To keep or phase out fuel-powered cars? The EU is in a quandary.

The EU plans to legislate to force car rental companies and large enterprises to purchase only pure electric vehicles from 2030 onwards, thereby accelerating the process of the ban on the sale of traditional fuel - powered vehicles by 2035. However, this policy has encountered strong opposition from the German government. Behind this, there is also a collective defection of car manufacturers and rental giants, combined with the tests of real - world dilemmas such as the lag in charging facilities and the decline in consumer acceptance.

On July 21, German Chancellor Merz publicly condemned a proposed plan by the EU, saying that the plan could damage the EU's important automotive industry.

Media reports said that the European Commission plans to ban car rental companies and large enterprises from purchasing non - electric vehicles for their fleets from 2030. This will affect 60% of the EU's new car business, covering a market scale of about 6.4 million vehicles per year. The plan is regarded as a key step to accelerate the EU's plan to completely ban the sale of fuel - powered vehicles by 2035.

Some reports said that the policy draft has entered the internal discussion stage, and the plan is to be officially announced at the end of summer 2025 and submitted to the parliament for approval. According to the disclosed details, rental giants such as Sixt SE and Europcar Mobility Group SA and large enterprises with fleets will be restricted to purchasing only electric vehicles.

Coincidentally, in March 2025, the EU signaled that it would take tax incentives for enterprise fleets powered by gasoline or diesel, aiming to accelerate the transformation of enterprise fleets to electric vehicles.

The automotive industry is one of the important pillars of the EU's economy, accounting for 7% of the EU's GDP (Gross Domestic Product) and providing about 14 million jobs, accounting for 6.1% of the total EU employment.

The sales volume of gasoline - powered cars still ranks first in the EU. Taking the data of 2024 as an example, the market share of traditional gasoline - powered cars reached 33.3%. Hybrid vehicles and electric vehicles accounted for 30.9% and 13.6% of the annual new car sales respectively.

Behind this, car manufacturers are facing a dilemma. On the one hand, electrification has subverted the key technologies of traditional cars and has gradually proven its value in huge markets such as China and the United States, and is regarded as the key to future automotive technology competition; on the other hand, the promotion speed of new energy vehicles is not as fast as expected, and the difficulty is not small.

In this context, participants in the automotive industry have begun to readjust their previous goals of discontinuing the sale of traditional fuel - powered vehicles, and are using a flexible approach of multiple energy sources to meet market demand.

Why actively transform when having fuel - powered vehicle technology?

Why does the EU (especially the automotive industries of countries such as Germany, Italy, and France), which has traditional advantages in internal combustion engine technology, actively promote the "ban on the sale of fuel - powered vehicles from 2035" and choose to transform to electrification?

With the shift of the focus of global automotive competition, the technological focus of the automotive industry has shifted from traditional engines and transmissions to system integration trends such as three - electric systems, intelligent cockpits, assisted driving, and vehicle electrical architecture and platformization. Internal combustion engine technology is the EU's traditional advantage, while electrification and intelligence are the keys to future competition.

In the process of electrification transformation, the EU's automotive industry is facing fierce challenges from Chinese and American car manufacturers. China is the world's largest producer of electric vehicles, with its production accounting for 70% of the global output. According to EU automotive industry trade data, in 2024, China became the largest source of the EU's automotive imports with an import value of 12.7 billion euros. The EU said that from 2019 to 2024, the EU's imports of cars from China increased by as much as 1591.3%.

This growth is due to the strong performance of China's new energy vehicles. In the first half of 2024, China's export volume of new energy vehicles reached 1.8 million, of which the contribution rate of the European market exceeded 35%. Affected by the EU's anti - subsidy tariffs and high tariffs in the United States, China's exports slowed down, but the pace of building factories overseas accelerated. For example, BYD announced in May this year that its European headquarters would be located in Hungary, with production expected to start in 2026 and a planned production capacity of 150,000 vehicles, mainly producing high - end electric models for the European market. This will further squeeze the space of European local brands.

In addition, China dominates the electric vehicle supply chain. In 2024, China ranked first among global battery - producing countries, accounting for more than 75% of the global battery supply. At the same time, the average price of Chinese batteries dropped the fastest, with a decline of nearly 30%, and was more than 30% and 20% cheaper than batteries produced in Europe and North America respectively.

It can be seen that if the EU clings to engine technology, it may lose the initiative in the future global market.

At the same time, the EU's climate policy is also an important reason for its electrification transformation. The EU established the long - term goal of achieving carbon neutrality by 2050 in the "European Climate Law" and set a key mid - term goal of reducing emissions by 55% on the 1990 level by 2030. However, enterprise fleets powered by fuel have dragged down the EU's green transformation process. In the first half of 2024, pure electric vehicles accounted for 13.8% of all newly registered private cars in the EU. The proportion in enterprise fleets was only 12.4%.

