Europe’s route to zero emission vehicles takes a detour

The road to vehicle electrification across Europe is no longer looking as Roman-straight as it once did. Regulatory uncertainty and customer reluctance have combined to create speed bumps and possible diversions along the journey to net zero for cars and vans.

Manufacturers had been staring down the barrel of a 2035 ban on internal combustion engines for these vehicles, until the European Commission introduced some flexibilities last December, which pave the way for a 90% reduction in new ICE sales from the middle of the next decade.

However, a leaked draft report from the European Parliament rapporteur on the review of CO2 regulations for cars and vans now proposes even more flexible emission targets for OEMs, including a fresh category for new vehicles running on biofuels, and a 73% reduction in the CO2 emissions of new cars by 2035 (equivalent to a 30 g/km target, which could be achieved by selling plug-in hybrids, rather than battery electric models).

The European Automobile Manufacturers’ Association (ACEA) welcomed the proposals, which it says better reflect the operational and economic challenges currently facing European automakers.

But this type of rule change is stalling progress towards more sustainable fleets across Europe, according to Alphabet’s European Fleet Emission Monitor. Companies have been spearheading the transition to BEVs across the EU, but 60% of fleet managers report that regulatory uncertainty is slowing and even reversing their decision-making around fleet strategy.

The Arval Fleet and Mobility Observatory Barometer found that 14 European countries ranked restrictive ICE policies as either their first or second biggest fleet concern, alongside mitigating increases in total cost of ownership (35%).

To facilitate fleet EV finance, Banco Santander and Uber Technologies have established a three-year financing platform of up to €1 billion across Europe. In several EU markets, Uber relies heavily on established professional fleet operators to deliver its mobility services.

While EV sales continue to lag behind their original forecasts, they are rising, due in part to new national BEV incentive schemes in important markets, such as Germany, France and Italy, as well as rising oil prices following the conflict in the Middle East. During the first four months of the year, registrations of electric passenger cars in Germany increased by 33% to 327,700 units. BEV registrations rose by 41% to 224,000 vehicles, while the PHEV segment grew 18% to 103,700 units.

But electrification remains negligible in the commercial vehicle sector, where diesel registrations have risen across all major segments in the first quarter of the year. Trucks and buses led the gains, up 10.7% and 24.5% respectively, ahead of more modest 2.3% year-on-year growth in the van sector. Electrically chargeable vans increased their market share to 12%, and electric buses to 22%, but diesel still dominates.

To drive the zero emission truck and bus market forward, Traton Group, which includes Scania, MAN, International, and Volkswagen Truck & Bus, has completed its first Green Bond issuance and secured a Green Loan. Traton raised a combined total of €850 million to support investments in battery-electric commercial vehicles and emission-free mobility.

In Europe’s car market, long-term leasing is increasing its share of vehicle funding, led by Gen Z and Gen Y drivers, whereas older age groups prefer more traditional ownership models, according to the Ayvens Mobility Monitor 2026. Ayvens itself has increased its full-service leasing contracts and posted higher Q1 earnings and margins.