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

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 purchase carbon offsets to compensate. This change is part of a broader ‘Automotive Package‘ designed to help the European car industry become both clean and competitive.

If the European Parliament approves this shift, it would likely satisfy traditional European carmakers that have been asking for more time to move beyond hybrid vehicles. These companies are struggling to compete with Tesla and the surge of affordable electric vehicles (EVs) coming from China. But the policy change has created division among EV startups and their investors.

“China already dominates EV manufacturing,” said Craig Douglas, a partner at World Fund, a European climate-focused venture capital firm. “If Europe doesn’t compete with clear, ambitious policy signals, it will lose leadership of another globally important industry — and all the economic benefits that come with it.”

Douglas was among the signatories of “Take Charge Europe,” an open letter to European Commission President Ursula von der Leyen that was published in September. Senior executives from companies including Cabify, EDF, Einride, Iberdrola, and numerous EV-related startups signed the letter, exhorting the Commission to “stand firm” on the original 2035 zero-emission target.

Their appeal wasn’t enough to counter pressure from the traditional automobile industry, which represents 6.1% of total European Union employment. But continuing pressure has sparked debate within the startup community and beyond about the best path for Europe if it’s to remain competitive during the energy transition.

Industry split on timeline

Even within the auto industry, opinions differ. In a statement to Swedish media, a Volvo press officer warned that “backing down on long-term commitments in favor of short-term gains risks undermining Europe’s competitiveness for many years to come.”

Unlike Mercedes-Benz and other manufacturers, the Swedish carmaker had no concerns about meeting the 2035 ban. Rather than postponing the deadline, Volvo would have preferred to see increased investment in expanding charging infrastructure — something critics fear the new policy could actually discourage.

Issam Tidjani, CEO of Cariqa, a Berlin-based EV charging marketplace startup, echoed these concerns. He cautioned that weakening the 2035 zero-emission mandate could harm electrification progress overall. “History shows that this kind of flexibility has never worked out well,” said Tidjani, who also signed the Take Charge Europe letter this fall. “It delays scale, weakens learning curves, and ultimately costs industrial leadership rather than preserving it.”

To be fair, the Commission hasn’t completely ignored infrastructure and supply chain issues. As part of its Automotive Package, it introduced the “Battery Booster,” a strategy that would invest €1.8 billion (about $2.11 billion) into developing a fully European-made battery supply chain. The goal is to strengthen local production and ensure supply security.

The plan received positive feedback from Verkor, a French startup that produces lithium-ion battery cells for electric vehicles. The company, hoping to succeed where Swedish battery maker Northvolt struggled, opened its first large-scale battery factory in Northern France this week. Verkor called the Booster initiative “a necessary step to scale up Europe’s battery industry.”

Mixed signals

Still, many question whether the Battery Booster is enough to offset what they see as negative signaling about the EU’s commitment to using decarbonization as an economic growth driver.

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

Another uncertainty involves the United Kingdom. It’s unclear whether the U.K. will follow the EU’s lead and modify its own 2035 combustion engine ban. Unlike both the European Union and the United States, the U.K. hasn’t yet imposed tariffs on Chinese electric vehicles, despite that their rapidly increasing sales in the British market have raised concerns among domestic manufacturers.

The debate highlights ongoing tensions in climate policy between how to balance the economic realities facing existing industries with the urgency of transitioning to cleaner tech. As Europe tries to thread this needle, the decisions made now will invariably impact whether the continent leads or lags in the global EV market.