The European Automobile Manufacturers’ Association (ACEA) has drafted a proposition suggesting a delay in the EU’s 2025 emission targets by two years. The current rules, aiming for a CO2 fleet emission of approximately 95 grams of CO2 per kilometer per vehicle, could potentially halt the production of about 2 million cars or expose automakers to fines up to €13 billion ($14.3 billion) for passenger cars. Van manufacturers could face an additional €3 billion in penalties for not meeting the targets.
The ACEA, currently led by Renault SA CEO Luca de Meo, attributes the crisis to low consumer demand for EVs and unfair competition from third-country EV manufacturers. The group warns that the EU industry may have to significantly cut production, threatening millions of jobs, harming consumers, and impacting the EU’s competitiveness and economic security.
The Struggle of Europe’s Auto Sector
Europe’s auto sector is grappling with cheaper models from China, high energy costs, and slow consumer demand, with sales remaining well below pre-pandemic levels. These challenges are pressuring the EU’s deadline to effectively ban sales of new combustion-engine cars from 2035.
The ACEA stated that the EU automotive industry has invested billions in electrification, but the other necessary components for this transition are not in place, and the competitiveness of the EU is eroding. To comply with the stricter 2025 emissions rules, the EV share of passenger cars and vans should be about 20% to 22%, while the current level is less than 15% for cars and much lower for vans.
The EU’s plan to phase out the sale of new combustion engine-powered vehicles by 2035 is under review in 2026. However, the scope for regulatory leniency is low, and the 2025 rules could accelerate capacity restructuring within the industry. This could lead to a strategic shift in the industry, with companies like Airbus and Honda making significant adjustments. The EU’s struggle for stronger supply chain accountability is also a key factor in this crisis.
