Auto Brief: Automakers Breathe Easier As CO2 Sanctions Ease

This report does not constitute a rating action. Ms. von der Leyen is set to unveil the proposal in the Strategic Dialogue on the Future of the European Automotive Industry on March 5, 2025. The 15% reduction in CO2 emissions for cars and vans compared to the 2021 baseline still holds, but automakers will now have until 2027 to comply. Neither the 2030 target--a reduction of 50% for vans and 55% for cars compared to the 2021 baseline--nor the 2035 ban on the sale of all vehicles with tailpipe emissions are changing. This will support their margins and cash flow metrics in 2025-2026. The development appears to: Acknowledge legacy original equipment manufacturers' (OEMs') commitment to launch clean mass-market vehicles, most

...EU Commission President Ursula von der Leyen anticipates taking a softer regulatory stance toward the imposition of penalties on automakers missing CO2 emissions targets in the EU in 2025. Ms. von der Leyen is set to unveil the proposal in the Strategic Dialogue on the Future of the European Automotive Industry on March 5, 2025. At this stage, S&P Global Ratings understands that there will be no substantial change to the CO2 emissions targets per se. The 15% reduction in CO2 emissions for cars and vans compared to the 2021 baseline still holds, but automakers will now have until 2027 to comply. Neither the 2030 target--a reduction of 50% for vans and 55% for cars compared to the 2021 baseline--nor the 2035 ban on the sale of all vehicles with tailpipe emissions are changing. Most importantly, automakers' earnings will not be constrained by penalties until 2027. This will support their margins and cash flow metrics in 2025-2026. The development appears to:...

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