VW, Mercedes etc: High fines threatened due to CO2 limits

We actually thought we didn't need to report on CO₂ limits at InsideEVs. After all, emissions are a problem in the world of combustion engines. However, the topic has a major impact on the electric car market, as strict CO₂ regulations can lead to lower prices for electric cars. We try to summarise the most important facts.

The European Union has decided on lower CO₂ emission limits for 2025. They relate to the entire fleet of a manufacturer, i.e. the emissions are averaged across all new vehicles sold by a manufacturer, weighted according to sales figures. If the targets are not met, huge fines are imposed. In autumn, Renault boss Luca de Meo spoke of fines of €15 billion for the manufacturers.

According to EU regulations, CO₂ emissions must fall from 116 grams per kilometre in 2024 to below 93.6 grams. However, each make has to achieve a different target, which depends on the weight of the vehicles sold. If the target is missed, the manufacturer pays a fine of €95 per gram above the limit value. And this is per vehicle sold.

An analysis by the bank UBS shows how big the gap is between previous emissions and the EU targets. According to this analysis, the Volkswagen Group would have to increase the share of electric cars in sales from 13 to 25 per cent, and Mercedes it would have to rise from 18 to 24. BMW, Renault and Stellantis would not have to make such large increases. The difference here is only a few percentage points.

The data above are for 2023; more recent data do not appear to be available for the EU. The calculations also differ slightly depending on the analysis. According to an analysis by Dataforce for Automobilwoche, Stellantis is missing about 7 percentage points. UBS, on the other hand, only comes up with four percentage points because it already takes into account the CO2 pooling with the electric car provider Leapmotor.

According to the Dataforce analysis, Ford would also need to significantly increase its Europe-wide share of electric cars from just under 5% to 23%. However, this does not include best-selling internal combustion engines such as the Focus and Fiesta, but rather electric cars such as the Capri and Explorer.

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Although Toyota hardly sells any electric cars, it benefits from the fact that three quarters of its sales are accounted for by full hybrids, which also emit significantly less CO₂ than pure combustion engines. Other manufacturers such as BMW or Mercedes have relatively low CO₂ fleet emissions thanks to strong plug-in hybrid sales - because PHEVs also formally emit very little of the greenhouse gas according to the WLTP standard.

Volkswagen apparently wants to achieve its targets primarily through sales promotion. This includes discounts such as the purchase price and other special offers. Mercedes could achieve its goal through pooling with Smart.

Pooling means that several manufacturers get together and average their fleet emissions. Of course, the manufacturers with low emissions get paid a lot of money for this from the 'dirty' manufacturers. Two major pools have already been announced: Stellantis, Toyota, Ford, Subaru and Mazda want to form a pool with Tesla, while Mercedes wants to team up with Volvo, Polestar and Smart. But no manufacturer wants to pay money to the competition.

More about the electric car market:

Opel, Fiat and Dacia plummet in German electric car sales in 2024

Half of all electric cars sold are made in China

BP is selling hundreds of petrol stations as electric cars advance

Electric car sales back on the rise worldwide

The bottom line

Whether sales promotion measures, pooling or fines: It will be expensive for manufacturers with high CO₂ emissions in 2025. Most brands are also reluctant to reduce their range of combustion engines and cross-subsidise their range of electric vehicles. The VW Group is reportedly facing costs of around one and a half billion euros. Manufacturers with low emissions, such as Tesla, Smart or Volvo, on the other hand, benefit because they can pay for the pooling. Volvo, for example, is said to be expecting a windfall of €300 million.

However, manufacturers still seem to be hoping that the EU will be lenient and water down the CO₂ targets for 2025. A free way out for manufacturers would be new subsidies at national level or even an EU-wide subsidy, as recently suggested by Chancellor Olaf Scholz. However, this would mean that we as taxpayers would ultimately have to pay for the fact that some manufacturers have not done their homework.

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