The European Commission has bowed to pressure from automakers, extending the deadline for CO2 compliance by three years. While the move relieves short-term regulatory pressure, it raises questions over Europe’s ability to keep pace with US and Chinese rivals in the EV race.
”They have to fulfil the targets, but it means more breathing space for industry”
- Ursula von der Leyen, President, European Commission
The European Commission has announced it has softened its stance on CO2 emissions targets, granting carmakers three additional years to comply and avoid penalties. The move marks a significant concession to an industry grappling with declining demand, factory closures and intensifying global competition.
Regulations introduced this year had tightened the cap on carbon dioxide emissions from new vehicles, requiring that at least 20% of total sales be electric by 2025. However, following discussions with industry leaders, trade unions and environmental groups, Commission President Ursula von der Leyen announced that compliance would be measured over a three-year period from 2025 to 2027, rather than a single-year threshold.
“The targets stay the same. They have to fulfil the targets, but it means more breathing space for industry,” von der Leyen stated at a press conference, stressing that the proposal still requires approval from EU governments and the European Parliament.
EU’s reprieve could mean automakers gather production speed against leading Chinese competion
”A pragmatic approach that does not impact CO2 reduction while providing carmakers with flexibility to accelerate demand through affordable new models”
- Oliver Blume, CEO, Volkswagen
The decision comes as European carmakers struggle to gain traction in the EV market, where they are lagging behind Chinese and US competitors. Shares in Volkswagen, Renault, BMW and Mercedes-Benz rose between 1.5% and 4% following the announcement, reflecting optimism that the regulatory easing will help stabilise production operations.
The extension is particularly welcome news for OEMs and suppliers that have been contending with supply chain disruptions and an uneven shift towards electrification. “A pragmatic approach that does not impact CO2 reduction while providing carmakers with flexibility to accelerate demand through affordable new models,” remarked Oliver Blume, CEO of Volkswagen.
The automotive industry had lobbied intensively for regulatory relief, warning that fines for failing to meet the stringent 2025 deadline could have reached €15 billion ($16.2m) Italy and the Czech Republic were particularly vocal in advocating for an extension, with Italian Industry Minister Adolfo Urso declaring the decision had “saved the European car industry.” However, Czech Transport Minister Martin Kupka argued that even more leeway was required, calling for a five-year extension.
“The key to competitiveness is producing electric vehicles at a price mass consumers want”
- William Todts, Executive Director, Transport & Environment (T&E)
Not all industry players were pleased. Volvo Cars, which is majority-owned by Chinese automaker Geely, expressed concern that firms which had already adapted to the 2025 deadline should not be penalised by last-minute regulatory shifts. Meanwhile, the European Automobile Manufacturers’ Association (ACEA) welcomed the additional flexibility but cautioned that meeting the targets remains a challenge.
“The proposal is positive, but it does not change the fundamental difficulty in hitting these targets,” said ACEA Director General Sigrid de Vries. Matthias Zink, President of European auto suppliers’ association CLEPA, described the relief as “limited.”
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The delay also sparked criticism from environmental groups, who argue that it weakens the EU’s climate ambitions. “The key to competitiveness is producing electric vehicles at a price mass consumers want,” said William Todts, Executive Director of Transport & Environment (T&E). “That’s what the Chinese have done. Postponing this in Europe does not make you more competitive.”
Beyond compliance deadlines, the EU faces broader questions about its ability to support its automotive sector in a rapidly shifting global landscape. The European Commission is set to unveil an automotive action plan aimed at accelerating electrification and ensuring European manufacturers can compete effectively. However, as the regulatory framework continues to evolve, automakers must navigate an uncertain path, balancing emissions compliance with commercial viability in an increasingly fragmented market.
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