The future may be electric, but that future is postponed. The European Commission, citing the need for flexibility, has softened its ambitious plan to ban the sale of natural gas cars by 2035.
Instead of requiring 100% of new cars to be zero-emission vehicles by that date, the revised plan would allow 10% of new car sales to be hybrids or other vehicles, as long as manufacturers buy carbon offsets to compensate. This change is part of a wider oneCar PackIt was designed to help the European car industry become clean and competitive.
If the European Parliament approves this shift, it will likely satisfy traditional European carmakers who are asking for more time to move beyond hybrid vehicles. These companies are struggling to compete with Tesla and the rise of affordable electric vehicles (EVs) coming out of China. But the policy change has created a divide between EV startups and their investors.
“China is already dominating EV manufacturing,” said Craig Douglas, a partner at the World Fund, a European climate-focused venture capital firm. “Unless Europe competes with clear, ambitious policy signals, it will lose leadership of another globally important industry — and all the economic benefits that come with it.”
Douglas was among the signatories of “Take Charge Europe,” an open letter to European Commission President Ursula von der Leyen published in September. Senior executives from companies including Cabify, EDF, Einride, Iberdrola and several EV-related start-ups signed the letter, urging the Commission to “stand firm” on the original 2035 zero-emissions target.
Their appeal was not enough to counter pressure from the traditional car industry, which accounts for 6.1% of total employment in the European Union. However, the ongoing pressure has sparked debate within the startup community and beyond about the best course for Europe if it wants to remain competitive during the energy transition.
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Even in the automotive industry, opinions differ. In a statement to Swedish media, a Volvo press officer warned that “backtracking on long-term commitments in favor of short-term profits risks undermining Europe’s competitiveness for many years.”
Unlike Mercedes-Benz and other manufacturers, the Swedish carmaker has had no concerns about meeting the 2035 ban. Instead of pushing back the deadline, Volvo would prefer to see increased investment in expanding charging infrastructure – something critics fear the new policy could actually discourage.
Issam Tidjani, CEO of Cariqa, a Berlin-based startup in the EV charging market, echoed these concerns. He warned that weakening the 2035 zero-emissions mandate could hurt the progress of electrification overall. “History shows that this kind of flexibility has never worked well,” said Tidjani, who also signed the Take Charge Europe letter this fall. “It delays scale, weakens learning curves and ultimately costs industry leadership rather than sustaining it.”
To be fair, the Commission has not completely ignored infrastructure and supply chain issues. As part of its Auto Package, it introduced the “Battery Booster,” a strategy that would invest 1.8 billion euros (about $2.11 billion) in developing a fully European battery supply chain. The aim is to strengthen local production and ensure security of supply.
The plan received positive feedback from Verkor, a French startup that produces lithium-ion battery cells for electric vehicles. The company, hoping to succeed where Swedish battery maker Northvolt struggled, opened its first large-scale battery factory in northern France this week. Verkor called the Booster initiative “a necessary step to scale up the battery industry in Europe.”
Mixed signals
But many question whether the Battery Booster is enough to offset what they see as a negative signal about the EU’s commitment to using decarbonisation as a driver of economic growth.
Already, traditional automakers have begun to complain that the carbon offset requirements could make cars more expensive for consumers, potentially undermining the very competitiveness the policy change was intended to protect.
Another uncertainty concerns the United Kingdom. It is unclear whether the UK will follow the EU’s lead and amend its own ban on internal combustion engines in 2035. Unlike the European Union and the United States, the UK has yet to impose tariffs on Chinese electric vehicles, although their rapidly growing sales in the UK market have raised concerns among domestic manufacturers.
The debate highlights ongoing tensions in climate policy between how to balance the economic realities facing existing industries with the urgency of the transition to cleaner technology. As Europe tries to thread that needle, the decisions made now will always affect whether the continent leads or lags in the global EV market.
