On Tuesday, the EU Commission adjusted its emissions guidelines for the automotive industry. According to the new regulations, CO2 fleet emissions will only have to be reduced by 90 percent compared to 2021 from 2035 onwards, instead of 100 percent as originally planned. This means that new hybrid or gasoline cars or electric vehicles with a gasoline generator on board, known as range extenders, can still be registered after that date. If the member states and the EU Parliament approve the EU Commission's proposal, it would be the most far-reaching U-turn in climate policy in the past five years.
The Commission is responding to pressure from the automotive industry, which had called for concessions in view of sluggish demand for electric cars, as well as to corresponding initiatives from car-producing countries such as Germany and Italy. German Chancellor Friedrich Merz said that greater technological openness and flexibility were the right steps to take in order to better reconcile climate targets, market realities, businesses, and jobs. Merz had recently sent a letter to Commission President Ursula von der Leyen urging her to back down.
The German industry association VDA felt that the concessions did not go far enough. VDA President Hildegard Müller said that Brussels had disappointed with its draft. "The rightly recognized openness to technology must be more than just lip service," she said. "What looks like more openness is fraught with so many hurdles that it threatens to remain ineffective in practice." The association was particularly critical of the fact that emissions from the sale of combustion engines after 2035 are to be offset by the use of green steel from Europe or climate-neutral fuels.
Among car manufacturers themselves, however, the EU Commission's initiative met with approval. A Volkswagen spokesperson described the new regulation as economically sensible. With its proposal, the EU Commission is making it clear that electric mobility is the leading technology of the future. "This is also undisputed for the Volkswagen Group." A Mercedes spokeswoman said that mobility must become CO2-neutral and that battery-electric mobility remains the main path to decarbonizing the industry. Now, she said, it is important to analyze the effects of the proposed compensation approach with regard to green steel and CO2-neutral fuels. BMW stated that it was an important first step that the EU Commission was no longer pursuing technology bans as a guiding principle, but was recognizing the future viability of the combustion engine. Now, the further process of CO2 fleet legislation must ensure that this does not lead to a sham solution, but that Europe finds a way out of the regulatory impasse.
Environmental lobbyists, on the other hand, accused the Commission of weakening the industry in the race with emerging suppliers from China. It is the wrong time for Europe to take the wind out of its own sails, said Chris Heron, secretary general of E-Mobility Europe. William Todts of Transport & Environment said the EU prefers complexity to clarity. "Breeding faster horses would not have slowed the rise of the automobile," he said. Every euro spent on hybrids now is money not spent on electric cars, while China continues to gain ground. "Sticking with combustion engines now will not make Europe's carmakers great again."
SLOWING SALES
Sales of electric cars in the EU are currently weak and are also concentrated mainly in several countries in the north and west of the continent, while in southern and eastern Europe, electric cars have so far played only a minor role. Analysts at brokerage firm Jefferies spoke of a realignment in the global market for electric cars, pointing to the demise of prestigious electric pickups and the associated billion-dollar write-off at Ford. "It is clear that the global automotive sector is reaching a reset point and is not on a straight path to electrification."
To get the market moving, the EU Commission is pushing for further subsidies. A new category of small electric cars from Europe is to be introduced, which will be given special preferential treatment when calculating fleet limits. Volkswagen has announced a range of cars around the ID.Polo for next year that will fall into this category, while Renault and Stellantis already have such vehicles on offer.
In addition, companies and rental car firms are to be given guidelines on the use of electric cars. Konstantin Sixt, co-CEO of the car rental company of the same name, spoke of a tightening of the rules and a de facto bringing forward of the end of combustion engines by five years for the majority of new registrations in Germany, for example. Brussels should instead focus on expanding the fast-charging infrastructure. Finally, the construction of battery factories and the associated raw materials chain in Europe should be supported.
(Report by Philip Blenkinsop and Christina Amann. Edited by Olaf Brenner. If you have any questions, please contact our editorial team at Berlin.Newsroom@thomsonreuters.com (for politics and the economy) or Frankfurt.Newsroom@thomsonreuters.com (for companies and markets).
