In 2020, the European Union set a CO₂ emissions target of 95g/km (NEDC test cycle) for passenger cars registered by OEMs within the region. This regulation led to €510 million in fines for manufacturers who failed to meet the target. However, this was just the tip of the iceberg. Many OEMs entered private pooling agreements, purchasing CO₂ credits from “greener” companies to avoid penalties. That same year, Tesla reported $1.58 billion in revenue from pooling agreements, as disclosed in its financial report, supporting OEMs such as Stellantis and Honda to reach their target.
Today, OEMs face a new challenge. Since 2025, the CO₂ target has been reduced to 93.6g/km, now based on the WLTP test cycle, which is on average 20–30% stricter than NEDC. Moreover, the target is brand-specific, calculated according to the average vehicle weight of each manufacturer.
This new regulation has become a “sword of Damocles” hanging over OEMs, caught between a customer base still largely purchasing traditional powertrains and a regulatory framework pushing them toward electrified solutions.
Although the EU has shown some flexibility by applying penalties over a three-year period, results are still calculated annually and can be compensated in subsequent years. Meanwhile, ACEA continues to advocate for a revision of the regulation, warning that it could seriously impact the European automotive industry, already under pressure from new export duties and the growing market share of Chinese brands.
All this brings us to a question: how are Europe’s leading automotive groups performing against the new CO₂ targets?
CO₂ Emissions by Pool/Group According to EU Regulation
The results are concerning: the top three are above their CO₂ targets, even when factoring in the bonus granted for the percentage of ZLEV* (Zero and Low Emission Vehicles) registered. These three pools represent over 70% of total EU volumes, making this a significant warning signal.
The Tesla pool, which includes some of the largest OEMs in Europe, accounted for over 3.5 million vehicles registered in H1 2025. Despite Tesla’s fully electric lineup and Toyota’s strong hybrid strategy, the pool is still 1.4g/km above its target. This shortfall is largely due to Stellantis, which alone represents 51% of the pool’s volume.
While 1.4g/km may seem minor, it translates into nearly €500 million in penalties for the pool in just half a year. There is still time to address this gap by increasing ZLEV sales, reducing combustion engine volumes, or adding more CO₂ efficient brands to the pool, but the trend so far seems to be not positive.
A similar situation is seen with Volkswagen Group, where only Cupra is significantly below the CO₂ target. The group has not teamed up with other manufacturers yet to lower their CO2 emissions, which are 5.6g/km above the target.
On the Renault-Nissan-Mitsubishi alliance front, Nissan still appears to be well above the target, while the Renault Group, despite launching new electric models, remains heavily reliant on traditional powertrains, particularly through Dacia.
The landscape becomes even more interesting when we look at Chinese OEMs entering the European market.
BYD currently holds one of the strongest positions, thanks to a lineup composed entirely of BEV and PHEV models. This strategy positions BYD as a highly attractive candidate for pooling agreements being 85 grams below its target and offering a significant CO₂ advantage that could become a new source of profit. A move that could further enhance the brand’s already strong competitiveness in the region.
On the other hand, SAIC (owner of MG) and Chery (owner of Omoda and Jaecoo) face challenges. Their European strategies are still heavily based on traditional combustion powertrains, meaning they will need to increase ZLEV registrations to meet EU targets.
Today, the EU CO₂ regulation is one of the most hotly debated topics in the European automotive sector.
On one side, OEMs argue that penalties reduce available investment, threaten competitiveness, and may lead to job losses due to the closure of combustion engine plants. On the other side, virtuous OEMs, those who have heavily invested in electrification, want to protect their competitive advantage, including the expected gains from CO₂ pooling.
According to our forecast, if current trends continue, penalties could reach up to €3.5 billion in 2025 alone. This poses a significant risk that could drastically alter the economic outlook for many major industry players. These companies are already under pressure from declining volumes in key regions. In China, local competitors are gaining ground. Meanwhile, in the United States, uncertainty around import duties continues to create instability.
This analysis was made possible thanks to the new CO₂ performance monitoring tool developed by JATO Advisory, designed to track OEM emissions performance against EU targets. The tool enables a deeper understanding of regulatory risks and strategic opportunities, supporting both internal decision-making and external reporting.
On a methodology stand point, the JATO EU CO2 Monitoring Tool has been developed to monitor CO₂ emissions from passenger cars only across 21 EU countries (listed in Note**).
The tool recognizes “Pools”—groups of manufacturers that voluntarily collaborate to meet EU CO₂ targets under Regulation (EU) 2019/631. These pools information is sourced directly in the official EU application folder data.
The tool calculates CO₂ emissions using a volume-weighted average based on vehicle versions equipped with standard features. Emission values comply with the WLTP combined standard, ensuring consistency across models.
The CO₂ target is derived from a formula that adjusts for vehicle weight and aligns with EU parliament regulations:
The tool also take into account the ZLEV credits: manufacturers with a share of zero- and low-emission vehicles (vehicles <50g/km CO₂ emissions) above 25% see their CO₂ target revised upward by 1% per percentage point, capped at 5%. ECO-innovation bonuses are not included in the methodology.
The penalties estimation is based on total volume and on a official rate of €95 per gram per kilometer of CO₂ target exceedance.
**Note – Covered Countries: Austria, Belgium, Croatia, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden.
*EU has set a potential bonus on the CO₂ target for the Pool and group that reach a percentage of ZLEV (vehicles <50g/km CO₂ emissions) above 25%.