EU's 2025 CO2 Emissions Reduction Targets: Obstacles and Advantages for Automotive Industries

The automotive industry is facing a significant challenge as European automakers strive to meet the 2025 CO2 emissions targets. The stakes are high, with the race going beyond mere compliance and into leadership in the rapidly changing automotive landscape.

In 2023, battery electric vehicles (BEVs) made up a relatively small share of new car registrations. To bridge this gap, automakers are exploring various strategies. Some, like Ford and Volkswagen, are facing a steeper climb and need to significantly ramp up their production and sale of electric cars. On the other hand, plug-in hybrid electric vehicles (PHEVs), especially those with extended electric ranges, could play a role in the transition.

However, changes in how PHEV emissions are calculated from 2025 will make it harder for automakers to rely on PHEVs to reduce fleet emissions on paper. Shifting sales strategies towards lighter, more fuel-efficient models or adopting mild hybrid technologies can cut CO2 emissions by 7% to 15%.

The EU regulations between 2019 and 2021 required a 23% reduction in CO2 output from automakers. During this period, automakers managed to boost their BEV market share by about 8 percentage points. This progress needs to continue, as automakers need to make steady progress, reducing their fleet's emissions by about 4% each year between 2021 and 2025.

The ICCT analysis identifies the automakers farthest from the 2025 CO2 targets but does not explicitly name them or specify the exact required CO2 emissions reductions in the provided search results. Some companies may need to increase their BEV shares by as much as 8 to 18 percentage points compared to 2023 levels.

Success for European automakers in meeting the 2025 CO2 targets represents an opportunity to solidify their place in a market that increasingly values sustainability. Companies like Volvo, which have leaned heavily into electric models, are better positioned to meet these challenges. Improving the efficiency of internal combustion engine vehicles (ICEVs) is another strategy for meeting the new targets.

The new targets come at a time when the transition to electric vehicles is gaining momentum globally. One key strategy for manufacturers is increasing the share of BEVs in their fleets. As European roads continue to feature a mix of ICEVs, PHEVs, and BEVs in 2023, the race to meet the 2025 CO2 targets is on. The victors will not only ensure compliance but also lead the way in a greener, more sustainable future for the automotive industry.