According to media reports, last year, the European electric vehicle market faced challenges. Despite automakers launching more affordable models, the latest provisional data shows that the number of electric vehicle registrations in Europe in 2024 has decreased by 6% compared to 2023, in stark contrast to the growth trends in the electric vehicle markets in the U.S. and China.
Even worse, starting this year, if automakers fail to meet the EU's average fleet CO2 emissions targets, they will have to pay fines. This is part of a series of measures under the "European Green Deal." The European Green Deal is a legislative framework aimed at reducing net greenhouse gas emissions by at least 55% compared to 1990 levels by 2030, and completely eliminating net greenhouse gas emissions by 2050.
These regulations will significantly limit the ability of automakers to sell internal combustion engine vehicles in EU countries, while paving the way for the development of pure electric vehicles in Europe. However, European automakers do not support this agreement, nor do the countries where these companies are based. Ola Källenius, CEO of Mercedes-Benz and president of the European Automobile Manufacturers' Association (ACEA), has sent an open letter to the European Commission and the European Parliament calling for the cancellation of the upcoming fines.
Källenius believes that imposing fines on automakers who fail to meet emissions reduction targets would negatively affect the industry. He argues that the fines could otherwise be used for research and development, enabling automakers to bring more affordable electric vehicles to the market.
Källenius stated, "The automotive industry needs to know how to mitigate significant non-compliance risks. At this critical stage of transformation, facing huge fines for non-compliance with CO2 emissions targets would divert necessary funds that could be used for R&D and other investments."
He also noted that the decline in electric vehicle sales is not necessarily due to a lack of options, as there are many models available on the market. He believes, "The European Green Deal must undergo a reality check and be adjusted to make it more flexible and less rigid, transforming the decarbonization process of the automotive industry into an environmentally friendly and profitable business model." He suggested additional incentives to stimulate electric vehicle sales in Europe, emphasizing the need for close collaboration with energy companies, telecom operators, and smart grid solution providers.
Most importantly, Källenius firmly stated that European automakers still support the decarbonization plan for 2050 and the transition to zero-emission transport and mobility.
Källenius added, "Let me reiterate: the EU automotive industry remains committed to achieving the EU's 2050 climate neutrality goals and the transition to zero-emission transport and mobility. However, the decarbonization strategy for the automotive industry must foster economic growth and competitiveness, not restrict it."
However, the European non-profit organization Transport & Environment (which lobbied for the EU to adopt new emissions rules) has a different view. The organization argues that most automakers will not actually face fines. This is because automakers typically launch new models in the year the regulations take effect (in this case, 2025) that help them meet the new targets.
Starting this year, the average CO2 emissions of passenger cars in Europe must be below 95 grams per kilometer (previously 116 grams/km), and light commercial vehicles must emit less than 147 grams/km. However, this limit is not fixed and will be adjusted based on the average weight of the cars sold in 2025, as well as the credits earned through the sale of zero-emission and low-emission vehicles. For companies that sell a certain number of electric vehicles, these factors will lower the target emissions values.
For example, Mercedes expects its passenger car fleet's overall CO2 emissions target to be 91 grams/km, while Volvo's target is below 90 grams/km, and Stellantis' target is below 97 grams/km. Exceeding these limits could result in fines of €95 (approximately $98) per car sold for every gram of CO2 per kilometer above the target.
Transport & Environment stated that the EU's 2025 CO2 targets are both achievable and realistic, and since automakers have just launched some hybrid, plug-in hybrid, and electric vehicles this year, they are unlikely to face fines this year, as these models are designed to meet the new regulations and will be released this year.
