Navigating reshaped CAFE targets

Passenger cars and light commercial vehicles (vans) account for about 19% of total CO2 emissions in the EU¹. To reduce emissions, the EU has set vehicle emission standards for new cars and vans, also referred to as the CAFE standards (corporate average fuel economy).

2020 – 2024 (based on NEDC²):

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  Cars: 95 g CO2/km
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  Vans: 147 g CO2/km

2025 – 2034 (based on WLTP³):

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  Cars: 93.6 g CO2/km (2025-2029) and 49.5 g CO2/km (2030-2034)
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  Vans: 153.9 g CO2/km (2025-2029) and 90.6 g CO2/km (2030-2034)

2035: All new passenger cars and vans sold in the EU must be zero-emission.

Starting in 2025, manufacturers will face fines for not meeting these targets, with estimates suggesting potential fines could reach around €20 billion if trends continue. This has led manufacturers to lobby the European Commission for more flexible targets. While the overall targets will stay the same, the European Commission may allow manufacturers to average their emissions over a three-year period from 2025⁴. This means they can have some flexibility in how they meet these targets, but the 2035 goals will (until now) remain unchanged. This "banking and borrowing" is therefore seen as a temporary fix, as the industry must ultimately move towards more sustainable practices. This amendment is now subject to approval by European Parliament and Council.

The demand for battery electric vehicles (BEVs) and hybrid electric vehicles (HEVs) is rising, while plug-in hybrid electric vehicles (PHEVs) are declining. Local laws and fiscal regimes are increasingly supporting EU’s strive for decarbonisation, adding more pressure on manufacturers to speed up their shift to electric vehicles. An example of this are the recent changes in benefit in kind taxation in France and Italy.

In 2025, there will be more BEV models available than ever before, but there is still a gap between what is offered and what consumers expect. Although the average range of BEVs is improving—models like the Volvo XC40 and Tesla Model 3 can travel over 460 km—the options are still limited for vehicles priced below €25,000.

Europe and China are expected to lead in electrification, while the pace of change in the United States and other regions may be slower due to different regulations. Other parts of the world will also move towards electrification but at a slower rate.

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  Electrification is here to stay.
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  Stay informed about new laws and fiscal regimes.
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  Consider how changes will affect overall costs.
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  Corporates and large fleets will have more negotiating power when buying BEVs.

As the EU aims to reduce CO2 emissions, car manufacturers face both challenges and opportunities in adapting to these new rules. With fines for non-compliance on the horizon, manufacturers must embrace more sustainable practices. Strategies such as increasing sales of electric vehicles, collaborating with others to meet emissions targets, and offering competitive pricing are becoming essential.

As demand for electric vehicles rises, fleet managers should keep an eye on new laws and their potential impact on costs. The shift towards electrification is a significant change in the industry, highlighting the need for careful planning and active involvement to successfully navigate this new landscape. Ayvens will continue to monitor industry changes and keep clients updated.

Sources:

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  CO₂ emission performance standards for cars and vans - European Commission
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  NEDC: New European Driving Cycle – previous standard emission test for vehicles. Replaced by WLTP
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  WLTP: Worldwide harmonised light vehicle test procedure
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  Commission proposes flexibility to help manufacturers comply with 2025 CO2 emission targets