EU plans to ease internal combustion engine ban, automakers welcome a resuscitation

The Zhitong Finance App learned that under several months of pressure from the automobile industry, the European Union is preparing to propose relaxation of emission regulations for new cars and actually abolish the ban on fuel engines. The move will allow automakers to slow down the pace of introducing electric cars in Europe and bring the region closer in policy to the US — US President Donald Trump is abolishing energy efficiency standards for cars set by previous administrations. Global automakers are facing profit difficulties with the transition to electrification, and Ford Motor Company (F.US) has announced that it will charge $19.5 billion in related expenses due to the comprehensive reform of its electric vehicle business.

The EU's policy pullback will be announced on Tuesday. This is part of the general contraction of global green policies under the actual pressure of economic transformation. Increasing international trade tensions are driving Europe to prioritize supporting its domestic industries even more. Despite the EU's legal commitment to climate neutrality by 2050, governments and businesses are stepping up calls for more flexibility, warning that rigid goals could jeopardize economic stability.

According to people familiar with the matter, according to the new proposal, the European Commission will reduce the requirement to stop selling new gasoline and diesel vehicles, which was originally scheduled to take effect in 2035, and instead allow sales of a certain number of plug-in hybrids and electric vehicles equipped with fuel range extenders.

Those familiar with the matter, who did not wish to be named, said that by 2035, exhaust emissions will need to be reduced by 90% from current levels, rather than the 100% complete emission reduction target originally set. The European Commission will set a condition where car manufacturers need to compensate for additional pollution by using low-carbon or renewable fuels, or using locally produced green steel.

The European Commission declined to comment on the proposal.

The proposal is due to be passed by European Commission commissioners on Tuesday and will then be submitted to the European Parliament and the member states of the European Council for discussion. Each agency has the right to propose its own amendments, and the final form of the measure will be negotiated in “tripartite talks” involving the Parliament, the Council and the Commission.

As automakers get more time to move to full electrification, environmental groups worry that these changes have created new holes, hurt Europe's climate ambitions, and left major automakers further behind China in this electrification race.

The Chinese automobile market continues to rapidly electrify, and foreign brands are being pushed aside in the world's largest automobile market, which was once the main source of profit for Western automakers. Even in the home market, European car manufacturers are facing growing competition from Chinese brands. The new import tariffs set by the European Union only provide them with limited protection.

This prompted intense lobbying by companies such as the Stellantis Group and the Mercedes-Benz Group. Germany, which is the headquarters of Mercedes, Volkswagen, and BMW, has also promoted policy adjustments to ease political tension and protect employment.

Earlier this month, six prime ministers, including Italian Prime Minister Georgia Meloni and Polish Prime Minister Donald Tusk, lobbied the European Commission to allow the use of plug-in hybrids, extended-range electric vehicles, and fuel cell technology after 2035. Germany has also been working hard to tone down the upcoming ban to protect its automakers from US trade tariffs, fierce international competition, and weakening European demand.

Purchase Incentives

Sales growth of new battery electric vehicles slowed last year after countries including Germany, the EU's largest market, lifted purchase incentives. Although growth is recovering, due in part to the restoration of some subsidies, the growth rate is still far from meeting the EU's target requirements.

Electric vehicle penetration across the region is still very uneven. This year, electric vehicles accounted for 35% of sales in the Netherlands, compared to just 8% in Spain. In Spain, the uneven distribution of charging facilities and relatively high prices continue to discourage some consumers.

The package will also include measures to increase the penetration of small European-made electric vehicles, according to documents seen last Saturday. This includes exempting such cars from certain safety and emission requirements for up to 10 years, as well as incentives in the form of parking spaces and subsidies.