EU Reconsiders 2035 ICE Ban, Aiding Legacy Automakers
A proposed shift to a 90% CO2 reduction target, driven by German industry pressure, could allow plug-in hybrid sales and reshape Europe's EV transition.
The European Union is signaling a significant retreat from its landmark plan to ban the sale of new combustion-engine cars from 2035, a move that provides a critical lifeline to legacy automakers and complicates the continent's path to an all-electric future.
Under growing pressure from Germany's powerful automotive sector, policymakers are now poised to dilute the outright ban. Instead of a 100% reduction in CO2 emissions from new cars by 2035, the European Commission is expected to propose a 90% cut. This subtle but profound change would create a carve-out for the continued sale of highly efficient engines, most notably plug-in hybrids (PHEVs).
The policy shift follows a concerted push from influential German political figures concerned about the economic impact of a hard deadline. Last week, senior MEP Manfred Weber, president of the European People’s Party (EPP), declared the 2035 ban was "off the table," signaling a clear change in political winds. The pivot reflects apprehension over potential job losses and the formidable manufacturing presence of Germany’s car industry.
This revision offers substantial strategic breathing room for traditional automotive giants like Volkswagen, Mercedes-Benz, and BMW. These companies have invested billions in developing advanced PHEV technology as a bridge to full electrification, a strategy that appeared threatened by the original 2035 mandate. A 90% reduction target validates this dual-track approach, allowing them to continue leveraging their deep expertise in combustion-engine technology while gradually scaling their EV offerings. It aligns their production capabilities more closely with a segment of consumers who remain hesitant about going fully electric due to concerns over range, charging infrastructure, and cost.
Conversely, the proposal presents a new headwind for pure-play electric vehicle manufacturers. Companies that have built their business models on the assumption of a mandatory, continent-wide switch to EVs by 2035 will now face a prolonged period of competition from advanced hybrids. The continued availability of PHEVs could slow the rate of EV adoption, creating a more competitive and fragmented market than previously anticipated.
The potential reversal is not occurring in a vacuum. It comes as the initial surge in EV sales shows signs of moderating in some European markets. According to recent reports from Clean Energy Wire, the discussion in Brussels is shifting toward finding a balance between ambitious climate goals and industrial reality. The debate acknowledges a need for "more flexibility" on CO2 targets to avoid placing European industry at a competitive disadvantage.
While the formal legislative process to amend the rule is yet to begin, the direction of travel appears set. The move highlights a pragmatic, if contentious, adjustment to one of the world's most ambitious green policy initiatives. For investors and the auto industry alike, it introduces a new variable into long-term planning, underscoring the regulatory and political uncertainty that continues to shape the historic transition away from the internal combustion engine.