China is the real winner of the EU’s combustion engine ban reversal

 

China is the real winner of the EU’s combustion engine ban reversal

 

Europe’s automakers have to compete globally but are at risk of getting shut out as emerging markets turn to electric vehicles.

 

December 18, 2025 6:39 pm CET

By Jordyn Dahl

https://www.politico.eu/article/why-china-is-the-real-winner-of-the-eus-combustion-engine-ban-reversal/

 

BRUSSELS — Germany is claiming victory for its automakers after the European Commission reversed its 2035 combustion engine ban, but the change gives Chinese automakers time to get even further ahead — in Europe and emerging markets.

 

The EU executive argues the automotive package unveiled on Tuesday straddles the line between maintaining a strong stance on climate and helping Europe’s sector remain globally competitive.

 

But left-leaning policymakers and analysts say it does nothing of the sort.

 

“The package doesn’t solve any of the structural issues of European carmakers in Europe or globally,” said Nils Redeker, co-director of the Jacques Delors Centre. “There is a technological gap between European automotive manufacturers and those in China. The package doesn’t move the needle on any of these fronts.”

 

European industry is facing a cacophony of problems, including being squeezed out of the Chinese market as consumers turn to domestic brands offering better electric vehicles; sluggish sales at home; and a transatlantic trade war courtesy of U.S. President Donald Trump.

 

The Commission lowered the 2035 emissions target from a 100 percent reduction from 2021 levels to 90 percent, saying the remaining 10 percent will have to be offset by investments in green steel and alternative fuels.

 

One of the sector’s biggest requests was to continue producing plug-in hybrids, which have both an electric motor and a traditional combustion engine, past 2035. The executive acquiesced, allowing hybrids, pure combustion engines and range extenders — small combustion engines that give batteries more range.

 

The danger is that this could encourage automakers to continue investing in combustion engines or plug-in hybrids instead of catching up with China on pure electric vehicles.

 

“This would hurt European competitiveness and basically help China to get ahead faster,” Redeker said.

 

Dutch MEP Mohammed Chahim from the center-left Socialists and Democrats put it more bluntly in a Parliamentary debate on Tuesday after the package was announced: “This is a Christmas gift for the Chinese car industry.”

 

The Commission last year hit Made-in-China EVs with new duties, but instead of shutting automakers out of the European market, Chinese brands are getting around the duties by shipping plug-in hybrids that are popular with European consumers.

 

Three of the top 15 plug-in models this year are Chinese brands, according to data from Schmidt Automotive. In the first 10 months of the year, plug-in hybrid sales increased 43.2 percent year-over-year, per the latest sales figures from car lobby ACEA.

 

Everywhere, all at once

While the automotive package focuses on what can be produced in Europe, the continent’s automakers are global companies that have to compete everywhere.

 

China was once a cash cow for German automakers, subsidizing higher employment costs back home for over two decades. But over the past five years, Chinese automakers have shifted to all-electric vehicles thanks to government policies, and consumers are following suit. Over 50 percent of car sales in China are now electric.

 

In the first 10 months of this year, EVs made up a quarter of global car sales, a sharp increase from 3 percent in 2019, according to a new report from Ember, an energy think tank.

 

The shift to electric is also underway in emerging markets with significant sales potential, such as Latin America and Southeast Asia.

 

Vietnam and Singapore have higher EV sales than the EU. In 2021, Vietnam’s share of EVs was less than 1 percent. Today, it’s at nearly 40 percent, the report shows.

 

“Emerging markets are a huge prize that Europe can’t afford to let slip away,” said Chris Heron, secretary general of E-Mobility Europe, a trade association. Chinese players are gaining ground every day across Latin America and Southeast Asia. Europe’s long-term route to compete has to be electric vehicles.”