EU Withdraws Ban on Internal Combustion Engine Vehicles... Eco-Friendly Policies in Retreat [Current Affairs Show]

Reflecting Concerns Over the Ukraine War and Economic Downturn
Global Automotive Market Segmentation Expected

■ Broadcast: The Asia Business Daily 'So Jongsup's Current Affairs Show'

■ Host: Political Specialist So Jongsup

■ Director: PD Ma Yena

■ Guest: Reporter Lee Hyunwoo

The European Union (EU) has abruptly withdrawn its previous eco-friendly plan to completely halt the production of internal combustion engine vehicles by 2035. This major policy reversal is seen as a result of economic difficulties caused by the wars in Ukraine and the Middle East, combined with concerns over a slowdown in the automotive industry. Such a shift in policy is expected to trigger significant upheaval in the global automotive sector.

Europe Follows the US in Retreating from Eco-Friendly Policies... Economic Logic Takes Priority

AFP Yonhap News

With the EU's policy change, the production of internal combustion engine vehicles will continue even after 2035, and the emissions reduction target has been lowered from 100% to 90% compared to 2021 levels. Following the United States, where most eco-friendly policies, including electric vehicle subsidies, were scrapped after the Donald Trump administration, Europe's eco-friendly policies have also taken a significant step backward.

Some suggest that lobbying efforts by renowned German and Italian car manufacturers played a role behind the EU's policy shift. European automakers have struggled to compete with China's aggressive low-price strategy in the electric vehicle market. In this situation, the abandonment of eco-friendly policies in the US, the world's largest car market, has thrown the European automotive industry into turmoil.

With the internal combustion engine vehicle market, which was expected to disappear completely in the 2030s, now set to continue, the competitive landscape among internal combustion, hybrid, and electric vehicles will remain unchanged. There are concerns that European automakers, who have been focusing on expanding their share of the electric vehicle market, may lose competitiveness across all segments.

The economic environment has also changed significantly since Europe announced its aggressive eco-friendly policies. The wars in Ukraine and the Middle East have led to a sharp rise in the prices of essential goods and energy. The need to allocate a significant portion of the budget to increased defense spending is also a burden. Even if the war in Ukraine ends, it will be extremely difficult to improve the economy. Prices of essentials, especially energy, have surged, and if the economic recession continues, the livelihoods of ordinary citizens are at risk of collapsing entirely. This economic situation is seen as a key factor behind the retreat from eco-friendly policies.

Unlike the US and Europe, China Strengthens Eco-Friendly Policies... Greenwashing Intensifies

Reuters Yonhap News

China, on the other hand, is moving in the opposite direction by strengthening its eco-friendly policies. Since President Xi Jinping pledged in September to reduce emissions by 7% to 10%, China has been actively working to cut emissions, showing even greater commitment than the US.

China has set a goal to dominate more than 80% of the global electric vehicle market by 2040. Furthermore, it has announced an ambitious plan to convert 100% of internal combustion engine vehicles to hybrid vehicles by 2035. As China aggressively expands its presence in the electric and eco-friendly vehicle industries with low prices, eco-friendly policies are working in its favor from an industrial perspective.

Additionally, China faces severe domestic air pollution problems. The government is under pressure to reduce emissions to address its own environmental issues. However, some analysts believe that China's push for stronger eco-friendly policies is also driven by more complex strategic calculations.

The US and Europe are currently working to reduce their dependence on China for rare earth elements by diversifying their supply chains. They have relaxed environmental regulations that previously restricted rare earth mining and refining, and have resumed mining operations domestically. China views these changes negatively and is seeking to project an image of fulfilling its international obligations regardless of the policy shifts in Europe and the US. This is interpreted as part of a so-called "greenwashing" effort-using eco-friendly initiatives to improve its global image. China is thus pursuing a dual strategy of securing industrial benefits while managing its image in the international community.

Global Automotive Industry Upheaval... Market Segmentation Expected

Yonhap News Agency

The retreat of Europe's eco-friendly policies presents new challenges for the automotive industry. There are concerns that the industry will face a difficult market environment starting next year. This is because the US and Europe have, in effect, given up competing with China in the electric vehicle market. The low-cost electric vehicle market is expected to be completely dominated by China, while the US and Europe are projected to increase their market share in new technology sectors such as autonomous vehicles and flying cars.

If the polarization intensifies, with the US and Europe leading the premium market and brands, and China dominating the low-cost market, automakers will need to adapt their survival strategies. Securing an advantage and market share in either of these segmented markets will become a major challenge. With internal combustion engine vehicles remaining in the market, competition and technological development in this segment are also expected to intensify.

Going forward, domestic automakers will need to be highly competitive in three areas: internal combustion engine technology, securing niche markets against China in the electric vehicle sector, and developing new technologies such as flying cars. At this critical juncture, developing technologies that can lead or at least quickly adapt to market trends is more important than ever.