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The European Commission has moved to ease key elements of the EU’s 2035 car and van emissions framework, signalling a shift in how quickly and how uniformly Europe’s automotive market will be pushed towards full electrification, while simultaneously rolling out new demand-side, industrial, and simplification measures.
The Automotive Package, published on 16 December, would replace the current requirement for 100 per cent zero-emission new car and van sales by 2035 with a 90 per cent tailpipe CO₂ reduction target. The remaining compliance gap would be filled through the use of low-carbon materials produced in the European Union and through e-fuels and advanced biofuels, introducing a degree of flexibility into what had previously operated as a clear phase-out signal for internal combustion engine vehicles.
The change introduces formal flexibility into what had previously functioned as a de facto phase-out of internal combustion engine vehicles. It would allow certain plug-in hybrids, range-extender vehicles, and other combustion-based powertrains to remain on the market beyond 2035, alongside battery-electric and hydrogen vehicles, subject to compliance with the revised framework.
The Commission has argued that the revised target preserves a clear long-term signal towards electrification while providing manufacturers with greater technological neutrality and compliance optionality. The proposal responds to sustained pressure from parts of the automotive industry, which has warned of slowing electric vehicle demand, rising costs, and intensifying competition from Chinese manufacturers.
Beyond 2035, the package introduces further near-term flexibilities. These include banking and borrowing provisions for the 2030 to 2032 compliance period, super credits for small and affordable electric vehicles manufactured in the EU, and a reduction in the 2030 CO₂ reduction target for vans from 50 per cent to 40 per cent. A targeted amendment is also proposed to ease compliance for heavy-duty vehicle manufacturers ahead of the 2030 milestone.
On the demand side, the Commission has tabled a new Clean Corporate Vehicles initiative, setting binding national targets for the uptake of zero- and low-emission vehicles by large company fleets. Corporate vehicles account for a substantial share of new registrations and higher annual mileage, and the Commission sees the segment as a lever to accelerate market uptake and expand the second-hand market for cleaner vehicles. Access to public financial support would be restricted to zero and low-emission vehicles produced in the EU.
Industrial policy measures form a second core pillar of the package. A new Battery Booster strategy would mobilise €1.8 billion to support the European battery value chain, including €1.5 billion in interest-free loans for battery cell manufacturing. The Commission said the measures are intended to strengthen cost competitiveness, reduce strategic dependencies, and support the scaling of domestic production capacity.
The Automotive Package is accompanied by an omnibus regulation aimed at reducing administrative burdens for manufacturers. The Commission estimates annual compliance cost savings of around €706 million, through measures including streamlined testing requirements, reduced secondary legislation, updated vehicle labelling rules, and the creation of a new regulatory category for small electric vehicles of up to 4.2 metres in length.
Taken together, the proposals represent one of the most significant adjustments to the EU’s automotive regulatory framework since the adoption of the 2035 target. While the Commission has presented the package as a pragmatic alignment of climate ambition and industrial competitiveness, it has reopened fundamental questions about regulatory certainty, technology neutrality, and the pace of Europe’s transition to zero-emission road transport.
The proposals have prompted sharply divergent reactions across the transport and industrial policy landscape.
Environmental organisation Transport and Environment said the revised 2035 target sends a confusing signal to manufacturers and consumers and risks diverting investment away from electrification at a critical moment. It argued that weakening the target to a 90 per cent reduction opens the door to high-emitting combustion-engine vehicles remaining on the market and could result in up to 25 per cent fewer battery-electric vehicles being sold in 2035 compared with the current framework. T&E criticised the use of credits for fuels and materials, warning that they would allow manufacturers to sell fewer electric vehicles in exchange for limited or uncertain emissions savings and raised concerns about the scalability and integrity of advanced biofuels. While welcoming national targets for corporate fleets, it said allowing plug-in hybrids to count towards those targets would undermine real-world emissions reductions. T&E also argued that the Battery Booster fails to bring new financing to the sector, instead repackaging previously announced Innovation Fund resources.
E-Mobility Europe also expressed concern over the weakening of the 2035 target, warning that changing the rules risks undermining investment certainty after companies have already committed capital on the basis of a full electrification trajectory. While acknowledging that the package maintains an overall focus on electrification, it said extending the role of transitional technologies would slow progress as global competitors, particularly China, continue to scale rapidly. The group welcomed the delivery of the corporate fleets initiative, the battery package and the omnibus, but highlighted the exclusion of heavy-duty vehicles from fleet targets as a missed opportunity to strengthen demand for zero-emission trucks.
Cities voiced similar concerns. Eurocities said weakening the 2035 zero emission target undermines municipal investments in charging infrastructure, zero emission zones and clean mobility planning, and risks leaving polluting vehicles on urban streets for years to come. While welcoming stronger demand signals for light-duty electric vehicles through corporate fleet targets and support for small electric cars, it criticised the inclusion of low-emission vehicles and the absence of measures to promote multimodal mobility, such as cycling and public transport.
Industry reactions were more mixed. The European Automobile Manufacturers’ Association described the package as a first step towards a more pragmatic and flexible pathway, recognising the need for technology neutrality to reconcile decarbonisation with competitiveness. However, it cautioned that the impact would depend heavily on the detailed design of the measures. ACEA warned that without urgent action on flexibilities towards the 2030 milestone, changes focused on 2035 may have limited effect, and raised concerns about strict conditionalities, including narrow made in the EU requirements and the proposed emissions compensation system. It welcomed specific measures for light commercial vehicles and the targeted amendment for heavy-duty vehicles, while questioning whether mandatory corporate fleet targets risk running counter to a market-based approach.
The International Road Transport Union welcomed the exclusion of heavy-duty vehicles from the corporate fleets proposal, arguing that charging infrastructure, grid capacity, energy costs and vehicle suitability remain major constraints in the segment. It also welcomed the move away from a purely tailpipe-based approach in the CO₂ standards revision, seeing the partial recognition of renewable fuels as an important conceptual shift. At the same time, IRU said the flexibility remains too limited and too late, with restrictive definitions and capped credits applying only from 2035 and warned that binding national targets for light commercial vehicles could translate into de facto purchase quotas that distort competition within the single market.
By contrast, the eFuel Alliance criticised the package for failing to unlock the full potential of renewable fuels. While welcoming the introduction of a limited life cycle element through the use of materials and fuels, it argued that a 3 per cent cap on renewable fuels and the delayed application from 2035 provide no meaningful incentive for market ramp-up. The alliance called for broader eligibility of fuels under the Renewable Energy Directive, immediate crediting, removal of caps, and the creation of a dedicated vehicle category for combustion engines running exclusively on renewable fuels.
The Platform for Electromobility warned that repeated adjustments to key policies risk eroding long-term clarity and slowing the rollout of electrification infrastructure and vehicles. It said a 90 per cent target masks potentially wide variations in market outcomes and risks diverting resources towards less efficient technologies, urging lawmakers to maintain clear and robust criteria for zero-emission vehicles.
The legislative proposals on CO₂ standards, corporate fleets, small electric cars and the automotive omnibus will now be negotiated by the European Parliament and the Council, where disagreements over technology neutrality, national implementation, and “made in the EU” criteria are expected to come to the fore. With industrial competitiveness, Single Market coherence, and long-term investment certainty all at stake, the negotiations will determine whether the Automotive Package consolidates Europe’s clean mobility transition or fragments it along national and technological lines.
