Europe prohibited new gas vehicles post-2035 — now it’s reevaluating

Ola Källenius, CEO of Mercedes-Benz, is a persistent optimist, with just cause. He has consistently urged the European Union to reconsider its ambitious objective to eradicate new internal combustion engine vehicles, asserting that relaxing the regulations signifies a return to practicalities rather than submission to critics of Europe’s climate policies.

His advocacy is yielding results. Källenius told The Verge in a recent dialogue that the stringent timelines for discontinuing combustion engines post-2035 are “no longer realistic,” citing infrastructure challenges and the gradual uptake of electric vehicles by consumers. A more adaptable approach is essential to safeguard jobs and competitiveness, enhance consumer options, and ensure that manufacturers can transition sustainably while maintaining profitability.

“This is not a retreat,” he asserted while justifying the softening of the 2035 deadline. “This is an enhancement of a more intelligent strategy that aligns Europe’s ambitions with a well-considered plan for achievement.”

During prosperous economic times with abundant job opportunities, Europeans largely supported an assertive climate agenda. However, as the economy struggles and automakers and suppliers eliminate thousands of jobs, the consensus has shifted to a desire to decelerate the transition.

Källenius remarked that car manufacturers have demonstrated their dedication to combating climate change through a decade of significant investments in innovative technologies, electric vehicles, and battery production facilities.

“Adopting a more realistic perspective could be a method for achieving Europe’s environmental objectives more efficiently,” he stated. “The ultimate aim of reaching CO₂ neutrality within the EU by 2050 remains firmly in place. The only difference is the route taken to reach it.”

As of now, it remains European legislation to prohibit the sale of new vehicles with internal combustion engines beyond 2035. To modify this, the EU must either revoke the law or amend it to introduce exceptions allowing the continued sale of traditional vehicles past the deadline.

During their summit in October, European leaders urged the Commission, the bloc’s executive arm, to revisit the ICE car ban and submit proposals by the year’s end to decelerate Europe’s previously rapid chase towards a carbon-free future.

The Commission has mentioned it is exploring the possibility of allowing greater “technology neutrality,” which analysts interpret as potentially permitting plug-in hybrids and internal combustion vehicles utilizing synthetic fuels or biofuels that yield lower emissions than conventional fuels. The automotive sector has long requested such an alteration and seeks that hybrids and vehicles powered by synthetic fuels be classified as zero-emission even if they retain an internal combustion engine surpassing the 2035 threshold.

“Transforming the EU’s most significant automotive regulation into a piece of Swiss cheese will not revive the industry’s competitiveness,” remarked Lucien Mathieu, director of cars at the Brussels-based advocacy group Transport & Environment, in a statement from October. “It represents a cynical effort to dismantle a foundational pillar of Europe’s climate legislation. If the Commission gives in to these requests, it will merely grant a further edge to Chinese manufacturers.”

Källenius highlighted that even after 2035, there would still be over 200 million conventional vehicles operating. Without alternative fuel options and new internal combustion cars to replace them, the aging fleet could face a “Havana effect,” leading to a deterioration in both climate and economic factors.

Germany is advocating for a dilution of the ban and the implementation of an extended transition phase. The German economy is stagnating following two years of downturn, and the auto industry has faced issues for a longer period. Auto manufacturing in Germany peaked in 1998 but plummeted by 25 percent due to the COVID impact in 2020 and has continuously declined since. Now, German automakers are confronted with fresh competition from lower-cost Chinese vehicles.

The nation’s political leaders are apprehensive due to the nearly 800,000 jobs the sector supports and the fact that economic unpredictability is contributing to a rise in support for right-wing populism. Against this backdrop, the government is rallying behind industry calls to reconsider climate objectives and extend a lifeline to core gasoline-powered vehicles.

“There will be no abrupt halt” in 2035, German Chancellor Friedrich Merz pledged following discussions with auto industry leaders in September.

Delaying the transition to electric vehicles aims to provide manufacturers and suppliers with additional time to continue profiting from their most lucrative models and maintain their competitive advantage over rivals, including emerging Chinese automakers swiftly establishing a foothold in European markets.

However, there is a risk that decelerating the shift towards EVs might jeopardize the considerable investments made in EV charging infrastructure and battery production, potentially leading to job losses.

“If we abandon the 2035 target tomorrow, we can forget about European battery factories,” French President Emmanuel Macron told the press following the October summit of leaders, emphasizing the gigafactories now under construction across the continent as a direct outcome of the 2035 goal. Instead, he endorsed the idea of softening the law’s language to accommodate alternative fuels and hybrids.

Allowing auto manufacturers to continue marketing traditional vehicles as hybrids or with low-emission fuels is merely one aspect of a potential compromise. To incentivize the sale of affordable electric vehicles, European officials are also developing incentives for purchasing new battery electric vehicles. Manufacturers might be obliged to utilize more European-sourced components to qualify for EV subsidies, promoting job creation and countering inexpensive Chinese imports.

As discussions about aiding automakers progress, the outlook for the industry is becoming increasingly bleak.

