The EU has shifted its auto policy and given more time to the automakers to sell hybrids and other transitional vehicles to the market. Let’s see how the EU auto policy shift will affect the automobile industry.
The European Commission has proposed a major change to the automobile policy as it plans to lift the ban on new combustion car sales. The shift to the policies was the effort of the German and Italian automakers as they were urging the EU to amend the 2035 deadline.
The EU revised the plan on 16 December 2025 to drop the 2035 ban and let the European automakers compete with Chinese rivals in the EV market. The future has electric vehicles in it, but before they achieve it, they can sell the hybrid vehicles for a longer time.
What is the EU Auto Policy shift?
The European Commission had originally planned to ban new combustion engine cars by 2035 in October 2022, and the Parliament approved it in February 2023, making it effective from April 2023. Ever since the EU passed such a proposal, the European automakers have been asking the EU lawmakers to ease the ban.
Now, after the effort from the German and Italian automakers, the EU has finally agreed to lift the 2035 ban on combustion cars. Let’s see what the EU has changed from the new proposal:
- Now, the original plan was to achieve 100% emission reduction by 2035 with the ban on internal combustion engine cars, but now the revised plan has lifted the ban.
- The revised plan allowed for a 90% emission cut by 2023, allowing the sale of plug-in hybrids and hybrid cars beyond 2035. The remaining 10% would be offset through EU steel, low-carbon, bio-fuels, or e-fuels cars.
- The plan also has incentives to boost the use of the bloc’s battery industry and EV transitions.
- The new plan offers hybrid technologies and small Electric vehicles shift as they delay the ICE bans.
- With the 2035 ban being lifted, the EU makes sure it is still on track to meet the 2050 climate goals.
- The other thing that automakers should not miss is the 2030 CO2 reduction target lowering to 40% from 50% and super credits for affordable and small electric cars.
- Automakers must meet the mandatory national targets from zero-to-low emission fleets and allow the EU countries to set their rules to meet their targets.
Why is the EU focusing on small EVs?
The revised plan has insisted on the small and affordable electric vehicles, as they open the path for incentives for them as well. The EU has introduced emission credits for automakers who sell qualifying small EVs. The reason for the shift and special treatment for the small EVs is as follows:
- The commission understands that luxury EVs dominate the market, but due to their high cost, not everybody can afford them; hence, it enhances the adoption. The automakers need to focus on small and affordable EVs.
- The smaller EVs would also consume less energy and help the commission to balance the sustainability goals and reduce the demand for lithium for the batteries.
- Chinese automakers are dominating the EV market with affordable and compact EVs; hence, the EU incentivizing the small EVS can help the local automaker to compete well and make their required place in the domestic market.
What will be the Policy shift benefit?
The 2035 ban on ICE cars was lifted, and other policy changes can offer the following benefits to the automakers and overall auto industry:
- The change in policies would allow plug-in hybrids, hybrids, e-fuel vehicles, and bio-fuel vehicles to remain in the market even after 2035, giving the flexibility to the automakers for the electrification transition.
- The European countries’ customers will get more affordable options in EVs from the domestic brands.
- Reducing the emission target to 40% from 50% would also reduce the pressure from the automakers and help cut down the cost to meet the emission standards.
- The corporate fleet rule provides the flexibility to companies that can implement rules tailored to their local market conditions.
- The EU offers funding of €1.8 billion to accelerate the development of local batteries and strengthen the local battery supply chain, and reduce the cost of EVs. The reports revealed that six battery projects spanning Germany, France, Sweden, and Poland will receive a grant of €852 million.
How will it affect the auto industry’s future?
The change in the EU auto policy will have a great impact on the auto industry. Let’s see how it will affect it in the long run:
- The abandonment of the 2035 ban will offer some relief for the automakers and open the passage for hybrid and plug-in hybrid vehicles after 2035, and they will perfectly meet their transitional role.
- The automakers now need to expand their strategy as the small and affordable EVs will receive the incentives and produce such small EVs.
- The new plan would scale the adoption of low-emission vehicles and help build the infrastructure that can help in the transition.
The EU proposal to lift the 2035 ban is yet to get the Parliament’s approval, and to make it effective, the approval is needed, so let’s see what happens in the future.
