Europe dilutes plans to end new petrol and diesel car sales by 2035

European Commission unveils new automotive package that seeks to address car industry concerns

The European Commission is diluting plans to end the sale of petrol and diesel cars in 2035.

The previous intention had been that all new vehicles sold in the European Union from 2035 should be zero-emission. However, European carmakers have been lobbying for concessions, arguing that market demand for electric cars is currently too low.

The European Commission’s new approach will mean that 90% of new cars sold from 2035 would have to be zero-emission. The remaining 10% could be made up of conventional petrol or diesel cars, as well as hybrids.

The new Automotive Package sets out what the commission says is a policy framework to ensure 2050 climate neutrality and strategic independence while providing more flexibility to automotive manufacturers

The proposals build on the Automotive Action Plan, and input from industry and key stakeholders gathered during a Strategic Dialogue launched by European Commission president Ursula von der Leyen's in January 2025. This process brought together industry representatives, social partners, member states, regions and civil society.

Responding to the new Automotive Package, European Commission president von der Leyen said: “Innovation. Clean mobility. Competitiveness. This year, these were top priorities in our intense dialogues with automotive sector, civil society organisations and stakeholders. And today, we are addressing them all together. As technology rapidly transforms mobility and geopolitics reshapes global competition, Europe remains at the forefront of the global clean transition.” 

A new Automotive Package

On the supply side, there will be a review of the existing CO2 emission standards for cars and vans and a targeted amendment to those for heavy-duty vehicles (HDVs).

On the demand side, the commission proposes an initiative to decarbonise corporate vehicles with binding national targets for zero-emission and low-emission vehicles.

From 2035 onwards, carmakers will need to comply with a 90% tailpipe emissions reduction target, while the remaining 10% emissions will need to be compensated through the use of low-carbon steel Made in the Union, or from e-fuels and biofuels.

The changes will allow for plug-in hybrids (PHEV), range extenders, mild hybrids, and internal combustion engine vehicles to still play a role beyond 2035, in addition to full electric(EVs) and hydrogen vehicles.

Prior to 2035, car manufacturers will be able to benefit from “super credits” for small affordable electric cars made in the European Union. This will incentivise the deployment on the market of more small EV models. 

For the 2030 target for cars and vans, additional flexibility is introduced by allowing “banking & borrowing” for 2030-2032. 

An additional flexibility is granted for the vans segment, where the electric vehicle uptake has been structurally more difficult, with a reduction of the 2030 CO2 vans target from 50% to 40%.

The commission is also proposing a targeted amendment to the CO2 emission standards for heavy-duty vehicles with a flexibility easing the compliance with the 2030 targets.

Regarding corporate vehicles, mandatory targets are set at the member state level to support the zero- and low-emission vehicle uptake by large companies. 

The commission argues that more zero- and low-emission vehicles on the market, both first- and second-hand markets, will benefit all customers. As companies' cars cover higher yearly mileages, it also means more emission reductions. 

The package will also make zero- or low- emissions and “Made in the EU” a pre-requisite for vehicles benefitting from public financial support.  

Europe's battery industry

With €1.8 billion, the Battery Booster programme will accelerate the development of a fully EU-made battery value chain. As part of the Battery Booster, €1.5 billion will support European battery cell producers through interest-free loans. Additional targeted policy measures will support investments, create a European battery value chain and foster innovation and coordination across member states. 

The commission says these measures will enhance the cost competitiveness of the sector, secure upstream supply chains and support sustainable and resilient production in the EU, contributing to the de-risking from dominant global market players.  

Cutting red tape

The commission says the ‘Automotive Omnibus’ will ease administrative burden and cut costs for European manufacturers, boosting their global competitiveness, and freeing up resources for decarbonisation. 

Businesses are expected to save approximately €706m per year, bringing the administrative savings thanks to all omnibuses and simplification initiatives the commission has presented so far to around €14.3 billion per year. 

Among other things, it proposes to reduce the number of secondary legislation that will be adopted in the upcoming years and to streamline testing for new passenger vans and trucks. The commission said this will reduce costs while maintaining highest environmental and safety standards. The roll-out of electric vans in domestic transport is supported by measures that place them on an equal footing with internal combustion vans regarding drivers' rest times and rules.

