Europe’s EV Monopoly Requires Cheaper, Smaller Vehicles

Europe’s EV Monopoly Requires Cheaper, Smaller Vehicles.

“This is aimed at a European revival of what they used to do very well: making competitive, attractive small cars to meet everyday needs”

Europeans are being forced to buy more electric cars and eschew combustion ones and will have to make some unpalatable concessions to safety, comfort and style as the European Union prepares to incentivise microcars.

By 2035, EU CO2 rules will effectively mean 90% of new car sales must be EV only. Then, typical new cars won’t be huge BMW, Mercedes, Audi or Volvo SUVs, or even more modest Renaults, Peugeots or Volkswagens. They won’t even be little Fiats or Citroens. 

According to French automotive consultancy Inovev, EVs reached an 18% market share in Europe last year. In the first nine months of 2025, it said Chinese share of the market reached 11% and is expected to keep on growing despite the hefty EU tariffs designed to slow them down.

For the EU rules to succeed by 2035, a mass market is required and this means perhaps half of EV sales will have to be affordable by average wage earners. That means an entry-level price of perhaps €10,000 ($11,700), and microcars. That’s about one third cheaper than the current lowest price EVs, led by the Dacia Spring starting at €15,000 ($17,500). Other cheaper EVs available in 2026 include Stellantis affiliate Leapmotor’s TO3 and the BYD Dolphin Surf. Newcomers at under €20,000 ($23,400) include the Renault Twingo E-Tech and the Nissan Micra

EU eliminated affordable ICE cars
EU rules on CO2 emissions have allowed manufacturers to make profits on SUVs and more expensive EVs, while effectively eliminating the entry-level ICE minicar segment and offering little to incentivize cheap EVs. Gone are the ICE-powered Fiat 500s, Ford Kas, Citroen C1s, Peugeot 108s and Renault Twingo.

Schmidt Automotive Research founder Matt Schmidt said Commission proposals seek to reverse that.

“This is arguably aimed at a European revival of what they used to do very well: making competitive, attractive small cars to meet everyday needs. The proposal aims to compensate for regulatory hurdles that have added high costs, such as the most recent type approval change, that has effectively engulfed their business model, leading (manufacturers) such as Ford to do the unthinkable and drop its Fiesta,” Schmidt said in an email exchange. 

These microcars will be stripped-down, cheap and cheerful little urban runabouts designed to exploit what EVs do best – provide short-range, bare-bones utility for shopping, commuting and school runs, with small batteries that might even allow for recharging from a standard domestic house plug. They will resemble Japanese Kei cars, designed by government to be small, underpowered, cheap and city-friendly. None exist in Europe yet, but they soon will. 

ICE “concession” turned out not to be the case
Last month, the European Commission announced revised proposals for CO2 emissions in 2035, which at first looked like a big concession to traditional auto industry, but turned out to be nothing of the sort. The Commission, the EU’s executive arm, allowed some concessions to make it easier for automakers to meet tightening rules on the way to zero by 2035. This ultimate CO2 target was shaved to 90% from 100%, but the related restrictions were so tight as to only really allow the likes pf Ferraris, Rolls-Royces and Lamborghinis to retain ICE power.

The proposals will now have to be approved by politicians in the European Parliament. The Commission added a crucial new element. It proposed measures including incentives to build small, cheap cars. The assumption is these microcars will be EVs. 

Automakers are already starting to prepare designs to meet this so far unspecified plan. Already popular in France are so-called “quadricyles”, like the Citroen Ami (€7,990-$9,350) and Renault Mobilize Duo (€9,090-$10,600). They can be driven by people as young as 14 and don’t require a license because of a top speed of just under 30 mph. Their construction is flimsy and these vehicles aren’t likely to succeed in a grown-up market. Don’t expect any new microcars to reach the market before 2027.

More serious vehicles are likely to emerge from a Renault proposal that wants current EU regulations for small cars to be frozen. This would allow manufacturers to lower their cost base and make cars economically viable and affordable. The EU has a program which insists on an increasingly tough set of rules which effectively have ruled out low-cost ICE cars. Renault owns Dacia, its value brand, which sources the Spring from China.  

Tax breaks and incentives will boost microcars
Sales of new cars in Europe remain about 3 million a year under the level reached before the Covid pandemic and manufacturers believe this is because new regulations have forced prices up. Manufacturers want tax breaks and incentives to boost sales of microcars. 

Renault CEO Francois Provost said recently he wasn’t asking for rules to be removed, just that no new rules are made for between 10 and 15 years on electric cars of 4.2 meters in length or less.  

Schmidt said it’s no surprise European roads seem to be packed with big SUVs.

“The past decade has been all about packaging the various regulatory requirements, such as various ADAS safety additions, into a model and adding a proportion of those added costs on to the consumer, with the end formula throwing out more often than not an SUV/Crossover. It’s how we partly ended up with our roads being dominated by these high-rollers. The latest proposal is all about redressing the balance and giving the likes of mainly French and Italian (manufacturers) hope of reinventing the small car to the masses’ profitably,” Schmidt said. 

Will this boost Europe’s manufacturers?
“Japan has shown with Kei cars that small cars can be successful and reduce congestion on congested roads. A mix of laxer safety standards, limits to engine sizes, and fiscal benefits for consumers all help to midget cars account for every third new car registered on Japanese roads,” he said.

“If it will lead to a European industrial safety net is another question,” Schmidt said.