EU Automotive Package – The Porsche Amendment
- Matthias Schmidt
- 13 hours ago
- 7 min read
Updated: 1 minute ago
The all important European Commission’s Automotive Package, laying out the foundations and trajectory the market will take, and giving some form of planning security for the next decade, was unpacked and presented in Strasbourg just days before Christmas this week. However, following the presentation, Commissioner Hoekstra darted across to the Parliament's plenary chamber, reminding us that this is far from a done deal and is still just a recommendation from the European Commission. It still needs to pass the lawmakers in the Parliament as well as the European Council early next year with tweaks likely. However so far, in its current form, the winners are clear to see! In the morning, prior to the Automotive Package being officially released, the President of the EPP/EVP, and de facto key protagonist in getting the wheels of the package into motion, the ever-hubristic Manfred Weber, appeared even more sanguine than normal having finally gotten his technological neutral equation effectively over the line. However, crucially, he mentioned, he hasn’t stopped his mission to allow even more new ICE models onto European roads post-2035, seeking even more downward movement from the 10% window that Commissioners are proposing, once it hits the Parliament chamber floor next year. In a jovial mood, Weber made clear that he has made good on his pledge to bring a form of technological neutrality to the market from 2035 onwards, and to keep the internal combustion engine alive and kicking, albeit powered by renewable fuel and with models containing a sizeable proportion of green steel. It wasn’t going so far as a George W Bush-style mission accomplished message, but not far off.
Meanwhile, and much more crucially, the much-anticipated Automotive Package, presented hours later on Wednesday evening, was discussed right down to the final moments according to the opening comments of the press conference, led by Commissioner Séjourné. It gave some indication of how tense and sensitive this package has become. A shift from a 100% CO2 tailpipe-new-car fleet emissions reduction by 2035 compared to 2021 levels, and the poster child policy of Ursula von der Leyen's first tenure as Commission President, reduced to a 90%, suggests that much-requested EPP/EVP technology neutral aspect leaves the door open for internal combustion engines to live on. Traditional motorists unlikely to be sat behind the wheel of a new ICE from 2035
However, traditional motorists aren’t likely to be the ones sitting behind the wheel of a new ICE new motor from 2035 despite the proposed changes. ICE models to become the haute couture Swiss watches of the motor industry That will be left to the privileged few who have enough in their bank account to factor in the added costs of green steel and renewable fuel, which will undoubtedly be priced into ICE models, putting them out of reach to many, while ICE models become the haute couture Swiss watches of the motor industry, while everyone else goes digital. As scaling benefits for ICE models diminish a value over volume approach will be reserved for high-end ultra-luxury models such as Porsche, Lamborghini, Bentley and Ferrari etc.
Only those brand badges that can achieve high enough margins which will be reflected in exotic list prices, will see pure ICE models continue to be driven, while malus’ increasingly applied to certain markets such as France will add even further to that niche status.
In France, already in 2025, a new car customer who walks into a Porsche dealership in Paris and wishes to purchase a Porsche 911 will be asked to cough up a €70,000 Malus – a CO2-scaled fine/punishment tax – for the pleasure, on top of the basic entry-level €140,000 Porsche 911 list price for the iconic German sports car.
Meanwhile, that Malus rises to €90,000 from 2028 or €230,000 prior to inflation with the car and Malus together, and that’s prior to a higher proportion of green-steel content being priced in... not to mention the price per litre of renewable fuel. However, even a model with CO2 emissions above 156g/km, such as a VW Tiguan, will face an over €10,000 malus bill from 2027 in France and slowly pricing medium to large ICE models out of the market and accelerating the path to BEV/ICE price parity.
Power to the people likely to be e-fuelled.
So the technology-neutrality aspect the EPP has been fighting for won’t likely be for the people, as the party's name suggests, but for the precious few who can afford it.
However, that gap in the CO2 door won’t necessarily be filled just by ICEs.
The other part of the equation for achieving the roughly 11g/km fleet emissions average CO2 target from 2035 will be to form a mix of ICE models, plug-in hybrids, and extended-range hybrids, which could increase the share of non-BEVs to 20% under other calculations, depending on EV ranges.
Engine development consolidation to get the scaling benefits will likely be the course of action such as already seen through Geely and Renault's Horse Powertrain venture which are also potential winners, or whisper it quietly potentially even Mercedes and BMW combining resources. Japanese OEMs may also be able to continue offering small hybrids given ICE scaling benefits still in place from its domestic market.
Of course, one can also go beyond that and bypass compliance targets, pay a fine and factor that into pricing, or alternatively join an open pool, which has been commonplace since 2020.
