BMW iX1 (Source: BMW)
BMW Group CEO Oliver Zipse says it's time to pull the plug on the European Union's plan to ban ICE vehicles by 2035. Obviously this isn't the first time we've seen a backlash, but Zipse is now taking it up a notch, albeit an EV. Sales are good for BMW and Mini. What's going on here?
At this week's Paris motor show – one of the last auto shows of any kind – Zipse told reporters that the EU needs to cancel its plan to ban ICE vehicles by 2035 to reduce reliance on China's battery supply chain.
In comments designed to set off alarm bells in Brussels, BMW's CEO now says the ICE ban is “no longer effective” because EV sales are much lower than expected, and EV subsidies are “unsustainable,” according to Bloomberg.
“The 100 percent BEV fix targeted by 2035 as part of the CO2 reduction package will also make European OEMs less dependent on China for batteries,” Zipse said in a Reuters report. “To maintain a successful course, a robust approach to technology assessment within a policy framework is essential.”
In 2023, EU countries approved a landmark law requiring all new cars to have zero CO2 emissions from 2035. From April 2023, new cars sold in the EU have a CO2 emission limit of 95 grams, while vans must not exceed 147 grams. CO2/km. The rules will tighten again in 2025, with new cars limited to 93.5 g CO2/km and vans to 153.9 g CO2/km. In 2030, the restrictions will tighten, leading to a ban on CO2 emissions from new cars and vans sold in the EU from 2035. So, as we get closer to that date, the panic among legacy car manufacturers begins.
In fact, Zipse now says that the European car market could be the victim of a “significant contraction” and that the ban would “threaten the European car industry at its heart.”
Of course, European automakers are feeling the heat from Chinese automakers, who are taking a large share of the market with their low-cost BEVs or PHEVs. At the Paris show, nine Chinese companies unveiled new models, all of which could face EU tariffs of up to 45% to counter what the European Commission argues are unfair subsidies given by Beijing to Chinese carmakers. Still, European automakers are rolling out new EVs to stay in the game, with Chinese brands representing one-fifth of all new car shows, down from one-half of all models in 2022.
Still, the situation in Europe seems bleak, with Italian prime minister Giorgio Meloni calling the ICE ban “self-defeating.” Germany has rejected an early revision of the rules, and in Paris, the head of the French motoring association PFA is working on ways to revise those targets.
Sales of BEVs and PHEVs in Europe fell by 4% in the first nine months of the year compared to last year, while BEVs saw continued growth of 12% year-on-year in September. But the European car market is in general decline, with sales down 18.3% in August.
And the reality is that automakers will be forced to pay billions in fines — as much as $16.4 billion — if emissions limits aren't met. BMW and Mercedes are on track to meet those goals this year, but Volkswagen, Stellantis, and Renault are at risk of falling short, according to a Bloomberg survey. Of course, Tesla has its own debt issuance to help cover those fines.
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