EU proposes new small affordable electric car category to counter cheap imports

European Commission President Ursula von der Leyen on Tuesday proposed a new “small affordable cars” initiative aimed at encouraging production of lower-cost electric vehicles in Europe, citing the need to prevent Chinese and other foreign manufacturers from dominating the market for compact, budget e-cars.

Von der Leyen said in her State of the Union address that the commission would “work with industry on a new small affordable cars initiative,” describing the concept as European, economical and environmental. The proposal draws inspiration from Japan’s long-standing kei car class — tightly regulated small vehicles designed for low cost and limited engine power — and was first publicly floated by Stellantis chairman John Elkann and former Renault chief executive Luca de Meo in July.

Kei cars (keijidosha), introduced under Japanese regulation in 1949 and updated over decades, are constrained by strict dimension and propulsion limits. Today’s kei rules set a maximum length of about 3.4 metres, width of 1.48 metres and height of 2.0 metres; proponents say a European variant could be tailored to local safety and emissions priorities.

European automakers and trade officials argue that a new category could make it commercially viable to build electric cars priced around €15,000 with modest ranges, which they say would help serve cost-conscious customers and sustain European production. Stellantis executives have said that strict current regulations and rising component costs have made low-priced cars nearly impossible to produce profitably in Europe; the company reported that 49 sub-€15,000 cars were on sale in 2019 but only one remained by 2025.

Von der Leyen urged a policy shift that would combine affordability with cleaner transport, saying, “Millions of Europeans want to buy affordable European cars, so we should also invest in small, affordable vehicles, both for the European market but also to meet the surge in global demand.” She added: “E for environmental – clean, efficient and lightweight. E for economical – affordable for people. E for European – built here in Europe with European supply chains.”

Industry proposals to lower costs include exempting some advanced driver-assistance systems (ADAS), such as lane-keeping assist, from mandatory fitment in the new class, because ADAS components are among the most expensive modules in modern cars. Manufacturers contend that loosening some equipment or certification requirements could materially lower vehicle prices while still meeting safety objectives.

The initiative also touches on how vehicle emissions are measured. Several carmakers have urged the EU to place greater emphasis on lifecycle carbon emissions — which account for manufacturing and battery production as well as tailpipe output — rather than focusing solely on tailpipe emissions. They argue this would allow a broader set of powertrain technologies during the transition to full electrification.

European Union policy already aims for a stringent ban on new internal combustion engine vehicle sales by 2035, a target carmakers say narrows options and adds cost pressures. The commission’s proposed small-car category would operate within that broader decarbonisation framework, officials said, and would require legislative and regulatory changes that typically take years to complete.

Stellantis welcomed von der Leyen’s announcement, calling the initiative “visionary and urgent” and saying affordable cars mean “cleaner air, safer roads, increased industrial production, and faster decarbonisation.” European policymakers will need to balance safety, environmental goals and industrial competitiveness as they draft detailed measures.

Any new European small-car rules would move through consultations with member states, industry stakeholders and regulators before becoming law, making rapid market availability unlikely. Lawmakers and manufacturers alike said the proposal signals a shift in strategy as Europe seeks to retain vehicle manufacturing and meet consumer demand for lower-cost electric options in a rapidly changing global market.