The European Union’s decision to soften its automotive carbon dioxide emissions rules was greeted with derision by environmentalists and sighs of relief by the industry.
Investment bank UBS declared the change to be a “small relief”.
European Commission President Ursula von der Leyen announced Monday manufacturers would receive a two-year extension for meeting the planned tighter CO2 emissions rules for 2025 if they outperform restrictions for the next two years.
Volkswagen had said it might be hit by fines of up €1.5 billion ($1.58 billion) for failing to meet the rules this year. Renault expected a lesser penalty.
Brussels-based green lobby group Transport & Environment described the change as “an unprecedented gift to Europe’s car industry.”
“Weakening the EU clean car rules rewards laggards and does little for Europe’s car industry except to leave it further behind China on electric vehicles,” said William Todts, executive director of T&E, in a statement.
“The EU risks creating very damaging uncertainty about the electric vehicle transition in Europe. So, we expect an automotive action plan that restores confidence and puts Europe and its industry back on track towards 100% emission free cars in 2035,” Todts said.
Todts was referring to the EU Commission’s Strategic Dialogue, which was set up to help revitalize Europe’s flag-ship automotive industry, under pressure from highly competitive Chinese EVs, and threatened by a tariff war with the U.S.
The commission will publish Wednesday its Strategic Dialogue action plan. This is designed to rescue an industry floundering under the assault of Chinese electric vehicles, not least because the commission decided to force its citizens to buy only new EVs by 2035, even though it was aware China was years ahead in making the vehicles and producing batteries. The Commission also talked Monday about member states incentivizing the purchase of electric vehicles, promoting autonomous cars, and supporting the building of battery factories.
President Trump is about to announce his plan to equalize tariffs with the EU and remove artificial barriers to free trade.
The European Automobile Manufacturers Association (ACEA) described the 2025 proposals as a “first step” and wanted more support for autonomous vehicles and battery production.
ACEA President and Mercedes CEO Ola Källenius welcomed the commission move but wanted more action.
“Let me be clear about our primary concern: how do we chart the course to 2035 with the necessary flexibility and pragmatism to make this transition work? This is the fundamental question we would like to address with Commission President during the next Strategic Dialogue meeting,” Källenius said.
German members of ACEA want much more drastic revision of the CO2 rules. They want internal combustion engines to still be available after 2035 in the form of plug-in hybrids and range extenders, and to allow the use of so-called e-fuels, synthetic fuels made from renewable electricity, water, and carbon dioxide. Some want the EV mandate to be replaced by an open technology regime. According to Berenberg Bank, Germany, Poland, France, Italy and Czechia have asked the Commission to relax CO2 regulations to avoid weakening an already challenged automotive sector.
The European Consumer Organisation, known by its French acronym BEUC, said this watering down of CO2 rules will make electric cars more expensive and less accessible for consumers.
“This is deeply regrettable, given that January 2025 saw record-breaking sales of European made EVs; up 51% compared to last year. Despite this, the Commission should now reinforce demand-side measures to green corporate fleets to feed the second-hand market, expand consumer-friendly public charging, and introduce European subsidies for EVs,” BEUC said in a statement.
Sales of EVs have in fact been stagnating because they are too expensive for Europeans on average wages and are unable to provide the all-round utility that ICE vehicles can. Chinese manufacturers of EVs are said to have a 30% cost advantage over European manufacturers and the likes of BYD, Geely, Great Wall Motors and SAIC’s MG threaten to undermine their profits and viability.
UBS said the proposed changes by the Commission still need to be agreed by the EU Parliament and member states but expects swift progress.
“EU (manufacturers) will still have to sell more EVs this year, because a “sit-back-and-relax” strategy could be risky and costly in the coming years. Therefore, the growth in EVs will continue, and we expect EV price competition to remain intense,” UBS said in a research note.
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