UAE: Electric Car Mandate Dropped

EU Revises 2035 Ban on New Petrol and Diesel Cars, Opting for Looser Emissions Targets

In a significant shift in its environmental policy, the European Union has announced it will no longer mandate a complete ban on the sale of new petrol and diesel cars by 2035. Instead, the bloc will implement revised, less stringent emissions targets, allowing for the continued sale of some combustion-engine vehicles beyond the original deadline. This decision marks a substantial pivot from the EU's ambitious climate agenda, signalling a compromise with the automotive industry.

The European Commission has confirmed that car manufacturers will not be compelled to exclusively offer zero-emissions vehicles. The revised requirement mandates a 90% reduction in car exhaust emissions from 2021 levels, rather than the initially proposed 100%. This adjustment is intended to alleviate pressure on an industry grappling with subdued demand for electric vehicles (EVs) and intensifying competition, particularly from Chinese manufacturers.

Industry Lobbying and Economic Realities Drive the Policy Change

This policy reversal follows extensive lobbying efforts by key European nations, including Germany and Italy, alongside major European automotive corporations. These stakeholders have voiced concerns about losing market share to Chinese rivals and being disadvantaged by more affordable imports. While critics argue that this move could significantly weaken one of the EU's flagship climate initiatives, proponents contend that it is a necessary concession to safeguard jobs and ensure the long-term viability of Europe's automotive sector.

The EU executive's apparent concession acknowledges the calls from carmakers to continue selling plug-in hybrid and range-extender vehicles. These models, which still utilise fuel, are seen as a crucial bridge as manufacturers navigate the challenges of competing with established EV players like Tesla and emerging Chinese EV makers.

Key Revisions to Emissions Targets

The original EU regulations stipulated that all new cars and vans registered from 2035 must produce zero tailpipe emissions. The newly proposed framework introduces a phased approach:

• 2035 Target: A 90% cut in CO2 emissions compared to 2021 levels, rather than a complete elimination.
• Offsetting Remaining Emissions: Automakers will be permitted to offset the remaining 10% of emissions. This can be achieved through the use of lower-carbon steel produced within the EU, as well as synthetic e-fuels and non-food biofuels derived from sources such as agricultural waste and used cooking oil.

• Interim Targets:
  • 2030-2032: A three-year window during which automakers must achieve a 55% reduction in car CO2 emissions from 2021 levels.
  • 2030 Van Target: The emissions reduction target for new vans in 2030 has been adjusted to 40%, down from the previously planned 50%.

These proposed changes, which are subject to approval by EU governments and the European Parliament, represent the most substantial retreat from the bloc's green policies implemented over the past five years.

Broader Industry Trends and Competitive Landscape

The EU's policy adjustment comes amidst broader challenges faced by the automotive industry. Ford Motor recently announced a significant $19.5 billion writedown and the discontinuation of several EV models, citing factors such as US administration policies and weakening EV demand. European manufacturers, including Volkswagen and Stellantis (owner of Fiat), have also reported softer EV sales and advocated for more flexible emissions targets and reduced penalties for non-compliance. The automotive lobby group ACEA described this period as a critical juncture for the sector.

German manufacturers, in particular, are facing considerable pressure. They are reportedly losing ground in the Chinese market to local competitors and are experiencing increasing competition within Europe from Chinese EV imports. The imposition of EU tariffs on Chinese-built EVs has provided only limited relief.

Concerns Over Climate Goals and Global Competitiveness

Despite the industry's concerns, the EV sector has warned that easing emissions targets could jeopardise investments and further widen the gap between Europe and China in the transition to sustainable mobility. Michael Lohscheller, CEO of Swedish EV manufacturer Polestar, expressed apprehension, stating, "Moving from a clear 100% zero-emissions target to 90% may seem small, but if we backtrack now, we won't just hurt the climate. We'll hurt Europe's ability to compete."

William Todts, executive director of the clean transport advocacy group T&E, criticised the EU's approach, suggesting the bloc is delaying action while China accelerates its progress. He commented, "Clinging to combustion engines won't make European automakers great again."

Strategies to Boost EV Adoption and Support Emerging Technologies

In parallel with the revised emissions targets, the Commission has also outlined plans to stimulate EV uptake, particularly within corporate fleets, which constitute approximately 60% of new car sales in Europe. The proposed national targets for 2030 and 2035 will be determined based on GDP per capita, allowing individual member states to devise their own strategies for meeting these goals. Industry groups have pointed to measures like Belgium's tax incentives for electric company cars as potential models.

Furthermore, the Commission has proposed the creation of a new regulatory category for smaller EVs. These vehicles would be subject to less stringent rules and would qualify for additional credits towards CO2 targets if manufactured within the EU. These measures aim to foster innovation and support the development of a more diverse and accessible EV market. The ongoing debate surrounding these revisions highlights the complex interplay between environmental ambitions, industrial competitiveness, and the evolving global automotive landscape.