In the 2000s, France and Arsenal footballing superstar Thierry Henry became the face of Renault’s Clio adverts. It typified the swagger of Europe’s small car industry. The intervening years have been less kind, but a new initiative could put the va-va-voom back into Europe’s small (electric) car industry.
If you holidayed in Italy or Spain recently, chances are you noticed a once familiar sight on the roads. Small, nimble cars – like the Fiat Panda and Seat Ibiza – are the preferred choice for locals.
Yet for decades, these affordable and largely homegrown iconic vehicles have been disappearing from much of the rest of Europe. Across Europe, small car sales accounted for 10% of the market in 2010. That dropped to only 3.8% in the first half of 2025. Saving them would not be a conservation project but an important part of securing the European car industry’s future.
While the industry often blames regulations for the decline, manufacturers have actively chosen to chase higher profits by shifting their line-ups towards large SUVs. In doing so, they sacrificed cheaper, smaller mass market cars that once underpinned European industrial strength. It’s a trend that continued in the ‘early adopter’ phase of electrification, with a focus on big, high-end EVs. Only a quarter of new EVs are small, compared to 40% of the overall car market.
But with European car sales well below their 2019 peak, and Chinese brands like BYD filling gaps in our EV market, the big-margin big-car strategy has come back to bite.
So Commission President Ursula von der Leyen announcement of a “small affordable car initiative” in September’s State of the Union address could provide an answer to two challenges of the EV transition: affordability and industry competitiveness.
Demand for small electric cars is big but largely untapped, given the lack of affordable options. In Spain and Italy, smaller cars account for 53% of sales, but just 6% of the overall market is electric. For Europeans, the main barrier for EV adoption today is upfront price – the average European is willing to pay at most €20,000 for an electric car.
After years of neglect, carmakers are lining up the next generation small EV models like the VW ID Polo and Renault Twingo. These cars can succeed, but only if sold in high enough volumes to become profitable for automakers and affordable to ordinary households.
Boosting the small electric car segment could be the key to bringing EU production volumes back to pre-Covid levels, adding some 1.5 million small EVs to annual sales, according to a study for the European Commission. That could generate around 120,000 new jobs.
An Affordable EV Platform using ETS2 revenues would support small electric cars built in Europe, guaranteeing manufacturers the volume certainty needed to invest in lower-margin compact EVs. Reforming car labelling would help consumers identify the cleanest, European-made cars. Governments should provide favourable tax treatment, purchase support, and social leasing schemes to make small EVs cheaper than petrol cars.
But the future of small Europe-made EVs risks being set on a dangerous diversion, as the Commission has shown openness to a proposal from some manufacturers to freeze safety requirements for small cars. This would make small cars less safe than larger, more premium vehicles. Safety should not be based on the ability to pay.
Simultaneously, the car industry is lobbying for bonus credits for small electric cars to meet their fleet average CO2 targets. Past experience with super-credits indicate that by counting each EV as more than one sale, the credits would allow manufacturers to sell fewer electric cars and more gas guzzlers.
Europe’s automotive success depends on small, mass-market EV models designed to meet today’s EU car standards.
The European Commission may not be able to kick a football like Thierry Henry, but they can kick-start a European small electric car revolution. If they help carmakers achieve scale without compromising on safety and emissions targets, they might just put the Va Va Voom back into the car industry.
Lucien Mathieu is Director of Cars at T&E, a European umbrella for non-governmental organisations working in the field of transport and the environment, promoting sustainable transport in Europe.
