Mercedes Alone Faces Non-Compliance With EU CO₂ Standards

Europe’s major automakers are navigating the shift toward stricter climate regulations, but not all are moving at the same pace. A new study by Transport & Environment (T&E) highlights that Mercedes-Benz stands apart as the only large European carmaker unlikely to meet the bloc’s 2025-2027 CO₂ standards without outside help.

While BMW, Stellantis, Renault, and Volkswagen are on track to comply, Mercedes’s hesitation places it at risk of financial penalties. The findings arrive amid growing debate over whether the European Commission should maintain, soften, or delay its longer-term 2030 and 2035 climate goals.

The EU’s CO₂ Standards and the Postponement

Initially, the European Union planned for tighter average fleet CO₂ limits to take effect in 2025. However, earlier this year the Commission allowed manufacturers to phase in compliance between 2025 and 2027, rather than facing a single hard deadline.

The delay was framed as a relief measure for carmakers struggling with slower-than-expected EV sales. Yet T&E’s research suggests this decision has slowed the overall transition. As companies eased production plans, Europe may now see 2 million fewer EVs sold during the compliance window than under the original 2025 enforcement date.

Vertical Summary Table

Official report link: Transport & Environment – Mercedes the only EU carmaker not on track to meet CO₂ targets

Who’s On Track  and Who’s Not

According to T&E’s EV Progress Report, most automakers are projected to meet or even outperform the limits:

• BMW: Surplus of 13 g/km below the legal cap.

• Stellantis: 9 g/km below requirements.

• Renault: 2 g/km below the ceiling.

• Volkswagen Group: Right on the threshold, with no margin.

• Mercedes-Benz: 10 g/km above allowed emissions, falling short of compliance.

The report concludes that Mercedes is the only company in breach unless it purchases credits from Volvo Cars and Polestar via a pooling arrangement.

Mercedes’s Strategic Position

Mercedes-Benz currently holds the presidency of the European Automobile Manufacturers’ Association (ACEA) and has been one of the most outspoken critics of tightening emission rules.

Rather than expanding its EV portfolio aggressively, Mercedes has been slower to shift away from profitable combustion engine models. By contrast, competitors like BMW and Stellantis have accelerated their electric offerings, giving them more breathing space under EU rules.

Mercedes’s reliance on pooling credits not only adds costs but also signals a strategic risk: failing to lead in electrification while lobbying against the targets could undermine its long-term competitiveness.

Favorable Market Trends Undermining the Case for Delay

Ironically, the regulatory delay occurred even as underlying market conditions for EV adoption are strengthening:

• Battery costs are falling rapidly. T&E forecasts a 27% reduction between 2022 and the end of 2025, with a further 28% decline expected by 2027 compared to 2025 levels.

• Charging infrastructure is expanding. Coverage has now reached 77% of the EU’s core highway network, and all member states have already surpassed the EU’s 2025 target for public charging points.

These dynamics suggest the industry has fewer technical barriers than often claimed. The real challenge may be strategic choices by manufacturers themselves.

The Stakes for 2030 and 2035

The EU’s next milestones are much tougher: a 55% CO₂ cut by 2030 compared to 2021 levels, and a full phase-out of new combustion engine cars by 2035.

Automakers are pressing policymakers to soften these goals. Yet a coalition of over 150 industry leaders, including Volvo Cars and Polestar, recently urged Brussels not to retreat, warning that weaker rules could damage investor confidence and leave Europe behind global rivals.

The issue will take center stage during the European Commission’s upcoming strategic dialogue on the automotive industry, where both industry and policymakers will weigh short-term pain against long-term competitiveness.

Europe’s Global Position in the EV Race

Globally, other regions are advancing quickly:

• China is expected to reach over 30% BEV sales share by end-2025.

• Emerging markets such as India, Mexico, Indonesia, and Thailand already have EV market shares ranging from 5% to 24%.

If Europe hesitates now, Chinese and other non-European automakers could gain a dominant role in global markets. T&E stresses that the EU must hold the line on future targets to ensure European carmakers remain competitive in the decade ahead.

Frequently Asked Questions (FAQs)

Q1: Why did the EU extend the 2025 deadline to 2027?

A. The extension aimed to ease pressure on automakers facing slower EV sales. However, critics argue it weakened incentives, resulting in fewer electric cars being sold.

Q2: What does pooling mean in EU compliance rules?

A. Pooling allows a carmaker exceeding CO₂ limits to purchase credits from another manufacturer that is under the limit. Mercedes is expected to buy credits from Volvo Cars and Polestar.

Q3: Why is Mercedes struggling compared to peers?

A. Mercedes has focused longer on high-margin combustion models, investing less aggressively in EV production than competitors such as BMW and Stellantis.

Q4: How do falling battery costs affect the transition?

A. Cheaper batteries reduce EV production costs, narrowing price gaps with combustion vehicles and making electric cars more competitive.

Q5: What risks does Europe face if it weakens 2030 and 2035 goals?

A. A retreat could slow investment, reduce competitiveness, and allow Chinese manufacturers to dominate EV markets.

Conclusion

Mercedes-Benz’s position as the only European automaker failing to comply with the EU’s near-term CO₂ rules underscores the risks of delaying regulation. While market fundamentals are turning favorable for EV adoption, strategic hesitation and lobbying could undermine Europe’s climate goals and its global competitiveness. The decisions taken by EU leaders in the coming months will determine whether Europe leads or lags in the global EV transition.

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