EU Eases 2035 Car Rules, Allowing Petrol and Diesel Models to Stay on the Market

The European Commission has proposed a significant change to its previously planned rules on new car sales, allowing vehicles with internal combustion engines to remain on the EU market beyond 2035. Under the revised approach, petrol and diesel cars, as well as hybrids, will still be permitted, provided manufacturers offset their remaining emissions through alternative measures such as the use of low-carbon steel produced in the EU and renewable fuels.

Until now, EU legislation required all new cars and vans sold after 2035 to be zero-emission, effectively limiting the market to electric vehicles only. Following sustained pressure from the automotive industry, particularly from Germany and Italy, the Commission has adjusted the target. Instead of a full elimination of emissions, carmakers will now be required to cut CO2 emissions from new vehicles by 90 percent compared to 2021 levels. According to the Commission, this shift does not weaken the EU’s climate ambitions but reflects a more pragmatic path.

European Commission Vice-President Stéphane Séjourné said the overall objective remains unchanged, but flexibility is needed in light of consumer behavior and the challenges manufacturers face in scaling up fully electric production within the original timeframe. He stressed that any leeway granted to producers will be balanced by strict carbon compensation requirements.

Manufacturers that continue to sell vehicles with combustion engines will be required to offset the remaining emissions in advance through a dedicated credit system. These credits can be obtained by using low-carbon steel manufactured in Europe or by relying on renewable, synthetic fuels and biofuels. The Commission argues that this approach preserves the goal of achieving a fully decarbonised new car fleet by 2035, while allowing technological diversity in the transition period.

The new measures also include targeted support for the automotive sector. Brussels plans to provide €1.5 billion in interest-free loans to European battery producers, recognising their central role in the transition to cleaner mobility. In addition, the Commission intends to support the development of a new category of small electric vehicles, known as “M1e”, designed to help European manufacturers compete with Chinese rivals.

These compact vehicles will be under 4.2 metres in length and will benefit from reduced regulatory burdens for a period of ten years. Cars of this type produced in Europe will generate so-called “super credits” for manufacturers, helping them meet their emissions targets. Member states will also be encouraged to introduce national incentives, such as purchase subsidies, to stimulate demand.

The revised plan places particular emphasis on professional vehicle fleets, which account for a substantial share of new car registrations in the EU. Decarbonisation targets for these fleets will be set at national level and will apply to large companies with more than 250 employees or annual turnover exceeding €50 million, including car rental firms. The aim is to boost demand for low-emission and fully electric vehicles where uptake can be more easily coordinated.

Support for European industry is another central element of the package. The Commission plans to promote “Made in Europe” production by introducing local content requirements for manufacturers receiving public funding. Emission credits linked to European low-carbon steel and battery support measures are part of this strategy. An additional policy document, referred to as an “industrial accelerator”, is expected by the end of January and will outline further steps.

The Commission will also reassess electrification requirements for light and heavy goods vehicles. Truck manufacturers have warned that weak demand for electric models could expose them to heavy penalties from 2030 onwards, prompting Brussels to review the existing obligations.

The changes have been welcomed in Bulgaria. Svetoslav Benchev, chairman of the Bulgarian Oil and Gas Association, argued that no energy source disappears overnight and warned against abruptly phasing out petroleum products in transport. He said such an approach could have negative consequences, particularly given current technological and market realities.

The European automotive sector employs nearly 14 million people and has been under increasing pressure in recent years due to strong competition from China and trade tensions with the United States. Against this backdrop, the Commission insists that the revised rules are intended to protect both climate objectives and the long-term viability of one of Europe’s most important industries.