On behalf of the car industry: Europe is taking a step back from the green revolution

The average lifespan of a car is 15 years, so – in the spirit of the times that had not yet changed then, three months after the outbreak of the war in Ukraine – everyone welcomed the step. “A good day for the protection of the environment,” said the vice president of the union. “A clear message regarding the achievement of the climate goals,” announced the German Minister of the Environment, then from the “Greens” party.

This week, three and a half years later, the European Commission effectively canceled the decision. Cars with an internal combustion engine will also be allowed to be sold in Europe after 2035, including hybrid cars with two engines, as long as the car companies present a 90% reduction in carbon emissions this year compared to the situation before the adoption of the decision.

The companies will be able to achieve this goal, among other things, by using “green steel” (produced without fossil fuels) or by using biofuel. They will also be able to receive an “increased credit” for offsetting carbon dioxide by producing cheap and small electric vehicles. Bottom line, this is a U-turn that symbolizes the decline of the climate issue and the rise of economic concerns on the continent. The European media defined it as “the biggest retreat from the vision of the green revolution” of the Union in the last five years.

The German government exerted heavy pressure

The person behind the decision is mainly the German government, which exerted heavy pressure on the Commission to cancel the ban. Italy also joined, and so did Hungary, and the result is the announcement published this week with a “re-examination” of the issue in the coming years. German Chancellor Friedrich Mertz sent an official letter to the Commission last November, in which he outlines the solution proposed yesterday, which still needs to be legally examined and approved by the European Parliament.

The reason why Germany fought against the ban is its automobile industry, whose sales this year showed a decline of tens of percent compared to last year: the figures for the first quarters of the German automobile giants showed a sharp decline in sales, mainly in Asia, and a steady decline in profits as well.

In fact, the Asian market, which was a gold mine for German industry, has been disappearing in recent years. The electric models are not sold at a high rate in Europe, government subsidies dramatically affect sales and Chinese car companies have penetrated the European market at floor prices. The EU “remembered” to fight this only this year, with a high tax on Chinese electric cars, but it is still dependent on China as a country for the supply of rare metals, fuel cells and chips for the production of electric vehicles.

The companies Mercedes-Benz, BMW and Volkswagen began “restructuring” procedures last year and, according to a study by the EY company, laid off approximately 51,000 workers – close to 7% of the workforce in the field in Germany. The companies are investing billions in retirement packages with the aim of reducing personnel expenses, in coordination with the strong labor unions in the automotive sector in Germany. The consultancy found that in terms of profits, the German car industry has so far recorded its worst year since 2009.

As mentioned, even in Italy the decision was welcomed by the government, which pressured Brussels alongside Germany in recent months to withdraw from the ban. Both Italy and Germany are expected to have minimal growth in the coming year, and damage to their automotive industries will worsen the situation. “It’s a step in the right direction,” said Italian Industry and Trade Minister Adolfo Orso. “And this is the first crack in the ideological wall of Brussels.”

Transportation experts explained that the newly announced mechanism includes generous subsidies in terms of carbon dioxide emissions for manufacturers who will focus on physically small vehicles at prices below 20,000 euros (70,000 shekels), so that they can continue to produce luxury cars with internal combustion engines.

Volkswagen closed a factory in Germany for the first time

A symbolic milestone in the decline of the German automobile industry, which was the main source of German economic prosperity in the decade before the corona epidemic, was the closing of the Volkswagen factory in Dresden this week. Although this is a step that has already been announced in the past, and a factory where production was small and was also used as a visitor center, this is the first time that the company has closed a factory in Germany in its 88 years of existence.

Until now, Volkswagen and other companies have reduced production by switching to part-time work, which helped them quickly recover from the global economic crisis in 2008 and capture new markets in Asia. Now, in coordination with the company’s workers’ union, the factory, which produced less than 10,000 cars a year since it was inaugurated in 2002, is closed.

The demand for electric vehicles is “too low”

The European Union’s decision about three years ago was supposed to provide certainty to the industry, encourage its changes and divert tens of billions to investments in research and development in the field of electric vehicles, as well as establish a fast charging infrastructure across the continent. Many of these ambitions have yet to be realized.

Only 16.4% of the sales of vehicles last year, according to the data of the European association ACEA, were of fully electric vehicles, and 9.1% of hybrid vehicles. The European car companies, backed by their governments, claimed that the demand on the continent is “too low” and that they must therefore sell old models with internal combustion engines for a longer time, to finance the transition to electric vehicles.

The European Commission headed by Ursula von der Leyen, which placed the “green revolution” high on the Union’s priorities, recently said that the commitment to the climate goals remained as it was, and that “the new decision provides more flexibility to the car manufacturers, after a renewed dialogue with them”. The BMW company said that this is an “important day… because the Commission no longer operates in the format of sweeping prohibitions, and recognizes the possibility of the continued use of the internal combustion engine.”