Europe moves closer to cutting off its lifeblood combustion engine

Europe’s effort to snuff out the internal combustion engine a little more than a dozen years from now just took a key step forward.

Members of Parliament voted Wednesday in favour of mandating that carmakers eliminate emissions from the cars they sell from 2035 onward. They rejected an attempt by some right-leaning lawmakers to let up on the industry even just a little bit, voting down an amendment that would have set a 90 per cent fleetwide CO2 average reduction instead.

The 19th-century invention by men named Maybach and Daimler isn’t dead yet. The Parliament has only voted on its position for negotiations with national governments. And member states haven’t decided yet whether they will back the 2035 date or not, but will do so by the end of the month.

After that, it’ll be time for negotiations between representatives of the Parliament and the Council of the European Union, which will start around September or October at the earliest. This will take several months.

While the 2035 plan has been well-telegraphed (the EU unveiled it 11 months ago) and the decision still needs more finalising, the European consumer organization BEUC isn’t exaggerating when it calls this vote historic and says this would have been unthinkable years ago.

“We have set a clear direction of travel for the industry,” Pascal Canfin, chair of the the European Parliament’s environment committee, said after the vote. Phasing out combustion engines any faster, as some political groups including the Greens have proposed, would make it “impossible to manage the social and industrial consequences associated with the transition of Europe’s leading industry in terms of employment.”

So what does this mean for automakers and their suppliers?

Several of the industry’s lobby groups remain wary. The European Automobile Manufacturers’ Association wants a review of post-2030 targets. Germany’s VDA similarly says it’s too early to set a zero-emission objective. The director of France’s PFA warns Europe is making a radical move and not properly protecting its industry.

On the other hand, manufacturers including Volkswagen, Stellantis and Mercedes-Benz have already spent the last several years accelerating their transition to battery-electric vehicles and ratcheting up their investments by tens of billions of euros. Even Toyota, which remains circumspect about how quickly consumers will be ready to make the jump, has said it’ll be ready to sell only zero-emission cars by 2035.

Where it gets trickier will be less-well-off carmakers like Renault, and suppliers whose fortunes remain too closely tied to combustion. The French manufacturer reeling from having to write-off operations in Russia, its second-largest market, is exploring drastic moves including a partial sale of its stake in Nissan and carve-outs of its EV and combustion-engine businesses. A wave of consolidation is taking place among parts makers, surely with more to come.

Other companies for which Wednesday’s vote was a big setback are high-end manufacturers such as Ferrari and Aston Martin. A measure poised to take effect from 2030 onward would end emissions-target exemptions for carmakers that produce fewer than 10,000 vehicles a year.

Italy wasted little time after the EU formalized its 2035 proposal last year to put the word out that it wants ways for the likes of Lamborghini to get around restrictions.

Ferrari investors are eager to get a look at the electrification plan chief executive officer Benedetto Vigna has been crafting since he took over in September. The maker of 1,000-horsepower supercars is staging a highly anticipated investor day next week, and faces a daunting task of making up for its late start. Ferrari’s first fully electric vehicle isn’t slated to arrive until 2025.

“We would expect OEMs that have exhibited a more cautious stance on EV adoption to revisit their plans and consider an acceleration of their electrification strategies,” Bernstein analyst Daniel Roeska wrote Thursday in a note.