The European automotive industry is intensifying pressure on EU policymakers to revise stringent CO₂ emission targets, arguing that current regulations have become “no longer feasible” in today’s challenging market environment. With the 2025 compliance deadline rapidly approaching, major automakers and industry associations are calling for urgent relief measures to prevent severe financial penalties and preserve European competitiveness.
Industry Leaders Declare Current Targets Unrealistic
European Union targets to cut CO2 emissions from vehicles, including a 100% reduction for cars by 2035, are no longer feasible, the heads of the European automobile manufacturers’ and automotive suppliers’ associations said in recent statements to EU leadership. This unprecedented unified stance reflects growing concerns across the sector about meeting increasingly strict environmental standards.
The European Automobile Manufacturers’ Association (ACEA), representing major car brands including Volkswagen, Mercedes-Benz, BMW, and Stellantis, has been particularly vocal about the challenges facing the industry. The European vehicle industry reaffirms its commitment to the EU’s 2050 climate neutrality goal and the shift to zero-emission mobility. However, with the 2025 clock ticking, manufacturers face mounting challenges meeting CO2 reduction targets due to sluggish demand for battery electric vehicles and a deteriorating economic climate.
Understanding the 2025 CO₂ Targets
Starting in 2025, the EU’s CO2 targets aim for an average reduction of 15% in emissions from new passenger cars, compared to levels in 2021. This represents a significant tightening of environmental standards that manufacturers must meet across their entire fleet of vehicles sold in the European market.
The current regulatory framework includes:
- 55% CO₂ emissions reductions from 2021 levels for cars by 2030
- 50% reduction targets for vans by 2030
- 100% emissions reduction (essentially zero-emission vehicles only) by 2035 for both cars and vans
These targets are designed to support the EU’s broader Green Deal objectives and contribute to achieving climate neutrality by 2050.
EV Market Stagnation Creates Perfect Storm
One of the primary concerns driving industry advocacy for target relaxation is the stagnant electric vehicle (EV) market. The continuous trend of a stagnating market share of battery electric cars sends an extremely worrying signal for industry and policy makers. The EU automotive industry has invested billions in electrification to put vehicles on the market, but the other necessary ingredients for this transition are not in place and the competitiveness of the EU is eroding.
This market reality creates a significant challenge for automakers who have invested heavily in electric vehicle technology but are struggling to achieve the sales volumes necessary to meet fleet-wide emissions targets. The gap between regulatory expectations and consumer adoption rates has widened considerably, putting manufacturers at risk of substantial financial penalties.
Which Automakers Face the Biggest Challenges?
Recent analysis reveals that the burden of compliance is not evenly distributed across the industry. Volkswagen and Ford face the largest reduction effort, with required cuts of approximately 21%. Hyundai, Mercedes-Benz, and Toyota must also reduce CO2 emissions by more than the average of 12%. BMW, Kia, and Stellantis are closest to meeting their targets, highlighting how different manufacturers face varying levels of challenge.
This disparity reflects differences in current fleet compositions, electrification strategies, and market positioning. Companies with heavier vehicle portfolios or slower EV adoption face particularly steep compliance curves.
Financial Stakes and Economic Impact
The financial implications of missing CO₂ targets are substantial. Without a clear political statement by the European Commission by the end of 2024, as also urged by the German, French, Italian and other European governments, the auto industry risks losing up to €16 billion in investment and competitiveness.
These potential penalties come at a time when the European automotive sector is already facing:
- Increased competition from Chinese EV manufacturers
- Rising raw material costs
- Supply chain disruptions
- Geopolitical tensions affecting trade
Industry Proposed Solutions
Rather than abandoning environmental goals, the automotive industry is proposing several “quick-fix” solutions to make the transition more manageable:
Three-Year Averaging Mechanism
The European Automobile Manufacturers’ Association (ACEA) welcomes both the European Parliament’s and Council’s support for a three-year averaging mechanism for emissions compliance for cars and vans, which would allow manufacturers more flexibility in meeting targets over a longer timeframe rather than strict annual compliance.
Phased Implementation
The industry seeks phased-in compliance and an average compliance mechanism to ease 2025 rules to avoid risks of penalties as EV uptake stagnant. This approach would provide a more gradual transition path that aligns better with market realities.
Earlier Review Schedules
European auto manufacturers, united in ACEA, therefore call on the EU institutions to come forward with urgent relief measures before new CO2 targets for cars and vans come into effect in 2025. Additionally, we urge the European Commission to bring forward the CO2 regulation reviews for light-duty and heavy-duty vehicles, currently scheduled for 2026 and 2027 respectively, to 2025.
Political Response and Government Support
The industry’s calls for flexibility have gained support from several EU member states. National governments in Germany, France, and Italy have echoed concerns about the potential economic impact of strict enforcement without corresponding market development in EV infrastructure and consumer adoption.
European Commission President Ursula von der Leyen faces mounting pressure to address these concerns while maintaining the EU’s environmental leadership position and climate commitments.
Market Infrastructure Challenges
Beyond manufacturing capabilities, the industry points to inadequate supporting infrastructure as a major barrier to EV adoption. Key missing elements include:
- Insufficient public charging network coverage
- Inconsistent charging standards across member states
- Limited grid capacity in many regions
- Higher costs for electric vehicles compared to traditional alternatives
- Consumer range anxiety and charging convenience concerns
These infrastructure gaps create a disconnect between regulatory expectations and practical market conditions that consumers experience daily.
Impact on European Competitiveness
The debate over CO₂ targets occurs against a backdrop of increasing global competition, particularly from Chinese manufacturers who benefit from different regulatory environments and government support structures. European automakers argue that overly stringent targets without corresponding market support could undermine their competitiveness in global markets.
This competitiveness concern extends beyond individual companies to the broader European automotive ecosystem, including suppliers, dealers, and service networks that employ millions across the continent.
Future Outlook and Potential Compromises
As negotiations continue, several potential compromise scenarios are emerging:
- Graduated Penalties: Rather than full penalties for missing targets, implementing scaled penalties that reflect market conditions
- Credit Banking: Allowing manufacturers to bank excess compliance from previous years
- Cross-Manufacturer Trading: Enabling companies to trade emissions credits
- Infrastructure Conditionality: Linking target enforcement to charging infrastructure deployment milestones
Environmental Groups’ Perspective
Environmental organizations maintain that the automotive industry’s concerns, while understandable from a business perspective, should not derail Europe’s climate commitments. They argue that the regulatory certainty provided by firm targets is essential for driving innovation and investment in clean technologies.
However, there’s growing recognition that a balance must be struck between environmental ambitions and industrial reality to ensure a successful and sustainable transition.
Conclusion: Balancing Climate Goals with Economic Reality
The pressure from EU auto groups to relax CO₂ targets reflects the complex challenge of managing an industrial transition of unprecedented scale and speed. While environmental objectives remain crucial, the industry’s warnings about economic consequences and competitive disadvantages require serious consideration.
The coming months will be critical in determining how European policymakers choose to balance climate ambitions with industrial competitiveness. The outcome will significantly impact not only the automotive sector but also Europe’s broader economic future and environmental leadership.
As the 2025 deadline approaches, finding a pragmatic solution that maintains environmental progress while supporting industry viability has become one of the most pressing challenges facing European policymakers. The automotive sector’s massive investments in electrification technology demonstrate commitment to the transition, but the pace and conditions of that transition remain subjects of intense negotiation.
The resolution of this debate will likely shape the European automotive landscape for decades to come, influencing everything from consumer choice to industrial employment and environmental outcomes across the continent.