The sole growth within Europe’s automotive sector this year is attributed to electric and hybrid vehicles, from which many manufacturers still struggle to achieve profitability due to high expenses associated with technology development, production in Europe, and limited sales volumes of EVs.

In the nine months leading to September, Europeans purchased 1.3 million electric vehicles, representing around 16 percent of total new car sales, according to ACEA, the auto industry authority in Europe. Nevertheless, despite the strong uptake of electric and hybrid vehicles, it failed to compensate for the significant downturn in internal combustion engine sales. Overall, new car sales in Europe increased by just 0.9 percent in the first nine months.

For certain automakers, the modifications currently under discussion are insufficient.

BMW CEO Oliver Zipse informed reporters in a earnings call that under the EU’s prevailing legislation, manufacturers receive no advantage from investments in carbon-neutral components like green steel or for establishing new, low-emission factories. He criticized the EU’s emphasis on regulating tailpipe emissions instead of the vehicle’s overall carbon output.

“We are not advocating for a relaxation of targets. We are seeking a different system,” stated Zipse. “We are consistently lowering our CO2 footprint, but it has no tangible effect.”

Certain environmental tech advocacy groups and think tanks caution against increasing support for plug-in hybrids at the cost of fully electric vehicles.

Transport & Environment (T&E), a green advocacy group based in Brussels, determined in a recent analysis that plug-in hybrids produce almost five times more CO2 in real-world conditions than indicated in official testing. Additionally, even when operating in electric mode, PHEVs consume more fuel than manufacturers claim because their combustion engines activate during acceleration or uphill driving, according to their findings.

This discrepancy also affects consumers’ finances: Annual fuel and charging expenses exceed advertised costs by approximately €500. With an average price tag of €55,700 in 2025, plug-in hybrids are also €15,200 pricier than battery-electric vehicles.

“Plug-in hybrids are among the greatest scams in automotive history,” stated T&E’s Mathieu.

Peter Mock, managing director of the International Council on Clean Transportation in Europe, dismissed the idea that plug-in hybrids serve as a “bridge” to full electrification. He explained that evidence indicates most individuals who transition to battery-electric vehicles tend to stay with them, while a significant portion of plug-in hybrid purchasers later revert to combustion vehicles.

Mock pointed to Denmark, where battery-electric vehicles represent approximately 70 percent of new sales, and Belgium, at about 40 percent, as examples of successful acceleration in adoption. He emphasized that a combination of EU CO2 standards and national tax incentives making combustion vehicles more costly while reducing expenses for EVs is essential — ideally in a self-regulating framework where higher taxes on internal combustion engines fund subsidies for electric vehicles.

Regarding e-fuels, Mock was straightforward: they are excessively inefficient and expensive for vehicles. “For road transport, electrification is unequivocally the superior choice,” he stated. “E-fuels are merely a diversion.”

The EU’s climate strategies over the last decade have drawn substantial investment from pure electric vehicle manufacturers, battery producers, and various suppliers along the electric vehicle supply chain. As a result, over 200 industry leaders signed an open letter urging the Commission to “Remain steadfast, don’t retreat” against lobbying from traditional automakers.

Michael Lohscheller, Polestar’s CEO, told The Verge that diluting the 2035 ban would penalize companies that have already committed to electrification. “It undermines the foundation for the investments made by companies like ours,” he remarked, pointing out that years of negotiations shaped the present framework, including discussions with traditional automakers who are now trying to step back.

While a postponement might disrupt the linear growth of EV demand, Lohscheller asserted, “the transition will still occur and is currently in progress, as evidenced by the interest in our vehicles across most European markets.”

He also cautioned that Europe risks trailing behind global competitors if it weakens its climate aspirations. “Our competitiveness could further diminish in the future. The rest of the world will not remain stagnant: they will continue to innovate and develop superior technologies, potentially jeopardizing more jobs within the EU.”

Others concur. Lawrence Hamilton, president of Lucid Motors Europe, stated that reopening discussions about the EU’s 2035 prohibition on combustion vehicles risks confusing consumers and hindering electric vehicle acceptance. “It diverts from conversations with consumers,” he noted. “If the ban on internal combustion engines is lifted, people might believe they have more time, leading to delayed consumer uptake of EVs. However, we want individuals to consider transitioning to EVs now.”

Hamilton emphasized the lengthy replacement cycles for vehicles — often seven years or more — underscoring the necessity for the industry to motivate customers to begin switching today, not years in the future. He highlighted that EVs are nearing price parity with gasoline vehicles, frequently offer lower overall ownership costs, and have largely alleviated range concerns.

If automakers in Europe aim to restore their competitiveness — particularly in relation to China — the solution is not to impede the transition to electric vehicles but rather to intensify focus on it and address their inherent structural weaknesses.

“They need to close the battery cost gap, pivot to software and AI-driven technologies in manufacturing, and revive the entrepreneurial vigor that their Chinese competitors embody,” remarked Andy Palmer, who was instrumental in advancing electric vehicle technology at Nissan and afterwards served as CEO of Aston Martin. “Europe possesses tremendous engineering expertise, yet it is hindered by bureaucracy and outdated perspectives. There is an urgent need to catch up.”