Europe’s plan to save its automotive industry allowed some CO2 relief for manufacturers but the EU’s decision to retain the 2035 ban on new combustion powered vehicle sales spurred criticism from some politicians and carmakers.
The EU Commission published its Strategic Dialogue Wednesday, designed to rescue an industry struggling to meet mandated electric vehicle sales, and likely to flounder under the assault from Chinese EVs.
For 2024, the EU mandated a target of 22% market share for EVs and plug-in hybrids, but it slid to 19.6%, according to the European Automobile Manufacturers Association (ACEA). EV’s accounted for 13.6%. The target for EVs was between 20 and 25% for 2025, but automakers now have two more years to reach that, potentially avoiding huge fines. The combined target was 28% for 2025, and 80% by 2030, on the way to 100% by 2035.
Other measures, which need to be approved by the European Parliament, included proposals to subsidize battery production, charging infrastructure, and autonomous driving. The Commission talked about industry demands for technology neutrality but gave no details.
German manufacturers want ICE to still be available after 2035 in the form of plug-in hybrids and range extenders, and to allow the use of so-called e-fuels, synthetic fuels made from renewable electricity, water, and carbon dioxide.
The Commission wanted member states to crank-up subsidies for EV sales and backed “social leasing” plans, like France’s scheme to allow low-income buyers to rent an EV for €40 ($43.3) a month. It also wants an end to corporate fleet tax schemes which subsidize ICE cars.
The centre-right EPP is the largest political grouping in the European Parliament. It wants to reverse the ICE ban and change to a technology-neutral approach.
According to the Wall Street Journal, the EPP is the biggest political grouping in the European Parliament composed of national center-right parties such as Germany’s Christian Democrats and Spain’s Popular Party.
EPP’s lead on the automotive industry, Jens Gieseke, welcomed the increased flexibility proposed by the Commission.
“It would have been incomprehensible to the public if, at a time when some car factories are closing, and hundreds of thousands of workers are worried about their jobs, Brussels had imposed billion-euro ($billion) fines on European manufacturers,” Gieseke said in a statement.
“The EPP Group had hoped for a clear commitment to swiftly revising the internal combustion engine ban. Instead, it remains vague and non-committal. The Commission must act decisively. If we want to achieve our goal of climate neutrality by 2050, we need all available technologies. We expect the Commission’s promise of technological neutrality to be implemented swiftly,” Gieseke said.
Brussels-based consumer group BEUC criticised the move to lessen the CO2 burden regime and doesn’t want to hear any proposal that would weaken them more, saying this would undermine manufacturers’ flexibility and consumer confidence.
“The Commission announced welcome steps making it easier, in theory, for consumers to access electric cars. But at the same time giving car manufacturers flexibility in meeting the 2025 CO2 targets sends really the wrong signal to consumers,” BEUC Director General Agustin Reyna said in statement.
“Electric cars are already rolling off the production lines in increasing numbers. This will simply disincentivise car makers from providing new, more affordable models until later in the decade. Consumers’ choice will be reduced to only more expensive options. To maintain momentum, the Commission now needs to hold firm and ensure the 2030 and 2035 targets are maintained.” Reyna said.
Earlier this week Brussels-based green lobby group Transport & Environment described the change as “an unprecedented gift to Europe’s car industry.”
“Weakening the EU clean car rules rewards laggards and does little for Europe’s car industry except to leave it further behind China on electric vehicles,” T&E said in a statement.
VDA, the German automakers’ association, agreed that fining manufacturers while they are investing huge sums in future EV production would have been “irrational” and “counterproductive”.
“The entire process and the associated necessary framework conditions for customer acceptance and the ramp-up of e-mobility were initially underestimated politically and then massively neglected. This situation has now hopefully been seriously recognized and must lead to real course correction,” VDA President Hildegard Mueller said in a statement.
This EU plan to outlaw sales of new ICE vehicles is beginning to look over-ambitious. For instance, forecasters see no chance for the target of about an 80% market share in Europe for EVs by 2030.
EV Volumes’ forecasts 61.6% share. French consultancy Inovev sees 40% EV share at most by 2030. Investment researcher Jefferies cut more than two million sales from its 2030 forecast late last year. Its 2030 forecast now stands at 4.7 million for a market share of 35%.
Henning Dransfeld, director of Strategy & Industry Solutions at Infor, believed the targets were the wrong approach and unlikely to be met.
“The targets look impossible, I’d agree with that,” Dransfeld said in an interview.
“These targets are being imposed on consumers. They should have a choice. It should be incentives not regulation. I think it’s difficult to force an entire market by a certain date to embrace EVs,” Dransfeld said.
Dransfeld said faltering consumer demand could be improved if leasing was more commonplace. Currently, second-hand EV prices are weak and leasing could remove a big uncertainty by ending worry about ultimate residual values.
The extension of the 2025 CO2 demands was a relief for Volkswagen shareholders who feared the company might be hit by fines of up €1.5 billion ($1.58 billion). Renault expected a lesser penalty.
But before investors in European sedan and SUV manufacturers get too complacent, they should brace themselves for renewed controversy as President Trump prepares his plan to equalize tariffs with the EU and remove artificial barriers to free trade.
Equalizing tariffs between the U.S. charge of 2.5% and Europe’s 10% on auto imports looks simple and logical. Unfortunately, Trump wants to attack a huge range of what he considers unfair non-tariff barriers across all of U.S. trade with Europe.
Former U.S. ambassador to the EU Gordon Sondland, put it this way in an interview last month with the BBC’s NewsNight program.
“When EU citizens come to the U.S. on vacation or to live here temporarily, they don’t bring their own cars or their own food. They are perfectly safe eating our food and driving our cars and it’s high time the EU treated our products that way,” Sondland said.
