EU gives automakers breathing room, slashes Tesla’s emission credit revenue

The European Commission has decided to give automakers breathing room in achieving its zero-emission target, which is going to enable them to buy fewer emission credits from Tesla and other all-electric automakers.

In Europe, like several other markets, they have a mandate to transition new cars to zero-emission vehicles and they implemented a system of zero-emission credits and fines to force automakers to get there.

Automakers are increasingly being asked to increase their mix of electric vehicle sales year over year, and if they don’t achieve the goals, they either have to pay fines or avoid them by buying credits from automakers with a surplus, like Tesla, Polestar, and several Chinese automakers.

The requirements keep increasing year over year with the goal to be 100% zero-emission by 2035.

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European automakers have been pressuring the European Commission to slow down the transition as the fines are putting pressure on local automakers while sending money to American automaker Tesla.

Their lobbying efforts have paid off as Commission President Ursula von der Leyen announced today that the Commission will be giving them three years, rather than only one, to meet new CO2 emission targets for their cars and vans.

Instead of compliance being calculated on their mix of sales this year, it will be based on the average emissions over the period 2025-2027 – giving automakers more time to deploy electric vehicles.

von der Leyen commented:

“The targets stay the same. They have to fulfil the targets, but it means more breathing space for industry.” 

European automakers Volkswagen, Renault, BMW, and Mercedes-Benz have all seen their stock rise on the news.

The proposed rule change still needs to be approved by the EU government. It is getting mixed reactions, with automaker associations wanting even more leeway while environmentalists and EV advocates are disappointed.

Electrek’s Take

I think the EU wants to do the right thing here, but they fear that they would be handing the market over to China, which is not entirely false.

But at one point, you have to blame and penalize automakers who are lagging behind in the transition.

At least, the 2035 target remains the same, and EV sales are still expected to grow in 2025.

I guess that the idea is that this is money that EU automakers will be able to spend on increasing EV production rather than send it to Tesla and other all-electric automakers.