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Europe's top car giants appear to be increasingly concerned about the prospect of massive fines, particularly as electric vehicle demand falters ahead of the next tightening of carbon regulations. Automakers operating in Europe face stricter emission targets from next year as the EU cap on average emissions from new vehicles sales falls to 93.6 grams of CO2 per kilometer (g/km), reflecting a 15% decrease from a 2021 baseline of 110.1 g/km. Exceeding those limits — which were agreed in 2019 and form part of the 27-nation bloc's ambition to reach climate neutrality by 2050 — can result in hefty fines. Rico Luman, senior sector economist for transport and logistics at Dutch bank ING, said Europe's carmakers had every reason to be concerned about the scale of the financial penalties. "The fines are massive actually. When you calculate it … it easily comes to many millions based on the volumes they produce," Luman told CNBC via videoconference. Renault CEO Luca de Meo said last month that if EV sales remain at current levels, the European auto industry may have to pay 15 billion euros ($16.5 billion) in financial penalties or give up the production of over 2.5 million vehicles, Reuters reported, citing an interview with French radio.

The European Automobile Manufacturers' Association, or ACEA, says the industry is missing "crucial conditions" to support the zero-emission transition, "with concerns about meeting the 2025 CO2 emission reduction targets for cars and vans on the rise." The car lobby group, which represents the likes of BMW, Ferrari, Renault, Volkswagen and Volvo , warned that the EU's current rules "do not account for the profound shift in the geopolitical and economic climate" in recent years. "European auto manufacturers, united in ACEA, therefore call on the EU institutions to come forward with urgent relief measures before new CO2 targets for cars and vans come into effect in 2025," ACEA said in a statement published Sept. 19.

Tim McPhie, a spokesperson for the European Commission, the EU's executive arm, said in a press briefing late last month that the auto industry still has 15 months to meet the new targets, adding it is "too soon to speculate" on the scale of the potential fines. "We have designed these policies in a way that the industry has time to adapt, that the overall economic ecosystem has time to adapt but, of course, we are sensitive to the challenges that are being faced," McPhie said on Sept. 24.

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