The automotive industry welcomed the European Commission going soft on its own 2035 phase-out of the combustion engine. Environmental and climate groups such as Transport & Environment (T&E), however, voice strong concerns about the potential weakening of Europe’s EV strategy. EU Perspectives spoke to T&E’s Lucien Mathieu who oversees the cars sector.
Shortly before the Christmas break, the European Commission introduced its automotive package revising emissions targets for 2035. A major step in Europe’s climate and industrial policy, the revision moves away from a complete ban on new internal combustion engine cars after 2035 to a more flexible approach. Not everybody is happy.
Looking back at 2025, how would you characterise 2025 for EU climate policy, particularly in the automotive sector?
This was a challenging year for EU climate legislation. For one thing, this was the first full year of the new Commission, which set new priorities for the legislative term, notably simplification and competitiveness. In practice, simplification has—unfortunately—often meant deregulation. If we look back at the automotive sector, there were not one but three major interventions by the Commission, all concessions to the car industry.
In March, the Automotive Action Plan delayed the 2025 CO₂ targets by two years, allowing carmakers to slow the transition. In September, during the Strategic Dialogue with industry and civil society, the Commission announced it would revise the 2035 law. Finally, just days ago, the Commission published its proposal for that revision, introducing additional flexibilities. Taken together, these moves send what is—from an environmental perspective—a damaging signal about Europe’s commitment to its climate targets.
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Walking a tightrope
The Commission would argue it had to balance climate ambitions with competitiveness. And given the political realities of the new Parliament as well as pressure within the Council, compromise at times seemed inevitable. There were repeated warnings from both governments as well as the industry itself, e.g., the co-signed letter to President von der Leyen in the summer.
First off, the narrative that regulation is somehow the core problem here is misleading. If we take a step back, European carmakers deliberately reduced production post-Covid, prioritising “value over volume” to maximise profits. That strategy has made cars less affordable while competition from Chinese manufacturers has intensified. At the same time, European carmakers were slow to invest in electric vehicles. After the European elections, political dynamics created an opportunity to push for changes to the 2035 phase-out, but these combined (or simply amplified) opportunism with industry resistance.
From an environmental perspective the Commission sent a damaging signal about Europe’s commitment to its climate targets. — Lucien Mathieu, director of cars at T&E
If it is, as you say, a strategic mistake, is there any silver lining? Doesn’t it buy time or give more breathing room? After all, even industry heads maintain they want to meet climate goals.
I don’t think so. Weakening the target undermines Europe’s global competitiveness. The transition to electric vehicles is already underway. By reopening the door to combustion and hybrid technologies beyond 2035, Europe risks splitting investment, scale, and attention across multiple technologies, making it harder, not easier, for European manufacturers to catch up with competitors, particularly Chinese EV producers. Before the revision, the framework was clear: the future was electric. The revised approach introduces uncertainty, which is very damaging across the entire EV value chain.
No longer 100 per cent
Much of the debate has focused on the shift from a 100 per cent ban on new combustion vehicles to a 90 per cent CO₂ reduction target.
The revised 2035 target refers to emissions, not production: what was floated was a 90 per cent reduction in CO₂, not a requirement that 90 per cent of cars be electric. Targets are set in grammes of CO₂ per kilometre, and manufacturers are allowed an average of roughly 11 grams per kilometre in 2035. How they achieve that depends on the emissions performance of the vehicles they sell. Very low-emission vehicles, including plug-in hybrids or extended-range EVs, allow manufacturers to sell more non-fully electric cars. The share of non-electric vehicles could range from five to 50 per cent, creating major uncertainty for production volumes and investment in batteries, charging infrastructure, and components.
Supporters of flexibility argue the adjustment will protect jobs.
The problem is that slowing down does not solve structural problems. While manufacturers support climate neutrality in principle, lobbying to delay electrification only increases emissions. European carmakers must do the opposite: accelerate investment to remain competitive in the automotive industry of the future, which will be electric.
