German Chancellor Friedrich Merz signaled a shift in approach to the future of the automotive industry, suggesting that internal combustion engines will likely continue to play a role alongside electric vehicles in the coming years. The statement, made during a recent meeting with industry leaders, comes after the European Union abandoned plans to effectively ban the sale of new gasoline and diesel cars from 2035.
Merz’s comments, reported by Telex and autoMAGAZIN, were deliberately phrased with qualification, indicating a willingness to consider alternatives to a purely electric transition. His government and party members had previously opposed the EU’s proposed ban, which would have penalized manufacturers unable to achieve zero carbon dioxide emissions by the target date.
Unlike the EU’s approach, both China and the United States are pursuing emissions reductions through regulation rather than outright prohibition. In the U.S., only California has a planned restriction on the sale of new internal combustion engine vehicles, set for 2035. China, while promoting electric vehicles, has not announced a nationwide ban on gasoline or diesel cars, and is instead focusing on developing both electric and hybrid technologies. According to the report, Chinese authorities recognize the challenges of rapidly building out sufficient charging infrastructure and the current limitations in electric vehicle range.
The Chinese approach includes the development of extended-range electric vehicles (EREV), where a gasoline engine is used solely to generate electricity, driving the wheels via an electric motor. Examples include the BMW i3 REx and Mazda MX-30 R-EV. The Chinese government provides equal support for both fully electric and hybrid vehicles, categorizing them together as “New Energy Vehicles” (NEV), which accounted for nearly 45% of all new car sales in China during the first half of 2025.
European consumers continue to favor gasoline and hybrid vehicles, while diesel car sales are declining. Data from the European Automobile Manufacturers’ Association (ACEA) shows that gasoline cars still held over 26% of the market share in 2025, with hybrids at 35% and electric vehicles exceeding 17%. The industry anticipates a gradual phase-out of diesel passenger cars due to increasingly stringent environmental regulations and rising development costs.
German automotive supplier Mahle has developed a highly efficient gasoline engine with a 42% efficiency rate, capable of producing 85 kilowatts of power. The company claims this system could enable an EREV to achieve a range of up to 1350 kilometers. Merz and Hildegard Müller, president of the German Association of the Automotive Industry (VDA), alluded to such range-extending technologies when discussing the need for technical openness.
The VDA has affirmed the German automotive industry’s commitment to the Paris climate goals and carbon neutrality, with companies investing an estimated €320 billion in research and development and another €220 billion in capital expenditure between 2025 and 2029. Approximately half of all new cars produced in Germany in 2025 were either partially or fully electric.
The industry association stressed the need for a regulatory framework that supports investment in all climate-friendly technologies, including efficient internal combustion engines powered by climate-neutral fuels, hybrids, and EREVs. Mercedes-Benz has called for a reassessment of the EU’s carbon dioxide reduction targets for road traffic to ensure industry competitiveness and supply chain resilience.
Andreas Radics, a partner at Berylls by AlixPartners, suggested that easing the strategy to phase out internal combustion engines would particularly benefit suppliers who have not yet fully ramped up the development and production of electric vehicle components. The parallel development of electric drives and internal combustion engines will be costly, according to Christian Martin, global product director at AVL List.
Volkswagen Group emphasized that the transition to electric mobility is also dependent on factors beyond the control of automakers, such as the availability of raw materials, electricity prices, and the development of charging infrastructure. The automotive industry is facing strategic and structural changes, and some companies are already relying on external engineering services to maintain expertise in internal combustion engine technology.
Experts estimate that Europe has sufficient engineering capacity to continue developing internal combustion engines, comparable to Chinese manufacturers. However, this requires a supportive regulatory environment. Lutz Eckstein, head of the RWTH Aachen Institute of Automotive Engineering and president of the VDI, argued that European regulations must be revised to restore global competitiveness, citing the relocation of production and research and development to third countries. Eckstein also pointed out that EU regulations focus on engine emissions while overlooking the carbon footprint of energy production and distribution.
The average age of cars on German roads is nearly eleven years, and even higher in countries like Hungary and across the EU. Many drivers are retaining older vehicles or purchasing used cars due to the rising cost of new vehicles.
Experts suggest that internal combustion engines remain a viable intermediate solution on the path to climate neutrality, and that some car buyers are motivated by emotional attachment to gasoline technology, citing examples like the Porsche 911 and Cupra Formentor VZ 5. Porsche is even reconsidering plans for fully electric versions of its Boxster and Cayman sports cars due to lower-than-expected demand and higher development costs.