Germany calls on Europe to scrap 2035 ICE ban on diesel, gasoline cars

Germany's Chancellor Friedrich Merz is calling on the European Commission to relax its 2035 ban on diesel and gasoline cars to support the country's ailing automotive sector, he said in Berlin on Nov. 28.

The 2035 ban on internal combustion engine cars -- which applies to new car sales and includes most hybrids -- is a cornerstone of EU climate policy, and is expected to rapidly erode one of the largest sources of the region's oil demand. By effectively limiting new car sales to electric and hydrogen fuel cell vehicles, the law is set to reduce demand for diesel, gasoline, and biofuels that contribute to carbon emissions.

In a 2025 long-term outlook report, analysts at S&P Global Energy CERA projected European gasoline demand sinking from 2.4 million b/d in 2025 to 915,000 b/d by 2050, while diesel demand could shrink by 60% over the same period. At the same time, gasoline cracks are set to shed more than $3.50/b, sinking close to $8.50/b.

The ICE ban was a flagship policy under its Green Deal, but critics have challenged the rules, arguing that they place an unfair burden on Europe's carmakers, which have already struggled to compete with Chinese competitors and absorb rising costs.

After months of campaigning against the 2035 ICE ban, Merz announced his Christian Democratic party had won support from his coalition partners, the Social Democrats, to push for reform. In a televised press briefing from DRM News, the chancellor said that he would send a letter to Commission President Ursula von der Leyen, urging her to reconsider the ban.

Instead, he insisted that climate goals should be met in a "technology-neutral way," and that manufacturers should at least be permitted to continue making hybrid battery vehicles beyond the 2035 cutoff.

"This is the key decision for the future of Europe as a centre of automotive manufacturing," Merz said.

Meanwhile, SPD vice-chancellor and finance minister, Lars Klingbeil, offered public support, saying, "We agree that the future of the industry is electric ... but we need to be open to more technologies, we need flexibility."

In the UK, public pressure has already led to the date of the ICE ban being repeatedly revised, while the change in policy direction under President Donald Trump has materially shifted most long-term demand forecasts for the US. The International Energy Agency, for instance, said in May that EVs could displace 1 million b/d less oil by 2030 previously expected, mostly due to slower US uptake.

S&P Global Mobility analysts have already baked in relaxed EU ICE bans into their base case scenario, citing a fast-tracked review process promised by the Commission. The EC has pledged to revisit the ban on Dec. 10, in a process that could lead to policy relaxations.

Policy direction

While lead manufacturers have called for extra time to transition their operations, others have warned that policy swings could prove detrimental.

Transport and Environment, an advocacy group for clean energy, has called on European politicians to stick to agreed targets, warning the region could lose out to potential EV investment while laws remain in flux.

According to Nov. 25 data from the European Automobile Manufacturers' Association, EVs currently account for 16.4% of the regional market, contrasting with a 34.6% share for hybrids and a 9.1% share for plug-in hybrids.

As a result, manufacturers have been reluctant to hike production while policies remain uncertain, Transport and Environment added.

"Any weakening of the targets will further reduce the attractiveness of Europe as an investment destination," the group said in a recent statement, citing Eur70 billion of announced EV investment by carmakers in Europe versus Eur97 billion in North America.

"First, European carmakers and politicians need to be firmly committed to the 2035 target and to accelerate the ramp up of electric car models," it said.