EUROPE'S CARMAKERS BRACE FOR PIVOTAL PARLIAMENTARY VOTE ON CO₂ OVERHAUL

Brussels, 19 March 2026 — Europe's automotive industry is entering a decisive legislative stretch as the European Parliament and Council work through the Commission's December 2025 Automotive Package — a sweeping revision of CO₂ emissions rules that has exposed deep fault lines between manufacturers, environmental groups, and member states.

The timing is uncomfortable. New EU car registrations fell 3.9% in January compared with a year earlier, marking a second consecutive difficult start to the year, even as battery-electric vehicles climbed to a 19.3% market share, up from 14.9% twelve months prior. The direction of travel is clear; the pace remains deeply contested.

The Package itself represents a significant recalibration of Brussels' approach. From 2035, carmakers would be required to achieve a 90% reduction in tailpipe emissions — not the 100% originally mandated — with the remaining margin offset through approved measures such as low-carbon steel produced in the EU, or alternative fuels including e-fuels and biofuels. For commercial vehicles, the Commission has lowered the 2030 CO₂ reduction target for vans from 50% to 40%, acknowledging structural difficulties in that segment.

Industry leaders have signalled cautious acceptance.

At the ACEA Annual Reception in Brussels on 17 March, Ola Källenius, ACEA President and CEO of Mercedes-Benz, called for an honest inventory of what works, even when the conclusions prove uncomfortable. Daimler Truck CEO Karin Rådström urged policymakers to ensure regulatory frameworks support innovation rather than slow it.

Green groups are considerably less sanguine. Analysts calculate that softening the 2035 target would reduce battery-electric market share by around 15 percentage points and add roughly 720 million additional tonnes of CO₂ compared with current rules.

With member states already diverging sharply, the legislative battle is only beginning.