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The car industry has soured on the EU’s plan to ease the 2035 ban on combustion engines as details have become clearer, with some executives warning the “disastrous” changes would lead to more expensive vehicles.
Brussels said on Tuesday it would scrap a law forcing carmakers to cut their emissions to zero by 2035. While carmakers will be allowed to carry on releasing 10 per cent of their 2021 emissions and to continue selling some petrol engines and hybrids, the European Commission has mandated that the emissions be offset by using low-carbon steel and sustainable fuels.
The softening of the 2035 ban was meant to be a hard-won victory for carmakers after months of intense lobbying. Although it was initially welcomed by some carmakers, many companies said the offsets would be too challenging to bring in since the required use of green steel and “made in Europe” content in vehicles would be complex and expensive.
“In times when European economic strength is crucial, this entire package from Brussels is disastrous,” said Hildegard Müller, president of the German car lobby VDA. “What appears to be greater openness is fraught with so many obstacles that it risks remaining ineffective in practice.”
Stellantis, the European group behind the Jeep, Fiat and Peugeot brands, said the proposals failed to address the challenges in the electric transition for light commercial vehicles and did not include enough flexibility to meet emissions targets in 2030.
“The introduction of technology neutrality through the revision of the 2035 CO₂ reduction target is an important step but, as currently proposed, it will not support the production of affordable vehicles for the vast majority of customers,” it said.
Auto industry analyst Matthias Schmidt predicted petrol cars would “become haute couture Swiss watches of the motor industry” with the added costs of green steel and renewable fuel priced in.
The French car industry body, the Plateforme automobile (PFA), has adopted a more measured approach to the package, saying that the policies “represent an initial response to the urgent challenges facing the European automotive industry today”.
France, which had pushed for “made in Europe” protections that are set to be announced in January, was broadly reassured by the measures, one industry expert said, although the PFA wants to see more flexibility for vans and on 2030 emissions targets.
In a sign of deep division among EU member states, negotiations over the revision, particularly on whether full combustion engines should still be allowed after 2035 and on national targets to electrify corporate fleets, ran down to the wire on Tuesday.
A senior EU official said the offsets for the final 10 per cent were a “pretty strong compromise” given heated politics around the easing of the ban, which has been heavily lobbied by industry and countries such as Germany, Italy and the Czech Republic.
Manfred Weber, the Bavarian leader of the conservative European People’s party, the European parliament’s largest political group, had claimed victory on Friday, saying the Commission would put forward “a clear proposal to abolish the ban on combustion engines”, without mentioning conditions for green steel and renewable fuel.
Chris Heron, secretary-general of E-Mobility Europe, a trade association, estimated that the changes meant that plug-in hybrids and other petrol vehicles could account for more than a quarter of new car sales in Europe based on preliminary estimates.
“By reopening the door to plug-ins, hybrids and unscalable biofuels, we risk slowing ourselves down in a highly competitive global race,” Heron said.
The proposal setting binding national EV ratios for zero emissions corporate vehicles was among the most contested elements, EU officials said. A draft list of targets showed that Germany was originally expected to run an entirely electric corporate fleet after 2035 but after negotiations on Tuesday, the goal was reduced to 95 per cent.
EU officials said the corporate fleets proposal was critical to maintaining the bloc’s ambitions for cutting emissions in the road transport sector, which accounts for about 20 per cent of the total, because it would expand the second-hand market for electric cars.
“A great aspect is that it brings these vehicles to the second-hand market much faster,” one official noted, adding that about 80 per cent of EU citizens buy cars second-hand.
But Richard Knubben, director-general at Leaseurope, which represents Europe’s leasing and automotive rental companies, warned that limiting financing options for companies and the lack of incentives for EV uptake meant that the corporate fleets rules were “likely to make a difficult situation worse for the manufacturers”.
Additional reporting by Ian Johnston in Paris
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