Europe’s automotive sector faces collapse under the weight of the EU’s CO2 regulations and their “draconian penalties,” Ola Källenius, CEO of carmaker Mercedes andpresident of the European Automobile Manufacturers’ Association (ACEA) has warned.
Starting in 2035, every new car sold in Europe must produce zero CO2 emissions, a rule that is up for review in late 2025.
Critics have said this timeline will hinder European carmakers already struggling with weak demand, Chinese competition, and underwhelming electric vehicle (EV) sales.
“We need to do a reality check. Otherwise, we’ll be driving full speed into the wall. Of course, we have to decarbonise but it has to be done in a technology-neutral way. We mustn’t lose sight of our economy,” Källenius said in an interview with German media outlet Handelsblatt on August 11.
He stressed that if Europe’s automotive sector lost its economic power, political and environmental goals would be out of reach.
The industry should not be forced into a “fixed deadline” to phase out combustion engines, he argued.
“An absolute target at a fixed time with draconian penalties won’t help,” he added.
Instead, he called on politicians to back electromobility by investing heavily in vehicle charging infrastructure.
“First, a comprehensive charging infrastructure must be established. This will take ten, perhaps 15 years – if all member states participate. Far too little has been done in recent years,” he said.
“We also need a market-oriented path with incentives for the ramp-up of electromobility.”
The 15-per-cent tariff that the United States will apply to exports of cars from the European Union as part of a new deal “burdens” Germany’s carmakers, an industry group said Monday. https://t.co/z2F1ZgSBnS
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Källenius also highlighted trade tensions with the US and intense competition from China as key challenges weighing on Europe’s carmakers.
“Our industry is facing rain, hail, storms, and snow all at once. Manufacturing cars has never been tougher,” he said.
The outlook for the EU auto sector looked grim, with major players including BMW, Volkswagen, Volvo and Porsche all having reported sharp profit declines recently.
Mercedes-Benz was hit particularly hard, seeing its profits drop 55.8 per cent in the first half of this year alone compared to 2024.
Källenius pointed to global trade disruptions and fierce market rivalry: “If the US moves to redefine a global trade order that’s been in place for decades, it will directly impact our business.
“We’re also caught in Darwinian competition in China. Meanwhile, the shift to electromobility is taking longer than expected, so we’re investing across multiple drive technologies for the long haul,” he added.
