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A number of EU member states are preparing to rise up again in the EU.
Leaders from Germany, Italy, the Czech Republic, Austria, and other countries are ready to speak out against a motion to waive carbon emission penalties for the automotive industry at an EU summit in March.
The reason for this is the same as the old opposition to the 2035 ban on combustion, which is still an imposition by the EU.
From January 1, 2025, the European Union began to implement a new requirement of the CAFE regulation, that is, passenger cars sold within the European Union, the average carbon dioxide emissions must be reduced to 93 6 grams per kilometer.
What does that mean?
For comparison, the EU 2021 requirement for passenger cars is 116 grams of CO2 per kilometer, which corresponds to a fuel consumption of 43L 100km. Using the simple formula of CO2 emissions KG liters of fuel consumption 2 7
If we look at a specific fuel car, this is already so stringent that only minivans with a displacement of about 1 liter can meet it!
The latest EU carbon emission requirements have been reduced by almost 20%, which rounds up to a fuel consumption of less than 35 liters.
This means that no fuel-only car will be able to meet the EU standard in 2025! Not even if we send our Qin PLUS DM i there!
In other words, this is the EU’s way of forcing car companies to sell electric cars.
Fuel-only cars can’t consume 3.5L per 100 kilometers, but hybrids may be able to do so, and electric cars have zero carbon emissions, so it’s just a matter of averaging out to meet the standard.
This logic seems to be flawless, and with China’s proven double-points policy in front of us, there is no reason for European car companies to oppose it.
But the problem is that the Europeans simply do not buy it!
According to the European Automobile Manufacturers’ Association (ACEA), only 13.6% of all new car registrations in the EU in 2024 will be purely electric, with 33.3% of the market still dominated by gasoline-powered vehicles and 30.9% by HEV hybrids.
According to some investment institutions, the proportion of electric vehicles sold in the EU car market would have to be increased to 25% if CO2 emissions of 93.6 grams per kilometer were to be met.
That is, in one year’s time, EVs would have to take out 10 of the fuel cars in the EU, where EV sales have even declined.
For European car companies, this is even more difficult than to reduce fuel consumption to 3 5L 100km.
Maybe if it’s really hard, try selling 2.5 million fewer gas guzzlers with EVs as they are.
The dilemma is indeed disturbing, but the more critical point is that failure to fulfill the EU’s environmental mandate is subject to huge fines!
According to EU regulations, the fine for excessive CO2 emissions from passenger cars is 95 Euro grams. The industry estimates that the total fine in 2025 may be as high as 16 billion euros, equivalent to 124 billion yuan!
That’s a pretty scary number, higher than Mercedes Benz’s annual EBITDA of 13.6 billion euros!
Of course, car companies don’t have to pay these huge fines.
The EU has left the door open with the emissions trading system.
Car companies that foresee that they will not be able to fulfill the EU carbon emission requirements can choose to buy carbon credits from other zero-emission or lower-emission car companies to form an emission pool, and ultimately achieve the goal of compliance.
So two pools were formed at the beginning of the year.
One is Stellantis, Toyota, Ford, Mazda, Subaru, five car companies, and a pool that eats carbon credits from Tesla, an all-electric car maker.
The other is the pool of Mercedes-Benz and smart brands, which eat the carbon credits of Polester and Volvo.
Together, the two pools account for 41 percent of the European car market and 50 percent of the European electric car market, and with 10 months left in 2025, there is still a chance that new pools will be added.
But the enthusiasm of European carmakers to form the pools can’t hide the fact that by choosing to trade carbon credits with other carmakers, they avoid a hefty fine but pay another transaction cost.
Tesla, for example, earned $2.76 billion in revenue last year just from selling carbon globally. It is estimated that the price of carbon credits in the European Union may rise to 20 euros grams this year, meaning that Tesla will earn more than 1 billion dollars from selling carbon in Europe.
Therefore, the EU’s current carbon emissions regulations have become a shackle that has been tightened around the necks of its own people.
If this regulation is enforced meticulously, it will, as ACEA says, hurt only Europe’s own automakers, with four consequences that are likely to happen simultaneously
One, the loss of money that could have been reinvested in manufacturing jobs.
Restrictions on the production and sale of fuel-efficient vehicles.
Three, causing European automakers to give money to competitors for nothing, and damaging the entire European automotive industry.
Four, selling zero-emission vehicles at unreasonably low prices to meet compliance requirements, weakening the profitability of European automakers and thus further weakening their global competitiveness.
Of course, there are still hard feelings in the face of this difficult situation.
Volkswagen, Europe’s largest automaker, has said it will not turn to its friends, but rather push itself to get its carbon emissions mission accomplished by selling electric cars!
