The European Commission announced on Tuesday (December 16) that it plans to withdraw its policy of banning the sale of new gasoline cars starting in 2035, and instead replace it with more flexible emission reduction standards. The new requirement for car manufacturers is to reduce the average carbon dioxide emissions of new vehicles by 90% compared to 2021 levels by 2035. Those meeting the standards will be allowed to continue selling internal combustion engine models, including hybrid vehicles.
This revision still needs approval from the European Council and the European Parliament. Countries like Germany and Italy, major automobile manufacturing nations, have long been calling for policy adjustments, emphasizing the need for a more practical pace of transformation for companies facing competition from Tesla in the United States and electric vehicles from China.
German automaker Volkswagen stated that keeping fossil fuel cars in the market under emission reduction compensations is a “realistic decision that aligns with market realities.” Volkswagen also mentioned that the new proposal is “economically reasonable,” especially supporting more flexible interim targets until 2030 and measures to support small electric vehicles.
According to the European Commission’s new proposal, the 2035 target shifts from “zero emissions” to “a 90% reduction compared to 2021.” Car manufacturers can offset emission differences by using low-carbon steel produced in the EU, synthetic fuels (e-fuels), or non-food biofuels (such as agricultural waste or kitchen grease). The emission reduction target for cars in 2030 includes a three-year transition period (2030-2032), requiring a 55% reduction for passenger cars compared to 2021 levels, while the 2030 target for trucks has been relaxed from the original 50% to 40%.
The Commission also proposed setting electric vehicle targets for corporate fleets in 2030 and 2035, and establishing a new category for “small electric vehicles,” which can earn additional carbon emission credits if produced within the EU, thereby encouraging local manufacturing in Europe.
This policy shift comes at a time when global demand for electric vehicles is slowing down. Recently, Ford announced a $19.5 billion impairment charge for its electric vehicle business due to weak demand, leading to the cancellation of several new EV models, causing ripples in the global market.
International brokerage firm Jefferies noted that the world is clearly entering a period of “electric vehicle policy reset,” with the EU abandoning its “black or white” transition strategy in favor of a more flexible emission reduction framework.
European automakers, including Volkswagen and Stellantis, have repeatedly warned of weak electric vehicle demand in Europe and called for relaxing emission targets and fines. The European Automobile Manufacturers’ Association (ACEA) described the current situation as a “decisive moment” for the automotive industry.
German carmakers are facing setbacks in the Chinese market and rapid expansion of Chinese electric vehicles in Europe, despite the EU imposing tariffs on Chinese-made electric vehicles. The general consensus in the industry is that the relief effect is limited.
Hildegard Müller, President of the German Association of the Automotive Industry (VDA), stated that the new proposal is still not sufficient to alleviate the industry’s burden, criticizing Brussels for “not facing reality” by adding obligations for green steel and renewable fuels.
Michael Lohscheller, CEO of the Swedish electric car brand Polestar, warned that while the reduction from 100% to 90% may seem small, it could weaken Europe’s competitiveness and continue to lag behind China in the electric vehicle race.
The policy revision requires approval from the 27 member states and the European Parliament. While countries like Germany and Italy support relaxation, France and Spain are concerned that slowing down the pace of electrification will leave Europe behind in the next automotive revolution. It is widely expected that subsequent negotiations will be full of twists and turns.
Despite the relaxed standards, countries will still need to increase the sales of electric vehicles to meet the targets. The European Commission suggests that countries should follow Belgium’s model by promoting electrification through a company vehicle tax system, as corporate vehicles account for approximately 60% of new vehicle sales in Europe.
(Adapted from reporting by Reuters)