Europe made history on October 27th. Late in the evening, negotiators for EU governments and MEPs reached an agreement on ending sales of new combustion engine cars and vans by 2035. The combustion engine, invented in Europe, would be no more.
Cars play a major role in European life and their manufacture employs millions across the continent. We recount how the decision went down across Europe’s biggest capitals and the challenges that lie ahead.
Germany
Where better to start than Berlin. In the home of the European automobile, the shift from the internal combustion engine to electric was always going to be a big deal.
With 26% of new cars already fully or partly electric, Germany is one of Europe’s EV leaders. Nevertheless, with so many jobs on the line, the decision to end the combustion engine would be a contentious one.
2021 saw the end of Angela Merkel’s 16-years rule and the start of a social-democrat (SDP), green and liberal (FDP) coalition. Chancellor Scholz and his party were in favour of the 2035 phase-out along with the Greens. The liberal FDP would, however, expose cracks in the coalition’s resolve. While in favour of the general principle of 100% zero-emissions by 2035, its ideological focus on ‘technological neutrality’ would set them on a conflicting path. Christian Lindner, the head of the party, pushed hard for an e-fuels mandate as a backdoor for liquid fuels in road transport and even threatened to not support the EU’s deal.
Germany has ambitious climate targets to meet. The German government has set a target of 15 million BEVs in 2030 from just 1 million today, with 80% of electricity to come from renewable energy by that date. The shift to renewables and clean technologies offers huge opportunities, but it will be a challenge. “It will need reinvestment and retraining for workers,” says Friederike Piper, e-mobility expert at T&E Germany.
Most German carmakers had already committed to phasing out petrol and diesels sooner with Daimler and Opel opting for the earlier date of 2030. But German carmakers’ focus on plug-in hybrids (PHEVs) poses a challenge. High demand for raw materials means automakers will need to prioritise battery electrics rather than PHEVs, argues Piper.
For consumers, affordability is key. “We need to stop the incentives for polluting company cars, which disproportionately go to wealthy workers,” says Piper. While the public is increasingly embracing electric with one in five new cars BEVs, in the corporate world, just one in 10 are fully electric. “With over 70% of new cars going to the corporate market, this is a major opportunity to get millions of second-hand battery electrics onto the European market,” explains Piper.
Italy
2022 was a turbulent year for Italian politics. When isn’t? Following the collapse of President Draghi’s government of national unity, the year ends with Italy’s first woman Prime Minister in the form of Giorgia Meloni, the head of the right-wing Brothers of Italy. Could this derail Europe’s electric push?
With Mr Draghi officially supporting the EU Commissions’ Fit-for-55 package, the announcement of the support to the 2035 phase-out for ICEs from the Italian government came as early as December 2021. However, as pressure mounted in his coalition government to reopen the proposal, and with industry and ecological transition ministers putting together a coalition to allow a backdoor for e-fuels, Draghi went quiet. “Despite the strategic importance of electric mobility for national and European economies, we never saw him clearly stepping up in favour of the phase-out,” said T&E’s Italy director Veronica Aneris.
Italy’s automotive industry faces major challenges. On both EVs and traditional motors, Italy’s market share has long been slipping behind. It has been losing market share not only to traditional competitors like Germany and France, but also to upstarts like Bulgaria and Romania. The country is moving agonisingly slowly towards electric with just 3.7% of new cars being battery electric (BEVs).
On the back of these fears, Italian ministers were divided on the phase-out. The transport and labour ministers supported the choice, while the ecological transition and industry ministers sought to reopen the decision, falsely depicting the EV transition as a “bloodbath” for jobs.
Forward-looking unions themselves, including in Piedmont – the region where historically Fiats have been produced – understood such a false narrative might jeopardise the competitiveness of this industrial sector. “Despite a general resistance from the public driven by the false narrative on job losses, civil society, in particular the unions, got behind the phase-out. They realised that postponing the 2035 phase-out would not save jobs; it would do the opposite,” said Carlo Tritto, representative of T&E Italy.
Current transport minister and populist, Matteo Salvini, is desperately seeking to reopen the decision. But the government seems to have understood the global and strategic nature of e-mobility, says Tritto. At the end of the Automotive Table (an industry-government working group) – and the first for the new Government – the industry minister from Meloni’s party called for an EU-wide industrial response to China and the US’ muscular support for their automotive sectors. With France and Germany moving quickly on this, Italy is finally making its first steps in the right direction. Let’s hope the new year brings a serious industrial commitment to e-mobility.
Poland
At the forefront of the war in Ukraine, Poland could be forgiven for not having the transition to electric mobility at the forefront of public debate. With only 2.5% of new cars BEVs in 2022, “the idea of owning and driving an electric car still seems unthinkable for the majority of Poles,” says T&E Poland director Rafal Bajczuk. Yet, Poland sits on the brink of a major opportunity as Europe’s green technology factory.