Not easy being green
Demand for EVs is growing strongly, and market share reached around 17 per cent in Q3 2025, with Q4 expected to set new highs. Affordability remains a factor but is rapidly improving: purchase prices are approaching parity with combustion vehicles, and running costs are already lower. Electrifying corporate fleets is particularly important, as these vehicles later enter the second-hand market, making EVs accessible to a broader public. While uptake varies across member states, the overall trajectory is clear: Europe is moving decisively towards electric mobility.
The transition to electric vehicles is already underway. By reopening the door to combustion and hybrid technologies beyond 2035, Europe risks making it harder, not easier, for European manufacturers to catch up. — Lucien Mathieu, director of cars at T&E
When we look at demand, I am surprised the industry isn’t taking greater advantage of the shift in interest towards EVs: in short, more and more car owners are going green. I personally would change to an EV in the blink of an eye and many Europeans feel the same way. The success of Europe’s EV transition depends not just on corporate compliance, but on everyday drivers, doesn’t it? Speaking of which, corporate fleets are a big part of the latest revision—did the Commission get it right last week by targeting that segment?
Yes. Targeting large corporate fleets is an essential part of the automotive package. T&E has advocated for this approach for years. Each member state receives different targets, reflecting slower transitions in Central and Eastern Europe. Only fleets with more than 250 employees and €50m in turnover are targeted, around 0.16 per cent of EU companies, but they have an outsized influence on the new car market.
These companies can absorb costs more easily and are total-cost-of-ownership driven. Tying targets to local content also supports domestic production of vehicles and batteries, which is crucial for a young and fragile European battery industry. Offtake certainty for producers like Northvolt is critical to achieve independence in battery production.
Political dynamics and progress
On the workaround, like green steel or other factory modifications, is it possible the industry could after all catch up or accelerate progress towards 2035?
I’m sceptical. Technical solutions like green steel or factory modifications may help marginally, but they are not sufficient on their own to secure the 2035 target. The bigger challenge lies in regulatory certainty and political alignment.
How will political dynamics affect progress towards 2035?
Ursula von der Leyen has a strong grip on this file; it’s part of her Green Deal legacy. Completely reversing 2035 would contradict that legacy. Political pressure from the EPP and member states, including Germany and Italy, forced concessions, but this is a highly emotive issue. The file will go through Parliament, the Council, and trilogues. The European Parliament has a right/far-right majority, so the question is whether the EPP will build a centrist consensus or align with the far-right. Some reasonable voices could still salvage progress, but it will be a difficult negotiation process.
Meanwhile the EU appears to be losing more and more ground to China. It seems China is already forcing the European industry’s hand with cheap EVs…
China represents an existential threat. European manufacturers have been too slow, short-term profit-focused, and not strategic enough, but they are transitioning. New models are launched every year that are more affordable and higher quality. CEOs have recognised the urgency from observing China. Regulation is essential to ensure manufacturers maintain focus on electrification and do not backtrack under shareholder pressure.
Will renewed focus on small cars help?
On another note, one highlight of Ms von der Leyen’s State of the Union in September was the small car initiative, specifically the introduction of a new micro car class. How important is this?
The E-car initiative—economical, European, environmental—is a positive step. Its aim is to stimulate both supply and demand for small European electric cars. There is clear potential for small EVs due to high consumer demand for affordable electric vehicles, alongside emerging industrial projects from European carmakers.
Small cars under 4.2 metres receive a 1.3 super-credit under the EU CO₂ regulation, which slightly reduces the number of EVs needed to meet targets, but the overall effect remains manageable. This measure could help revive Europe’s traditional small-car segment, particularly in congested urban areas. Segment A and B electric vehicles already exist — such as the Renault 5 and the upcoming Volkswagen ID Polo. To preserve the intended impact, incentives must remain strictly limited to genuinely small vehicles.
Far from straight path
To sum up, a lot of changes but above all tough negotiations appear to be ahead.
2025 has been a year of intense pressure and change in EU automotive policies but next year, 2026, will be decisive. The key question is whether co-legislators will correct or worsen the situation, maintaining the focus on electrification.
Politics, real-world constraints, and denial make this a complex landscape, but the trajectory towards electric mobility in Europe is irreversible.
