On the occasion of the European Parliament’s plenary debate on the “crisis in the automotive sector”, Eurelectric said NO to an early review of the CO2 emission standards for cars and vans regulation.
The regulation, agreed by the previous legislative cycle as part of the EU Green Deal, sets a 15% CO2 emission reduction target for newly registered cars and vans. This will come into effect in 2025. Some European car manufacturers have demanded swift legislative action on what they are calling a “crisis” for their industry.
While we understand the automotive industry’s concerns given the overall decline in EVs demand in 2024 and increasing foreign competition, an early review and relaxation of the CO2 regulation would be detrimental for three reasons.
- Europe needs investment certainty to achieve its e-mobility ecosystem
Decarbonising our transport sector will require investing billions of euros into charging points, electricity grids, battery supply chains, technology platforms, and other infrastructure that make up the entire e-mobility ecosystem. The only way to make these investments happen is by ensuring a consistent and transparent regulatory framework. If the review of the CO2 emission standards Regulation comes too early for a proper assessment and consultation, policymakers risk making damaging amendments to investor certainty and disrupt planning. - Europe’s 2024 market trends do not foreshadow crisis in the EV market and are not representative of the long-term trajectory.
Lessons from the past: The last CO2 emission reduction target for newly registered vehicles came into place in 2021. Before that, in 2019 and 2020, the EV market saw sluggish growth, especially as Covid-19 placed significant pressure on economies. Despite this, 2021 was a record-breaking year for battery EVs (BEV) sales in Europe, increasing by 63% to reach 1.2 million passenger vehicles and a market share of 10%.
By observing the long-term trend in Europe’s EV market instead of just the last one or two years in isolation, a slowdown or “stagnation period” in EV sales in the two years leading up to a new target is normal, and even expected. For this reason, the review of the Regulation on CO2 standards for cars and vans would not even be able to provide a proper assessment sooner than 2026, after we have witnessed the new CO2 target’s impacts on the market. - Consumers need smaller and more affordable European EV models:
Car manufacturers are currently prioritising their larger and expensive EV models. Today an average EV costs 40,000 euros and large EV sales make up around 60% of the market, when in 2021 they only made up around 40% (T&E, 2024). Consumers are therefore incentivised to purchase cheaper hybrid and internal combustion engines (ICE) models that manufacturers will not be able to sell later down the line. That is why Europe is expecting to see most of its affordable EV models enter the market in 2025, capturing the lower and middle-income consumer base that Chinese manufacturers have been most successful in targeting.
Without the regulatory assurance that automakers must meet the new CO2 emission reduction target, manufacturers won’t have the incentive to push for more affordable BEV models. With the recent tariffs on BEVs imported from China, European manufacturers have an opportunity to regain competitiveness by increasing their share in sales of smaller and more affordable BEVs.