Europe Abandons Combustion-Engine Ban

EU Considers Weakening 2035 Car Emissions Rules

Brussels has proposed a significant revision to its plan for banning new combustion-engine cars in the European Union by 2035, following intense pressure from the automotive industry. This move highlights a growing challenge in transitioning away from gasoline-powered vehicles, as policymakers face unexpected difficulties in implementing their electric-vehicle (EV) goals.

The revised proposal, announced on Tuesday, suggests a shift from a complete ban on tailpipe emissions to a 90% reduction from baseline levels. The remaining 10% could be offset through the use of low-carbon steel or e-fuels and biofuels. This change would allow plug-in hybrid electric vehicles, range extenders, and internal combustion engines to continue being sold in the EU after 2035, alongside fully electric and hydrogen vehicles.

The European Commission, which acts as the EU’s executive body, claims that the new plan still supports the market's shift toward zero-emission vehicles while providing more flexibility for automakers. However, the proposal must still gain approval from the EU’s member states and the European Parliament before it can take effect.

Industry groups have responded with mixed reactions. While some see the proposal as a positive first step, others question its complexity and effectiveness in protecting jobs and production. The European Association of Automotive Suppliers expressed concerns that the measures may not be sufficient to address the challenges faced by the sector.

Automakers have long argued that the original 2035 target for zero emissions is unrealistic due to slower-than-expected adoption of EVs by consumers. Jim Farley, CEO of Ford Motor Company, recently stated that the current CO2 requirements in the EU and the U.K. are out of sync with market realities. He also mentioned that Ford plans to outsource the production of two small EVs to Renault, signaling a shift in strategy.

The transition to EVs is causing financial strain across the automotive sector. Ford recently announced it expects to record about $19.5 billion in charges, primarily linked to its electric-vehicle business. In Europe, automakers have had to price their EVs aggressively to meet regulatory targets, leading to increased sales but lower profits.

Volkswagen, the region’s largest carmaker, reported a loss in the third quarter. The company attributed this to selling more lower-margin EVs and experiencing write-downs related to its EV investments. The European automotive supply chain is also facing significant challenges, as EVs require fewer mechanical parts compared to traditional vehicles. This shift has placed European suppliers at a disadvantage, especially when competing against Asian manufacturers who dominate the electronics supply chain.

Major suppliers such as Bosch and ZF Friedrichshafen have already announced thousands of job cuts in recent months. A study by consulting firm Roland Berger for the European Association of Automotive Suppliers warns that up to 350,000 jobs could be lost by 2030 if the current trend continues.

As the EU reevaluates its approach to reducing carbon emissions, the automotive industry remains at the center of the debate. The outcome of these discussions will have far-reaching implications for both the environment and the global economy.