Europe Abandons 2035 Internal Combustion Engine Ban

The European Commission has announced it will abandon its plan for a 2035 ban on internal combustion engine (ICE) vehicles in the European Union. This decision follows significant pressure from Germany, the continent’s largest economy, which expressed concerns over rising competition and trade challenges. An official announcement is expected soon from Brussels.

Details on the ICE Ban Reversal

The reversal of the combustion engine ban marks a substantial shift in the EU’s approach to automotive regulations. German Chancellor Friedrich Merz acknowledged that while electric mobility remains essential, alternative technologies like synthetic fuels will also play a crucial role in achieving carbon neutrality.

Manfred Weber, president of the European People’s Party, indicated that the proposal to abolish the ban aligns with a push for market-driven climate strategies. He emphasized the need for technological openness, which would provide the automotive industry with the necessary planning security.

Impact on Emission Goals

There is currently uncertainty regarding other EU emissions targets, such as the goal of a 55% reduction in automotive emissions by 2030. The 2035 ICE ban was enacted only recently in February 2023, making this reversal a rapid and unexpected development.

Global Electric Vehicle Sales Plateau

In another significant shift, global electric vehicle (EV) sales have hit their slowest growth rate since February 2024. Factors influencing this decline include a stagnation in the Chinese market and the end of a $7,500 federal tax credit for EV purchases in the United States. North America is now on track for its first year of decreased EV sales since 2019.

Regional Sales Trends

• Global EV registrations rose just 6% in November, nearing 2 million units.
• Sales in China increased by only 3% to over 1.3 million units.
• North American sales fell by 42% to just over 100,000 units.
• European registrations surged, growing by 36% to more than 400,000 units.

Despite strong growth in Europe, the decrease in North American sales coincides with Germany’s decision to abandon the ICE ban, signaling potential trouble ahead for the broader industry.

New Tariffs Imposed by Mexico

In related news, Mexico has approved a bill imposing tariffs of up to 50% on vehicles from China. This move disrupts trade with countries lacking free trade agreements, such as South Korea, and aims to bolster local production in sectors like automotive and textiles.

The legislation reflects growing protectionist sentiments and will come into effect next year, potentially raising an estimated $2.8 billion in additional revenue by 2026.

Volkswagen’s Strategic Shift

In a bid to adapt to the evolving automotive landscape, Volkswagen is exploring the introduction of electric vehicles equipped with range-extending gasoline engines in both the U.S. and Europe. This change aims to address consumer concerns regarding charging infrastructure amid a decrease in government support for EVs.

The automaker is currently assessing the market for this technology, particularly in light of the recent reversal of the ICE ban and shifting government policies.

Volkswagen’s forthcoming five-year investment strategy will address these technological advancements, with an official announcement expected in March.