Europe’s auto industry has been granted short-term flexibility after Brussels proposed dropping its effective 2035 ban on combustion-engine cars, but analysts say the long-term direction remains firmly electric.
The European Commission this week unveiled plans allowing plug-in hybrids, range-extended EVs and even conventional engines to remain legal beyond 2035, following intense lobbying from legacy automakers seeking relief as they compete with fast-growing Chinese rivals. The proposal also introduces a new category of small, Europe-built EVs eligible for extra credits — a key industry demand.
“The Commission has given Europe’s carmakers room to choose and a chance to compete,” said Phil Dunne of Grant Thornton Stax, adding the move could help the sector catch up with China on cost-competitive EVs.
Premium brands such as Mercedes-Benz and BMW gain more time to sell plug-in hybrids, while mass-market players like Stellantis and Renault stand to benefit from incentives aimed at compact city cars.
Despite EU tariffs on Chinese-made EVs, brands including BYD and Changan continue to expand in Europe, aided by the absence of duties on imported plug-in hybrids and combustion models in lower-EV-penetration markets.
Electric vehicle adoption is rising but uneven. Fully electric car sales in the EU jumped 25.7% year on year through October, accounting for 16.4% of total sales, though uptake remains limited in southern and eastern Europe. Analysts say a slower transition could allow time to build much-needed charging infrastructure.
The policy shift comes after automakers and suppliers invested tens of billions of euros in EV development under rules only enacted in 2023. While the change introduces uncertainty, some experts believe it could encourage collaboration on affordable EV platforms, such as Ford and Renault’s recently announced partnership.
Industry leaders continue to urge regulatory clarity. Ford CEO Jim Farley warned that frequent policy shifts undermine long-term investment planning. “We need certainty,” he said, calling on Brussels to commit to a stable roadmap for Europe’s automotive future.
