EV-only future threatened as Germany makes U-turn on EU's 2035 combustion engines ban
Hans · Mar 3, 2023 03:06 PM
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The European Union (EU) parliament had in October 2022 reached a provisional agreement to ban sales of new internal combustion engine (ICE) cars and vans starting 2035.
The EU parliament is supposed to meet again later this month to vote on the issue.
Now Germany – a strong proponent of battery EVs - is making a surprise U-turn on the subject, threatening to block the agreement together with Italy, unless the EU Parliament can assure Germany that there will be provisions to allow sales of combustion engine cars running on synthetic fuels.
Synthetic fuels are man-made fuels produced from carbon dioxide (CO2) and hydrogen (H2). Synthetic fuels produced from renewable energy are known as e-fuels. Such fuels have the potential to make combustion engine cars carbon neutral.
How synthetic fuels are made. Image: Repsol
Backing Germany is Italy, another country with a lot of vested interest in combustion engines. Lesser developed Poland and Hungary, where the transition to 100 percent battery EVs is not very realistic, have also signalled their intention to join Germany and Italy.
The topic of banning combustion engine cars is a politically charged one in Germany, one that is threatening to tear apart the country’s 3-party coalition government.
Similar to Malaysia, Germany’s current government is a fragile coalition of 3 unlikely partners - the radical Green Party is backing a complete ban in favour of battery EVs, while Social Democratic Party and Free Democratic Party are against the ban.
Last week, Germany’s Transport Minister Volker Wissing said Germany will not support the EU’s proposal.
“The EU Commission should propose regulation that allows combustion engines to be registered after 2035, if they can verifiably only be fueled with synthetic fuels,” he said.
Last year, Toyota raced a synthetic fuel-powered GR86 in a 25-hour endurance race in Thailand. Also raced was a hydrogen-burning combustion engine GR Corolla
Germany’s U-turn comes as a big surprise because the country is the largest market for battery EVs in the European trade bloc, and German car manufacturers are very far ahead in rolling out battery EV models.
Germany’s sudden U-turn is frustrating Brussels because Germany has previously been supportive of June 2022’s draft proposal to ban combustion engines by 2035, and voted in support of the provisional agreement in October 2022.
The China factor could be part of the reason behind Germany’s U-turn.
European car industry executives have warned that if the ban comes to pass, Europe will be flooded by imported Chinese EVs while Europe’s industrial base suffers a hollowing out.
Because of higher energy prices in Europe, European manufacturers cannot compete against Chinese EV manufacturers on price. Car industry executives estimate that stricter regulations and higher energy cost in Europe mean that EVs produced in Europe are about 40 percent more expensive than China.
The EU's ban on ICE is the most extreme. Source: JAMA
Also, China has no intention of banning combustion engines, which raises questions on why is the EU going this far.
Stellantis CEO Carlos Tavares has told German business publication Automobilwoche that the Stellantis group, which is the No.1 selling EV group in Europe by volume - can fight the Chinese imports head-on, but unpopular decisions will need to be made – car plants to be closed, manufacturing jobs to go elsewhere, European suppliers to be cut off, leaving Europe in a poorer state.
"If you keep the European market open, then we have no choice: we have to fight the Chinese directly. And that applies to the entire automotive value chain."
The consequences would then be significant, he said. "That would inevitably lead to unpopular decisions."
Capacities would have to be cut and plants would have to be relocated to more favorable locations.
Another option, Tavares said, is to "re-industrialize" Europe, to bring back lost industries and production chains.
"If you want that, however, there is still a lot to do in the EU, then you would need a different trade policy."
There have been projections about EVs coming down in price and reaching cost parity with combustion engine cars, but this is not happening.
“I am not worried about Stellantis, I am worried about the middle classes who will not be able to buy cars that cost 30,000 Euros,” said Tavares, whose Stellantis group’s Peugeot e-208 is now the No.1 selling budget EV in Europe.
Last year, Luca de Meo, CEO of Renault Group said, “I do not see this parity getting close. I can come up with better battery chemistry and better power electronics, but these gains would be erased when the price of cobalt doubles in just six months."
BMW CEO Oliver Zipse has also warned “We do not want cars to be taken away out of the base segment, politically that is super dangerous. If you all of a sudden make car ownership only for rich people, it's a dangerous thing."
"As a politician I would be mega-careful... because you are taking away cars by regulation," Zipse said.
Over 15 years of experience in automotive, from product planning, to market research, to print and digital media. Garages a 6-cylinder manual RWD but buses to work.
