• Manfred Weber, a German MEP, declares a strict technology ban on combustion engines in the EU after 2035 is "off the table," amid growing political resistance.
  • At least seven EU countries, including Germany and Italy, are urging the European Commission to weaken or delay the 2035 phase-out, citing competitiveness concerns and weak EV demand.
  • The European Commission's review in late 2025 or early 2026 is expected to reshape CO₂ standards, potentially allowing hybrids and e-fuels beyond 2035.

A Regulatory Reversal in Motion

Efforts to phase out internal-combustion-engine (ICE) vehicles in the European Union by 2035 have hit a snag, with key political figures and member states pushing for a more flexible approach. According to people familiar with the matter, Manfred Weber, leader of the European People’s Party, recently stated that a technology ban on combustion engines is no longer viable, aligning with a broader coalition seeking to loosen the regulations. This shift comes as real-time market data shows weaker-than-expected EV sales growth across Europe, with Tesla (TSLA) registrations dropping over 50% in markets like France and Sweden, highlighting competitive pressures from cheaper Chinese EVs.

Industry and Economic Pressures Mount

Without a deal to adjust the 2035 framework, European automakers could face significant planning uncertainty, forcing potential rewrites of product strategies. Companies such as Volkswagen Group (VOW.DE), Mercedes-Benz (MBG.DE), and BMW (BMW.DE), which had planned their last ICE cycles around the hard deadline, are now advocating for technological neutrality. In a joint letter, seven EU countries argued that the ban threatens industrial competitiveness and jobs, especially given high energy costs and supply-chain bottlenecks. Giampiero Mazza, head of Italy at CVC Capital Partners, noted in a recent industry conference that "the market here is not as competitive as other markets," suggesting opportunities for strategic pivots.

Political and Future Implications

The European Commission is expected to publish revised guidance, with a key review scheduled for late 2025 or early 2026. This could lead to scenarios like delaying the phase-out to 2040 or expanding exemptions for e-fuels and hybrids. Environmental groups have criticized the pushback, warning it could jeopardize EU climate goals under the "Fit for 55" package. Meanwhile, attempts to reach out for comments from the European Automobile Manufacturers’ Association were unsuccessful, but industry reports indicate a preference for emissions-based rules over specific technology bans. As negotiations continue, the outcome may slow EV adoption but extend the life of traditional automotive sectors, balancing climate ambitions with economic realities.

Correction: An earlier version of this article misstated the number of EU countries opposing the ban; it is at least seven, not six.