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Both EV production and sales figures are up in most markets as carmakers prepare to finally sell more mass market models. But this momentum is at risk if policy-makers are pressured into weakening the 2025 EU target.
Last year it was €15 billion. Now it is €16 billion.
Are these the growing income of a Russian oil oligarch? A weekly bingo win?
No, these are the ever exaggerated sums that carmakers claim that meeting this year’s EU CO2 emissions target will cost them.
The overall emobility story in Europe is a positive one. Electric car sales have grown seven times since 2019, the number of fast chargers increased 20 times in the same period, while local factories already meet over half of the battery demand from carmakers.
And yet automaker after automaker has issued exaggerated statements about the “crisis” and potential fines, blaming everyone for not doing enough. One minute they are demanding the EU's car CO2 targets be scrapped so they can pollute more. They next they are telling investors they can comply with the targets.
Explore the timeline of carmakers changing their story:
Exactly the same rhetoric was heard in 2019 ahead of the 2020 emissions target, yet everyone complied in the end. More recently, carmakers complained incessantly in the UK last year before meeting the 2024 zero emission vehicle mandate.
Big market benefits came with the targets: the EU’s BEV sales overtook China’s in 2020, while the UK’s overall car market grew in 2024 against the overall stagnation trend elsewhere in Europe. This shows that supply side regulation – designed to push the auto industry to produce and sell more electric cars – does work.
But “complain then comply” seems to be the preferred strategy. So, why are the current calls to ditch the 2025 targets wrong this time?
First, judging the ability to comply with the 2025 target on 2024 market figures is as unrepresentative as giving a mortgage to a banker based on their previous student stipend.
The five-year intervals of the EU emissions targets means there is no incentive to increase EV sales in the in-between years. No affordable models were available on the market until late last year, and many who bought an EV in 2024 saw their delivery delayed into this year.
As carmakers timed those models for the 2025 compliance year, a dozen of Europe-made affordable EV models are hitting the showrooms now. Billboards across Europe are advertising the likes of Renault 5 and Citroën eC3. Both EV production and sales figures are up in most markets as carmakers prepare to finally sell more of the mass market models drivers have been waiting for.
But this momentum is at risk if European and national policy-makers are pressured into weakening the 2025 target.
This leads to the second major issue: demand. Ask anyone around Brussels and they would cite to you the accepted wisdom that people are not willing to buy electric cars. The reality is they are not willing to buy premium e-SUVs that are way out of the average consumer’s budget. The average price of an (often large) electric car in Europe was €45,000 last year.
Capturing the mass market requires mass market models at mass market prices. So, as affordable European models are hitting the market due to the 2025 target, the demand will grow organically in 2025. T&E predicts the EV market to grow to 20-24% of sales this year.
Structurally, the best way to boost demand would be to require corporate fleets to go electric, as Commissioner Tzitzikostas has already committed. In addition, the EU can support member states in providing stable EV incentives by either reallocating unspent post-Covid funds or using the revenue coming from the EV tariffs: T&E estimates €3-6 bn will be generated in 2025.
But the real crisis is happening on the battery manufacturing side as many European plans are struggling to scale or faltering altogether.
The availability of batteries and materials to meet EU’s emissions targets is not the problem. China alone already manufactures more battery cells than the global demand combined. But trade, geopolitical and security concerns put Europe at risk if it can’t develop local expertise to produce energy transition’s core technology.
So, a comprehensive strategy for battery supply chains is what the Commission’s upcoming Automotive Plan should focus on. This should include an investigation into unfair battery subsidies in China, resilience criteria for the granting of state aid, and binding grid-based carbon footprint rules for batteries to access the EU market.
With over 650 GWh of battery capacity coming from South Korean and Chinese players, clear rules on foreign direct investment to ensure comprehensive technology and skills transfer are equally needed.
Don’t be fooled by the “complain then comply” strategy of automakers. An EU Automotive Plan that keeps the targets, but acts to support demand and local battery manufacturing, can turn 2025 into a landmark year for Europe’s EV sales and its automotive supply chain.
