The End of the ICE Ban? Analyzing the EU’s U-Turn on 2035 EV Mandate

What happens when a massive regulatory promise—the 2035 ban on new combustion engine cars—suddenly becomes negotiable? For Western investors and auto industry watchers, the recent proposal from the European Commission (EC) to water down its zero-emission mandate is a seismic event. Driven by pressure from key member states like Germany and Italy, alongside lobbying from legacy automakers, the EC has shifted from a hard ‘zero-emission’ target to requiring only a **90% tailpipe emissions reduction** by 2035. This pivot signals a major moment of internal division within the bloc, and our focus keyword is **EU 2035 ICE Ban Relaxation**.

This isn’t a complete abandonment of electrification, but it’s a clear pivot toward *technology agnosticism*. For the Chinese EV makers, this news might temper the immediate existential threat they posed to European incumbents, but is it a rescue or a managed decline? Let’s dive into the fallout.

The New Rules: A 90% Compromise on the EU 2035 ICE Ban Relaxation

The core of the change is the modification of the original 2023 legislation, which demanded a 100% reduction in new car emissions by 2035. The new framework:

• Requires a **90% tailpipe emissions reduction** compared to 2021 levels by 2035.
• Allows manufacturers to offset the remaining 10% via credits from using low-carbon steel made in the EU or from certified e-fuels and biofuels.
• The ‘technology-agnostic’ approach explicitly keeps Plug-in Hybrid Electric Vehicles (PHEVs), mild hybrids, and range extenders viable beyond 2035.

The Automaker Schism: Winners and Losers in the EU 2035 ICE Ban Relaxation

The industry reaction has been anything but unified, exposing deep fractures in strategy and risk appetite. This highlights why **EU 2035 ICE Ban Relaxation** is so significant for global supply chains.

The Pragmatists: Welcome the Breather

Legacy European giants who had lobbied heavily for flexibility applauded the move, seeing it as a necessary nod to current market realities like slow consumer adoption outside city centers and high EV prices.

• BMW: Welcomed the change, seeing it as a key step acknowledging the future value of the internal combustion engine and reinforcing their ‘technology-open’ strategy.
• Volkswagen Group: Called the revision ‘overall pragmatic’ and economically feasible, specifically praising support measures for smaller EVs.
• Renault Group: Expressed welcome, focusing on specific incentives like a new category for small electric cars (under 4.2m).

The Skeptics: Demand More Flexibility and Growth

Despite the easing, some major players feel the EC has not gone far enough, particularly concerning immediate growth and commercial vehicle strategy.

• Stellantis: CEO Antonio Filosa bluntly stated the package ‘does not do the job,’ criticizing the lack of a viable path for light commercial vehicles and insufficient flexibility on 2030 targets. They worry this still threatens future investment without guaranteed growth.
• Mercedes-Benz: Agreed the direction was correct by promoting flexibility and technology neutrality, viewing it as a positive response to slower EV adoption.
• Volvo Cars: Took the contrarian view, warning that weakening long-term commitments could damage future competitiveness and that stability is paramount.

Analysis: The Chinese Factor and Investment Risk

From a Western analyst’s perspective, the underlying driver here is the competitive threat from China. Automakers like BMW argued that a rigid 2035 mandate would force them to rely excessively on Chinese-dominated battery supply chains. The relaxation buys time for European OEMs to scale up local battery production—supported by new EU funding—and develop more cost-competitive EVs.

However, as one analysis notes, simply loosening the target isn’t solving the core issue: the speed gap. Chinese competitors launch new models in 18 months, while legacy European firms struggle with multi-year timelines. If this ‘buffer period’ is used to lean back on profitable hybrids rather than aggressively innovate, the long-term competitive collapse predicted by critics remains a real risk.

The EC is attempting a delicate balancing act: appease industry pressure while maintaining climate ambition. The inclusion of ‘super credits’ for small, affordable EVs (under 4.2m) is a direct attempt to incentivize affordable local production, a direct counter to inexpensive Chinese imports. See our analysis on EV infrastructure readiness and market impact.

Recommended Reading for Western Stakeholders

To understand the long-term strategic pivot required, we recommend ‘The New Titans: How Four Chinese Companies Are Building a New Global Order‘ as essential reading on the competitive landscape reshaping the East-West auto market.

The path forward for European automakers now hinges on *how* they utilize this regulatory breathing room. Will it foster genuine innovation or enable stagnation? Only time, and the next set of sales figures, will tell.