EU waters down plans to end new petrol and diesel car sales by 2035

The European Commission has watered down its plans to end the sale of new petrol and diesel cars by 2035, bowing to pressure from carmakers who warned that weak demand for electric vehicles could expose them to billions of euros in penalties.

Under the EU’s existing rules, all new cars sold from 2035 were due to be “zero emission”. However, the Commission’s revised proposal will require a 90% reduction in the CO2 output of all new vehicles compared with 2021 levels, rather than 100%.

The remaining 10 per cent could include conventional petrol or diesel cars as well as hybrids, with the additional emissions offset through other measures. These include greater use of biofuels and so-called e-fuels — synthetic fuels made using captured carbon dioxide — alongside stricter requirements on materials such as low-carbon steel produced within the EU.

The move follows intense lobbying from manufacturers, particularly in Germany. The European Automobile Manufacturers’ Association (ACEA) has repeatedly warned that demand for electric vehicles remains too low and that, without flexibility, companies would face “multi-billion euro” fines for missing emissions targets.

Sigrid de Vries, director general of ACEA, said ahead of the announcement that flexibility was now “urgent”.

“2030 is around the corner, and market demand is too low to avoid the risk of multi-billion-euro penalties for manufacturers,” she said. “It will take time to build charging points and introduce fiscal and purchase incentives to get the market on track. Policymakers must provide breathing space to sustain jobs, innovation and investment.”

Critics have warned that diluting the 2035 target risks undermining Europe’s transition to electric vehicles and weakening its global competitiveness, particularly as China and the US accelerate investment in EV technology.

The green transport group Transport & Environment (T&E) cautioned the UK against following Brussels’ lead by weakening its own Zero Emission Vehicles (ZEV) mandate, which phases out new petrol and diesel car sales by 2030.

“The UK must stand firm,” said Anna Krajinska, director of T&E UK. “Our ZEV mandate is already driving jobs, investment and innovation. As major exporters, we cannot compete unless we innovate — and global markets are going electric fast.”

Carmakers in the UK have previously argued that stronger incentives are needed to encourage consumers to switch to electric vehicles ahead of the 2030 ban, particularly as upfront costs remain high.

Manufacturers are split on the EU’s softer stance. Volvo said it had already built a fully electric portfolio in under a decade and warned that retreating from long-term commitments could harm Europe’s industrial future.

“Weakening long-term commitments for short-term gain risks undermining Europe’s competitiveness for years to come,” the company said. “A consistent and ambitious policy framework, combined with investment in infrastructure, is what delivers real benefits for customers, the climate and Europe’s industrial strength.”

By contrast, Germany’s Volkswagen welcomed the Commission’s draft proposal, calling it “economically sound overall”.

“The fact that small electric vehicles are to receive special support is very positive,” the company said. “Opening the market to combustion-engine vehicles while compensating for emissions is pragmatic and aligned with market realities.”

UK-based experts have warned that policy instability could deter investment. Colin Walker, head of transport at the Energy and Climate Intelligence Unit (ECIU), said consistent government policy had already delivered tangible benefits.

“It was government policy that saw Sunderland chosen to build Nissan’s original electric Leaf,” he said. “Today, the latest Nissan EV is rolling off production lines in the North East, securing jobs for years to come.”

Fiona Howarth, chief executive of Octopus Electric Vehicles, said any UK move to soften targets in response to Brussels would send a “damaging signal” to investors and manufacturers who have already committed billions to the transition.

“Many have invested heavily on the assumption the UK would stay the course,” she said.

The European Commission’s revised proposal is expected to prompt further debate among member states and lawmakers, as Europe grapples with how to balance climate ambitions against economic and political pressures in one of its most important industries.