- Europe’s 2025 CO2 cap will cut average emissions to 93.6 g/km, forcing automakers to adapt.
- Automakers must raise zero-emission vehicle sales from 13% to 20% to meet the EU targets.
- Critics argue the EU’s emissions targets are too ambitious, risking industry-wide financial penalties.
Starting in the new year, the European Union will drastically tighten its regulations on automotive carbon dioxide emissions. From January 1, 2025, the EU will enforce a much stricter cap, requiring the average CO2 emissions per kilometer for each new car sold by a manufacturer to not exceed 93.6 grams. This represents a 19% reduction from the current year’s target.
According to consultancy firm Dataforce, under the new emissions measurement system, the 2024 target would equate to 116 g/km using the previous system of calculation.
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While the regulation doesn’t prescribe specific methods to achieve this reduction, it effectively forces major car manufacturers to ensure that at least 20% of their sales come from zero-emission electric vehicles. This marks a significant increase from the current average of 13% of all cars sold in the region, according to data from the industry association ACEA. As Reuters reports, manufacturers that fail to meet these targets will face hefty fines.
Automakers Shift Pricing Strategy
In response, automakers have started increasing the prices of their gasoline and diesel vehicles to reduce demand for internal combustion engine models and make EVs more appealing.
“Carmakers have started with their pricing strategy to steer demand towards battery EVs in order to reach the CO2 targets and avoid potential fines,” Beatrix Keim of the Center for Automotive Research told Reuters.
Companies such as Stellantis, VW, and Renault have already increased the prices of ICE models by hundreds of euros in recent months. For instance, all Peugeot models sold in France—except EVs—saw price hikes of up to €500 ($525) last month. According to S&P Global auto analyst Denis Schemoul, these adjustments could also help fund future discounts for EVs.
Affordable EVs On the Horizon
Over the next year, Europe will see the launch of several new and more affordable EV models. These include the Hyundai Inster, Fiat Grande Panda, BYD Seagull, Cupra Raval, Renault R5, Skoda Epiq, and VW ID.2. Other EVs priced below €25,000 (about $26,200 at current exchange rates) are also in development, such as the Renault Twingo, Kia EV2, and VW ID.1.
Mounting Criticism From Automakers
Not everyone is on board with the EU’s tightening regulations. At the Paris Auto Show in October, Luc Chatel, president of the French car lobby PFA, slammed Brussels for what he described as unrealistic emissions targets.
“At some point, enough is enough,” Chatel said. “I can’t sell enough electric vehicles and I’m going to be penalized on my thermal vehicles. What do they want me to make, horse-drawn carriages?”
This year, just 13% of all vehicles sold across the EU have been electric, and many politicians are pushing the region to relax its targets for 2025. If the sector fails to meet its CO2 obligations, fines could soar as high as €15 billion ($15.7 billion). Some automakers have found alternative strategies to avoid fines, such as pooling emissions with other brands. For example, Suzuki will pool emissions with Volvo in 2025, eliminating the risk of penalties.
Despite these efforts, skepticism remains. A source close to one of Europe’s major automakers told Reuters that simply raising ICE prices may not be enough to drive sufficient EV sales, citing weak growth in the EV segment. As the market faces both political and economic pressures, 2025 could be a turning point for the region’s auto industry.
