BREAKINGVIEWS-Europe's EV rollback risks state backsliding

By Neil Unmack

LONDON, Dec 16 (Reuters Breakingviews) - Europe’s backsliding on electric vehicles is a measly Christmas stocking-filler for carmakers. Brussels on Tuesday abandoned plans to make battery rides account for 100% of sales by 2035. Still, the rules are tougher than American ones, meaning that Volkswagen VOWG.DE and its European peers probably won't slash EV plans in the way that Ford Motor F.N did on Monday. Looser targets may, however, embolden governments to slam the brakes on the green-car transition.

Some tweaks to the EU’s targets looked inevitable. The bloc’s rules called for a 55% reduction in carbon emissions by 2030, and a full elimination five years after that, effectively banning the sale of combustion engines by the middle of the next decade. Yet in the first 10 months of the year, electric cars made up just 16% of sales, per ACEA data. Deutsche Bank analysts expect the share of battery rides to still be below 45% by 2030.

Europe is only slightly taking its foot off the gas with its EV targets. The new 2035 goal still requires a 90% reduction in emissions. The remaining 10% will have to be offset by use of synthetic fuels or low-carbon steel. And the 55% target in 2030 can be spread over three years. That means it's a far cry from the U.S., where President Donald Trump has slashed subsidies for EVs and proposed radically scaled back emissions rules.

Ford on Monday halted some EV models and wrote down its battery ride investments by nearly $20 billion. That's unlikely to happen at Renault RENA.PA, Stellantis STLAM.MI, BMW BMWG.DE, Volkswagen and Mercedes-Benz MBGn.DE. Instead, arguably the key takeaway for Europeans is that they're less likely to face cash-sapping fines from Brussels.

Arguably, carmakers aren’t even the main problem any more. The sector has invested heavily in battery technology and production capacity. That has helped drive down EV costs to the point where consumers need not pay a big penalty versus combustion engines. Volkswagen, for example, is planning an electric hatchback next year with a starting price of just over 20,000 euros.

The bigger challenge is persuading consumers that EVs can be charged easily and cheaply. Even hitting the 2030 target would require over 8 million charging points, per ACEA estimates, versus less than 1 million today. Energy costs will need to come down, with charging prices across Europe currently varying wildly. Moreover, a lack of European policy coordination is highlighted by the fact that EV uptake varies wildly by state. It's less than 5% in Italy, around 21% in Germany and some 70% in Denmark in October, ACEA data shows.

Tuesday's announcement won’t solve those bigger problems. Instead, the danger is that politicians see the move as a sign that further backsliding is inevitable, incentivising governments to avoid further help for EVs and chargers. That would make Europe's energy transition even more challenging.

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CONTEXT NEWS

The European Commission on December 16 announced plans to water down Europe’s planned 2035 ban of combustion engine cars.

Under the new proposals, carmakers will need to cut emissions by 90% versus 2021 levels by the same 2035 date. They will still be able to sell hybrid vehicles and electric cars that use gasoline to boost driving range. Extra emissions created by the lower 2035 target will need to be offset by the use of low-carbon steel, or so-called synthetic e-fuels. Furthermore, the 55% reduction target for 2030 will now only need to be met over three years, from 2030 to 2032.