Germany's Merz urges EU to ease 2035 combustion engine ban

By Sarah Marsh and Rachel More

BERLIN (Reuters) -German Chancellor Friedrich Merz wrote to Brussels on Friday to urge the European Commission to ease a planned ban on new combustion-engine cars from 2035, arguing that automakers need more flexibility in the shift to electric vehicles.

Merz, a conservative who has long sided with the car industry, says the timeline for phasing out combustion engines is unrealistic as manufacturers face stiff competition from China and slower-than-expected EV uptake.

His coalition partners, the Social Democrats, had been divided, but on Thursday the government agreed to seek exemptions for plug-in hybrids and highly efficient combustion engines.

FROM HYBRIDS TO GREEN STEEL - CALL FOR FLEXIBILITY

After clinching the agreement in Berlin, Merz sent a letter to European Commission President Ursula von der Leyen emphasizing the importance of supporting the auto sector as it navigates a costly EV transition while battling tariffs, supply chain shocks and stiff competition from abroad.

"Our goal should be technology-neutral, flexible and realistic CO2 regulation that meets the EU's climate protection goals without jeopardizing innovation and industrial value creation," Merz wrote in the letter, which was seen by Reuters.

Echoing appeals from industry, Merz said plug-in hybrids and "range extender" vehicles should play a role in the transition, as well as biofuels and efforts to reduce emissions in production, for example with the use of green steel, which is produced using renewable energy.

The Commission, the EU's executive arm, is set to unveil updated carbon-emission targets for the car sector on December 10.

GERMAN CAR LOBBY WELCOMES 'GOOD NEWS'

Ahead of that date, carmakers such as Volkswagen, Mercedes and BMW have been lobbying for transitional technologies, as they struggle with a slower-than-expected uptake of EVs in the region.

Germany's VDA car lobby welcomed Berlin's push for exemptions.

"This is good news for the automotive industry and its hundreds of thousands of employees," VDA President Hildegard Mueller said.

Campaign group Transport and Environment criticised the move, saying Berlin was clinging to outdated technology.

"Anyone who thinks that Germany will be able to secure jobs and value creation in the future with combustion-engine technology, which is already outdated today, is deliberately closing their eyes to reality," said T&E Germany chief Sebastian Bock.

The group pointed to fleet regulation of company cars as a way to boost EVs.

Asking large corporations to electrify 75% of their new cars in 2030, with "made-in-EU" requirements, could lead to an additional 1.2 million locally produced EVs by the end of the decade, according to T&E research seen by Reuters.

Part of the Commission's review of EV targets aims to boost take-up of zero-emission vehicles in corporate fleets, which make up 50-60% of all new car sales.

(Additional reporting by Thomas Seythal and Andreas Rinke in Berlin and Philip Blenkinsop in Brussels; Editing by Emelia Sithole-Matarise, Louise Heavens and Conor Humphries)