EV startups worry as EU softens 2035 electric car targets

The European Union’s revised approach to its 2035 vehicle emissions target is generating significant concern among electric vehicle startups and climate-focused investors. The European Commission has softened its original plan for a complete ban on new internal combustion engine cars by 2035. The updated proposal would permit up to 10% of new car sales to be hybrids or other non-zero-emission vehicles, provided manufacturers purchase carbon offsets. This shift, part of a broader ‘Automotive Package,’ aims to offer traditional carmakers more flexibility as they navigate intense competition from Tesla and a wave of affordable Chinese EVs.

For many startups, this policy adjustment represents a dangerous retreat. They argue it sends mixed signals that could undermine Europe’s competitive position in a critical global industry. Craig Douglas, a partner at the climate venture firm World Fund, voiced a common fear: “China already dominates EV manufacturing. 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 among the signatories of an open letter to Commission President Ursula von der Leyen, urging officials to “stand firm” on the original 100% zero-emission target.

The automotive sector itself is divided on the timeline. While some legacy manufacturers welcome the breathing room, others see it as a strategic misstep. Volvo, for instance, publicly warned that “backing down on long-term commitments in favor of short-term gains risks undermining Europe’s competitiveness for many years to come.” The Swedish automaker, confident in its ability to meet the original deadline, expressed greater concern over the need for accelerated investment in charging infrastructure, an area where critics fear the revised policy may reduce urgency.

Issam Tidjani, CEO of Berlin-based EV charging startup Cariqa, shares this apprehension. He cautions that introducing flexibility into the mandate could stall overall progress. “History shows that this kind of flexibility has never worked out well,” Tidjani noted. “It delays scale, weakens learning curves, and ultimately costs industrial leadership rather than preserving it.”

In response to infrastructure and supply chain concerns, the Commission’s package includes a “Battery Booster” strategy. This initiative pledges €1.8 billion to develop a fully European-made battery supply chain, aiming to bolster local production and security. The move has been welcomed by companies like French battery cell producer Verkor, which called it “a necessary step to scale up Europe’s battery industry.”

Nevertheless, a prevailing question is whether this investment sufficiently counteracts the perceived weakening of the EU’s decarbonization ambition. Many industry observers worry the policy shift sends the wrong signal about using the green transition as a driver for economic growth. Further complications arise as traditional carmakers now express concern that the required carbon offsets could increase vehicle costs for consumers, potentially hurting the very competitiveness the policy was designed to protect.

The situation is further clouded by uncertainty in the United Kingdom, which has its own 2035 combustion engine ban. It remains unclear if the UK will follow the EU’s lead and adjust its targets, especially as it continues to refrain from imposing tariffs on Chinese EVs despite growing market penetration.

This ongoing debate underscores the complex challenge of balancing urgent climate action with the economic realities of a major industrial sector. The path Europe chooses now will critically influence whether it secures a leading role or falls behind in the rapidly evolving global electric vehicle market.

(Source: TechCrunch)