⚖️ EU postponing EV mandate

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The Softening of the 2035 Mandate and the "Automotive Package"

On December 16, 2025, the European Commission unveiled a major policy shift with its "Automotive Package," effectively walking back the total ban on internal combustion engine (ICE) vehicles previously slated for 2035. Instead of a 100% zero-emission requirement, the new proposal sets a 90% fleet-wide emissions reduction target compared to 2021 levels. This "pragmatic" softening allows carmakers to continue selling hybrids and even high-efficiency combustion vehicles indefinitely, provided the remaining 10% of emissions are offset. These offsets are highly specific: up to 7% can come from using "Made in the EU" low-carbon steel, and up to 3% from the use of e-fuels or biofuels. To cushion the blow for the EV sector, the Commission also introduced a €1.8 billion ($2.1 billion) "Battery Booster" initiative and a new "super-credit" system—where small, affordable EU-made electric cars (under 4.2 meters) count as 1.3 vehicles toward a manufacturer's compliance targets.

Navigating a Fragmented Policy Signal

For climate-tech and EV startups, this policy shift represents a significant "climbdown" that prioritizes the economic stability of legacy manufacturers (who represent 6.1% of EU employment) over the aggressive scaling of pure electric platforms. The immediate insight for founders is that the regulatory "north star" has moved. While the long-term goal remains climate neutrality by 2050, the medium-term market (2030–2040) is no longer a winner-takes-all race for Battery Electric Vehicles (BEVs). The introduction of "green steel" and "e-fuel" credits creates a new, complex secondary market for compliance assets. This move is a direct response to the surge of affordable Chinese EVs; the EU is essentially trying to "buy time" for its domestic industry to catch up while tethering the transition to other European industrial sectors like steel and fuel refining. For a startup, this means you are no longer just competing on battery tech—you are competing in an ecosystem where "European-ness" and supply chain origin are now quantifiable regulatory assets.

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