A new study by the US consultancy Kearney paints a stark picture of the European automotive industry as the European Commission weighs potential adjustments to its planned 2035 combustion engine phase-out. The findings, reported by “Der Spiegel”, suggest that existing CO2 reduction regulations are pushing established European manufacturers towards significant losses, potentially triggering a painful period of contraction.
The study highlights a precarious position for European automakers, increasingly unable to compete with Chinese manufacturers in the burgeoning electric vehicle market. Wulf Stolle, a Partner at Kearney and the study’s author, attributes this disadvantage to several factors, including China’s technological advancements and the lingering effects of US President Donald Trump’s trade policies which impact exports to the American market. The European home market, vital for survival, is now facing “unprecedented regulatory and financial pressure” due to the EU’s stringent CO2 fleet emission standards.
Based on current business figures, Kearney projects that the profit margins of major European automakers, including Volkswagen, BMW, Mercedes, Stellantis and Renault, could plummet from an average of 5.5 percent to as much as minus 2.9 percent by 2030 if the combustion engine ban remains unchanged. Stolle warns that without intervention, EU regulations will inevitably drive substantial losses across the sector.
The European Commission has signaled it is considering exemptions, particularly for plug-in hybrids and vehicles with range extenders, prompting speculation about a softening of the strict timeline. However, Stolle cautions that such temporary measures would only “prolong the gradual decline” of European automotive manufacturers. He argues a fundamental structural shift is underway, emphasizing the move away from traditional internal combustion engine expertise to a market now dominated by battery technology and software proficiency – areas where European firms are demonstrably falling behind China.
Currently, EU regulations permit newly registered vehicles to emit an average of 93.6 grams of CO2 per kilometer, scheduled for a progressive reduction to zero by 2035. These “fleet emission standards” are central to the “Fit-for-55” package, intended to place the EU on a path to limit climate change to just above 2 degrees Celsius. A recent ruling by the International Court of Justice has underscored the potential for legal action against states failing to adhere to a 1.5-degree Celsius limit, adding further political pressure on the Commission’s decision and potentially complicating the delicate balance between ambitious climate goals and the economic health of a crucial European industry.