Therefore, the transformation of enterprise fleets to electric vehicles is regarded as a key step to accelerate the plan. According to data from the European Commission, currently, the sales volume of enterprise fleets accounts for about 60% of the EU's new car market.

Forcing enterprises to purchase electric vehicles is a key strategy for the EU to drive the transformation of the entire electrification market and achieve carbon emissions reduction. This can not only improve the emission reduction effect but also enhance the scale of the electric vehicle industry and accelerate consumers' acceptance of electric vehicles.

Continuous resistance: Industry backlash, infrastructure short - board, and market ebb

Although the new regulations have not been officially announced, the resistance within the industry is increasing.

Regarding the EU's proposed mandatory order, some European MPs warned that car rental companies would be significantly impacted. Due to the lack of charging infrastructure, high maintenance costs, and low residual value of second - hand cars, companies including Enterprise, Hertz, and Sixt reduced the number of pure electric vehicles in 2024.

Max Felber, a member of the European Parliament, even called on the European Commission to abandon the plan. In a letter to European Commission President Ursula von der Leyen, he pointed out that if this regulation is introduced, enterprises will be forced to purchase electric vehicles just to meet the quota.

Sixt CEO Nico Gabriel also warned that the plan is "unrealistic". Tourists rarely want to rent electric vehicles because there is a serious shortage of charging piles across the EU, and the rental cost will eventually become higher.

According to data from the European Automobile Manufacturers' Association (ACEA), the sales volume of electric vehicles in Europe decreased by 5.9% in 2024, and the development was not as expected. The market share of electric vehicles dropped from 14.16% in 2023 to 12% in 2024, and less than 30% of European consumers chose to buy electric vehicles.

The association said that the limited charging infrastructure is part of the reason for the weak demand for electric vehicles. The sudden cancellation of electric vehicle subsidies in Germany and the long - standing lack of affordable electric vehicle models are also factors contributing to the decline in sales.

The person in charge of the vehicle and energy system business of a luxury car brand with a Nordic background told Caixin that the construction of charging facilities requires sufficient resources. It is not only about financial investment but also requires running through the business logic and various policy support, which often exceeds the capabilities of car companies and even regional governments.

Moreover, due to the sluggish sales of electric vehicles in Europe, some automotive giants have also collectively "defected" and gradually abandoned or postponed their "full electrification" plans.

Recently, Klaus von Moltke, the senior vice - president of engine production at BMW Group, said in an interview that "the internal combustion engine is our foundation." Gernot Döllner, the global CEO of Audi, also said in an interview that Audi will no longer set a clear timetable for terminating the research, development, and sales of internal combustion engine cars. Before this, many ultra - luxury car brands including Mercedes - Benz, Volvo, and Porsche announced the postponement of their electrification plans.

The lower - than - expected market demand is an important reason for the slowdown in the electrification progress of car manufacturers. Cigdem Cerit, a senior director of corporate ratings in the European region at Fitch Ratings, said that the reasons why consumers are reluctant to buy electric vehicles include anxiety about the driving range of electric vehicles and the limited popularity of charging infrastructure. In addition, the issue of price affordability and the speed of technological change further limit the popularity of electric vehicles.

From the perspective of revenue, fuel - powered vehicles still have substantial profits. Stephen Brown, a senior director of corporate ratings in North America at Fitch Ratings, said that the sales volume of fuel - powered vehicles is large enough and the supply chain is mature enough, which makes fuel - powered vehicles more profitable.

The attitude of EU car manufacturers towards the electrification process is quite complex. The CEO of a German luxury car company once told Caixin directly that his company will not bet unilaterally but will develop multiple routes in parallel, including fuel - powered vehicles, hybrid vehicles, hydrogen - powered vehicles, and pure electric vehicles. Only in this way can it meet consumer demand and give consumers the right to choose.

Under the unclear and wavering policies, both vehicle manufacturers and suppliers choose to respond flexibly and diversely to the future.

In the view of Matias Giarnini, the CEO of Horse Powertrain, this actually creates new business opportunities. The company also chooses a multi - line layout, including developing high - efficiency internal combustion engines, hybrid systems, and transmissions, and also supporting OEMs (Original Equipment Manufacturers) to focus on the transformation to pure electric vehicles, so as to meet the different needs of customers in different regions.

Regarding the full electrification timetable of EU car manufacturers, Cigdem Cerit gave his prediction. He expects that by 2030, pure electric vehicles, hybrid vehicles, and plug - in hybrid models of European and American car manufacturers will account for more than half of the new car sales.

The wavering of car manufacturers in the EU region exposes the gap between ideal and reality: when climate goals encounter industrial foundation, infrastructure short - board, and market rules, both policy - making and automotive development need to find a new dynamic balance point.

This article is from the WeChat public account "Caixin Auto", author: Li Jiayi, editor: Li Xiyin, published by 36Kr with authorization.