EU Backs Down on Ban for Petrol and Diesel Cars

Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)

Summary

The European Union (EU) has agreed to throw its plan to ban all petrol and diesel cars and vans by 2035 into reverse following heavy pressure from industry and leading Member States like Germany and Italy. Instead, the EU has proposed that carmakers ensure that 90% of all vehicles produced are zero emissions.

EU Rolls Back on Ban

The European Union (EU) has been forced to climb down on its landmark ambition to ban all internal combustion engine (ICE) vehicles by 2035 following mounting pressure from key Member States and the motoring industry. 

The proposed ban - a world first - had called for manufacturers to ensure that 100% of production of cars and vans had zero emissions by 2035. However, key states like Germany and Italy, under mounting pressure from the struggling European car industry, called for a less draconian move. The new mandate is that by 2035 manufacturers comply with a 90% tailpipe emissions reduction target, while the remaining 10% of emissions will need to be compensated through the use of low-carbon steel 'Made in the Union' or from e-fuels and biofuels. The European Commission (EC) said that it will allow for plug-in hybrids (PHEV), range extenders, mild hybrids, and internal combustion engine vehicles to still play a role beyond 2035, in addition to full electric (EVs) and hydrogen vehicles.

Clean Transition Still on Track

European Commission president, Ursula von der Leyen, who championed the legislation back in 2022, remained confident that the industry is still on track for a major transition to cleaner vehicles. "Innovation. Clean mobility. Competitiveness. This year, these were top priorities in our intense dialogues with the automotive sector, civil society organisations and stakeholders. And today, we are addressing them all together. As technology rapidly transforms mobility and geopolitics reshapes global competition, Europe remains at the forefront of the global clean transition." 

The Importance of the Car Industry

The automotive sector provides direct and indirect jobs to 13.8 million Europeans, representing 6.1% of total EU employment and 8.5% of its manufacturing sector. Annual turnover generated by the automotive industry represents over 7% of EU GDP. It is also a major customer for many of Europe's leading industries from steel, rubber and plastics to semiconductors and batteries. Industrial Info is tracking more than 500 projects in the automotive sector worth US$126 billion. More than US$100 billion of that will be spent on grassroot plants and plant expansions. Subscribers to Industrial Info's Global Market Intelligence (GMI) Project Database can click here for the reports.

Under Pressure

The European car industry has fought long and hard to change the proposed 2023 legislation calling for a 100% ban on petrol and diesel cars and vans. In recent years the industry has been suffering from a combination of U.S. tariffs, higher costs of production and much greater competition from Chinese EVs. For the first half of 2025, new car registrations across the EU declined by 1.9% compared to the same period in 2024, reflecting the lingering impact of economic uncertainty and weaker consumer sentiment in key markets, according to the European Automobile Manufacturers' Association (ACEA). The three largest markets, France (-7.9%), Germany (-4.7%), and Italy (-3.6%), all posted declines. Germany's largest industry group, the Association of the Automotive Industry (VDA), had called for an "adjustment of the reduction target to 90% from 2035 onwards" earlier this summer. VDA president Hildegard Müller told Politico that this would allow a limited number of new combustion engine vehicles to still be registered even after 2035 while additional emissions could be offset by "more ambitious targets for renewable fuels. Many European countries lack charging stations, modern power grids, and purchase incentives, such as tax breaks. Demand for electric cars remains significantly below what would be necessary to achieve climate goals. The industry calls were backed by political will. Germany's Chancellor Friedrich Merz has argued that the EU should continue to let vehicles with highly efficient combustion engines, plug-in hybrids and range-extender EVs be sold after 2035. 

Mixed Reactions

The car industry has been mostly supportive, and relieved, by the new measures. Germany's BMW (Munich, Germany) stated: "It is an important first step that the EU Commission no longer pursues technology bans as a guiding principle, but recognises the future viability of the combustion engine," while Volkswagen AG (VW) (Wolfsburg, Germany) stated: "The European Commission's pragmatic draft proposal for new CO2 targets is economically sound overall. The fact that small electric vehicles are to receive special support in future is very positive." However, Swedish carmaker Volvo (Göteborg, Sweden) was not supportive. "Volvo Cars has built a complete EV portfolio in less than 10 years and is ready to go full electric with a bridge of long-range hybrids. If we can do it, others can as well. Weakening long-term commitments for short-term gain risks undermining Europe's competitiveness for years to come." Italy's Foreign Minister Antonia Tajani welcomed the climbdown. "We have stopped the ban on combustion engines from 2035 - a choice that protects 70,000 jobs in Italy alone. Yes to protecting the environment, but always safeguarding the dignity of the individual, of those who do business and create jobs."

Key Takeaways

• The European Union (EU) will no longer ban all combustion engine cars and vans by 2035
• Instead, by 2035 manufacturers must comply with a 90% tailpipe emissions reduction target
• The remaining 10% of emissions will need to be compensated through the use of low-carbon steel 'Made in the Union' or from e-fuels and biofuels. 

About Industrial Info Resources

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).