Poland is arguably the biggest EV manufacturing success story. Already the third largest auto employer in Europe, as a major parts supplier, Poland has a major role to play in battery building. The largest lithium battery plant in the world is in Poland, with battery exports already exceeding those of traditional cars.
This was confirmed by a study from FPP, a T&E member, which found that the transition to EVs would be ‘favourable’ for Poland’s economic output. “The government opposes a quick transition to EVs at the EU level, but it knows what an opportunity this is for the country,” said Rafal Bajczuk, T&E Poland’s director.
The conservative government (PiS) chose to vote against the phase-out in an appeal to its voters. But behind the curtains the government must have been happy with the result, says Bajczuk.
This is evident in the government’s funding of a state-owned startup which will develop EVs in partnership with the Chinese car manufacturer Geely. Poland may well turn out to be Europe’s big winner. The next big challenge will be getting Poles to buy them.
Spain
People may be surprised to know that Europe’s second biggest car manufacturer is Spain. While it doesn’t host the recognised brands of Germany or France, Spain has for a while been the manufacturing hub for some of the world’s biggest carmakers. With the automotive industry the country’s second biggest employer, the decision in Brussels was an important one.
Spain’s left-wing coalition led by Pedro Sánchez was very much in favour of the 2035 phase-out from the beginning. But it wasn’t plain-sailing. Spanish MEPs were originally in favour of a new 2027 target and a higher 2030 target, however many, including socialist ones, were swayed into opposing this new 2027 target. The socialists supported the revised 2030 target, but Spanish liberals ended up killing it. The intermediate targets were dropped, but the 2035 date did make it over the line. A government official told T&E after the trilogues: “Believe us it wasn’t easy.”
Spain has been slow to electrify. Four times slower than its Portuguese neighbours, in fact. Currently there are around 200,000 electrified vehicles on the road in Spain, with a target of 5 million by 2030. As to public charging points the government’s goal is 100,000 by 2023, but with just 15,000 up and running today, this is looking like a tall order.
Spain’s automakers “better start swimming or they’ll sink like a stone… the chance won’t come again,” advises Isabell Buschel, T&E’s director in Spain. She is heavily critical of the focus on producing PHEVs. With Spain a major exporter of EVs, this tactic leaves Spain vulnerable. “As countries like Germany stop subsidising PHEVs and penalise them, who is going to buy PHEVs made in Spain?”
With Spaniards spending on average €13,000 on a car, electric car prices need to come down. Cheaper models are needed and, as Buschel says, “the creation of a currently non-existent second-hand electric market is essential for democratising the electric vehicle. Company cars and fleets will be central to this.”
With a progressive coalition, supported by EU recovery funds, now is the ideal time to future-proof Spain’s economy, says Buschel. With general elections due next year, things may not be so favourable. The conservative opposition leader, Alberto Núñez Feijóo, has admitted that he is no fan of electric cars. The times are changing, reaffirms Buschel, Spain’s huge manufacturing industry cannot afford to hesitate.
France
France’s presidency of the Council of the EU fell during an election year back home. President Macron was reelected following a bruising campaign on the back of a promise to tackle climate change and secure French jobs. The transition to electric mobility was and will continue to be a key battleground.
Going into the negotiations, France was initially in favour of the 2035 phase-out as long as it allowed PHEVs until 2040. French manufacturers had invested heavily in the technology and much of its automotive workforce trained in building combustion engines. The French government “used its role as Council President to appear neutral and not too favourable of the 2035 phase out, leaving the door open to concessions on PHEVs,” said Diane Strauss, T&E France Director.
When the 2035 decision dropped in France, it was big news. “We were all over French television and radio,” recounted Lucien Mathieu, acting French director at the time. “I have to admit, there was a degree of scepticism. Many asked whether EVs are really right for the climate? It was a great opportunity to explain to the public why this was the right decision.”
Following the EU’s decision, the government dropped its stance on PHEVs and firmly committed to going fully electric car sales by 2035.
The challenges are “social and economic,” said Strauss. In France, arguably more than anywhere else in Europe, the focus on affordability has become a major topic. France was the birthplace of the ‘social leasing’ idea – a mechanism which would grant an EV for €100 per month for the most vulnerable – which Mathieu says could make France a “thought leader” in managing the transition to electric mobility.
While moving away from the combustion engine means the workforce needs to be retrained, the switch to electric presents new opportunities for French jobs. French and industrial policy should aim to increase and reshore EV production while focusing on small, mass-market vehicles. Clearly today there is a “mismatch between what the French automakers have been producing and what the people are asking for,” says Strauss.
In an election year, the 2035 phase-out may turn out to be emblematic. Macron was able to see off right-wing populism for now. Seizing the industrial and societal opportunities of switching to electric may well be what wins Europe’s moderate politicians reelection next time.
UK
Boris Johnson’s government was out before the EU, with its plan to ban fossil fuel car and van sales by 2030. See how the UK is doing.
