BBA is surprisingly consistent in its opposition to a complete ban on gasoline vehicles in Europe by 2035.

Recently, Mercedes Benz took over the baton from BMW and Audi, and its CEO Kang Linsong also expressed dissatisfaction with the above policies during a media interview. Compared to the former, Kang Linsong's speech is bolder and more threatening. He linked gasoline cars with the European automotive industry and bluntly stated that without gasoline cars, the European automotive industry would face a "collapse".

Opponents speak in unison, while supporters are equally resolute. Last September, Volvo Cars and dozens of industrial manufacturers strongly supported the European Union, urging the implementation of the 2023 ban on the sale of internal combustion engine vehicles.

Their testimony was equally stern, with Volvo CEO Jim Rowan stating, "The 2035 target is crucial for coordinating all stakeholders and ensuring Europe's competitiveness

Caught between supporters and opposition, the EU's attitude is wavering. On the one hand, the EU is making various efforts to implement policies, and currently the policies have not been cancelled; On the other hand, amidst opposition lobbying, the EU has repeatedly made concessions, not only granting exemptions for synthetic fuels, but also delaying fines for non-compliance with emission reduction standards in March.

The EU's repeated reneging on its promises and wavering attitude reflect the difficulties and hidden crises in the development of electric vehicles in Europe.

From the current situation in Europe, the popularity of electric vehicles is still hovering at a low level, and the public's attitude towards electric cars is also lukewarm. The situation of car companies is particularly awkward, as the electrification transformation of many manufacturers has fallen far short of expectations. According to the semi annual report data, under the internal and external pressure of sales and tariffs, the profitability of European car companies has been affected, and their profit sources heavily rely on fuel vehicles. If Europe continues to aggressively push forward with the 2035 ban on internal combustion engine cars, it is highly likely to lead to the "collapse" of the European automotive industry, as Kang Linsong said.

Amidst the intertwined interests of multiple parties, Europe still finds it difficult to let go of gasoline powered cars.

01 Electrified soil has not yet formed

Even compared to China, which has the highest acceptance of new energy vehicles, the EU's ban on the sale of internal combustion engines is slightly more aggressive. The "2024 Future Travel Trends Research Report" shows that in terms of sustainable travel, Chinese consumers have a recognition rate of 90%, while EU users such as Germany and France only have a recognition rate of 60% that the government must vigorously promote sustainable travel.

According to the report "Research on the Exit Schedule of Traditional Chinese Fuel Vehicles", China will prioritize hybrid technology to significantly reduce fuel consumption levels. It is expected that by 2050, the proportion of pure electric vehicles in the private car sector will reach around 85%. This means that China not only allows but also encourages the transition of hybrid vehicles to the delisting of gasoline vehicles. Moreover, by the middle of this century, the proportion of pure electric vehicles had not reached 100%.

On the other hand, the EU's policies somewhat reveal a one size fits all radical approach. According to the plan, the EU will reduce its net greenhouse gas emissions within its borders by 55% from 1990 levels by 2030, ultimately achieving carbon neutrality by 2050, with decarbonization of the transportation industry being seen as key to achieving this goal. Therefore, in 2023, the European Union issued a ban on internal combustion engines, stipulating that the sale of new cars emitting carbon dioxide will be prohibited within the EU from 2035 onwards.

This means that both synthetic fuel vehicles and hybrid electric vehicles are not available for sale, except for pure electric vehicles.

For today's Europe, this is almost an unattainable 'fantasy'. Data shows that in the first half of this year, the sales of hybrid vehicles in the EU market accounted for 34.8% of all sales, and the market share increased by 5.6% compared to the same period last year; Gasoline and diesel vehicles accounted for 37.8% of the total, with a 10.4% decrease in market share compared to the same period last year; Pure electric vehicles accounted for 15.6% of the total, with a 2.7% increase in market share compared to the same period last year.  

It can be seen that although the market share of fuel vehicles in the EU market has decreased year-on-year, consumers are more inclined towards hybrid models compared to pure electric models, and the penetration rate of electrification is still relatively low. Compared to that, in the first half of this year, China sold a total of 6.937 million new energy vehicles, including 4.415 million pure electric models.

Behind the low penetration rate of electrification in the EU market, there are various reasons, including low public willingness, inadequate electrification by car companies, insufficient government subsidies, and inadequate infrastructure support.

The reasons behind the low penetration rate of electrification in the EU market are complex: it includes low public acceptance, weak promotion of electrification by car companies, insufficient government subsidies, and lagging infrastructure construction.

Zidan Cherrit, Senior Director of Corporate Ratings at Fitch Ratings in Europe, stated that range anxiety and limited charging infrastructure for electric vehicles have dampened consumers' enthusiasm for purchasing them. In addition, affordability issues and the speed of technological change further limit the popularity of electric vehicles.

Price is also an important reason why European consumers oppose the ban on internal combustion engines. Data shows that over half of German and French users are skeptical about the idea that electric vehicles are more environmentally friendly than internal combustion engines. On the contrary, they are concerned that banning internal combustion engines will increase driving costs and lead to job losses.

Their concerns are not unreasonable. As one of the important pillar industries in Europe, automobiles provide nearly one million job opportunities in Germany alone. Typically, an internal combustion engine car has 20000 to 30000 components, while an electric car only has over 10000. Many small businesses in Germany make a living by providing parts for internal combustion engines. Once the market demand for internal combustion engines decreases, the employees of these companies will undoubtedly face the risk of unemployment.

