Dataforce: Manufacturers must significantly increase BEV sales to meet CO2 limits
In 2025, the EU will significantly tighten CO2 targets for car manufacturers. For passenger cars, the average emissions of new vehicles sold must decrease from 116 g/km in 2024 to below 93.6 g/km—a reduction of 19 percent. For light commercial vehicles up to 3.5 tons, the targets will be reduced from 185 to 154 g/km, which corresponds to a reduction of 17 percent. This is highlighted in a recent analysis by the automotive data specialist Dataforce. Exceeding CO2 limits can lead to significant fines. These are calculated as 95 EUR multiplied by the CO2 exceedance in g/km and the registration volume. For large OEM groups, this can result in fines amounting to several hundred million euros.
Despite ambitious targets, progress this year has been minimal, according to the analysis. In the first six months of 2024, emissions were higher than in the entire year of 2023. BEVs and PHEVs offer the greatest reduction potential, but subsidy cuts have hindered their transition to the mass market. From January to June 2024, the European car market (EU-27 + IS + NO) grew by nearly 243,000 new registrations (+4.3%), while registrations of BEVs and PHEVs decreased by 9,000 units. More than half of the growth was attributable to full hybrids, which are more fuel-efficient but still have emissions above the average for passenger cars.
"The tightening of CO2 targets will disrupt the European market for passenger cars and light commercial vehicles in 2025. They require a significant acceleration in the adoption of electric vehicles," explains Dataforce-Senior Automotive Analyst Benjamin Kibies.
Car buyers must prepare for price increases for gasoline and diesel vehicles, while BEVs will become more affordable with the introduction of new models. From the OEM perspective, monthly monitoring of CO2 emissions will once again become an important part of market analysis.
Seven of the largest OEMs behind targets
Moving away from the general development and looking at the various OEM groups: They have already made considerable efforts to meet current targets and have been quite successful. In 2023, all major OEM groups reduced their average emissions below their individual, weight-adjusted targets. The targets are also within reach for 2024. Seven of the 10 largest groups are already below their targets. The VW Group, Renault-Nissan-Mitsubishi, and Ford are slightly above but should be able to achieve the remaining 1-2 g/km reduction in the second half of the year. However, the situation for 2025 looks completely different. Of all manufacturers with combustion engines in their model range, only Geely (Volvo, Polestar, etc.) and the SAIC Group (MG) are below the threshold of 93.6 g/km. Following them, Toyota (105 g/km) and BMW (106 g/km) need comparatively moderate reductions, but all others will have to make significant efforts. This applies especially to the VW Group and Ford.
37 percent BEV and PHEV necessary
Given their above-average heavy vehicles, their individual targets were raised to 121 and 124 g/km for 2024, providing some leeway. However, this weight adjustment will be removed in 2025, as the weight factor in the equation becomes negative. To lower average CO2 emissions next year, each OEM will pursue its individual strategies, which will always include a stronger electrification of vehicles. Based on current fuel-type-specific emissions, an OEM without full hybrids in its portfolio needs a 37 percent share of BEVs and PHEVs in its sales mix.
With full hybrids, the task seems easier. In a scenario with a 55 percent HEV share, the necessary BEV/PHEV share reduces to 23 percent. However, OEMs with a strong focus on HEVs typically sell fewer BEVs. Apart from that, the EU regulation allows BEV registrations to be weighted higher if the vehicles are sold in markets with a comparatively low electrification share.
CO2 Pooling: A Strategic Safeguard
Another option for complying with CO2 regulations is CO2 pooling. In the past two years, there hasn't been a significant need for pooling, but in 2021, the former FCA group teamed up with Tesla and Honda to lower their CO2 average. Dataforce expects a revival of this instrument in 2025, where manufacturers of pure electric vehicles can sell emission certificates to other corporations. CO2 monitoring is crucial. Moreover, CO2 targets will be an important component of annual goals, just like sales targets. By monitoring emissions monthly, OEMs can identify markets or segments with the most positive or negative impacts and thereby steer the sales strategy towards CO2 compliance, leaving enough time to react.
Strategies and Challenges in the Rapid Ramp-Up of E-Mobility
From today's perspective, achieving such a high share of electrification seems unattainable. However, electrification is not a linear process but happens step by step. In the past, the jump from 2019 to 2020 was astonishingly large. The current setback is also influenced by the abrupt end of electric vehicle subsidies in Germany, the largest BEV market in Europe by volume. Nevertheless, the situation is now different, as it has become harder to convince additional customers to choose BEVs over ICEs. This can only be achieved with a change in price structure. The current decline in lithium and battery prices enables some price reductions along the supply chain, but OEMs will also need to cut costs elsewhere to remain profitable. Increasing production and replacing expensive NMC batteries with LFP batteries could be alternative options. OEMs will likely discontinue discount promotions for combustion engine vehicles and focus on BEVs. Last but not least, smaller and more affordable models will help create the transition to the mass market.
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