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EU’s New M1E Electric Car Class Could Reshape Europe’s Small-Car Market

The European Union is laying the groundwork for what could become the most important small-car category of the electric era. As part of a broader automotive policy package, the European Commission (EC) has confirmed plans for a new class of European-built small electric vehicles, complete with regulatory incentives designed to make them attractive not just to consumers, but to manufacturers struggling to meet tightening emissions targets.

At the heart of the plan is a new sub-category of the existing M1 passenger car class, to be known as M1E. Unlike previous attempts to encourage compact EVs through subsidies alone, this initiative embeds small electric cars directly into the EU’s regulatory framework—arguably a more powerful lever.

Inspired by Kei Cars, But Built for Europe

The concept loosely mirrors Japan’s kei car class, which has long supported affordable, urban-friendly vehicles through favourable tax and regulatory treatment. However, the EU’s version will be far less restrictive in size. While kei cars are capped at around 3.4 metres in length, M1E vehicles will be allowed to stretch to 4.2 metres, placing them firmly in the supermini segment by European standards.

That detail alone makes the category commercially significant. Cars such as the Renault 5 (3.9m), Renault 4 (4.1m) and Volkswagen Group’s upcoming small EVs—widely expected to include an ID Polo-sized model—could all qualify. In other words, this is not a niche city-car regulation; it is a potential foundation for the next generation of mass-market electric cars.

Regulatory Certainty for a Decade

While the full technical requirements of M1E vehicles will only become clear once draft changes to EU regulation 2018/858 are published, the EC has already signalled a crucial commitment: the rules are intended to be frozen for 10 years. For car makers, this kind of regulatory certainty is gold.

Product planning cycles in the automotive industry often stretch close to a decade, and frequent rule changes can make smaller, lower-margin cars particularly risky. By locking in the M1E requirements long-term—subject to approval by the European Parliament—the EU is effectively telling manufacturers that investing in compact electric platforms will not be undermined by shifting goalposts.

Super Credits: The Real Incentive

The most powerful aspect of the M1E proposal lies in emissions accounting. EU-built M1E cars will qualify for “super credits” against manufacturers’ EU CO₂ targets. Instead of counting as a single vehicle, each qualifying car will be worth 1.3 credits.

For manufacturers facing steep fines for missing emissions targets, this is a substantial incentive. Selling a high volume of small, EU-made electric cars could significantly ease compliance pressure—particularly for brands that still rely heavily on internal combustion models in larger segments.

The EC believes this mechanism will also have knock-on benefits for consumers. According to the Commission, the super-credit scheme should have “an expected indirect positive effect on the affordability of these vehicles,” as manufacturers are encouraged to price them aggressively to boost sales volumes.

Beyond Brussels: Local Incentives Made Easier

Another less obvious—but potentially transformative—aspect of the M1E class is administrative simplicity. By creating a single, EU-wide definition for small electric cars, the Commission aims to make it easier for individual member states to design targeted incentive schemes.

These could include direct subsidies, tax reductions, or non-fiscal perks such as reduced parking fees, access to priority lanes, or favourable urban access rules. Crucially, national and city governments would no longer need to invent their own classifications for “small EVs”—they could simply reference M1E.

What About the UK?

Because the UK is no longer part of the EU, the M1E class will not directly affect the zero-emission vehicle (ZEV) mandate targets faced by manufacturers in Britain. However, the story does not end there.

UK vehicle regulations still closely mirror EU standards, and the commercial realities of a shared market mean that cars engineered to meet M1E rules could easily be sold in the UK. The open question is whether Britain will offer equivalent incentives.

If the UK government does not introduce its own advantages for M1E-style vehicles, manufacturers may prioritise EU markets where each sale delivers extra regulatory value. That could leave UK buyers with fewer choices—or higher prices—when it comes to the next wave of affordable electric cars.

A Strategic Bet on Small EVs

In many ways, M1E represents a strategic admission by the EU: the transition to electric mobility will not succeed on premium SUVs and luxury saloons alone. Affordable, compact cars—built in Europe, for European cities—are essential.

If the incentives work as intended, the M1E class could become the backbone of Europe’s electric car market over the next decade. And for an industry under pressure from Chinese imports, rising costs, and aggressive climate targets, that might be exactly the reset it needs.

Source: Autocar

News

EU Softens 2035 ICE Ban, Opening the Door for Combustion Cars Beyond the Deadline

The European Union’s long-planned 2035 ban on new combustion-engined cars has taken a decisive turn, with top legislators proposing a major rethink that could keep ICE vehicles on sale well beyond the middle of the next decade.

Following months of intensive lobbying from national governments and some of Europe’s most influential car makers—including Volkswagen Group, Renault, Mercedes-Benz, BMW and Stellantis—the European Commission (EC) has unveiled more flexible emissions rules that stop short of a total prohibition on non-electric vehicles.

Under the revised proposal, total tailpipe CO₂ emissions from new cars sold from 2035 would need to be cut by 90% compared with 2021 levels, rather than the previously mandated 100%. That final 10% may sound marginal, but it fundamentally changes the landscape: a 100% reduction would have effectively outlawed the sale of new petrol and diesel cars, while the new threshold allows both hybrid and pure ICE models to continue—at least in theory.

The EC has made it clear that the remaining emissions gap will need to be offset through alternative measures, including the use of biofuels, e-fuels and low-carbon materials produced within Europe. One notable addition is the inclusion of “green” steel in the regulatory framework, with manufacturers set to receive additional credits toward their emissions targets if they use low-carbon steel in vehicle production.

How these offsets will work in practice remains unclear, and many of the technical details have yet to be defined. However, the direction of travel is evident: emissions compliance will no longer be judged solely at the tailpipe, but increasingly across the entire manufacturing ecosystem.

