Britain ‘will have to rethink’ ban on sale of diesel and petrol vehicles

The EU is reportedly preparing to abandon its 2035 ban on new combustion‑engine cars after lobbying from Germany and Italy, prompting industry leaders to warn the UK will likely have to delay or accelerate a regulatory review to avoid a damaging divergence given the scale of cross‑border vehicle trade; former Aston Martin CEO Andy Palmer and other executives say EU manufacturers would not ramp up EV production as forecast, leaving the UK short of supply. The article notes the UK’s zero‑emission vehicle (ZEV) mandate rises from 28% this year to 80% by 2030, that the £12,000 per‑car penalty for missing targets is paused until 2030, and that ministers have allowed new hybrids until 2035—factors that together have led some firms to reintroduce internal‑combustion capacity. The potential rollback in EU targets therefore raises near‑term investment and production risks for automakers and supply chains and could weaken the investment signal for EVs, even as the government reiterates its commitment to phasing out non‑zero emission car and van sales by 2035 and notes EVs accounted for one in four November sales.

Analysis

The EU is reported to be preparing to abandon its 2035 ban on new combustion‑engine cars after lobbying from Germany and Italy, a shift publicized by Manfred Weber and described by senior industry figures as likely to force the UK to delay or accelerate a regulatory review. The article specifically cites Andy Palmer warning that EU factories would not ramp EV production if the EU relaxes targets, creating a potential shortfall of EV supply for the UK market.

The UK’s current regulatory framework includes a ZEV mandate rising from 28% this year to 80% by 2030, a paused £12,000 per‑car penalty until 2030, and allowance of new hybrids until 2035; executives report some manufacturers are reinstating internal‑combustion capacity as a response to slower consumer EV uptake. Industry voices and trade bodies are conflicted: E‑Mobility Europe warns a rollback would weaken the investment signal, while government spokespeople reiterate commitment to phasing out non‑zero emission sales by 2035 and note EVs were 25% of November sales.

The signals ensemble labels sentiment as mildly negative and tone as uncertain with a modest market‑impact score, implying near‑term policy noise that could disrupt production planning, capital allocation and supply chains for OEMs and tier‑one suppliers. Investors should treat regulatory timing and EU/UK alignment as primary drivers of demand and supply risk for automotive and EV‑supply chain exposures.

Key Decisions for Investors

• Monitor official EU and UK policy announcements and the timing of the UK 2027 review closely and reprice or hedge positions in UK‑exposed OEMs and suppliers if regulatory divergence becomes likely
• Favor companies with flexible manufacturing footprints and hybrid/ICE capacity that can pivot if EV supply ramps slow, and de‑emphasize pure‑play European EV manufacturers lacking such flexibility
• Reduce conviction in investments that rely solely on an accelerated EV rollout in Europe or increase hedges for suppliers whose long‑cycle investments depend on the 2035/2030 regulatory path
• Track ZEV mandate compliance metrics (28% now to 80% by 2030), the paused £12,000 penalty schedule, and monthly EV sales share (25% in November) as near‑term triggers to adjust exposure