EV startups alarmed as EU softens 2035 targets - AI News Today Recency

The European Commission’s decision to soften the 2035 car-emissions target has set off alarm bells among electric-vehicle (EV) startups, which warn the move could slow EV adoption, reroute investment and hand a competitive advantage to overseas rivals already scaling battery production[1][5].

Why the EU changed the 2035 target The Commission’s Automotive Package replaces the previous effective ban on new internal-combustion-engine (ICE) passenger-car sales from 2035 with a requirement to achieve a **90% reduction in tailpipe CO2 emissions by 2035**, leaving a 10% emissions “headroom” that manufacturers must address through offsetting measures or alternative fuels[5][1]. Officials framed the change as a pragmatic response to pressure from some member states and automakers and as a way to preserve industrial competitiveness while still pursuing the EU’s climate goals[1][5].

Immediate reaction from EV startups and investors EV startups and clean-transport advocates expressed sharp concern that the watered‑down target will undermine the market certainty that spurred billions in battery, cell and vehicle startups over the last decade. Industry groups and smaller EV makers argue that any loosening of regulatory certainty reduces demand predictability, which in turn discourages venture and manufacturing-scale investment needed for local battery and supply-chain buildout[1][2]. Analysts cited by outlets estimate the softer target could cut projected 2035 battery-electric vehicle (BEV) sales materially compared with the original rule, and that credits and exemptions risk shifting OEM focus to partial-combustion or hybrid options rather than pure electrics[1].

How the 10% allowance works — and why startups worry Under the proposals, the remaining 10% of permitted tailpipe emissions can be compensated in several ways, including the use of e‑fuels or biofuels, increased production of low‑carbon steel in the EU, and a system of credits and “super credits” that favor certain vehicle types or early EU-made affordable EVs[1][5]. Startups say those mechanisms could be exploited by incumbent manufacturers with scale and legacy supply chains to minimize their BEV rollouts while continuing to sell hybrids or ICE models, thereby slowing the market transition and making it harder for independent EV entrants to compete on production volumes and cost[1][2].

Market and policy risks for Europe’s EV ecosystem EV startups identify several concrete risks from the diluting of the 2035 objective: - Investment flight or delay: Investors seeking predictable policy-driven demand signals may pause or redirect capital to markets with firmer ICE phaseouts, notably China and parts of the U.S.[1][2]. - Supply-chain divergence: Reduced urgency on BEV volumes could slow local battery-cell and critical-minerals processing capacity buildout, increasing reliance on imports and weakening industrial resilience[2][4]. - Strategic reprioritization by incumbents: Large OEMs may choose to exploit offsets and hybrid technologies to meet relaxed targets at lower up-front cost, squeezing smaller pure‑EV makers that lack legacy production margins[1][3].

Legal and advisory commentary notes the Automotive Package is still a proposal that must pass the EU’s co‑legislative process, meaning details could shift during parliamentary and council negotiations — but startups say the signal itself already matters for fundraising and partnership decisions[2].

What the Commission says it will do to protect EV progress Commission spokespeople argue the package balances climate ambition with competitiveness, preserving incentives for BEVs via measures like super credits for EU-produced EVs and continued encouragement of electric and hydrogen vehicles while allowing flexibility for the remaining emissions fraction[5][1]. The Commission maintains that offsets (upstream carbon reductions, low‑carbon materials) will be required to neutralize any additional tailpipe emissions and that the EU’s long‑term climate neutrality objective through 2050 remains intact[5].

Likely next steps and what startups should watch - Legislative process: The proposal goes to the European Parliament and Council, where MEPs, member states and industry stakeholders can amend the package; outcomes could tighten or loosen elements[2]. - Rule detail: Specifics on how credits, super credits, e‑fuel accounting and low‑carbon material credits are calculated will determine how easily OEMs can avoid increasing BEV volumes[5]. - Market signals: Startups should monitor procurement and fleet policies, public charging rollouts and national incentives, because those sub‑EU measures can offset or amplify the Commission’s policy signal[1][3].

Frequently Asked Questions

What exactly changed in the EU’s 2035 rule? The Commission’s Automotive Package replaces the prior de facto requirement that all new cars be zero‑emission by 2035 with a target to cut tailpipe CO2 by 90% by 2035, allowing up to 10% of emissions that must be compensated through offsets or other measures[5][1].

Could the 2035 change be reversed or tightened? Yes. The package is a legislative proposal that must be negotiated and approved by the European Parliament and EU Council; amendments could tighten or alter the rules during that process[2].

How might this affect EV startups’ funding? Softening the policy target reduces regulatory certainty, which investors consider when underwriting capital‑intensive manufacturing and battery projects; many startups may face greater difficulty raising late‑stage funds or see investment timelines pushed out[1][2].

Will the change increase the use of e‑fuels or biofuels? The legislation allows e‑fuels and biofuels as avenues to compensate for the permitted 10% emissions, meaning producers of such fuels could see stronger demand if OEMs choose that compliance route[1][5].

Are there measures to protect European EV manufacturing? The Commission proposes incentives such as “super credits” for EU‑made affordable EVs and encourages low‑carbon materials production domestically, but critics say these may not fully replace the investment pull created by a stricter 2035 ban[5][1].

What should EV startups do now? Startups should engage with national and EU policymakers during the legislative phase, diversify market focus beyond single‑country bets, accelerate partnerships with OEMs and suppliers, and strengthen investor communications to explain resilience plans amid regulatory uncertainty[2][1].