Europe agrees to ban new combustion vehicles by 2035

The sun will set on combustion engines in Europe in 2035, leading to knock-on effects throughout the automotive world – including Australia.

The European Union last week agreed to laws – first proposed in June – that effectively ban the sale of new combustion-powered cars, SUVs and vans to private buyers in Europe’s 27 member-nations by 2035.

The proposal had been agreed by the EU’s executive arm (the European Commission) and the parliament, but needed the approval of member states to reach a deal – and that agreement for car-makers to hit a zero-emission target has now been reached.

The deal marks the end of a way of life for Europeans and their car-makers, which began with Karl Benz’s first car in 1886 and boomed in popularity after World War II, led by cheaply available machines like the Mini, Fiat 500 and Volkswagen Beetle.

Effectively, the new legislation means no new petrol- or diesel-powered cars or SUVs will be registered in the EU after 2035, accelerating the switch to battery-electric vehicles (EVs) and hydrogen fuel-cell electric vehicles (FCEVs).

The EC and the EU parliament both agreed to a one-year extension for boutique car-makers like Lamborghini and Donkervoort to reach the zero-emissions target.

Low-volume car-makers that sell fewer than 10,000 vehicles annually, such as Lamborghini, which will have until 2036 to comply with the rules.

The member states also sent proposals back the other way, into the EC and the parliament, to allow companies to register cars that run on carbon-neutral fuels like hydrogen and the synthetic petrol being developed by Porsche.

G7 member Japan and EU member states Germany and Italy had applied pressure on the EU to allow for internal-combustion engines (ICE) to be powered by zero-emission fuels.

Car-makers including Toyota are developing combustion engines fueled by hydrogen, while others including both Lamborghini and Porsche are developing e-fuel powered vehicles that run on synthetic fuel created from recycled carbon captured from the atmosphere, including in Australia.

“Following consultation with stakeholders, the [European] Commission will make a proposal for registering vehicles running exclusively on CO2-neutral fuels after 2035 in conformity with [European Union] law,” the European Council said in a statement last week.

However, Europe’s largest mechanical engineering body, the VDMA, criticised the EU for not making such provisions for e-fuel vehicles binding, putting the future of the internal combustion engine in doubt in Europe.

“Instead of making the opening for eFuels binding and thus securing the future of the internal combustion engine powered by eFuels in a climate-neutral way, only the non-binding recital 9a was retained in the regulation,” said VDMA deputy executive director Hartmut Rauen.

“A ban on the combustion engine for passenger cars and light commercial vehicles, which would hit European industry hard and would also unnecessarily hamper climate protection, is thus still conceivable.

“With its stance against eFuels, the EU is doing a disservice to climate protection and massively endangering an industry with long, well-established value chains.”

The EU’s target for CO2 reductions from transport by 2035 in Europe had been 37.5 per cent, so the new regulations are a massive increase in carbon-reduction potency.

“It's the start of a big transition of the European Union,” said the European parliament’s negotiator, Jan Huitema.

EU climate boss Frans Timmermans admitted surprise at the speed at which Europe was transitioning to electric cars.

“European car-makers are already proving they are ready to step up to the plate, with increasing and increasingly affordable electric cars coming to the market,” he said.

“The speed at which this change has happened over the past few years is remarkable.”

Even before the agreement, Volkswagen last week announced it would stop production of petrol and diesel vehicles in Europe by 2033 (while Stellantis, Ford, Bentley and Jaguar Land Rover had already nominated 2035), and the 2035 EU target could incentivise other car-makers to give up on ICE vehicles far earlier than originally planned.

It’s worth pointing out how radical the 2035 EU ban is compared to other markets. Even California’s 2035 deadline for the sale of ICE vehicles will still allow plug-in hybrid vehicles (PHEVs), and more than 15 other US states are expected to follow suit.

But the danger for Europe is that it is a three-speed change, and not universal. The Latin nations of Portugal, Spain and Italy all pushed for a 2040 phase-out date, because they all lag in both disposable income and charging infrastructure. Spain and Italy are major car manufacturing hubs.

Europe has by far the greatest EV take-up rate in the world per-capita, and is running at around 10 per cent of the new-car market, compared to just four per cent for the US and around seven per cent for China.

BMW Group chairman Oliver Zipse and the president of Europe’s peak manufacturers’ body, ACEA, said there was still much for the EU to discuss with carmakers.

“We are now keen to see the framework conditions which are essential to meet this target reflected in EU policies,” Zipse said.

“These include an abundance of renewable energy, a seamless private and public charging infrastructure network, and access to raw materials.”

The new zero-emission rules will fall under the Fit for 55 umbrella at the EU, which aims for a 55 per cent emissions cut by 2030 (from 2021 levels).

Commercial vans will only need to meet a 50 per cent CO2 reduction by 2030, but will be required to meet the full 100 per cent (zero) CO2 emissions standard by 2035.

European law-makers will also create a standardised method to assess the full lifecycle CO2 emission impact (including the supply-chain and manufacturing processes) of cars and vans sold in the EU by 2025.

In the meantime, France and Germany have joined forces to boost a plan to help Europe’s car-makers in the face of booming EV competition from China.

French president Emmanuel Macron met with Germany chancellor Olaf Scholz last week to plan ways to protect their car-makers. They were particularly concerned with keeping EU EV subsidies going to EU-based companies, Macron told French television.

Macron spoke in reaction to a move by US president Joe Biden to lift subsidies for electric cars made in the US.

While European companies make millions of cars in their US factories (indeed, BMW is the biggest automotive exporter, by dollar, of any car-maker in the US), none of them make an EV there yet.

Only Tesla operates an EV plant in Europe, but it is not yet finished, despite officially opening earlier this year, while Chinese-owned Volvo churns out EVs from Sweden.

“You have China and the US protecting their industry, but Europe remains open to all winds. We must change,” Macron told France 2.

“France and Germany must stick together because we have been too open, because many of our auto-makers were selling a lot in China and they did not want to close things.”

The two countries control most of the European brands people buy.

German companies control Volkswagen, Seat, Skoda, Cupra, Audi, Bentley, Lamborghini, Porsche, BMW, MINI, Rolls-Royce and Mercedes-Benz.

The French control Renault, Dacia, Alpine, Citroen, Peugeot, Opel/Vauxhall, Fiat, Maserati, Lancia, Jeep, RAM, Chrysler, Dodge, Alfa Romeo, Abarth and DS.

This isn’t a one-off for Macron, either, who was pushing a ‘Buy European Act’ for all EU Government purchasing, but was rebuffed by the EU as a breach of its rules, and of World Trade Agreements.