Carmakers accelerate EV sales to meet EU’s 2025 climate targets

European car manufacturers are ramping up electric vehicle (EV) sales to meet the European Union’s stringent climate targets set for 2025, according to a new analysis by Transport & Environment (T&E). The study forecasts that battery electric vehicles (BEVs) are expected to reach between 20-24% market share in 2025, driven by an influx of new, more affordable models and regulatory compliance requirements.

EV sales surge anticipated

T&E’s modelling, based on sales in the first half of this year and forecasts from market research company GlobalData, indicates that BEVs will contribute approximately 60% of the carbon dioxide (CO₂) reductions that carmakers need to achieve to meet the EU emissions targets next year. This surge is partly attributed to seven new fully electric models priced under €25.000 entering the market in 2024 and 2025.

“2025 will be a great year for Europeans in the market for an electric car,” said Lucien Mathieu, Cars Director at T&E. “BEVs should be almost a quarter of new cars sold thanks to a glut of new, more affordable models. But manufacturers’ reliance on hybrids, which are reaching the limits of their CO₂ saving potential, is a short-sighted strategy for the climate and competing with Chinese BEVs.”

Manufacturers’ compliance strategies

While BEVs are expected to make the most significant contribution to CO₂ reductions, some manufacturers plan to rely heavily on hybrid vehicles (HEVs). According to T&E’s central scenario, Stellantis and Volkswagen Group are expected to depend on hybrids for 33% and 30%, respectively, of the CO₂ reduction they still need to achieve their targets. Mercedes-Benz and Renault are also projected to rely on hybrids for 17% and 15% of their required CO₂ cuts.

BMW is anticipated to depend on plug-in hybrids (PHEVs) for 18% of its emissions reductions. If manufacturers rely more on selling hybrids to comply, the overall BEV market share would be at the lower end of the forecast, around 20%, compared to 24% in the central scenario.

Pooling as a compliance tool

For manufacturers still struggling to meet the targets, the EU allows “pooling” with other companies to lower average emissions. For instance, if Volkswagen pools with Tesla, it would only need 17% of its sales to be BEVs in 2025 instead of 22%. Similarly, if Ford pools with Volvo Cars, as it did in 2021, BEVs would need to account for just 9% of its sales instead of 21%.

Industry calls and policy support

Some manufacturers have called on the EU to trigger a special crisis clause to delay their CO₂ targets by two years, citing concerns over sluggish EV sales. However, both the European Commission and the German government have affirmed their commitment to the existing targets.

In July, European Commission President Ursula von der Leyen confirmed the bloc’s zero-emissions cars target for 2035 would proceed as planned. Last week, the German government rejected the car industry’s call to weaken the 2025 target.

T&E is urging EU and national lawmakers to bolster EV demand through policies such as corporate fleet targets, charging infrastructure masterplans, and social leasing schemes.

“We welcome that President von der Leyen and the German government have put an end to uncertainty over the car CO₂ targets,” said Lucien Mathieu. “Now it’s time for the EU to support electric car uptake by setting electrification targets for corporate fleets. Governments need to build a stable regulatory environment for EVs with national charging goals and targeted support for buyers.”

Market dynamics and future outlook

The European EV market experienced stagnation between 2022 and 2024 due to manufacturers focusing on profits from internal combustion engine (ICE) vehicles and higher-priced EVs. However, the impending 2025 CO₂ targets are expected to trigger a surge in mass-market affordable EVs.

Carmakers are anticipated to boost EV sales significantly in 2025. T&E’s analysis shows that increasing BEV sales is expected to be the main compliance strategy, accounting for 60% of the CO₂ improvements needed. The share of mild hybrids is also expected to double, from 19% to 37%, as manufacturers rely on hybrids for 20% of the CO₂ reductions.

Despite this shift towards electrification, some manufacturers are still heavily relying on hybrids and ICE improvements, a strategy T&E describes as short-sighted. The organisation warns that while hybrids offer incremental improvements, they may not align with long-term climate goals or industrial competitiveness, especially as the automotive industry moves towards a zero-emission future by 2035.

Conclusion

Transport & Environment’s analysis underscores that the EU’s car CO₂ regulation is effective and continues to drive manufacturers towards electrification. However, it emphasises the need for additional support through national policies to facilitate EV adoption. These include comprehensive charging infrastructure plans and stable, targeted subsidy schemes.

The organisation also cautions against any weakening of the 2025-2035 targets or delays in compliance, arguing that such actions would hinder the European automotive industry’s ability to compete globally, particularly against Chinese EV manufacturers.

Source: Transport & Environment