EU Rethinks the Pace of Its Electric Vehicle Transition
The European Commission has unveiled a new automotive policy package aimed at keeping Europe’s transition to clean mobility on track while responding to mounting economic, industrial and energy system pressures.
The measures reaffirm the EU’s long-term commitment to climate neutrality by 2050, but introduce greater flexibility in how carmakers meet emissions targets. The shift reflects concerns that rigid rules could undermine competitiveness at a time when the global automotive industry is undergoing rapid technological change and facing intense competition.
Road transport remains a critical energy and climate challenge for Europe. In 2023, it accounted for around 30% of the EU’s net CO₂ emissions, while also driving demand for oil, electricity, batteries and grid infrastructure. As electrification accelerates unevenly across regions and vehicle segments, the Commission is seeking to balance decarbonisation with industrial resilience and energy security.
Emissions targets adjusted, not abandoned
At the centre of the package is a revision of the EU’s CO₂ emission standards for cars and vans. From 2035, manufacturers would be required to cut tailpipe emissions by 90%, rather than reaching zero. The remaining emissions could be compensated through the use of low-carbon steel produced in the EU, as well as verified emissions savings from e-fuels and biofuels.
This approach allows a broader mix of technologies to remain part of the vehicle market beyond 2035, including plug-in hybrids, range extenders and some internal combustion engine vehicles, alongside battery-electric and hydrogen models. The Commission argues that this maintains a strong market signal towards electrification while offering manufacturers greater predictability and flexibility.
Additional measures include temporary “banking and borrowing” of emissions targets between 2030 and 2032, incentives for small, affordable electric cars made in the EU, and reduced CO₂ targets for vans, where electric uptake has lagged due to cost and infrastructure barriers. A targeted amendment is also proposed for heavy-duty vehicles to ease compliance with 2030 emissions goals.
Corporate fleets as a demand lever
On the demand side, the Commission is proposing binding national targets for zero- and low-emission vehicles in corporate fleets from 2030. Corporate cars and vans account for around 60% of new car registrations and 90% of van registrations across the EU, making them a powerful tool for cutting fuel use and emissions.
By focusing on large companies, the policy aims to create predictable demand for clean vehicles, accelerate turnover into the second-hand market, and improve affordability for private buyers. Public financial support for corporate vehicles would also be limited to zero- or low-emission models made in the EU.
From an energy perspective, higher utilisation rates in corporate fleets mean faster emissions reductions and earlier displacement of fossil fuels in road transport.
Batteries and energy security move to the foreground
Recognising that vehicle electrification depends heavily on battery supply chains, the package includes a €1.8 billion “Battery Booster” to support EU-based battery manufacturing. Of this, €1.5 billion would be provided as interest-free loans to European battery cell producers.
The initiative aims to strengthen Europe’s battery value chain, reduce dependence on dominant global suppliers, and improve the cost competitiveness of electric vehicles produced in the EU. Batteries are increasingly viewed as strategic energy infrastructure, underpinning not only electric mobility but also grid storage and renewable integration.
Cutting red tape while keeping direction of travel
The Automotive Omnibus component of the package is designed to reduce administrative and compliance burdens for manufacturers, with estimated savings of around €706 million per year. Measures include streamlining testing requirements, reducing secondary legislation, and updating vehicle labelling rules to give consumers clearer information on energy use, emissions and electric range.
The Commission argues that these cost savings will free up capital for investment in clean technologies, helping manufacturers adapt without weakening Europe’s overall climate ambition.
A more pragmatic phase of the transition
Taken together, the package signals a shift toward a more pragmatic phase of Europe’s clean mobility transition. While the long-term move away from fossil fuels remains intact, the Commission is placing greater emphasis on flexibility, domestic supply chains and industrial competitiveness as the energy transition becomes more closely tied to global trade and geopolitics.
The Commission argues this approach will help European manufacturers adapt while maintaining progress on decarbonisation. However, the increased flexibility has prompted debate about potential risks and trade-offs.
Environmental groups and some analysts warn that allowing a continued role for combustion engines beyond 2035 — even when linked to e-fuels or compensation mechanisms — could weaken regulatory clarity and dilute the long-term signal for a full transition to electric vehicles. They caution that regulatory uncertainty may slow investment in charging infrastructure, battery manufacturing and supporting energy networks.
The role of e-fuels remains particularly contested. Critics note that producing synthetic fuels at scale is energy-intensive and costly, raising questions about whether they can contribute meaningfully to emissions reductions without diverting clean electricity from other uses.
There is also a broader competitiveness question. Supporters of the new flexibility see it as giving European manufacturers time to retool and strengthen domestic supply chains. Others argue it risks delaying investment and could leave EU firms further behind rapidly expanding electric vehicle producers elsewhere, particularly in China.
How effectively this approach balances decarbonisation with competitiveness will depend on how quickly EU-made batteries, vehicles and energy infrastructure can scale in practice.