EU eases 2035 combustion engine ban under new automotive plan

The European Commission has announced a wide-ranging Automotive Package aimed at supporting Europe’s car industry through its transition to clean mobility, while easing regulatory pressure and strengthening competitiveness in the face of global challenges.

Presented on Wednesday, the package seeks to balance the EU’s long-term goal of climate neutrality by 2050 with calls from manufacturers for greater flexibility, simpler rules and stronger support for European-made vehicles and batteries. The automotive sector remains a cornerstone of the EU economy, contributing around 7% of GDP and supporting nearly 14 million jobs.

The announcement follows speculation last week by European People’s Party (EPP) leader Manfred Weber that Brussels was preparing to drop plans for an effective ban on the sale of new cars with combustion engines from 2035, in favour of a more flexible emissions-reduction framework.

At the heart of the proposals is a commitment to maintain a strong market signal for zero-emission vehicles (ZEVs), while giving carmakers more leeway in how they meet emissions targets. The Commission said this would provide predictability for investment while recognising the technological and economic realities facing the industry.

Under the revised framework, carmakers will still be required to achieve a 90% reduction in tailpipe emissions by 2035, but the remaining 10% can be offset through the use of low-carbon steel produced in the EU or sustainable fuels, such as e-fuels and biofuels. This opens the door for technologies including plug-in hybrids, range extenders and other hybrid vehicles to continue playing a role beyond 2035, alongside electric and hydrogen-powered cars.

Before that date, manufacturers will benefit from additional flexibilities. These include “super credits” for small, affordable electric cars made in the EU, designed to encourage the rollout of compact EV models, and new banking and borrowing mechanisms to smooth compliance with 2030 emissions targets. The Commission also eased requirements for vans, lowering the 2030 CO₂ reduction target from 50% to 40%, and proposed targeted relief for heavy-duty vehicles.

On the demand side, the package introduces a corporate vehicles initiative, setting binding national targets for the uptake of zero- and low-emission vehicles by large companies. Vehicles benefiting from public financial support will need to meet clean and “made in the EU” criteria, a move intended to stimulate both first- and second-hand markets and cut emissions from high-mileage company fleets.

A key industrial pillar of the package is the €1.8 billion Battery Booster, aimed at accelerating the development of a fully European battery value chain. Of this, €1.5 billion will be made available as interest-free loans to battery cell producers, alongside additional measures to strengthen supply chains, foster innovation and reduce reliance on dominant global players.

The Commission also unveiled an Automotive Omnibus to cut red tape and administrative costs, with businesses expected to save around €706 million per year. Measures include streamlined testing procedures for vans and trucks, fewer secondary regulations, and updated vehicle labelling rules to give consumers clearer emissions information. A new category for small affordable electric cars, up to 4.2 metres in length, will allow Member States to design targeted incentives to boost demand.

European Commission President Ursula von der Leyen said the package brings together innovation, clean mobility and competitiveness at a critical moment for the sector.

Stéphane Séjourné, Executive Vice-President for Prosperity and Industrial Strategy, added: “This package will be a lifeline for the European automotive industry. We are pulling every lever at our disposal – simplification, flexibility, European preference, targeted support and innovation. Together, these measures are our commitment to restoring Europe’s industrial leadership while leading the global transition on climate.”

Industry reaction was cautiously positive. The European Automobile Manufacturers’ Association (ACEA) welcomed the move towards greater flexibility and technology neutrality, calling it a “first important step” towards aligning decarbonisation with competitiveness. However, ACEA warned that the effectiveness of the package would depend on the detail, and urged faster action on near-term targets, particularly for 2030.

The proposals build on months of dialogue between the Commission, industry and other stakeholders, and will now move into the legislative process, where Member States and the European Parliament will scrutinise and shape the final measures.