The root of people's concerns comes from insufficient government. On the one hand, under the cooling off of subsidies, the willingness of European consumers to purchase electric cars has declined. Several countries, including the UK, France, and Germany, have terminated subsidy programs for electric vehicles.

Taking Germany as an example, it once stipulated that pure electric and plug-in hybrid vehicles under 40000 euros would receive subsidies of 6000 euros and 4500 euros respectively; Pure electric and plug-in hybrid vehicles priced between 40000 and 65000 euros will receive subsidies of 5000 euros and 4000 euros respectively. Starting from September 2023, Germany has cancelled subsidies for individual pure electric vehicles. The original plan was to retain subsidies for enterprises until the end of 2024, but the subsidy standard has been adjusted to only subsidize pure electric vehicles below 45000 euros at 4500 euros, and other models will not be subsidized.

As a result, the registered number of pure electric vehicles in Germany from January to May this year was 140000, a year-on-year decrease of 15.9%, which has been lower than the previous year for four consecutive months.

In addition to the subsidy cooling off, the layout of charging stations in the European Union is also facing great challenges. According to data from energy technology company GridX, there are approximately 882000 charging stations in the European Union, which is far from the European Commission's goal of installing 3.5 million charging stations by 2030. Realizing the EU's 2030 goal means installing 410000 new public charging points annually, which is almost three times the installation speed of the latest year.

However, even if the EU achieves its goal of laying out 3.5 million charging stations by 2030, it may not be able to support its comprehensive transition to electric vehicles. The European Automobile Manufacturers Association (ACEA) believes that the number of charging points required to achieve decarbonization goals may increase to 8.8 million by 2030.

A more severe challenge comes from within the automotive industry. As a rising brand in the era of fuel vehicles, the new energy transformation of many European car companies has not been smooth. It is not difficult to see from the just released semi annual financial report that the proportion of pure electric vehicles is relatively small, and the vast majority of companies still rely heavily on fuel vehicles for their revenue and profit sources. Cutting off the profit cow of fuel vehicles rashly is like a disaster for traditional brands.

Taking Mercedes Benz, which strongly opposes the ban on the sale of internal combustion engines, as an example, pure electric vehicle models accounted for only 8.4% of its global sales in the first half of this year, even lower than 9.7% in the same period last year. Even with plug-in hybrid, the proportion of new energy vehicle models is only 20.1%. In this context, Mercedes Benz's financial report data for the first half of the year was not good, and its net profit was also affected. The obstruction of electrification transformation is undoubtedly one of the important reasons for Mercedes Benz's declining performance.

02 Frequent concessions at critical moments

At present, the contradiction between the dependence on gasoline vehicles and the urgent desire of the European Union to achieve electrification transformation is concentrated in the policy of banning the sale of fuel engines by 2035. This has also led to the EU being determined to implement policies, while at the same time struggling to resist lobbying and even criticism from member states and car companies, and frequently making concessions at critical moments.

The contradiction between the current path dependence of car companies on fuel vehicles and the urgent demand of the European Union to promote electrification transformation ultimately boils down to the policy of banning the sale of fuel vehicles by 2035. Therefore, although the EU is determined to promote policy implementation, it has always been unable to resist lobbying and even "bombardment" pressure from member states and car companies, leading to repeated concessions by the EU at critical moments of policy implementation.

Previously, while establishing a policy to ban the sale of fuel vehicles within the EU by 2035, the EU also set a phased goal of reducing carbon emissions from fuel vehicles by 15% by 2025 compared to 2021. Industry institutions predict that if car companies are fined for failing to meet emission reduction standards by 2025, the overall loss will reach up to 16 billion euros.

Taking the automotive giant Volkswagen as an example, it has warned that if the company wants to achieve its emission reduction targets, it will suffer a loss of 1.5 billion euros this year. In order to meet the EU's emission reduction requirements, some European car companies even have to purchase "carbon credits" from overseas new energy manufacturers such as Tesla, BYD and other competitors to offset their carbon footprint.

At the critical moment when the punishment was about to be implemented, the EU ultimately made concessions. In March of this year, von der Leyen, the president of the European Commission, said that the car companies that failed to meet the emission reduction targets this year need not pay a fine temporarily. The time for car companies to meet the carbon emission targets will be extended from one year to three years, and the companies that failed to meet the targets will be allowed to exceed the targets in the next few years, so as to avoid paying fines. That is to say, the fine has been postponed until 2027. Perhaps this can be seen as a temporary failure of the EU's policy to ban internal combustion engines.

Although the EU has made concessions on fines, some car companies are still not satisfied with this.

Previously, Klaus von Moltke, Senior Vice President of Engine Production at BMW Group, stated that 'internal combustion engines are our foundation'. Audi's global CEO, Gao De Nuo, also stated that Audi will no longer set a clear timetable for terminating the development and sale of internal combustion engine vehicles. Afterwards, as mentioned earlier, Mercedes Benz CEO Kang Linsong's stronger opposition to this policy will not only constrain Mercedes Benz's development, but also lead to the collapse of the entire European automotive market.

For car companies, there is still a slight turning point in the 2035 ban on the sale of internal combustion engines. At the meeting held in 2023, under strong recommendations led by Germany, some policy concessions were made: if internal combustion engine vehicles only use carbon neutral fuels, they can still be sold after 2035.

Although the concessions are not significant and synthetic fuels only provide substantial assistance to small batch sports car brands, the EU's actions indicate that although its stance is tough, its position still shows signs of wavering. If this policy flexibility continues to exist, the situation in 2035 may usher in new changes.

In the tug of war between environmental vision and reality, Europe's farewell to gasoline cars is destined to be a long farewell.