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The European Union plans to create a new category for compact electric vehicles with more relaxed technical requirements than standard-size EVs as the region seeks to lower manufacturing costs and compete with Chinese producers.

The European Commission, the bloc's executive arm, plans to release a draft proposal soon, with the new "E car" category to be launched in the next few years following approval by key institutions. The proposal is expected to define the class by vehicle size, weight and motor displacement. EU member states will also discuss a mechanism for vehicle tax exemptions for the new class.

The EU has until now required EVs to be equipped with systems to detect driver drowsiness, maintain lane positioning and signal sudden stops. These requirements, designed for long-distance travel, have contributed to higher costs.

"The overall vehicle set-up ... will be on a lower level which will bring down cost as the vehicle is less complex," said Beatrix Keim at Germany's Center Automotive Research. Sale prices of such cars are predicted to fall by 10% to 20% to land in the range of 15,000 to 20,000 euros ($17,500 to $23,200).

The EU imposes import duties of up to 45.3% on EVs made in China. The new classification will allow European autos to better compete on price. This will be a boon for European developers of compact EVs, including Germany's Volkswagen, European multinational Stellantis and France's Renault.

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