With a historical background spanning approximately 150 years, the automotive industry has become one of the most strategic sectors of the global economy, with an annual vehicle production of 92.5 million units and a market size of 2.9 trillion dollars. The sector is undergoing a fundamental transformation centred on electric vehicles, autonomous driving technologies and sustainable production practices. However, it is evident that the R&D and innovation activities driven by this transformation fail to achieve sufficient economic and social effectiveness when left entirely to market mechanisms, due to challenges in knowledge dissemination and financing. Consequently, state intervention in R&D activities—a key component of technological progress and innovative development—has become a functional necessity.

This study examines this reality through the example of the European Union and primarily from the perspective of public finance. The EU, which accounted for 45.4 per cent of global automotive R&D expenditure in 2023, is a world leader in this field. The Union’s incentive framework comprises tax-focused tools such as R&D tax credits, super-deductions and patent box schemes; finance-focused incentives including direct grants and innovation vouchers; environmental protection investment aid under the Green Deal; support for battery and hydrogen technologies under the IPCEI mechanism; the Cluster 5 component of the Horizon Europe programme, innovation funds and regional investment aid. Each of these tools is designed to address a different market failure and, together, they form a multi-layered structure. Consequently, the study demonstrates that the EU has not left the innovation capacity of the automotive industry to market forces, but has instead shaped it within the framework of a deliberate, multi-tool, multi-layered and long-term public intervention.