Recently, there has been a global shift in automotive policies as countries in Europe and America are re-evaluating their electrification strategies due to concerns regarding cost, energy sources, and safety of supply chains. The European Union recently withdrew its plan to ban the sale of fuel-powered cars by 2035, while American car manufacturers are reducing electric vehicle production. In contrast, China has long been heavily invested in electric vehicles, but with this trend reversal, its industry and economy are now facing backlash.
The European Commission announced a significant adjustment to its plan of completely banning fuel-powered cars by 2035 on Tuesday, December 16, lowering the requirement for new cars to be “100% zero carbon” to “90% carbon reduction,” essentially allowing around 10% of non-electric vehicles to continue being sold.
This shift signifies a lifeline for internal combustion engine technology, granting traditional car manufacturers some breathing room. In the future, various vehicles including plug-in hybrid cars, extended-range electric vehicles, and even traditional fuel-powered cars, as long as they can achieve emission reduction targets through multiple means, will be permitted to remain in the market post-2035.
The Chairman of the European People’s Party, Manfred Weber, publicly stated that the ban on fuel engines has been “essentially overturned,” highlighting a shift in Europe’s political direction. This adjustment is seen as the result of several months of lobbying efforts between Europe’s center-right political parties and the automotive industry, reflecting the practical considerations faced by European car manufacturers amid stiff competition from Chinese electric vehicles, trade pressures from the United States, and weak domestic sales.
Economic scholar Davy Jun Huang analyzed for Dajiyuan that the recent shift in the West is not a denial of environmental protection but a reevaluation of whether the “climate change narrative” has been overly politicized.
Professor Xie Tian from the Darla Moore School of Business at the University of South Carolina criticized from a climate and energy perspective. He told Dajiyuan that the so-called “climate change crisis” has been exaggerated at the policy level, becoming a primary reason to promote green energy and electric vehicle subsidies.
Huang bluntly stated that some political forces in Europe have been overly obsessed with climate change in the past, adopting a radical electrification path in policies, which has instead allowed China to seize the opportunity, entering the global automotive supply chain through electric vehicles and altering the original industry landscape.
In the United States, President Trump announced at the White House in early December that his administration will be reevaluating the strict Corporate Average Fuel Economy (CAFE) standards set by the Biden government, criticizing the related regulations as “absurd and expensive,” claiming they raise car prices and limit consumer choice. The White House estimated that the new policy can save American households approximately $109 billion in total.
Trump emphasized that the government should not force the market towards electric vehicles through subsidies and bans but should let costs and consumer demand determine the technological path. Subsequently, top executives from Ford, Stellantis, and General Motors also publicly supported the policy adjustment, believing it will help the industry return to affordability and stability.
Ford Motor Company announced on Monday, the 15th, that it will be writing down assets worth $19.5 billion and discontinuing production of several electric vehicles, making it the most significant instance in the automotive industry of cutting back on electric vehicle models in response to policies of the Trump administration and weak demand for electric vehicles.
Huang pointed out that the Trump administration’s development of fuel-powered cars is driven by three strategic considerations: stability in industry and employment, as the fuel-powered car industry chain is more mature in the US; better cost-effectiveness of fuel-powered cars in a high inflation and interest rate environment, helping to alleviate social pressures; and geopolitical and supply chain security concerns, as electric vehicles heavily rely on batteries and rare earth materials that are mostly concentrated in China, posing potential national security risks.
In reality, more and more research and practical experiences are showing that pure electric vehicles are not truly zero-pollution. Instead, Huang pointed out, they may “shift carbon emissions from cars to power plants.” In countries where coal-fired power generation remains high, the actual carbon reduction effect of electric vehicles is limited, yet incurs higher social costs.
According to various media reports, limitations in the development of electric vehicles are particularly noticeable in commercial vehicles and infrastructure. For example, in the European market, a 40-ton electric truck is priced at up to 300,000 euros, about twice the cost of a diesel truck, but the transportation industry’s average profit margin is only 2% to 3%. Without long-term subsidies and stable return mechanisms, businesses find it difficult to bear the risks of transitioning.
Furthermore, charging infrastructure is also severely lacking. Currently, there are only about 1,500 public charging stations for heavy-duty trucks in all of Europe, whereas the actual demand is as high as 35,000 stations, necessitating construction at a rate of about 500 new stations per month, along with simultaneous upgrades to the grid capacity. This not only involves significant investments but also affects local governments, energy companies, and residents’ interests, making it a challenge that cannot be solved by short-term policies.
Xie Tian mentioned that electric vehicles themselves still face fundamental issues like range, charging speed, and efficiency decline in cold regions.
“In high latitudes or cold regions, electric vehicles lose battery power quickly and are not suitable for completely replacing fuel-powered cars,” Xie Tian believes that pushing electric vehicles forcefully through administrative means before the technology is mature is wasteful.
Some viewpoints suggest that the global development of electric vehicles is already “irreversible.” Nevertheless, market changes further undermine the narrative of electric vehicles being “irreversible.”
According to a report from EY on Tuesday, December 16, fuel-powered cars are regaining popularity globally.
The report stated that 50% of global car buyers plan to purchase new or used internal combustion engine cars in the next 24 months, an increase of 13 percentage points from 2024; preferences for pure electric vehicles and hybrid cars have decreased by 14% and 16%, respectively. About 36% of potential electric vehicle buyers are reconsidering or postponing their purchase plans due to geopolitical uncertainties and supply chain disruptions.
Huang believes that this indicates a transition of electrification from a “singular path to an inevitable future” to a transitional phase of multiple power sources coexisting. While electric vehicles may continue to grow, their pace and profitability curve are no longer as promising as expected in the early stages.
With the policy shifts in Europe and America, the impact on China’s electric vehicle industry is particularly pronounced. Due to the longstanding inability to break through in traditional engine and transmission technologies, China opted to aggressively promote electric vehicles on a large scale through government subsidies, resulting in the rapid emergence of over 200 car manufacturers and the integration of electric vehicles into the core of the “new productive forces.”
Xie Tian bluntly stated that this is a “misdirected gamble.” He pointed out that China miscalculated that electric vehicles would rapidly and completely replace fuel-powered cars, and sought to dominate the European and American markets with a pricing advantage. However, with the US and European markets closing off and subsidies dwindling, the industry is facing massive eliminations, with an estimated three-quarters of enterprises likely facing closure.
He described that if the electric vehicle bubble bursts, it will further exacerbate China’s economic decline.
Huang also noted that the current policy rollback in Europe and America, correcting previous idealism, will undoubtedly deal a heavy blow to China’s industry.
He stated that China’s traditional automotive industry has no significant advantages, and with recent decreases in foreign investments in joint ventures for traditional cars shifting towards Mexico and Southeast Asia, foreign joint ventures for traditional cars are contracting. Therefore, with global automotive sales leaning back towards fuel and hybrid technologies, China’s past massive investments in electric vehicles are facing the risk of collapse.
Experts believe that from the loosening of bans in the EU, reshaping of fuel-powered car policies in the US, to changes in market and consumer attitudes, the global automotive industry is transitioning from a highly politicized narrative of electrification back to a realistic evaluation based on cost, energy, and safety. China’s electric vehicle model, overly dominated by political forces and concentrated resources, is now facing a severe and practical test.