Carmakers and their backers have lobbied hard for Brussels to relax the ban over the past year -- in the face of fierce competition from China and a slower-than-expected shift to electric vehicles (EVs).
The European Commission is expected to propose replacing it with a less ambitious 90-percent emission-reduction target, in a move critics say risks undermining the EU's green agenda and deterring investments in electrification.
"This is a critical milestone for the future of the sector. There is a lot at stake," Sigrid de Vries, the head of European auto lobby ACEA told a press conference in Brussels on Monday, referring to the expected reforms.
Set in 2023, the ban was a cornerstone of the EU's environmental Green Deal, which has come under increased pressure from businesses and right-wing politicians as the EU seeks to bolster its industry.
"There is a clear demand for more flexibility on the CO2 targets," commission spokeswoman Paula Pinho told a press conference Friday, saying Brussels was "aiming for balance".
Carmakers argue the 2035 goal to have only electric vehicles sold in Europe, and an intermediate 2030 target, are no longer realistic.
High upfront costs and the lack of adequate charging infrastructures in parts of the 27-nation bloc mean consumers have been slow to warm to EVs, producers say.
Just over 16 percent of new vehicles sold in the first nine months of 2025 run on batteries, according to ACEA.
Automakers would like to see continued sales authorised for hybrids with rechargeable batteries or those equipped with range extenders (small combustion engines which recharge the battery instead of powering the wheels).
Germany supports this option as do eastern European nations where German carmakers have set up factories.
- 'Poisoning the debate' -
Others, like Italy, want to see the use of alternative fuels such as those derived from agricultural crops and waste products allowed.
"EVs will be the dominant choice, but to make the transition work for society and industry, other options must be available too," de Vries said in a social media post.
In the other camp are France, the Nordic countries and Spain who have long called for keeping to the planned trajectory in order not to harm firms that have invested in the transition to electric vehicles.
Last week Manfred Weber, the conservative head of the EU parliament's largest group, said the 2035 ban would be discarded with carmakers required to meet a 90-percent reduction in CO2 emissions from their fleet instead.
EU sources confirmed to AFP that was likely, adding the review would probably allow for plug-in hybrids and range-extender vehicles to be sold after 2035.
This has many environmentalists worried, with a recent report indicating that plug-ins pollute almost as much as petrol cars.
But William Todts, director of the clean transport advocacy group T&E, said he hoped obtaining concessions would help the auto industry move on.
"I hope that if they get a little bit of what they want, they will stop poisoning the political debate," he told AFP, arguing heated discussions had created confusion in the sector and among consumers.
The commission is also expected to unveil additional measures to support the sector, including plans for "greening" company fleets and encouraging production of small and "affordable" EVs.
France has advocated for a "European preference" compelling manufacturers receiving public subsidies to source components from within the bloc.
Road transport accounts for about 20 percent of total planet-warming emissions in Europe, and 61 percent of those come from cars' exhaust pipes, according to the EU.
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