Europe's EV Gambit

No one likes Brussels. But we should.

The news of the week is the European Commission's decision to ease 2035 emission targets for European car-makers. Funny enough, Brussels managed to offend both ends of the automotive opinion spectrum - those who believe that the European automotive players should switch to electric vehicles ASAP, and those who push for extending the sales of internal combustion engines.

At the beginning of the week, right after the announcement of the easing of the ban, my LinkedIn was flooded with laments for Europe. People were calling it a huge setback and a death sentence for the European auto industry. Then, towards the end of the week, a different chorus of voices rose, this time from the automotive giants themselves, who also blamed the new regulations for increasing costs and deterring investment! “This package doesn’t do the job”, said Antonio Filosa of Stellantis, “disastrous”, echoed Hildegard Muller, president of VDA.

So what’s the deal here? First, OEMs can continue selling ICE cars and release 10% of their 2021 CO2 by 2035, instead of going to zero. A clear blow to EV transition, and a win for ICE. But to comply with the 10% requirement, emissions must be offset with low-carbon steel and sustainable fuels. Which, in the words of Matthias Schmidt, an industry analyst, would make European ICE cars “haute couture Swiss watches of the motor industry”.

When I worked as a lobbyist, I saw how immense industry pressure could be on the rank-and-file lawmakers. You have many who are paid far more than you and have access to all the consultants and resources you’ll never have, trying to convince you that their point is correct. You do your own research, but you are understaffed and out of time. Then, there is a political dimension too. Your bosses manoeuvre for power, and they can cut deals in the backrooms that will nullify your effort.

So the Brussels decision seemed to be a gambit - sacrifice some CO2 targets, but make exploiting this option too expensive. On the face of it, the ICE industry wins. In reality, they’ve been duped, as they now realise. Hope that after spending so much firepower on pushing through a deal that ultimately hurts them, they’ll go back and double down on EVs. Especially since Brussels have announced the same week a carrot of €1.8B for the battery industry.