Europe’s auto industry is bracing for a major announcement from the EU on December 10, which could see significant changes to the European Commission’s proposed 2035 combustion engine phase-out.
However, amid pressure from car manufacturers and other affected sectors such as car rental and car leasing companies, the announcement may now be postponed to January.
“We are still working on it,” said the EU Commissioner for Sustainable Transport and Tourism. Apostolos Tzitzikostas told the German business newspaper Handelsblatt This week. “We want to offer an automotive package that is really comprehensive and covers all the essential aspects.”
Several media reports in recent weeks have suggested that the EU Commission plans to force electrification of the rental, lease and company-car markets by 2030, while a 2035 blanket ban on all internal combustion engines will be significantly relaxed and electric vehicle (EV) options will be allowed.
An executive at a major car rental company told DW that, based on their discussions with the EU, they expect the EU to propose strict electric vehicle quotas for those known as fleet operators.
He said discussions showed that car rental, car leasing and company-car operators could face 90% or more quotas by 2030.
“The commission is not looking for dialogue or discussion, that is our perception,” the executive said.
The EU Commission said it had no comment to add regarding the negotiations. A spokesperson told DW that preparations for the upcoming package were “ongoing.”
request for concessions
In 2022, the 27 EU member states reached a deal to effectively ban the sale of new combustion engine cars by agreeing to halt new registrations of C02 emitting vehicles by 2035. The aim was to reduce the car sector’s high emissions as part of the bloc’s strategy to become climate-neutral by 2050.
However, Europe’s car sector has been plagued by a number of problems in recent years, struggling to cope with the technological challenge of the shift to electrification and heavy competition from China.
German Chancellor Friedrich Merz is among those urging the EU to soften the 2035 cut-off date. They have asked Brussels for exemptions for a variety of technologies, including plug-in hybrids, battery hybrids and some range-extended electric systems that use petrol-powered generators to charge the battery.
“It is more appropriate and practical to invest more effort and money in the development of efficient, hybrid systems that will combine the best of the worlds of the internal combustion engine on the one hand and electric mobility on the other,” Merz said.
Europe’s major carmakers support the German government’s move.
“The EU Commission is ignoring market realities and endangering jobs and competitiveness in one of its key industries,” premium carmaker BMW said in a statement to DW. “It is vital that CO2 rules are redesigned immediately.”
The company hopes the EU Commission will seriously consider the German proposal before making its announcement. “We are convinced that all drive systems can and must contribute,” the statement said. “Effective climate protection requires ambitious but realistic guidelines, not targets that are decoupled from the market.”
German brands like BMW are particularly effective when it comes to plug-in hybrids. Together with Mercedes, Volkswagen and Audi, they accounted for more than 41% of all plug-in hybrid sales in the EU in the first ten months of the year. They would benefit greatly from the relaxation of the 2035 ban in favor of plug-in hybrids.
Commercial fleet operators are deeply concerned
Still, carmakers are worried that any easing of the 2035 ban would lead to potential quotas being offset by commercial fleets, which comprise about 60% of all new car registrations in Europe. Car rental companies are particularly concerned.
Sixt, one of the largest European car rental companies, has been vocal in its opposition to the EU’s alleged plans.
It says the chronic lack of charging infrastructure for electric vehicles across Europe undermines any efforts towards electrification.
“The regulation under discussion will affect more than 60% of all new registrations in Europe and will effectively bring forward the combustion engine ban by almost eight years,” a company spokesperson told DW.
Sixt argues that “premature quotas” would deepen Europe’s existing dependence on China for battery and mineral production critical to the automotive sector.
“A transition that increases dependency and reduces employment is going in the wrong direction,” the spokesperson said. “Any regulatory framework must be aligned with real-world conditions – charging infrastructure, grid capacity, vehicle availability and customer demand.”
Andrew Mountstephens, general counsel of Sixt, told DW that the company is committed to emissions-free mobility and said they had previously invested heavily in electrification. However, customer preference is still towards diesel and petrol cars.
“We just had to realize that our customers were not ready to go at the speed we wanted to go,” he said, adding that the lack of charging infrastructure across Europe was a central reason for this.
Slow EV adoption hurts profits
Many car rental and car sharing companies have invested in electric models, but have suffered huge losses due to lack of customer interest.
Hertz reported a massive loss of $2.9 billion (€2.49 billion) in 2024, largely due to a failed investment in thousands of Tesla cars, which were expensive to maintain and customers largely stayed away from.
Problems with charging infrastructure and customer demand are widespread and have limited previously high expectations for how quickly Europeans will adopt electric driving.
While new registrations of electric vehicles in the EU increased dramatically from 2017 to 2023, there is a decline in 2024 and only 17% of cars registered in 2025 are expected to be fully electric.
Patrick Schauffas, head of the Center for Future Mobility at consulting firm McKinsey, says he would hope that any update the EU Commission brings forward “will take those realities into account”.
“The pace of infection is probably not as fast as we expected or planned,” he told DW. He also said it is important that any policy platform considers both decarbonization and economic success as “part of a holistic approach.”
Emphasizing that long-term electrification will be the future, Schaufuss, however, said that markets are “diverging” and different regions are moving at different speeds. “So this transition period is critical, and maintaining economic success during this period is absolutely critical.”
Edited by: Uwe Hessler