The European car industry faces a pivotal year after tough EU CO2 emission standards came into force on 1 January, requiring a sharp increase in electric vehicle production to avoid hefty fines.
With the imminent threat of fines amounting to €15 billion, manufacturers are now compelled to accelerate the shift towards electric vehicles – or EVs – in the midst of a sluggish market.
Under the new regulations, at least 20 percent of vehicles sold must be electric to avoid penalties. This target presents significant challenges, with EVs making up just over 13 percent of total sales in Europe during 2024.
The drop comes after a strong 2023, when EVs represented nearly 23 percent of new registrations across the EU.
Battery electric vehicles (BEVs) accountied for 15 percent of the market, with 2.4 million electric cars registered that year – a 20 percent increase from 2022.
With EU targets aiming for a drastic reduction in vehicle emissions in 2025 – in tandem with a zero-CO2 goal by 2035 – a continuous rise in the adoption of zero-emission vehicles will prove essential for Europe to achieve its climate objectives.
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Fear of losses
However, the European Automobile Manufacturers Association (ACEA) has raised concerns over the financial implications of these new standards.
According to the ACEA lobby group, financial penalties could severely impact investment, potentially leading to a total of €16 billion in losses.
This strain on the purse-strings could also be compounded by external market pressures including the reduction in ecological incentives – like the cut in France's ecological bonus effective from 1 January – further impeding growth in EV sales.
European automakers have been coping with emissions regulations through adopting advances in technology – such as improvements in combustion engines and the adoption of electric powertrains – falling into line with Corporate Average Fuel Economy (CAFE) standards.
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Euro 7 challenges ahead
Along with the latest set of emissions standards this new year, stringent Euro 7 rules being implemented between now and 2029 will pose further challenges for the motor industry when it comes to compliance.
These include managing non-exhaust emissions – such as brake dust and tire particles – along with tough requirements for the management of vehicle emissions over their lifecycle.
In particular, Euro 7 mandates the durability of battery performance for EVs, that aims to standardise the battery's longevity and efficiency.
So as of 2025, manufacturers must now significantly scale up their infrastructure and innovate their vehicles to align with this new set of regulations.
