Why Are European Car Makers Urging the EU to Rethink CO2 Rules?
If you’ve been following the European car industry lately, you might have noticed a growing sense of urgency—and even alarm—among top executives. Stellantis’s Jean-Philippe Imparato recently sounded the alarm at the Munich Motor Show, warning that unless the EU revises its ambitious CO2 reduction targets soon, the entire European automotive sector could be at risk. But what’s really driving these concerns, and what are industry leaders proposing as a way forward?
Let’s break down what’s at stake, why these rules matter, and what solutions are on the table.
What’s the Problem With the Current CO2 Targets?
Right now, European legislation requires carmakers to slash CO2 emissions by 55% for cars and 50% for vans by 2030, compared to 2021 levels. By 2035, the goal is a complete 100% reduction—effectively phasing out new petrol and diesel vehicles. Ambitious? Absolutely. But according to Imparato and other industry leaders, these targets are outpacing both market readiness and infrastructure.
Here’s the crux: Most European car buyers still shop for vehicles under €40,000, and electric vehicles (EVs) at that price point remain scarce. Charging infrastructure is patchy, especially outside major cities. And with inflation and economic uncertainty, many consumers are holding onto their older cars longer than ever. The result? A widening gap between regulatory ambition and real-world feasibility.
BMW CEO Oliver Zipse echoed these concerns, warning that if the rules don’t adapt, the European car industry could shrink by half. That’s not just boardroom bluster—recent data from the European Automobile Manufacturers’ Association (ACEA) shows EVs made up only about 14% of new car sales in 2023, and growth is slowing as incentives wane and costs remain high.
Why Are City Cars and Vans in the Spotlight?
Two segments are particularly under threat: affordable city cars (the so-called A-segment) and light commercial vehicles (LCVs) like vans under 3.5 tonnes.
Let’s start with city cars. Not long ago, buyers could choose from nearly 50 models under €15,000. Today, there’s just one left. Why? Safety and emissions regulations have added thousands to the cost of building these small cars, making them unprofitable. That’s a big deal, since these vehicles are often the most accessible option for urban drivers and first-time buyers.
Vans face a similar squeeze. The current rules would require electric vans that cost upwards of €50,000—a tough sell for small businesses and tradespeople. Imparato argues that the legislation as written is “just writing the crash of the LCV industry below 3.5 tonnes in Europe.”
What Solutions Are Industry Leaders Proposing?
Rather than just pushing back, car bosses are coming to the table with concrete ideas. Here’s what they’re asking the EU to consider:
1. Rethink Van Emissions Rules
Imparato suggests pooling CO2 reductions for vans over a rolling five-year period, and allowing all relevant technologies—including cleaner diesel options—to count toward targets. This would give manufacturers more flexibility and help keep essential vehicles affordable.
2. Bring Back the Affordable City Car
Industry leaders want a new European-specific category for city cars, inspired by Japan’s kei car rules. These vehicles would have capped emissions (around 110g/km), limited power and speed, and be built with high European content. Crucially, they’d be exempt from some of the costly regulations that have priced them out of existence. The goal? Revive the sub-€15,000 city car segment and make urban mobility accessible again.
3. Focus on Renewing the Car Fleet, Not Just Selling EVs
Here’s an interesting twist: Instead of only chasing new EV sales, why not incentivize people to trade in their aging cars for newer, cleaner models—regardless of powertrain? The average car on European roads is now 12 years old. Removing a 15-year-old car and replacing it with a new one can cut CO2 emissions by up to 76g/km per vehicle. Imparato argues that manufacturers should get credit for these CO2 savings, not just for tailpipe emissions from new cars.
4. Prioritize B-Segment EVs
The B-segment (think compact hatchbacks) is the heart of the European market. Imparato suggests giving carmakers “super credits” for selling EVs in this segment, supporting both the transition to electric and the broader European supply chain—including battery makers and parts suppliers.
How Realistic Are These Proposals?
On paper, these ideas sound like a win-win: more affordable cars, a smoother transition to lower emissions, and a stronger European industry. But will lawmakers bite?
There’s reason for optimism. For the first time, major carmakers are presenting a united front, with broad agreement on the need for change—even if each company has its own priorities. The European Commission, led by Ursula von der Leyen, is under pressure to balance climate goals with economic realities, especially as the global auto market faces fierce competition from the US and China.
Still, the clock is ticking. If the EU doesn’t adapt its rules by the end of the year, industry leaders warn that plant closures, job losses, and a shrinking manufacturing base could follow. That’s not just a problem for car companies—it’s a risk for millions of workers and the wider European economy.
What Does This Mean for Everyday Drivers?
If you’re in the market for a new car, you’ve probably noticed prices creeping up, especially for smaller models. The disappearance of affordable city cars isn’t just a niche issue—it affects anyone looking for practical, budget-friendly transport. And if you run a small business, the cost of upgrading to an electric van might feel out of reach.
The proposals from Stellantis and others aim to keep mobility accessible while still moving toward a greener future. By focusing on realistic targets, flexible rules, and incentives for renewing the existing fleet, there’s hope that the transition won’t leave everyday drivers behind.
The Road Ahead: Will the EU Listen?
Change in the auto industry doesn’t happen overnight. But what’s clear is that the current trajectory isn’t working for manufacturers or consumers. The next few months will be crucial as EU leaders weigh these proposals and decide whether to adjust course.
If they get it right, Europe could lead the world in sustainable, affordable mobility—without sacrificing jobs or innovation. If not, the risks are real, and the consequences could be felt for years to come.
For now, all eyes are on Brussels. The outcome? It could reshape not just the cars we drive, but the future of European industry itself.