11:53 22-10-2025

EU carmakers tap EV carbon credits to offset CO2 penalties

European automakers have found a way to sidestep multibillion-euro penalties for exceeding CO2 limits. According to Reuters, several companies have formed coalitions with electric-vehicle manufacturers to tap their so-called carbon credits and balance out average fleet emissions.

The fines, originally calculated for 2025, could have reached 15 billion euros, but the European Commission softened the framework: fleet averages will now be measured across 2025–2027. Even so, the risk remains high for brands that are behind on electrification.

Nissan has struck an agreement with China’s BYD, while South Korea’s KG Mobility paired with Xpeng. Tesla, effectively the center of many such arrangements, created a pooling scheme in January with Toyota, Ford, Mazda, Subaru, Stellantis and China’s Leapmotor. Honda and Suzuki later joined.

Mercedes-Benz also entered a separate pact with Volvo Cars, Polestar and Smart—all connected through China’s Geely, which holds stakes in each participant.

AlixPartners estimates that EVs accounted for 12% of Europe’s market in 2024, will climb to 15% in 2025, and reach 24% by 2027. By the end of the decade, 40% of all new passenger cars in the EU are expected to be electric.

These tie-ups buy time and help manufacturers avoid massive fines, but experts warn that even tougher environmental standards arrive in 2030, at which point full electrification will be hard to sidestep. For now, pooling looks like a pragmatic stopgap—useful for compliance, yet a reminder of how far some lineups still are from hitting the mark on their own.