EU softens 2035 zero-emission vehicle mandate

The European Commission is softening its plan to ban the sale of gas-powered cars by 2035. The revised plan moves away from the original requirement for 100% of new cars to be zero-emission vehicles. Instead, the new framework would allow 10% of new car sales to be hybrids or other vehicles, provided that manufacturers purchase carbon offsets to compensate. This policy shift is part of the Automotive Package, an EU policy initiative designed to help the car industry. For these changes to take effect, the European Parliament must first approve the shift.

The policy change has divided the European automotive industry. Traditional European carmakers, which are currently struggling to compete with Tesla and affordable electric vehicles from China, have welcomed the flexibility. The traditional automobile industry represents 6.1% of total European Union employment, giving it significant economic weight. However, climate-focused investors and electric vehicle startups argue that easing the mandate will damage the region’s long-term competitiveness. Craig Douglas, a partner at the European climate-focused venture capital firm World Fund, warned: “If Europe doesn’t compete with clear, ambitious policy signals, it will lose leadership of another globally important industry — and all the economic benefits that come with it.”

Douglas was among the signatories of Take Charge Europe, an open letter campaign published in September and addressed to European Commission President Ursula von der Leyen. Other signatories of the letter included representatives from Cabify, EDF, Einride, and Iberdrola. Startups in the sector have expressed concern over the policy shift. Issam Tidjani, the CEO of EV charging marketplace startup Cariqa, cautioned that this kind of flexibility delays scale and weakens learning curves. Even within the manufacturing sector, opinions are split; a press officer for automaker Volvo warned that backing down on long-term commitments risks undermining Europe’s competitiveness.

Alongside the policy shift, the Commission introduced the Battery Booster, an EU investment strategy for battery supply chains. The initiative will invest €1.8 billion (about $2.11 billion) to support local production. French battery startup Verkor, which opened its first large-scale battery factory in Northern France this week, welcomed the strategy as a necessary step to scale up Europe’s battery industry, hoping to succeed where Swedish battery maker Northvolt has struggled. Meanwhile, regulatory alignment across the region remains incomplete. It is currently unclear whether the United Kingdom will follow the EU’s lead on the 2035 combustion engine ban.

Why it matters

The European Commission’s decision to soften its 2035 zero-emission vehicle mandate highlights the tension between protecting the traditional European automotive industry and maintaining the aggressive decarbonization goals needed to compete with Chinese EV manufacturers.