The European Commission has softened its ambitious 2035 plan to ban the sale of gas-powered cars, a move that has sparked concern among electric vehicle (EV) startups and investors. Citing a need for flexibility, the revised policy allows for a percentage of hybrid vehicle sales beyond the original zero-emission target, provided manufacturers purchase carbon offsets.
This adjustment, part of a broader Automotive Package, aims to help the European car industry become both clean and competitive. Instead of requiring 100% of new cars to be zero-emission vehicles by 2035, the updated plan would permit 10% of new car sales to be hybrids or other vehicles, contingent on carbon offset purchases.
If approved by the European Parliament, this shift is likely to satisfy traditional European carmakers who have advocated for more time to transition away from hybrid technologies. These established companies are currently struggling to compete with Tesla and the influx of affordable electric vehicles from China. However, the policy change has created a significant divide within the EV startup community and among their investors.
"China already dominates EV manufacturing," stated Craig Douglas, a partner at World Fund, a European climate-focused venture capital firm. "If Europe doesn't compete 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 a signatory of "Take Charge Europe," an open letter addressed to European Commission President Ursula von der Leyen, published in September. Senior executives from companies such as Cabify, EDF, Einride, Iberdrola, and numerous EV-related startups signed the letter, urging the Commission to "stand firm" on the original 2035 zero-emission target. Their appeal, however, was insufficient to counter pressure from the traditional automobile industry, which accounts for 6.1% of total European Union employment. This ongoing debate highlights the differing views within the startup community and beyond regarding Europe's optimal path to remain competitive during the energy transition.
Industry Split on Timeline
Even within the broader automotive sector, opinions diverge. A Volvo press officer, in a statement to Swedish media, cautioned that "backing down on long-term commitments in favor of short-term gains risks undermining Europe's competitiveness for many years to come." Unlike Mercedes-Benz and other manufacturers, the Swedish carmaker expressed no concerns about meeting the original 2035 ban. Volvo would have preferred increased investment in expanding charging infrastructure, a crucial area that critics fear the new policy could inadvertently discourage.
Issam Tidjani, CEO of Cariqa, a Berlin-based EV charging marketplace startup and another signatory of the "Take Charge Europe" letter, echoed these concerns. He warned that weakening the 2035 zero-emission mandate could hinder overall electrification progress. "History shows that this kind of flexibility has never worked out well," Tidjani remarked. "It delays scale, weakens learning curves, and ultimately costs industrial leadership rather than preserving it."
To be fair, the Commission has not entirely overlooked infrastructure and supply chain challenges. As part of its Automotive Package, it introduced the "Battery Booster," a strategy committing €1.8 billion (approximately $2.11 billion) to develop a fully European-made battery supply chain. The initiative aims to strengthen local production and ensure supply security.
This plan received positive feedback from Verkor, a French startup producing lithium-ion battery cells for electric vehicles. Verkor, which recently opened its first large-scale battery factory in Northern France, called the Booster initiative "a necessary step to scale up Europe's battery industry." The company hopes to succeed where Swedish battery maker Northvolt has faced challenges.
Mixed Signals and Broader Implications
Despite the Battery Booster, many question whether it sufficiently offsets what they perceive as negative signaling regarding the EU's commitment to leveraging decarbonization as a driver for economic growth. Traditional carmakers have already begun to voice complaints that the carbon offset requirements could increase vehicle costs for consumers, potentially undermining the very competitiveness the policy change was intended to protect.
Another element of uncertainty involves the United Kingdom. It remains unclear whether the U.K. will follow the EU's lead and modify its own 2035 combustion engine ban. Unlike both the European Union and the United States, the U.K. has not yet imposed tariffs on Chinese electric vehicles, despite growing concerns among domestic manufacturers over their rapidly increasing sales in the British market.
This ongoing debate underscores the inherent tensions in climate policy: how to effectively balance the economic realities faced by existing industries with the urgent need to transition to cleaner technologies. As Europe navigates this complex challenge, the decisions made today will undoubtedly determine whether the continent leads or lags in the evolving global EV market.