At the same time, the Commission is doubling down on electric mobility where it sees the most immediate impact. Small electric cars built under new M1E regulations within the EU will be awarded so-called “super credits,” giving manufacturers extra incentives to develop affordable, compact EVs aimed at mass-market buyers.

Despite the softer headline, the proposals retain a sharp edge. Carmakers that fail to meet their revised emissions targets face fines that could run into the billions, ensuring that compliance remains a serious financial consideration rather than a symbolic gesture.

Perhaps the most striking element of the proposal is what it doesn’t include: an end date for the sale of ICE vehicles. By removing a hard stop, the EC has left the door open for combustion engines to remain part of Europe’s automotive mix indefinitely—provided manufacturers can meet increasingly complex emissions and offset requirements.

The focus is also shifting toward corporate fleets, which account for a significant share of new vehicle registrations. EU member states will be required to set targets ensuring that a specific proportion of new cars and vans registered by large corporations are zero-emissions by 2030. While neither the exact percentage nor the definition of a “large corporation” has been finalised, the Commission believes this approach will accelerate EV adoption while feeding more low-mileage electric vehicles into the used-car market for private buyers.

The proposals still require formal approval from the European Parliament, but the EC expects the legislation to move quickly once presented to member states early next year. If adopted, the changes would mark a significant recalibration of Europe’s automotive strategy—less an abrupt break with combustion engines, and more a gradual, tightly regulated transition that gives manufacturers room to adapt while keeping emissions firmly in check.

Source: Automotive News

News

Cupra Pushes for EU Tariff Relief on Chinese-Built Tavascan

By the time Cupra decided to build the all-electric Tavascan in China, it looked like a straightforward business case. Europe didn’t have the spare factory capacity, the numbers worked, and tariffs weren’t even a talking point. Fast-forward to today, and the coupe-SUV has become a rolling test case for how flexible—or stubborn—the European Union plans to be as Chinese-built EVs flood the continent.

Now, there’s a hint of a thaw.

Cupra’s Chinese-assembled Tavascan is at the center of a growing political and industrial debate over the EU’s punitive import duties. Currently, the car is hit with a 20.7 percent “countervailing duty” on top of the standard 10 percent tariff, a surcharge designed to counter alleged state subsidies for Chinese EV manufacturing. But pressure is building for an exemption—or at least a compromise—and not just from within the Volkswagen Group.

At the official opening of Cupra’s new battery plant in Barcelona, Catalonia’s president Salvador Illa I Roca publicly urged Brussels to rethink the levy. Calling the tariff “unfair” and damaging to “strategic investments,” Illa signaled that both regional and Spanish governments are ready to work toward its removal. The message was clear: this isn’t just about one car—it’s about Europe’s broader industrial future.

Behind the scenes, Cupra has been lobbying hard. The proposal on the table reportedly involves an annual import quota and a minimum import price, conditions that would allow the brand to avoid the additional 20.7 percent surcharge without opening the floodgates to cheap imports. According to Seat-Cupra CEO Markus Haupt, talks with EU officials are progressing well. A decision could arrive within a month or two.

Don’t expect a sudden price slash if the deal goes through. Cupra chose not to pass the tariff hit on to customers when it was introduced, absorbing the cost instead. In Spain, the Tavascan starts at €44,010; in the UK, it opens at £47,350, where only the standard 10 percent duty applies. Any tariff relief would mainly boost Cupra’s margins rather than transform the showroom sticker.

As a product, the Tavascan makes a solid case for itself regardless of politics. The rear-wheel-drive V1 version packs a 77-kWh battery, delivers up to 337 miles of range, and sends 282 horsepower to the rear axle. The result is a 0–62 mph time of 6.8 seconds—respectable pace for a style-led electric SUV that leans more toward design flair than outright performance.

But the real significance of a tariff relaxation goes far beyond Cupra.

A long list of European brands build EVs in China and ship them back west: Volvo, Polestar, Lotus, Dacia, and MINI among them. Each case would have to be assessed individually by the EU, especially where Chinese ownership or joint ventures complicate the picture. That’s where things get messy.

MINI, for example, could be a bellwether for the UK. BMW has already paused plans to build the electric MINI hatch at Plant Oxford, opting instead to produce the Electric and Aceman models in China through Spotlight Automotive, a 50:50 joint venture with Great Wall Motors. Like the Tavascan, these cars are subject to the additional 20.7 percent duty. If MINI were to secure similar tariff relief, it could improve margins on Chinese imports—but possibly at the cost of continued delays to UK production.

Other brands have taken more drastic action. Geely-owned Volvo shifted EX30 production to Ghent, Belgium, specifically to dodge tariffs. Dacia plans to move assembly of the next-generation Spring EV from Wuhan to Slovenia by 2026. It’s a costly workaround, but one that guarantees certainty in an unpredictable regulatory climate.

Cupra doesn’t have that option. Volkswagen Group says Europe simply couldn’t accommodate Tavascan production, pushing the model into a joint venture with JAC Motors in China, where it’s also sold domestically as the ID.UNYX. And moving production back now? That’s off the table.

“We already invested the money there,” Haupt explains. “Reinvesting in the same product is probably not the best solution.” For Cupra, negotiating with Brussels isn’t just preferable—it’s the only viable path forward.

If the EU does soften its stance, the Tavascan could become the precedent that reshapes how Europe treats its own brands building cars in China. If it doesn’t, expect more production shifts, more factory reshuffles, and more strategic gymnastics as automakers try to stay one step ahead of tariffs that can turn a profitable EV into a financial headache overnight.

Either way, the Tavascan’s most important role may not be on the road—but at the negotiating table.

Source: Cupra