| Thanks for reading Hyperdrive, Bloomberg's newsletter on the future of the auto world. Last week, BMW CEO Oliver Zipse called for the European Union to scrap its plan to phase-out combustion vehicle sales by 2035, calling the target "no longer realistic." Automakers are becoming increasingly vocal on this topic as the timelines get nearer, and it all highlights a difficult point: nobody really knows how these targets will play out. BloombergNEF data shows a total of 38 countries that have announced plans to end sales of combustion cars. The EU accounts for 27 of those and has reinforced this with regulation: Automakers across the bloc have to hit a fleet-wide average CO2 target of zero grams by 2035. Many outside the EU are still high-level policy goals that have not yet been paired with specific mechanisms. Countries with phase-out targets account for just under 20% of total global car sales today. Announcements of new targets have dropped off recently, with Vietnam the only new country added in the last two year. China is notably absent despite making rapid progress on EV adoption. Battery-electric and plug-in hybrid vehicles now make up more than 50% of domestic Chinese sales. The US also doesn't have a target, though the Biden administration has a goal for two-thirds of car sales being electric by 2032 and supporting fuel-economy regulations to get part of the way there. The national targets in place have been important in signaling the overall direction of travel for the market. Automotive product cycles are long, and certainty is needed to help backstop big investment decisions. But strict phase-outs may be very difficult to enforce or maintain as deadlines near. Past experiences with products like incandescent lightbulbs show that it takes a huge amount of political capital to fully ban a consumer product that's already in the market. Higher taxation, as in the case of tobacco, can be a more palatable approach. Most regulators are hoping to get a helping hand on the supply side. As EV adoption rises, combustion cars will at some point cross below a minimum scale needed to be commercially viable, and suppliers will stop producing or delivering them to a given country. Nobody knows where exactly that point is, and it will also depend on what's happening around the world. This topic is coming up in real time in Norway, where the government has a goal of ending combustion vehicle sales in 2025 but does not explicitly ban sales past that date. Instead, Norway is tightening financial measures to dissuade sales. Over the summer, it closed a loophole that allowed leased vehicles and car-rental fleets to partially get around the higher sales taxes that private ICE buyers pay. The results were immediate — pure EVs surpassed 96% of sales in September. Norway isn't big enough to impact global car markets, but the EU is. The EU's 2035 vehicle CO2 targets are also not a strict ban, nor are they an EV mandate as Zipse and others often claim. Automakers are free to use whatever technology they want to bring vehicle CO2 emissions down to zero over the next 15 years, and an automaker could continue to sell gasoline or diesel vehicles past that date if they were willing to pay fines for every gram above the target. These penalties could be very steep, but this is an important distinction. An automaker could opt to pay the fines for some of its most profitable models at the higher end of the market. Selling plug-in hybrids at a minimum would also help reduce the fines, which makes the regulation look more like the tobacco taxation example than the incandescent lightbulb one. This is a strong disincentive for something deemed to have negative externalities, rather than an outright ban. It's also worth noting that the EU target isn't arbitrary. It's set based on what needs to happen for the bloc to meet its climate goals to reach net zero CO2 emissions by 2050, in line with the Paris Agreement. Road transport is one of the few areas where there's a clear path toward that 2050 goal. Challenging, definitely, but still much easier than sectors like cement or aviation. Automotive CEOs decrying the current targets should also be explicit that, in calling for the 2035 policy to be done away with, they're advocating for the EU to abandon its climate objectives.  Scout's Terra pickup and Traveler SUV concepts. Source: Scout Motors Volkswagen's forthcoming Scout line of electric sport utility vehicles and pickup trucks is adding internal combustion engines to the mix. Scout Motors will offer its new Traveler SUV and Terra pickup in plug-in hybrid versions in addition to battery-only configurations. The gas-electric models will feature a combustion engine to automatically recharge the battery as the vehicle rolls down the road, the company said at a splashy reveal of the concept vehicles Thursday near Nashville. | 
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