EU's 2035 Petrol and Diesel Ban Faces Mounting Pressure: What Does This Mean for UK Drivers and Electric Car Schemes?
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Breaking: Germany Challenges EU's Flagship Climate Policy
In a significant development that could reshape Europe's electric vehicle transition, Germany's Chancellor Friedrich Merz announced on 28 November 2025 that he will formally request the European Commission to soften its 2035 ban on new petrol and diesel car sales. This marks a pivotal moment in European climate policy, with potentially far-reaching implications for UK drivers and the electric car scheme UK market.
"This is the key decision for the future of Europe as a centre of automotive manufacturing," Merz stated during a televised press briefing in Berlin, confirming that his Christian Democratic party has secured support from coalition partners, the Social Democrats, to challenge the current regulations.
The 2035 ban, which effectively requires all new cars and vans to produce zero CO2 emissions, has been a cornerstone of the EU's Green Deal. The legislation was designed to support the bloc's 2050 climate neutrality goal by phasing out traditional internal combustion engine (ICE) vehicles, including most hybrid models. However, mounting pressure from the automotive industry and concerns about competitiveness against Chinese EV manufacturers have prompted calls for reconsideration.
What Is Germany Proposing?
Rather than an outright reversal of the 2035 deadline, Germany is pushing for what Merz describes as a "technology-neutral" approach to meeting climate goals. This would allow manufacturers to continue producing certain types of vehicles beyond 2035, specifically:
Plug-in hybrid electric vehicles (PHEVs) that combine electric motors with efficient combustion engines
E-fuel vehicles that run exclusively on synthetic fuels made from captured CO2 and renewable hydrogen
Advanced hybrid technologies that significantly reduce emissions compared to traditional petrol and diesel vehicles
SPD vice-chancellor and finance minister Lars Klingbeil confirmed his party's support, stating: "We agree that the future of the industry is electric … but we need to be open to more technologies, we need flexibility."
The German government is also preparing targeted subsidies of up to €5,000 for electric and hybrid vehicles that use predominantly German-made components, aiming to protect local manufacturing jobs and value creation.
Which Countries Are Supporting Germany's Push?
Germany is not alone in its concerns about the 2035 deadline. According to recent reports, at least six European nations have expressed reservations or are actively supporting calls for greater flexibility:
Germany - Leading the charge with formal requests to the Commission
Italy - Called for an earlier review of the ban in September 2024
Poland - Previously voted against the proposed law
Bulgaria - Abstained from the final vote on the legislation
Romania - Also abstained, signalling concerns about the timeline
France - Has previously opposed certain aspects of combustion vehicle bans
The coalition represents a significant portion of Europe's automotive manufacturing capacity, particularly given Germany's position as the continent's largest car market and home to major manufacturers including Volkswagen, BMW, and Mercedes-Benz.
How Does This Affect the UK's 2030 Ban?
The UK's situation differs from the EU, with the Labour government having reinstated a 2030 ban on new petrol and diesel car sales after the previous Conservative government pushed the date back to 2035. However, developments in the EU are putting renewed pressure on UK policymakers to reconsider this ambitious timeline.
Growing Pressure on UK Policy
Several factors are converging to create uncertainty around the UK's 2030 deadline:
Manufacturing Concerns: The UK automotive industry shares many of the same challenges facing European manufacturers, including high EV development costs, supply chain pressures, and intense competition from Chinese brands. Industry representatives have warned that an inflexible approach could undermine the sector's competitiveness.
Consumer Adoption Rates: While EV adoption is growing, with electric vehicles representing 17% of new car registrations in the EU as of late 2024, concerns persist about whether infrastructure and consumer readiness will keep pace with policy timelines.
Policy Alignment: If the EU softens its 2035 targets, the UK's 2030 deadline could leave British manufacturers at a competitive disadvantage, potentially accelerating production shifts to continental Europe where more flexible rules might apply.
However, environmental campaigners and some industry leaders warn that policy uncertainty itself poses the greatest risk to the transition.
What Does This Mean for Electric Car Salary Sacrifice Schemes?
Despite the political uncertainty surrounding ICE ban timelines, one thing remains clear for UK employees: electric car salary sacrifice schemes continue to offer substantial savings and remain fully protected under current UK tax policy.
Why EV Salary Sacrifice Is Insulated from Policy Shifts
The UK government has legislated Benefit-in-Kind (BiK) rates through 2030, with the current 3% rate for 2025/26 providing unprecedented tax advantages for electric vehicles. This long-term certainty means:
Guaranteed Savings: Employees can save 20-50% on the best electric cars to salary sacrifice compared to traditional leasing or purchase options
Policy Stability: Unlike broader automotive policy, which may shift with European developments, BiK rates for EVs are locked in with cross-party support
No Retroactive Changes: Existing salary sacrifice arrangements are protected even if policy changes occur in the future
This stability is particularly valuable given the current policy uncertainty, providing employees with a reliable pathway to more affordable electric vehicle ownership through schemes like The Electric Car Scheme.
