As the EU lowers its 2035 EV targets, electric start-ups are expressing concern

The future may be electric, but that future is on hold. The European Commission, citing the need for flexibility, has eased its plan to ban the sale of gas-powered vehicles by 2035.

Instead of requiring 100% of new cars to be zero-emissions by that date, the revised system would allow 10% of new cars to be hybrids or other vehicles as long as manufacturers buy carbon offsets to pay for them. This change is part of the spread’Car Packages‘ was created to help the European car industry become cleaner and more competitive.

If the European Parliament approves the change, it would satisfy European automakers who have been asking for more time to pass hybrid vehicles. The company is struggling to compete with Tesla and the rise of expensive electric vehicles (EVs) from China. But the policy change has created a divide between EV developers and their suppliers.

“China is already dominating EV production,” said Craig Douglas, a partner at the World Fund, a European climate firm. “If Europe does not compete with clear information, it will lose the leadership of some of the most important companies in the world – and all the economic benefits that come with it.”

Douglas was one of the signatories of “Take Charge Europe,” an open letter to European Commission President Ursula von der Leyen that was published in September. Executives from companies including Cabify, EDF, Einride, Iberdrola, and many other EV-related startups signed the letter, urging the Commission to “stand firm” on the original 2035 zero-emission targets.

Their pleas were not enough to overcome the pressure from the traditional car industry, which represents 6.1% of all workers in the European Union. But the increased pressure has led to debate among developers and over whether Europe’s best option will remain competitive during the energy transition.

Division of industry over time

Even in the car industry, opinions differ. In a press release in Sweden, Volvo’s press officer warned that “backtracking on long-term initiatives in favor of short-term profits could undermine European competitiveness for years to come.”

Unlike Mercedes-Benz and other manufacturers, the Swedish carmaker was not worried about meeting the 2035 ban. Instead of delaying the deadline, Volvo would have liked to see more money in the development of charging equipment – which critics fear that the new policy could upset.

Issam Tidjani, CEO of Cariqa, a Berlin-based EV market startup, also explained this. He warned that weakening the 2035 emissions target could undermine progress on electricity. “History shows that such flexibility has not gone well,” said Tidjani, who also signed the Take Charge Europe letter this fall. “It slows growth, weakens learning processes, and ultimately destroys industrial leadership rather than sustaining it.”

To be fair, the organization has not neglected all aspects of construction and distribution. As part of the Vehicle Package, it launched the “Battery Booster,” an initiative that will cost €1.8 billion (about $2.11 billion) to develop a battery fully developed in Europe. The aim is to promote local production and ensure that safety is provided.

The system received positive feedback from Verkor, a French developer of lithium-ion battery cells for electric vehicles. The company, hoping for success where Swedish battery maker Northvolt has struggled, opened its largest factory in Northern France this week. Verkor called the Booster initiative “an important step in the development of the battery business in Europe.”

Mixed signals

However, many question whether the Battery Booster is enough to offset what they see as a negative sign of the EU’s commitment to using decarbonisation as a driver of economic growth.

Already, traditional carmakers have begun to worry that carbon offset requirements could make cars more expensive for consumers, which could undermine the competition that policy changes are meant to protect.

Another uncertainty concerns the United Kingdom. It is unclear whether the UK will follow the EU’s lead and replace its ban on combustion engines by 2035. Unlike the European Union and the United States, the UK has not paid tariffs on Chinese electric cars, although their increasing sales in the British market have raised concerns among domestic manufacturers.

The debate reflects the ongoing tension in climate policy between how to reconcile the economic challenges existing companies are facing with the rapid transition to cleaner technologies. As Europe tries to thread this needle, the decisions made now will forever affect whether the continent moves forward or backward in the global EV market.