Mladá Boleslav: The assembly halls in this Czech town build cars for buyers who have not yet decided what they will be allowed to buy in 2035. That uncertainty is now the defining feature of Europe’s most contested industrial file. The Commission proposed in December 2025 to cut the 2035 target for new cars and vans from the 100 percent reduction written into Regulation 2023/851 to 90 percent, and the Parliament and Council have spent 2026 arguing over what the missing ten points mean.

Framing matters here. Commentators read the change as scrapping the combustion engine ban. The engineering reading is narrower and more interesting. A 90 percent fleet reduction leaves manufacturers an average of roughly 11 grams of CO2 per kilometre across everything they sell in 2035. On any plausible mix that still means the overwhelming majority of new vehicles run on batteries. What survives is a slice, not a segment.

Ten percent is a compliance instrument, not a product plan

The proposal does not simply hand carmakers a tenth of their fleet to fill with petrol. It requires them to compensate the residual emissions, and it names the currencies of compensation. Low-carbon steel made in the Union counts. So do e-fuels produced from renewable electricity and captured carbon, and biofuels from plant feedstock. The Commission’s own file on cars and vans sets out the framework the amendment modifies.

Tying vehicle compliance to steel procurement is the genuinely novel move, and it changes who has standing in the debate. A carmaker that buys hydrogen-reduced steel from a European mill earns headroom for combustion models. A carmaker that buys the cheapest available imported coil does not. Suddenly the emissions target for cars becomes an industrial policy instrument for the steel sector, and two lobbies that rarely negotiate together now share an outcome.

The mechanism has an obvious constraint. Low-carbon European steel is scarce and expensive, and the projects meant to produce it have slipped repeatedly. E-fuels are scarcer still. If the compensating supply does not materialise at scale, the ten percent flexibility becomes theoretical, and manufacturers end up close to the 100 percent target they were told they no longer had to meet.

The rest of the package moves more money than the headline

Two other elements will shape balance sheets sooner than 2035. The proposal averages compliance with the 2030 target across 2030 to 2032, which converts a cliff edge into a ramp and removes the risk of a single bad model year producing enormous fines. It also cuts the 2030 van target from a 50 percent reduction to 40 percent, an acknowledgement that light commercial vehicles electrify on a different timetable because their buyers optimise payload and duty cycle rather than list price.

Super-credits for small electric cars point at a real market failure. European manufacturers have concentrated battery models in premium segments where margins absorb battery cost. The affordable segment, the one that actually replaces old high-emitting cars on the road, has been ceded largely to imports. A credit that rewards small cheap electric vehicles tries to buy that segment back.

Environmental groups argue the package weakens a settled signal and invites further reopening. Manufacturers reply that a target no one can meet produces fines rather than emissions cuts. Both claims can be true. The proposal’s real test is whether a 90 percent target with credible compensation delivers more actual abatement by 2040 than a 100 percent target that gets renegotiated again in 2031.

Suppliers in central Europe, where the component base is deepest and the margins thinnest, will feel the answer first. They cannot hedge across two propulsion technologies indefinitely. Every additional month of negotiation is a month in which capital sits waiting rather than retooling, and that delay carries its own cost in jobs that never move.