European Commission presents automotive package – CO2 emissions targets, energy consumption labelling, Battery Booster and company cars

On 16 December 2025, the European Commission put forward a broad package of initiatives for the automotive industry. The Commission’s “automotive package” aims to support the automotive sector in its transition to cleaner mobility. The package was created as part of a strategic dialogue involving industry and stakeholders that was conducted under the leadership of the Commission’s president from January 2025.

At the heart of the package is first of all a relaxation of the reduction in CO₂ fleet emissions to zero, often colloquially referred to as a “ban” on petrol and diesel cars (see our article) (see A below); the CO₂ targets for heavy-duty vehicles are also to be adjusted (see B). Apart from this, the Commission has announced an automotive omnibus (see C) and a “Battery Booster” strategy (see D) and also intends to press ahead with the decarbonisation of company cars (see E).

Relaxation of CO₂ fleet-wide targets and new energy consumption labelling rules for cars and vans

The Commission (see COM(2025) 995 final) is initially presenting proposals to amend the CO₂ fleet-wide targets contained in Regulation (EU) 2019/631 (see I and II below). At the same time, the energy consumption labelling requirements up to now contained in Directive 1999/94/EC are to be placed on a new footing (see III below).

Fleet-wide targets

Under current legislation, the EU-wide CO₂ target and the specific CO₂ fleet-wide targets for each manufacturer will be set at zero from 1 January 2035 (see Article 1(5a)(a) of Regulation 2019/631, with equivalent rules for vans in Article 1(5a)(b)). This does not constitute a legal ban on the registration of combustion engine vehicles because the consequence of exceeding the fleet-wide target is “merely” the obligation to pay a premium (Article 8 of the Regulation). However, in practice this may well have the effect of a ban on registration because by 2035 at the latest it will no longer be possible to run a profitable business selling new cars with combustion engines.

Over the course of 2025, the EU already provided for a certain degree of flexibility in the emissions targets by stipulating that the overall average emission target needs to be met for the years 2025 to 2027.

Under the Commission’s current proposal, the emissions targets will also be relaxed somewhat over and above this: an overall assessment is to apply for the period between 2030 and 2032 (but not between 2028 and 2029), as was already the case for the period 2025 to 2027. The CO₂ target for vans will also be slightly reduced for the years between 2030 and 2034 so as to lower market entry barriers in this segment. From 2035 onwards, M1 and N1 manufacturers will then have to meet an emissions reduction target of 90% (currently: 100%). The remaining 10% of emissions are to be offset by the use of low-carbon steel “made in the EU” or by e-fuels and biofuels; in technical terms, the plan is that manufacturers will have to comply with “fuel credits” under the new Articles 5a and 5b of the Regulation. This is intended to ensure the future viability of hybrid vehicles (plug-in hybrids, range extenders, mild hybrids) and, to a certain extent, combustion engine vehicles alongside electric and hydrogen vehicles.

Super credits until 2035

If they achieve their emission targets before 2035, vehicle manufacturers will now benefit from special incentives (“super credits”) for small, affordable electric cars (made in the EU) in accordance with the new Article 5 of Regulation 2019/631. Such cars will be given a special weighting in the fleet-wide target (counting them as 1.3 instead of 1). These will be defined in a new subcategory of vehicles created specifically for this purpose in Type Approval Framework Regulation (EU) 2018/858.

However, manufacturers will not be able to use these super credits if they are part of an open pool (as defined in Article 6 of the Regulation). This regulatory structure will further complicate the already complex calculations involved in determining whether and to what extent such emissions pools make economic sense for the manufacturers concerned.

Energy consumption labelling for M1 and N1 vehicles

The most surprising change (but not necessarily obvious from a legislative perspective) can be found in Article 1(11) of the proposal. New Articles 15a and 15b are to be inserted into Regulation 2019/631 obliging manufacturers and dealers to provide a new emissions and consumption label for all M1 and N1 vehicles offered for sale or lease in the EU. For used vehicles, it will now also be mandatory to provide information on their SoH (state of health) value.

This will also replace the current Directive 1999/94/EC implemented in Germany by the German Passenger Car Energy Consumption Labelling Regulation (Pkw-EnVKV) – going beyond the requirements of the Directive (goldplating). It remains to be seen what scope the German labelling regulation may have despite the revised legislation. In any case, it is clear that the group of persons subject to the obligations applying in Germany up to now will be significantly widened. According to the Commission’s proposal, manufacturers and dealers of N1 vehicles will now also be subject to these obligations. The fact that manufacturers’ online configurators will have to clearly indicate the changes in CO₂ and fuel consumption associated with each element selected will also pose challenges in the future.

CO₂ emissions standards for heavy-duty vehicles

Alongside this, the Commission has also presented a draft regulation amending Regulation (EU) 2019/1242 for heavy-duty vehicles (see COM(2025) 784 final) that is intended to enable manufacturers to collect more emission credits before 2030 if their emissions are below their annual target. The goal of gradually introducing zero-emission heavy-duty vehicles remains unchanged.

Omnibus for the automotive industry

The proposals mentioned up to now are essentially also part of what the Commission refers to as its “omnibus” for the automotive industry, which is intended to reduce administrative burdens and lower costs for primarily European manufacturers as a result. Relief is also to be provided in this context by making additional changes to, among others, Regulations 561/2006, 2018/858, 2019/2144, 2024/1257. For example, manufacturers of electric vans between 3.5t and 4.25t are to be exempted from the obligation to install a smart tachograph.

The Battery Booster: strengthening Europe’s own battery industry

The Commission intends to provide €1.8 billion to increase the competitiveness of the European battery industry, €1.5 billion of which will be in the form of interest-free loans provided to battery manufacturers. The aim is to promote the development of batteries manufactured entirely in the EU along the entire value chain.

Other political initiatives include targeted investments and incentives for innovation to secure supplies of strategic materials and coordinating industrial policy initiatives such as the Net Zero Industry Regulation. In this way, the Commission aims to create a strategically coordinated approach to developing a competitive and sustainable European battery industry.

Decarbonisation of company vehicles

In the area of commercial fleets, the Commission is focusing on binding targets for Member States to promote zero- and low-emission vehicles, especially at large companies. The Commission has already presented a draft regulation on this topic (see COM(2025) 994 final).

The targets will be set on a country-specific basis to take account of different market conditions. There is a distinct focus on large companies, as they account for around 60% of new car registrations and 90% of van registrations. Due to their heavier use compared to private vehicles, corporate vehicles enter the used market more quickly, making affordable zero-emission vehicles more widely available.

The draft regulation also aims to prohibit Member States from providing financial incentives for company vehicles other than zero-emission and low-emission vehicles from 2028 onwards. Besides this, public financial support for company vehicles will in future be conditional on them being “made in the European Union” – this phrase is to be defined in more detail in a delegated act by the Commission.

Outlook and bottom line

The European Commission’s proposed regulations (as far as they have already been put forward) will now have to go through the EU legislative process. Since some carmakers and associations have been very critical, above all of the revisions to CO₂ Fleet Target Regulation 2019/631, it will be interesting to see how extensive the changes will be by the time the final legal acts are adopted.

All companies affected by these changes are advised to keep close tabs on how things develop so that they can respond to new or changed obligations in due time. We will of course keep you informed as soon as the legislative process moves forward.