The European Union (EU) is preparing to introduce a new category for compact electric cars, with lighter technical standards than existing battery‑powered models, according to a Nikkei Asia report.

The move comes as part of an effort to reduce manufacturing costs and sharpen price competition with Chinese brands.

The European Commission is expected to publish a draft framework shortly for the “E car” category.

The new class would come into force in the next few years once it has been approved by key institutions.

Under the emerging proposal, the category would be defined using criteria such as vehicle dimensions, weight and motor displacement.

Member states are also due to discuss how national vehicle tax exemptions might apply to these models.

Current EU regulations require electric cars to be fitted with features including driver drowsiness monitoring, lane‑keeping systems and emergency stop signalling.

These rules were designed around longer‑range vehicles and have added to production costs for smaller EVs.

Industry price expectations cited in the report suggest that models falling under the new compact EV class could sell for 10-20% less than comparable current offerings, bringing list prices into the region of €15,000-€20,000 ($17,500 to $23,200).

The EU has already moved to raise tariffs on Chinese‑built electric cars, with duties now reaching as high as 45.3%.

The new classification is intended to help European manufacturers to better compete on price.

The framework is viewed as particularly relevant for European groups developing compact battery cars, including Volkswagen, Stellantis and Renault.

The report says incentives tied to the E car class - such as development support and tax incentives - are expected to depend on vehicles being built within the EU.

On that basis, BYD, which has a manufacturing facility in Hungary, would be the only Chinese carmaker currently positioned to qualify for such support.

In Japan, Kei models are defined by limits on factors such as size and emissions, and accounted for 35% of new light vehicle registrations in Japan in 2024.

The EU has previously criticised Japan’s kei regulations, describing them as a form of non‑tariff barrier.

The bloc’s own compact EV classification is now poised to affect the strategies of Japanese manufacturers that specialise in kei cars.

Some of their models could be sold in Europe without needing any changes to their specifications.