Optimism runs dry

Manufacturers row back on e-car plans

(Bild: BMW)

The electric euphoria in the European car industry has subsided for the time being. It is not only German brands that are increasingly looking towards combustion engines again and pushing their discontinuation back.

E-cars are performing worse than expected in the important German market, the industry is still reliant on China for batteries and the issue of climate change has moved to the third row in the public consciousness. Reason enough for the German and European car industry to modify their grandiose electrification announcements and focus more on the familiar business with the combustion engine in uncertain times. An overview of the plans.

In 2023, car manufacturers were still publicly outbidding each other with ambitious announcements about phasing out combustion engine production. In many places, this now sounds much less euphoric. However, the legal framework has not yet changed. The so-called ban on combustion engines is still to apply in the EU from 2035. Apart from a few exceptions, petrol and diesel cars will no longer be allowed to be registered.

The second relevant driver for a drive turnaround is the regulation of CO2 fleet emissions, where stricter limits have been in place since the beginning of the year. A third regulation that plays a role, if not from an industry perspective, then certainly from a customer perspective, is European emissions trading, which will also apply to the transport sector from 2027 and is likely to make conventional fuels significantly more expensive.

Postpone or hope for better times?
If the framework remains in place, it makes no sense for manufacturers to delay the drive turnaround, at least in Europe. However, parts of politics and industry have been trying for some time to postpone the framework, especially in terms of time, but also in terms of essentials. The most common argument is the recent weak demand for e-mobility.

"To say that we are postponing 2035 because we see poor demand for e-cars in 2025 is not honest."

Ferdinand Dudenhöffer

A bogus argument, says car expert Ferdinand Dudenhöffer: "To say that we are postponing 2035 because we see poor demand for e-cars in 2025 is not honest." He expects the e-car to have established itself well before then. "We know that batteries will become significantly cheaper - partly because production processes are improving and waste is falling. So before 2030, the electric car will be cheaper to buy than the combustion engine."

In the short term, however, Dudenhöffer also recognizes a benefit for the industry. A shift would primarily benefit the brands that are doing well in the combustion world, i.e. all German brands. In fact, domestic companies are also among those who are at least considering toning down their ambitious electrification plans. The phase-out date in ten years offers a certain amount of leeway for this, as it theoretically leaves just enough time to launch a new generation of models with combustion engines.

How car manufacturers are rowing back
This is also made possible by the rather lax requirements for the Euro 7 emissions standard adopted last year, which is hardly stricter than the current version. Interestingly, the industry argued against the initially planned tightening at the time, not least with the argument that it would no longer be worthwhile in view of the imminent end of the combustion engine.

In fact, the official e-mobility plans were still very ambitious at the time, and in many cases manufacturers scheduled their own end of the combustion engine well before the ultimate date. This is now being partially reconsidered. Audi, for example, actually only wants to offer new e-cars from 2026, but according to media reports may be investing more in combustion engines again. Sister company VW officially wants to stop using petrol and diesel in 2035, but is apparently pursuing a similar strategy internally as the premium offshoot. At the heart of this: some combustion engines are to run longer in Europe than originally announced.

Combustion engines will run longer than planned
Porsche has recently positioned itself most aggressively and, under the impression of falling new car sales, has announced that it will once again focus more on combustion engines and plug-in hybrids. Premium competitor Volvo recently wanted to switch to pure e-drives by 2030, but now wants to continue building partially electrified petrol engines in the following decade. Alfa Romeo also appears to have abandoned its plans to go all-electric by 2027.

The German brands and European premium manufacturers are joined by other car manufacturers who have not given any specific dates. First and foremost BMW, whose CEO Oliver Zipse recently publicly criticized the 2035 plans as naive and called for adjustments. Mercedes is acting somewhat more cautiously; the Stuttgart-based company is still not naming a fixed date for the phase-out.

The e-car commitment no longer sounds quite as energetic as it did in 2023 for some Stellantis brands. Fiat had originally spoken of 2027, but now may not be ready until 2030. Sister brand Opel has said goodbye to concrete timetables, as brand boss Florian Huettl told British media. Whether the planned phase-out of the combustion engine in 2028 will go ahead depends primarily on market developments. Toyota's exact course is also unclear. The global market leader has never announced plans to phase out combustion engines, but wants to be climate-neutral by 2035, at least by its own definition.

Special electric tax in the USA
The situation becomes even more uncertain if you broaden the scope and include the USA. The Trump administration apparently not only wants to scrap the e-car subsidy, but is even planning a 1,000-dollar surcharge for electric vehicles. Ford had already refocused on building classic trucks and pick-ups in the face of weak e-car sales. General Motors, meanwhile, is currently sticking to its plans for 2035 to build only zero-emission cars. How the US market develops is also important for German car manufacturers. However, the situation is currently even more confusing in view of the tariff announcements.

Combustion engines a dead end?
However, sticking with combustion technology could be risky. "Germans and all those who have their advantages in the combustion world could become losers in the long term because they will be overrun by Tesla and the young Chinese after 2030," fears Dudenhöffer. At least as long as society does not give up the fight against climate change and completely abolish the zero-emission target.

One possible way out of the combustion dilemma would be so-called e-fuels. The EU wants to allow the sale of cars that can be refueled exclusively with this potentially CO2-neutral fuel beyond 2035. However, synthetic fuel is not yet available in sufficient quantities and the legal situation makes importing it virtually impossible.

In the long term, e-fuels could still be an option. Perhaps only for luxury brands. Lamborghini boss Stephan Winkelmann, for example, recently hinted at this in an interview with Die Welt. For ordinary drivers, designer fuels are unlikely to be an attractive alternative to electric cars, at least in their pure form, given the expected high prices. Unless the circumstances change.

Ultimately, from today's perspective, everything is moving towards the e-car. At least at the beginning of the year, there was a huge jump in registrations in Germany and, as a result, in the EU statistics. Even if many e-car registrations were pushed from the previous year into the current year for strategic reasons, there could be signs of a trend reversal.