Study Says EU Industry Can Match China and US by 2035 If It Electrifies and Enforces CBAM

Study Says EU Industry Can Match China and US by 2035 If It Electrifies and Enforces CBAM Seventy companies back a binding 50% electrification target as European manufacturers lose ground to Chinese rivals across vehicles and clean technology. Seventy companies and industry groups called on the European Commission last week to set a binding target to electrify 50% of final EU energy consumption by 2040, warning that the bloc risks falling permanently behind China and the United States on clean technology. The coalition's demand followed a study published on Wednesday showing that most European industries could compete with both rivals by 2035 if they electrified and had the backstop of a fully functioning EU carbon border adjustment mechanism.^2,7 That matters because Europe's competitive position is deteriorating fast. Chinese brands now account for 20% of the European hybrid market and 11% of electric vehicle sales, according to Rhodium, a consultancy. German cars command only 17% of the Chinese domestic market, down from a peak of 27% in 2020. Chinese competition is not confined to China's borders. It jeopardises European manufacturers' sales in third-country markets too, as China's net exports of vehicles and components expand.⁴ The subsidy gap between China and its competitors is vast. Chinese EV-makers received $231 billion in various forms of state support between 2009 and 2023, according to the Centre for Strategic and International Studies in Washington. The American government's bailout of Detroit after the global financial crisis was a fraction of that sum. European industry has had neither the scale of Chinese subsidies nor the tax credit architecture of the US Inflation Reduction Act.⁵ The IEA's latest Global EV Outlook quantifies how far ahead China has moved. Electric vehicles are expected to account for nearly 30% of global car sales this year, with around 23 million units projected to be sold worldwide. Chinese automakers supplied roughly 60% of electric cars sold globally last year. European and North American manufacturers each accounted for about 15%.³ Global EV sales jumped 20% last year to top 20 million vehicles, with one in every four new cars sold worldwide now electric and about 40 countries recording EV market shares above 10%. The growth trajectory is not slowing. The IEA projects worldwide sales will reach around 23 million by the end of this year.³ The study's argument rests on two pillars. Electrification lowers long-run energy costs for European manufacturers by replacing fossil fuel inputs with increasingly cheap renewable power. CBAM prevents producers in jurisdictions without carbon pricing from undercutting those investments by exporting carbon-intensive goods into the EU tariff-free. Remove either pillar and the economics break down. Electrification would also reshape European power demand. A separate study reported by Montel found that flexibility in operating data centres could slash their contribution to peak power demand by up to 45% by 2035, avoiding 4 GW of fossil fuel backup generation. The finding suggests that smart demand management can absorb significant new electrical load without proportional increases in peak capacity.¹ China is meanwhile pursuing its own industrial energy strategy through coal. PetroChina is developing a project for the extraction of gas from coal rock, targeting output of 30 billion cubic metres by 2035, Reuters reported. Chinese coal sector stocks jumped 30% between late February and mid-March as investors rewarded the industry's ability to use coal for fertiliser and petrochemical production.⁶ The divergence is stark. Europe is betting on electrification and carbon pricing. China is betting on electrification and coal-based chemicals. Both strategies aim at energy security, but they imply very different demand profiles for gas, coal and power over the next decade. For European power markets, a binding electrification target would be structurally bullish for baseload demand and renewables buildout, while compressing the long-term outlook for imported gas as industrial heat shifts to electric. For carbon markets, a functioning CBAM that genuinely levels costs would support ICE EUA Dec-rolling by maintaining the economic rationale for European producers to stay inside the EU emissions trading system rather than relocate. The risk is that Brussels moves too slowly. The 70-company coalition's call for a binding target suggests the private sector sees the current pace of policy as inadequate. Whether the Commission acts on it before the competitive gap widens further is the open question heading into the second half of 2026.