2nd day attached, and please note the “Background Paper” provided for Session 1.