EU To Yield on Combustion Engine Ban After Automaker Pressure

The European Commission is set to backtrack on the EU's planned ban on new combustion-engine cars from 2035 by allowing continued sales of some non-electric vehicles following intense pressure from Germany, Italy and Europe's auto sector.

The EU executive appears to have yielded to the call from carmakers to be allowed to keep selling plug-in hybrids and range extenders that burn CO2-neutral biofuel or synthetic fuel as they struggle to compete against Tesla and Chinese electric vehicles.

Under current EU rules, all new cars from 2035 must have zero emissions. But under Tuesday's proposal, the reduction of CO2 emissions will be reduced by 90 per cent from 2021 levels, instead of 100 per cent.

Manfred Weber - the German president of the EPP, the largest group in the European Parliament - said his understanding was that the 90 per cent level had been agreed upon by the Commission and that the scaled-back reduction still represented progress.

"A 90 per cent reduction on 2035 is a massive reduction," he told a press conference in Strasbourg.

EU Climate Climb Down As Ford Kills EVs

The move, which will need approval from EU governments and the European Parliament, would be the EU's most significant climb-down from its green policies of the past five years.

It comes as US carmaker Ford Motor announced on Monday it would take a $19.5 billion writedown and is killing several electric-vehicle models, in response to the Trump administration's policies and weakening EV demand.

European carmakers such as Volkswagen and Fiat owner Stellantis have also pointed to weak EV demand and called for an easing of targets and the fines for missing them. Automotive lobby group ACEA called it "high noon" for the sector, adding that the Commission should ease intermediate 2030 targets as well.

German carmakers in particular are feeling the pinch as they lose market share in China to local automakers and are threatened at home from imports of slick new Chinese EVs. EU tariffs on Chinese-built EVs have only slightly eased the pressure.

EU Lagging China in EV Race

However, the electric vehicle industry warned that easing emissions targets will undermine investment and result in the EU yielding even more ground to China in the shift to EVs.

"Moving from a clear 100 per cent zero-emissions target to 90 per cent may seem small, but if we backtrack now, we won't just hurt the climate. We'll hurt Europe's ability to compete," said Michael Lohscheller, CEO of Swedish EV manufacturer Polestar.

William Todts, executive director of clean transport advocacy group T&E, said the EU was playing for time while China was racing ahead.

"Clinging to combustion engines won't make European automakers great again," he said.

The Commission will also detail plans to boost the share of EVs in corporate fleets, notably company cars, which account for about 60 per cent of Europe's new car sales. The precise measure is not clear, but there may be an insistence on some local content. The auto industry wants incentives rather than mandatory targets.

The EU executive is also likely to propose a new regulatory category for small EVs that would incur lower taxes and earn extra credits towards meeting CO2 targets.

Credits might also be earned through more sustainable production, such as vehicles made with low-carbon steel. 

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