EU policymakers want to phase out all fossil-fuelled cars, buses, and trucks by 2035. But they're facing a big roadblock: consumer and car manufacturer resistance.
Under regulations revised last year in Brussels, all cars sold from 2035 onwards must be zero-emission electric vehicles.
While the ban is a decade away, there are interim CO2 reduction targets—by next year, manufacturers must ensure fleet average emissions of below 93.6 grams of CO2 per kilometre, a 19% reduction from current levels.
Starting in 2025, carmakers will face a €95 fine for every gram of CO2 exceeding the limit. At current production levels, this could amount to €15 billion in annual penalties.
European car manufacturers are pushing back, calling for leniency and further revisions to the internal combustion engine (ICE) ban. They cite sluggish demand for pricey electric vehicles (EVs) in a market increasingly challenged by competition from China.
German and French auto giants have been particularly vocal, repeatedly appealing for revisions to the legislation. Renault CEO Luca De Meo, in his March open letter to the EU and again earlier this month, called for flexibility regarding Brussels' deadlines and fines.
Starting in 2025, manufacturers will face a €95 fine for every gram of CO2 exceeding the limit. At current production levels, this could amount to €15 billion in annual penalties.
Post ’25, the European car industry will face a tough choice: either continue making cars and pay hefty fines, or cut production, and jobs. Currently, over 8% of the EU’s manufacturing workforce is in the automotive sector.
Missing crucial conditions
The market is not aligning with regulators’ ambitions either. Car sales in the EU are down 18% compared to pre-COVID levels, and EV market share dropped by 10% this year.
Earlier this month, the European Automobile Manufacturers' Association (ACEA)—whose board includes executives from major European automakers such as BMW, Mercedes-Benz, VW, Ferrari, Jaguar Land Rover, and Volvo—released a statement demanding action.
“We are missing crucial conditions to reach the necessary boost in production and adoption of zero-emission vehicles: charging and hydrogen refilling infrastructure, as well as a competitive manufacturing environment, affordable green energy, purchase and tax incentives, and a secure supply of raw materials, hydrogen and batteries,” read the statement from ACEA.
A McKinsey report surveying over 15 000 people showed that only 16% of non-EV owners in the EU are considering an EV for their next car purchase, while 20% of current EV owners plan to switch back to fossil-fuels.
Hedging the bets
Playing it safe, Renault is preparing to launch two major EV products: the entry-level, retro-inspired Renault 5 hatchback and the SUV-like, family-focused Renault 4. To hedge its bets, earlier this summer the French manufacturer announced a new 50:50 venture with China’s Geely, called HORSE Powertrain, expected to generate €15 billion annually in the ICE sector.
Ford, Mercedes-Benz, and Volvo are also scaling back their electrification targets.
Stellantis—the multinational conglomerate that includes brands like Chrysler, Peugeot, Opel, Alfa Romeo, Jeep, and Fiat—has remained more optimistic about meeting the EU’s regulations. However, even the group's top-selling brand, Fiat, has had to revert its flagship model, the Fiat 500, originally designed to be zero-emission, to include fossil-fuelled engines in an attempt to revive sluggish demand. This month, Fiat temporarily shut down the 500’s production line for four weeks due to poor sales.
“We need urgent and meaningful action now,” urges ACEA.
Meanwhile, the Japanese are carrying on. For years, Far East manufacturers have resisted heady EV ambitions and the rush toward electrification, even when it was all too easy for a brand to score PR points with claims of sustainability and environmental concern.
Toyota, the world’s biggest carmaker, conservatively aims to sell 3.5 million EVs annually by 2030 – roughly one-third of its total production. With the current EV market share in the EU at 12.6%, even that target could prove ambitious.