Comparing Costs: Why Salary Sacrifice Makes Sense Now
To illustrate the continued value of salary sacrifice despite policy uncertainty, consider a Volkswagen ID.3 with a standard lease cost of £450 per month:
Traditional Personal Lease:
Monthly payment: £450
Paid from post-tax income
No tax savings
Electric Car Salary Sacrifice Scheme (40% tax bracket):
Gross salary reduction: £450
Income tax saving: £180
National Insurance saving: £54
BiK tax (3%): ~£30
Net monthly cost: £276
Total monthly saving: £174 (39%)
This substantial saving remains available regardless of whether European policy shifts toward greater flexibility for combustion vehicles.
The Industry Is Divided: Who Wants What?
The debate over the 2035 ban has created clear divisions within the automotive sector, with competing visions for Europe's automotive future.
Those Supporting Policy Flexibility
German Automotive Industry: Traditional manufacturers including Volkswagen and BMW face significant pressure from high EV development costs and Chinese competition. Many have called for more time and flexibility to manage the transition while protecting jobs and manufacturing capacity.
Component Suppliers: Tier-1 suppliers and semiconductor manufacturers face complex planning challenges, with flexibility potentially allowing continued investment in efficient combustion and hybrid technologies alongside pure EV development.
Some Member States: Countries with significant automotive manufacturing sectors but less advanced EV infrastructure are concerned about the economic impact of rapid transition timelines.
Those Opposing Any Weakening
EV-Committed Manufacturers: Companies like Volvo, Polestar, and others that have made substantial investments in pure electric platforms have publicly urged the EU to maintain the 2035 target. These manufacturers argue that policy uncertainty undermines their competitive position and investment decisions.
Environmental Groups: Transport and Environment, a leading advocacy organisation, has strongly opposed any weakening of the 2035 target, stating: "First, European carmakers and politicians need to be firmly committed to the 2035 target and to accelerate the ramp up of electric car models."
The group warned that policy uncertainty could reduce Europe's attractiveness as an investment destination, noting that €70 billion of announced EV investment in Europe compares unfavourably with €97 billion in North America.
Climate Campaigners: Environmental organisations argue that delaying or softening the ban would undermine Europe's climate commitments and cede further ground to Chinese competitors who are unlikely to slow their EV development.
What Happens Next? Key Dates to Watch
The European Commission has scheduled a comprehensive review of automotive policy for 10 December 2025, which could result in significant announcements affecting the 2035 ban. However, some analysts suggest that the broader automotive policy package may slip into January 2026 given the complexity of the issues involved.
Potential Outcomes
Several scenarios could emerge from the Commission's review:
1. Status Quo Maintained: The Commission could reaffirm the 2035 deadline with minimal changes, potentially disappointing Germany and its allies but providing policy certainty for manufacturers committed to full electrification.
2. E-Fuels Exemption Expanded: Building on the existing exemption for vehicles running exclusively on climate-neutral e-fuels (secured by Germany in 2023), the Commission could clarify and expand this category to provide manufacturers with additional flexibility.
3. Hybrid Vehicle Carve-Out: A new exemption could be created for advanced hybrid technologies that meet stringent emissions criteria, allowing plug-in hybrids and highly efficient combustion engines to continue beyond 2035.
4. Extended Transition Period: The Commission could maintain the 2035 end date but introduce interim targets or grace periods for certain vehicle categories or manufacturers.
How Should UK Businesses and Employees Respond?
Given the policy uncertainty at both EU and UK levels, businesses and employees considering electric vehicles through salary sacrifice should focus on factors they can control.
For Employers Offering EV Benefits
Maintain Existing Schemes: Company electric car schemes remain one of the most cost-effective employee benefits available, regardless of shifting European policy. The combination of low BiK rates, no setup costs for businesses through providers like The Electric Car Scheme, and Complete Employer Protection make these schemes attractive in any policy environment.
Promote Long-Term Savings: Emphasise to employees that salary sacrifice vehicles are typically leased for 2-4 years, well within any credible policy transition timeline, ensuring predictable costs regardless of future regulatory changes.
Diversify Vehicle Options: Consider offering a range of EV models at different price points, including more affordable options like the Dacia Spring and used electric vehicles, to maximise accessibility across your workforce.
For Employees Considering EVs
Focus on Personal Economics: The case for salary sacrifice electric cars rests on substantial tax savings and lower running costs, not just environmental regulations. With EV running costs significantly lower than petrol and diesel alternatives, the financial case remains compelling.
Consider Charging Infrastructure: Focus on practical considerations like home charging installation and access to workplace or public charging networks. The UK's charging infrastructure continues to expand regardless of European policy discussions.
Evaluate Total Cost of Ownership: Use tools like The Electric Car Scheme's salary sacrifice calculator to understand real-world savings, including fuel, maintenance, tax, and insurance costs.
Look Beyond Policy Noise: Remember that the fundamental advantages of EVs—lower running costs, reduced maintenance, tax incentives, and improving technology—remain regardless of whether the 2035 ban is modified.
The Environmental Impact: What's at Stake?
