Electrical startups raise concerns as EU wateres down 2035 EV targets

The future may be electric, but that future is being postponed. The European Commission has softened its ambitious plan to ban the sale of petrol cars by 2035, citing a need for flexibility.

Instead of requiring 100% of new cars to be zero-emission vehicles by that date, the revised plan would allow 10% of new car sales to be hybrids or other vehicles, as long as manufacturers buy carbon offsets to compensate. The changes are part of a wider ‘car package’ designed to make Europe’s car industry cleaner and more competitive.

If the European Parliament approves the move, it would satisfy traditional European car manufacturers, which have been asking for more time to transition away from hybrid cars. These companies are struggling to compete with Tesla and the proliferation of affordable electric vehicles (EVs) from China. However, the policy change has created a rift between EV startups and their investors.

“China already dominates EV manufacturing,” said Craig Douglas, a partner at Worldfund, a venture capital firm focused on European climate change. “If Europe does not compete with clear and ambitious policy signals, it will lose leadership in another globally important industry and all the economic benefits that come with it.”

Mr Douglas was one of the signatories of the open letter ‘Take Charge Europe’ to European Commission President Ursula von der Leyen, published in September. Senior executives from companies including Cabify, EDF, Einride, Iberdrola and a number of EV startups signed a letter urging the European Commission to “stick to” its original 2035 zero-emissions target.

Their appeals were not enough to counter pressure from the traditional car industry, which accounts for 6.1% of total employment in the European Union. However, continued pressure has sparked debate within and outside the startup community about the best path for Europe to remain competitive during the energy transition.

Industry split in timeline

Opinions are divided even within the auto industry. “Backing away from long-term commitments in favor of short-term gains risks undermining European competitiveness for many years to come,” a Volvo spokesperson warned in a statement to Swedish media.

Unlike Mercedes-Benz and other manufacturers, the Swedish automaker had no concerns about meeting the 2035 ban. Volvo would have preferred to increase investment in expanding its charging infrastructure rather than delaying the deadline, but critics fear the new policy could actually be a disincentive.

Issam Tidjani, CEO of Cariqa, a Berlin-based EV charging market startup, echoed these concerns. He warned that weakening the 2035 zero-emissions mandate could have a negative impact on overall electrification progress. “History has shown us that this kind of flexibility never works,” said Tijani, who also signed the Take Charge Europe letter this fall. “It slows scale, weakens the learning curve, and ultimately results in losses rather than maintaining industry leadership.”

To be fair, the European Commission has not completely ignored infrastructure and supply chain issues. As part of its vehicle package, the company has introduced a strategy called “Battery Booster”, which will see it invest €1.8 billion (approximately $2.11 billion) in the development of a fully European battery supply chain. The goal is to strengthen local production and ensure security of supply.

The plan received positive feedback from Verkor, a French startup that makes lithium-ion battery cells for electric vehicles. The company opened its first large-scale battery factory in northern France this week, hoping to find success where Swedish battery maker Northvolt has struggled. Vercall called the booster initiative “a necessary step to expand Europe’s battery industry.”

mixed signal

Still, many question whether the battery booster will be enough to offset what they see as a negative signal to the EU’s efforts to use decarbonization as a driver of economic growth.

Already, traditional automakers have begun complaining that carbon offset requirements could make cars more expensive for consumers and undermine the very competitiveness the policy change was meant to protect.

Another uncertainty involves the UK. It is unclear whether the UK will follow the EU’s lead and amend its own ban on internal combustion engines in 2035. Unlike the European Union and the United States, Britain has not yet imposed tariffs on Chinese-made electric cars, even though a surge in sales in the British market has caused concern among domestic manufacturers.

This debate highlights the continuing tension in climate policy between the economic realities facing existing industries and the urgency of transitioning to clean technologies. As Europe attempts to thread this needle, decisions made now will always have an impact on whether the continent leads or lags in the global EV market.