EU Revises Combustion Engine Ban, Impacting Germany's Automotive Industry

The European Commission has proposed a significant reform to EU environmental regulations that allows the registration of new gasoline and diesel vehicles beyond 2035. This move comes after negotiations involving EU member states, the European Parliament, and the automotive sector. While maintaining the goal to transition to zero-emission vehicles mainly through electric models, the Commission has relaxed emissions targets and offered automakers more flexibility. Specifically, new vehicles must reduce average CO₂ emissions by 90% compared to 2021 levels by 2030, with allowances for up to 10% compensation via green steel, synthetic fuels, and modern biofuels. Furthermore, the reform includes incentives such as a “super bonus” for small, affordable electric cars produced in Europe and proposes 1.8 billion euros in interest-free loans supporting European battery production.

However, Germany faces disadvantages under the new plan, with reports highlighting that the country’s automotive industry, heavily reliant on combustion engine technology, might bear a disproportionate economic burden. Other EU countries seem poised to benefit more favorably from the updated regulatory framework, exacerbating concerns about Germany’s competitiveness and the potential for job losses within its crucial automotive sector. German government and European People's Party (EVP) discussions led to these revisions, with EVP leader Manfred Weber calling the reform a victory that provides clarity for hundreds of thousands of jobs in the industry.

This development reflects the ongoing tension between ambitious climate goals and economic considerations within the EU, with Germany's automotive sector navigating stricter regulations compared to its European counterparts. The European Commission views the proposal as a first step in a broader support package for the automotive industry aimed at balancing environmental objectives with economic sustainability.