Brussels' Automotive Package of 16 December 2025 formally created a route to revive the low‑cost small‑car segment by introducing a new ‘‘small affordable cars’’ category for electric vehicles (EVs) up to 4.2 metres and promising demand‑side measures and industrial support. The package includes a €1.8 billion “Battery Booster” and temporary “super credits” to reward EU‑made small EVs while the CO2 regime is adjusted.

What Brussels actually changed — the facts

The Commission press release and factsheet (16 Dec 2025) set out three concrete elements: a) an Automotive Omnibus that creates the new small‑EV category (covering EVs up to 4.2m); b) a Battery Booster worth €1.8bn, including €1.5bn in interest‑free loans for EU cell makers; and c) additional flexibility in the CO2 targets — including “super credits” for small EU‑made EVs and a shift to a 90% tailpipe reduction from 2035 with limited compensatory routes (low‑carbon steel, e‑fuels). The Commission said the omnibus should save industry about €706m a year in administrative costs.

Industry reaction has been immediate. Major groups and suppliers see the package as a potential lever to rebuild an affordable price ladder in Europe; Stellantis announced its multi‑brand “E‑Car” project in May 2026 as part of precisely that market response, with first cars targeted for 2028 and production in Europe. At the same time, analysts warn the move is as much a defensive response to rising Chinese competition as it is an affordability push.

Safety, regulation and the pushback

Road‑safety groups and some NGOs have raised cautions: the European Transport Safety Council (ETSC) and others warned that carving out a lower‑specification sub‑category risks freezing safety rules for a decade and creating a two‑tier vehicle fleet, with consequences for vulnerable road users unless mitigations are written into the final laws. ETSC’s briefing (March 2026) called for impact assessments and safeguards before any long‑term relaxation of requirements.

What this means for the market

For Germany and Austria the package is both opportunity and test. The Commission’s “Made in the EU” preference and the Battery Booster explicitly aim to pull value back into European supply chains — a win for German and Austrian suppliers of cells, steel, electronics and vehicle subsystems if Member‑State incentives steer demand to locally sourced models. The automotive package also ties public support to low‑carbon inputs and EU‑made batteries, which could favour local players such as suppliers in Baden‑Württemberg, Bavaria and Austria’s industrial clusters.

But the change will not magically restore volumes in Germany or Austria. OEMs and tier‑1s must rework platforms and sourcing to hit aggressive price targets; unions such as IG Metall and European trade unions have argued that any new class must be coupled to strong rules on jobs, retraining and safe working conditions. Analysts note the immediate industry response (new projects from Stellantis and renewed product plans from several OEMs) but also stress supply‑chain and certification work that will take years.

Practically, German and Austrian firms should expect: targeted R&D and production funding calls; new certification and labelling rules; demand incentives at national and municipal level for sub‑4.2m EVs; and a heavier emphasis on EU content checks when public money is involved. That mix rewards component makers who can invest fast (cells, power electronics, lightweight steel) but creates pressure on margins and on national training systems.

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Sources: European Commission, Stellantis, S&P Global Mobility, ETSC