But it’s hard to say whether this statement is merely a statement of intent; after all, the EU’s approach is inherently unreasonable.
Environmental protection and emission reduction is of course a good idea, and the policy makers are also in accordance with the scientific method to predict the future sales of electric vehicles, but the actual implementation is not so simple.
ACEA, which represents the interests of the majority of European automakers, puts it very clearly
Car companies are bearing the burden of the transition on their own, with no official support from the EU in terms of charging infrastructure and purchase incentives.
The EU has only a climate policy in the automotive sector, not an industrial policy, and regulation alone without a way out will not help carmakers make a smooth switch from fuel to electric vehicles.
The current stringent emissions policy is like a tax on European automakers, so the simplest solution is to lighten the load and waive the 16 billion euros in penalties that the auto industry may have to pay.
For their part, Renault, Volkswagen and many other European carmakers want the European Union to review, suspend or revise their carbon emission targets.
Last November, Italy, Czech Republic, Austria, Bulgaria, Poland, Romania and Slovakia jointly called on the European Union to waive the fines for exceeding carbon emissions targets.
By the end of the year, according to a variety of publicly available information can be learned, including Germany and France, a number of EU member states have reached a consensus, even if not to change the EU’s carbon emissions targets, at least to waive the carbon emissions fines, to reduce the burden on the European automobile enterprises.
In the rare case of a unified voice of all forces, compromise seems to be the only option for the EU.
Just recently, Renault executives released a statement saying that they were 100 percent confident that the EU would adjust its carbon emissions rules for 2025, and that the new EU carbon rules would allow car companies to meet their targets in a more flexible way.
This is not about abandoning or postponing targets, but about maintaining flexibility in how they are met. Otherwise, what are the alternatives for car companies? Paying fines or closing factories?
Write in the end
Volkswagen is preparing to launch a small electric car, the ID 2, in 2026, which is expected to be priced at 25,000 euros, followed by the ID 1, which is said to be VW’s cheapest electric car, priced at around 20,000 euros, waiting to be unveiled.
The Renault Group, which imported the Chinese-made Dacia Spring back to Europe for sale, plans to complete the development of a new Dacia electric car within 16 months, which will be priced further down to 18,000 euros.
So far, originally intended to cooperate in the development of small electric cars of the two European car companies, after the collapse of the negotiations, and each go back to focus on the launch of affordable electric cars on the road.
In fact, this is almost all European automakers are working hard in the direction of reducing the price of electric cars to 20,000 euros, so that more users can afford electric cars.
The reason, as German Chancellor Schulz said, is that car companies can’t force consumers to buy electric cars.
At present, a direct factor affecting the EU consumers to buy electric cars is that the market is too expensive electric cars. The cost of an electric car can be as high as 45,000 euros, which is equivalent to 300,000 to 400,000 yuan, and is not an option that ordinary people would consider.
To increase the market share of electric vehicles, the most reasonable approach is always to make them common people, Tesla’s key step to success is the launch of the Model 3 and Model Y, to help the Chinese market to complete the education of the electric car market is to sell only 20,000 to 30,000 yuan of the Hongguang MINI EVs, as well as countless cheap to a few thousand dollars or even non-compliant electric old man music.
If European automakers don’t have their own affordable EVs, be prepared to be overrun by Chinese affordable EVs.
Even against the unfavorable conditions of tariff increases.
Because BYD has already achieved sales reversal against Tesla in the European market.
In January this year, stimulated by the new emissions regulations, the EU electric car sales soared 34 , the German market on the electric car sales growth even as high as 53 3 year-on-year.
While the market is so strong, Tesla’s sales have plunged by 45 percent in Europe.
In contrast, BYD’s sales surged by 551,734 in the UK, 207 in Spain and 207 in Portugal, and surpassed Tesla’s sales in four EU countries.
In addition, the MG brand also performed well, with sales up 36.8 percent year-on-year.
The Chinese brand’s upward trend is due to its ability to offer excellent affordable EVs. As things stand, in the €152,500 price range, Chinese EVs have met little decent resistance in Europe.
It’s true that other rivals such as Volkswagen and Renault are targeting the €20,000 price range, but the Chinese companies are also able to deliver a steady stream of new products.
What’s even more frightening is that BYD SAIC, with its growing EV sales, can sell carbon credits under the European emissions trading system, even at a higher profit than Tesla.
If the EU really doesn’t intend to eliminate carbon overrun penalties, then ACEA’s worst fear will happen
In order to comply, European automakers will have to hand over their profits to BYD.
Maybe that money will end up being just enough to offset, in the end, the tariffs that the EU has imposed on Chinese EVs?
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