The German Ministry of Economy recently expressed its willingness to reexamine European sanctions scheduled for 2025 that would penalize automakers failing to meet carbon dioxide (CO2) emission limits. This initiative follows discussions with France, where Industry Minister Marc Ferracci also supports a temporary suspension of these fines to address the challenges facing the European automotive sector.
The fines imposed by the European Corporate Average Fuel Economy (CAFE) standard are intended to encourage automakers to gradually reduce emissions from their vehicles. A new threshold is set to come into force in January 2025, imposing additional constraints on manufacturers. However, with competition from Chinese manufacturers, rising energy costs, and declining global demand, this deadline is perceived as an additional burden for Germany’s automotive industry.
Mr. Ferracci emphasized that delaying sanctions until 2026 could provide relief for companies that have heavily invested in electrifying their production lines in recent years. This measure, he argued, would enhance the competitiveness of European players against Chinese manufacturers whose electric vehicles are currently flooding the European market.
Divisions within the German government
In Germany, the question of relaxing environmental sanctions divides the government. Bernhard Kluttig, German Secretary of State for Economy, clarified that no final decision had yet been made. While some members of the government, notably from the Social Democratic Party (SPD) and the Greens, are open to a more flexible approach, others, particularly the liberals represented by Finance Minister Christian Lindner, advocate for more radical measures. Mr. Lindner not only seeks to eliminate the fines but also to reconsider the ban on selling new thermal cars in the European Union by 2035.
The economic impact of the transition to electrification is a major concern for Germany, where nearly 140,000 jobs in the automotive sector could disappear by 2035, according to a study by the German Federation of Automotive Manufacturers (VDA). This concern is shared by industry players at the European level: European automotive equipment manufacturers announced the elimination of 32,000 jobs in the first half of 2024, a number of layoffs higher than those recorded during the Covid-19 pandemic.
Toward a European decision in the first half of 2025
In response to requests from Berlin and Paris, the final decision is expected to come from the European Commission, whose new commissioners will take office in December. The aim is to reconcile the pursuit of decarbonizing the automotive industry with maintaining the competitiveness of European companies.
Mr. Ferracci also announced the preparation of a “legislative package” in the first half of 2025 to support both the demand for and manufacturers of vehicles in Europe. France and Germany thus join forces to strengthen the European automotive industry’s ability to address environmental and economic challenges, promoting a temporary support solution for companies committed to the energy transition.