Other OEMs with perhaps not as exotic a brand stable as the German premiums are likely to leverage high-range PHEV models or extended-range electric vehicles (EREV) that use a small combustion engine as a generator to power an electric motor and have been relatively popular in China, accounting for almost 40% of the plug-in market there or roughly 20% of the total market, although that is now falling again. PHEV real-world CO2 emissions 300% out of sync Ranges are likely to increase to lower CO2 averages while also compensating for a so-called utility factor change that inflates the CO2 credentials of PHEVs, following real-world fuel economy standards being up to 300% out of sync with paper figures according to EEA collated data. The utility factor change for PHEVs will crucially remain in place, and could have been dumped as part of the Automotive Omnibus, as happened across the UK earlier this year.
At the other end of the spectrum, European-made sub 4.2m cars are set to be categorised under a new M1e segment, taking a leaf out of the Japanese Kei-car book, which sees models benefit from lower safety standards and lower taxes and should narrow the price parity equation as well as benefitting from super-credits helping OEMs meet compliance and should help bridge the next 2030 fleet emissions cut (-55% over 2021 levels to 49.5g/km) despite the help of the effective phase-in between 2030-2032 also announced.
The wider availability of LFP batteries and purchase subsidies, such as those being reintroduced across German from 2026, will help BEVs further, as well as the security of more European-made batteries arriving, thanks to the battery-booster incentive, which is essential for the old-continent in decoupling from China and bringing more local content back to Europe.
Significantly, Volkswagen’s PowerCo started its production ramp-up of NMC batteries at a facility in central Germany this week.
LFP cells will follow.
Volkswagen's core-brand urban electric models, due for launch from next year, will effectively pave the way for Porsche 911s to continue rolling off the production line in Stuttgart, 1,300km north-east of the main MEB+ small-model production hub, located close to Barcelona in low-cost Spain. OEM reactions to the Automotive Package: “Pragmatic,”and “economically sound overall” Unsurprisingly, Volkswagen that has effectively ticked all the boxes of the package issued a statement calling the Commission's proposals “pragmatic” and the proposal for new CO2 targets being “economically sound overall.” Read very happy! Battery improvements on the way
Meanwhile, battery energy density improvements across the board mean BEV models will require smaller, lighter batteries for similar ranges as today, lowering costs, or alternatively, the same-sized batteries but with larger ranges show that the industry is just at the start of the curve, suggesting that if the mid-term review had remained in 2026 as scheduled, a different outcome may have been possible. In fact, Volvo, which will launch its new SPA III platform with the new European-made EX60 from 2026, already said the BEV will be priced at parity with its XC60 PHEV next year (2026). Volvo Cars was a strong advocate of maintaining the status quo 0g/km 2035 target, having divested in ICE development and instead is leveraging its Geely parent’s Horse Powertrain JV with Renault.
Looking at Volvo’s Nordic Non-EU neighbour, Norway, it shows that there is likely to be a remaining business case for PHEVs, albeit a small one.
The oil-rich market planned to see a 100% BEV new car market during 2025, although it wasn’t binding.
It still sees two in every hundred new models registered during 2025 come as dual-motor PHEVs, despite the fiscal disadvantage of driving a hybrid compared to a BEV, while 95% were BEVs and the remaining 3% non-plug-ins according to OFV Norway data.
The market actually provides the perfect case study, as it has already surpassed the 2035 EU 11g/lm CO2 fleet targets.
In January 2024, thanks to the oil revenues, which enable the country to withstand lower returns from beneficially taxed BEVs for a sustained period, the average CO2 emissions from new cars reached 11g/km and translated into a new passenger car mix of:
BEV: 90.1%
PHEV: 2.0%
ICE/HEV/MHEV: 7.9%
It may not be a crystal ball, but it gives some good guidance. With PHEVs set to improve EV-only ranges and consequently lower CO2 emissions, and the further rollout of EREVs, we can expect a lower BEV margin to be required to hit that end goal by 2035 across the EU. But with BEV pricing about to hit parity with PHEVs, how many people will take a PHEV, while ICE models are likely to be priced out of the game for the vast majority, maybe even too high for Mr Weber! This appears ever more so like lip-service from the Commission to Mr Weber and his colleague, Mr Merz sat in Berlin which both have large voices thanks to parliamentary seats alongside a high population helping legislation get over the line or not. Das Auto survives in traditional engine modus but only for a handful of Europeans, but Mr Weber can nonetheless take it as a win. So is it winners all around? We will have to let the European Parliament and Council decide on that next year.
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Source: Schmidt Automotive Research
*Western Europe 18 Markets: EU Member States prior to the 2004 enlargement plus EFTA markets Norway, Switzerland, Iceland, plus UK