The omnibus also introduces a new vehicle category under the Small Affordable Cars initiative, covering electric vehicles up to 4.2 meters in length. This will enable member states and local authorities to develop targeted incentives, stimulating demand for small EVs made in the EU.

The commission is also updating and harmonising car labelling rules, for customers to have complete information about the cars' emissions when making purchases.

The UK has its own plans to phase out the sale of ICE cars by 2030 under the Zero Emission Vehicles Mandate.

The European Commission has created a Q&A on the new Automotive Package.

Responses

The European Commission’s new Automotive Package was welcomed by ACEA, the European Automobile Manufacturers’ Association. “Today’s proposals rightly recognise the need for more flexibility and technology neutrality to make the green transition a success,” said Sigrid de Vries, director general of ACEA. “This constitutes a major change compared to the current law. However, the devil can be very much in the detail. We will now study the package, and work with co-legislators to critically strengthen the proposals where needed.”

Germany’s Volkswagen welcomed the European Commission's proposal: “The fact that small electric vehicles are to receive special support in future is very positive. It is extremely important that the CO2 targets for 2030 are made more flexible for passenger cars and adjusted for light commercial vehicles. Opening up the market to vehicles with combustion engines while compensating for emissions is pragmatic and in line with market conditions.”

Reaction from other automotive companies was nuanced. Sweden’s Volvo was not convinced of the changes, stating that if it can move away from petrol and diesel vehicles, other companies should be able to as well: “Weakening long-term commitments for short-term gain risks undermining Europe's competitiveness for years to come. A consistent and ambitious policy framework, as well as investments in public infrastructure, is what will deliver real benefits for customers, for the climate, and for Europe's industrial strength.”

The European Commission’s move has been met with dismay by green groups, who warned that diluting the 2035 ambition risks undermining the transition towards electric vehicles and leaving the EU exposed in the face of foreign competition.

While green transport lobby T&E welcomed the announcement of national electrification targets for large company fleets, it argues these will not be ambitious enough to drive greater uptake in a sector which should be leading Europe’s electrification efforts. William Todts, executive director at T&E, said: “The EU has chosen complexity over clarity. Breeding faster horses could never have halted the ascent of the automobile. Every euro diverted into plug-in hybrids is a euro not spent on EVs while China races further ahead. Clinging to combustion engines won't make European automakers great again.”

The Energy Transitions Commission, a global coalition of leaders from across the energy landscape was concerned. Mike Hemsley, deputy director of the Energy Transitions Commission, said: “Diluting the 2035 ICE phase-out weakens one of the most effective levers for accelerating the transition to electric cars and trucks and risks locking in higher oil use and higher household bills.

“A five-year delay in the phase-out increases cumulative emissions, prolongs dependence on imported oil, and risks locking older ICE vehicles on the road well into the 2040s. And without EV fleet mandates as well, Europe misses a major opportunity to cut emissions this decade. There is also a growing competitiveness risk as Europe continues to focus on combustion engines, while Chinese manufacturers expand the production of cost-effective EVs at scale. Policy certainty tends to increase investment and innovation, ultimately reducing costs. Europe needs policies that point firmly in one direction – forward – and focuses on lowering long-term energy costs and promoting energy security. Electrification of motor transport does just that. 

Colin Walker, head of transport at the Energy and Climate Intelligence Unit (ECIU), said: “The losers here are European families who will be left behind in petrol and hybrid cars that are hundreds of euros more expensive to drive. Recent EU data shows that hybrids use 490% more fuel than their manufacturers claim. But there are clear risks too for the European car industry that, in attempting to slow the EV transition, could well become ever more uncompetitive as the world drives forward with electrification.

“Some are already suggesting the UK should follow the EU’s example in watering down its own EV policies, but to do so would cost British families by keeping them in dirtier and more expensive petrol cars for longer. Stable policy will give companies the confidence to invest billions in the UK’s charging infrastructure, and will avoid jeopardising investments in our car industry and its supply chains. It was government policy that saw Sunderland chosen to build Nissan's original electric Leaf, and today the latest Nissan EV has started rolling off the production lines in the North East, securing jobs for years to come.”