As part of the roadmap to achieve its climate-neutrality goal, the European Commission will come forward with a proposal for revised CO2 targets for new passenger cars and vans by the middle of 2021. This paper assesses the CO2 reduction potential and associated estimated costs for currently adopted policies and three policy scenarios: In the Adopted Policies scenario, manufacturers comply with the currently established targets of -15% by 2025 and -37.5% by 2030 but make no efforts to achieve additional reductions. In the Lower Ambition scenario, targets are strengthened to -20% by 2025 and -50% by 2030, and a -70% target is introduced for 2035. Battery electric vehicles (BEVs) account for about half of new car sales by 2035. In the Moderate Ambition scenario, the CO2 targets are increased to -30% by 2025, -70% by 2030, and -100% by 2035. In addition, BEVs reach a market penetration of about 50% by 2030 and 100% by 2035. In the Higher Ambition scenario, full CO2 reduction (-100%) of the new car fleet is achieved by 2030 due to a rapid transition towards battery electric vehicles (BEVs).