The EU's 2035 ban is more than just an automotive policy—it's a cornerstone of Europe's climate strategy. According to S&P Global Energy CERA projections, the policy is expected to:
Reduce European gasoline demand from 2.4 million barrels per day in 2025 to 915,000 b/d by 2050
Cut diesel demand by 60% over the same period
Significantly reduce transport sector CO2 emissions, which currently account for one-fifth of the EU's total emissions
Any weakening of these targets could slow the anticipated decline in oil demand and complicate efforts to meet net-zero commitments. Environmental groups argue that the automotive sector's transition is already lagging behind what's needed to meet climate goals, making policy certainty and ambitious targets essential.
However, supporters of a more flexible approach argue that a "technology-neutral" stance could achieve the same environmental outcomes while protecting economic competitiveness and giving manufacturers multiple pathways to decarbonisation.
Frequently Asked Questions
When will the EU finalise its position on the 2035 ban?
The European Commission is scheduled to present updated guidance on 10 December 2025, though the broader automotive policy package may be published in January 2026. Germany's exemption requests will be analysed alongside consultation submissions received by the Commission.
Will the UK follow if the EU softens its 2035 ban?
While the UK's 2030 deadline differs from the EU's 2035 target, significant softening of European policy could increase pressure on the Labour government to reconsider its timeline. However, the UK has its own independent regulatory framework and zero-emission vehicle mandate, making automatic alignment unlikely.
Does this policy uncertainty affect electric car salary sacrifice schemes?
No. UK electric car salary sacrifice schemes are protected by legislated BiK rates through 2030, with the current 3% rate for 2025/26 providing substantial tax advantages regardless of shifting automotive policy. The fundamental economics of salary sacrifice for EVs remain compelling in any policy scenario.
What vehicles would be affected by Germany's proposed changes?
Germany is specifically requesting exemptions for plug-in hybrid vehicles and cars running exclusively on climate-neutral e-fuels. Traditional petrol and diesel vehicles without electrification would still face the 2035 phase-out under the proposed changes.
Should I wait to get an electric car until the policy is settled?
The current uncertainty actually strengthens the case for proceeding with EV adoption through salary sacrifice. With legislated BiK rates providing guaranteed savings through 2030, expanding charging infrastructure, and rapidly improving EV technology, waiting means missing out on immediate financial benefits. Most salary sacrifice agreements run for 2-4 years, well within any credible policy transition timeline.
Are hybrid vehicles a better choice given this uncertainty?
While some hybrid vehicles may benefit from policy changes, they don't qualify for the favourable BiK rates that make pure electric vehicles so cost-effective through salary sacrifice. For most employees, the 3% BiK rate on EVs (compared to significantly higher rates for hybrids and petrol/diesel vehicles) makes pure electric the more economical choice.
What happens to my existing salary sacrifice agreement if policy changes?
Existing salary sacrifice arrangements are protected and will not be affected by future policy changes. Your agreed terms, including BiK rates and lease conditions, remain fixed for the duration of your agreement.
The Bottom Line: Navigating Uncertainty in the EV Transition
The debate over Europe's 2035 ban on petrol and diesel cars highlights the complex challenges of managing an industrial transition of this scale. While Germany and allied nations push for greater flexibility citing economic pressures and competitive concerns, environmental groups and EV-committed manufacturers warn that policy uncertainty itself poses the greatest risk to successful electrification.
For UK businesses and employees, the key takeaway is that electric car salary sacrifice schemes remain an exceptionally attractive option regardless of how European policy evolves. With legislated tax advantages, rapidly improving vehicle technology, expanding charging infrastructure, and compelling total cost of ownership advantages, the fundamentals supporting EV adoption through salary sacrifice are strong.
The European Commission's December review may provide clarity on the path forward, but the direction of travel remains clear: whether through a pure EV mandate or a "technology-neutral" approach allowing advanced hybrids and e-fuels, the era of traditional petrol and diesel dominance is drawing to a close.
For those considering an electric vehicle through The Electric Car Scheme, the message is straightforward: the benefits of salary sacrifice—20-50% savings, low running costs, and guaranteed BiK rates—provide a stable foundation for making the switch, regardless of the political debates playing out in Brussels and Westminster.
The transition to electric mobility may take different paths in different markets, but the destination remains the same. And for UK employees with access to company electric car schemes, the opportunity to reach that destination while maximising savings has never been better.
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Last updated: 08/12/2025
Our pricing is based on data collected from The Electric Car Scheme quote tool. All final pricing is inclusive of VAT. All prices above are based on the following lease terms; 10,000 miles pa, 36 months, and are inclusive of Maintenance and Breakdown Cover. The Electric Car Scheme’s terms and conditions apply. All deals are subject to credit approval and availability. All deals are subject to excess mileage and damage charges. Prices are calculated based on the following tax saving assumptions; England & Wales, 40% tax rate. The above prices were calculated using a flat payment profile. The Electric Car Scheme Limited provides services for the administration of your salary sacrifice employee benefits. The Electric Car Scheme Holdings Limited is a member of the BVRLA (10608), is authorised and regulated by the FCA under FRN 968270, is an Appointed Representative of Marshall Management Services Ltd under FRN 667174, and is a credit broker and not a lender or insurance provider.
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