Europe’s Auto Crossroads: When Brussels’ Green Ambitions Meet Industrial Realities

In the closing days of 2025, a political and economic storm has broken over Brussels’ flagship climate policy — the planned ban on new petrol and diesel-powered cars by 2035. The European Commission’s decision to soften the ban — once seen as a cornerstone of the bloc’s strategy to cut carbon emissions — has triggered vociferous criticism, most notably from Stellantis, the automotive giant behind Fiat, Jeep, Peugeot and other household brands.

At the heart of the dispute is not just emissions targets, but a broader debate over Europe’s industrial competitiveness, jobs, investment strategy and technological direction.

Why the EU Shifted Course

In a dramatic pivot, EU lawmakers and officials have proposed watering down the original 2035 ban on the sale of new internal combustion engine vehicles into what amounts to a 90% carbon-reduction target relative to 2021 levels, rather than a full prohibition on petrol and diesel cars. Under the revised framework, manufacturers can continue to sell combustion-engine cars — including hybrids — so long as the overall carbon footprint of their fleet meets strict reduction thresholds and emissions are offset through sustainable fuels and low-carbon materials.

European Commission Vice-President Stéphane Séjourné has defended the revisions as a “lifeline” for the automotive sector, arguing that the bloc’s climate ambition remains intact while offering industry breathing space during a turbulent transition. Yet this pragmatic framing conceals deep fractures within Europe’s political and industrial consensus.

Stellantis Slams Brussels: “This Package Does Not Do the Job”

The most forceful industrial backlash has come from Stellantis, Europe’s second-largest carmaker. Its newly appointed chief executive, Antonio Filosa, delivered a stark assessment of the Commission’s proposal, accusing Brussels of failing to address the industry’s immediate economic realities.

“This package does not do the job,” Filosa said, warning that without a credible strategy to restore growth, manufacturers cannot justify further investment in European production. His remarks reflect mounting frustration within the sector that climate regulation is being adjusted without parallel measures to stimulate demand, protect jobs or reduce costs.

For Stellantis, policy certainty is not a theoretical concern. Multibillion-euro investment decisions in factories, battery plants and supply chains hinge on predictable regulation. While the company has previously indicated that a relaxation of the 2035 ban could unlock fresh investment, Filosa made clear that the current proposal falls short of what industry leaders had hoped for.

A Fractured Industry Response

The backlash from Stellantis has exposed sharp divisions within Europe’s automotive industry. Not all manufacturers oppose the revised framework, and some have welcomed what they see as a more realistic approach.

BMW has cautiously endorsed the move away from an outright technology ban, arguing that efficient combustion engines and hybrids can still play a role alongside electrification. Renault has described the Commission’s proposal as pragmatic, emphasizing the need to adapt policy to market conditions rather than ideological targets.

These divergent responses underline how national interests shape corporate positions. French, German and Italian manufacturers face different market structures, labour pressures and export dependencies, making a unified industry stance increasingly elusive.

The Offset Problem: Cost, Complexity and Competitiveness

One of the most contentious aspects of the revised plan is its reliance on emissions offsets. Automakers would be required to compensate for continued combustion-engine sales through the use of sustainable fuels, green steel and other low-carbon inputs.

Industry executives argue that while the principle is sound, the economics are not. Offset mechanisms significantly increase production costs, particularly for mass-market vehicles. For companies like Fiat, whose brand identity is built around affordability, those costs risk pricing customers out of the market altogether.

Commercial vehicles represent another unresolved challenge. Vans and light utility vehicles — the backbone of Europe’s small business economy — remain difficult to electrify at scale. Stellantis and others have warned that the Commission’s proposal offers little clarity or targeted support for these segments.

Political Pressure Behind the Shift

The Commission’s retreat did not occur in a vacuum. Germany and Italy, Europe’s automotive heavyweights, have lobbied intensely for a reassessment of the 2035 ban. Both governments argue that a hard deadline threatens manufacturing jobs and undermines Europe’s industrial base at a time of fierce global competition.

German Chancellor Friedrich Merz has openly questioned the technical feasibility of a full transition within the original timeframe, advocating a more flexible approach that keeps hybrid and efficient combustion technologies on the table.

Environmental groups, however, see the shift as a dangerous concession. They warn that diluting the ban risks slowing electric vehicle adoption and eroding Europe’s leadership in clean mobility — particularly as China accelerates its dominance in battery and EV manufacturing.

“Hesitation Is Not a Strategy”

Climate advocates have been unsparing in their criticism. Chris Heron, Secretary General of E-Mobility Europe, summed up the concern succinctly: “Hesitation is not a strategy.” For critics, changing the rules mid-transition undermines business confidence and weakens the signal to investors betting on electrification.

They argue that the original 2035 target, while ambitious, provided clarity and direction. Rolling it back now risks locking Europe into a prolonged, uncertain transition that satisfies neither industry nor environmental goals.

A Policy Still in Motion

The revised framework must still pass through the European Parliament and win the backing of member states, where resistance remains strong on both sides of the debate. What emerges will shape not only Europe’s climate trajectory but also the future of one of its most strategically important industries.

For Stellantis and its rivals, the question is no longer whether Europe will electrify, but how — and at what cost. The battle over the petrol car ban has become a proxy for a much larger struggle over Europe’s economic identity in a decarbonising world.