The new report by the International Council on Clean Transportation (ICCT) captures the evolution of electric vehicles in Europe – covering the market, charging networks and industrial competitiveness – and shows that the CO₂ Regulation targets are within reach.
The entire European automotive sector has its eyes on the upcoming Strategic Dialogue on the Future of the European Automotive Industry, scheduled for 12 September. For many industrial players, the aim is to secure a commitment from the European Commission to amend the Regulation on CO₂ emission standards. However, relaxing emissions rules risks reversing years of innovation efforts. Speaking recently from the podium of the Strasbourg Parliament, President Ursula von der Leyen reiterated the importance of Europe’s climate ambitions, emphasising that the future of cars will be electric and announcing plans for a new initiative to promote compact cars that are affordable for all.
The Dialogues, designed to define and implement a revival plan for Europe’s automotive industry towards electric vehicles, reveal a lack of commitment and concrete proposals from the industry, particularly around battery production, one of the key issues to be addressed.
There is much speculation about the proposed amendments to the regulation being discussed at various industry roundtables, including lowering the 2035 emissions targets to 90%, introducing offset credits, modifying the utilisation factor for plugin hybrid vehicles, shifting from measuring tailpipe emissions to full lifecycle emissions, and widespread adoption of e-fuels and biofuels. Some even advocate scrapping the regulation entirely, letting only the CO₂ price determine market choices, to the detriment of consumers.
However, these demands lack a detailed, coherent analytical framework addressing the trends in Europe’s automotive sector performance and its transition to electric vehicles. Key questions include: how far are the short-term targets of the CO₂ Regulation from being met now, and what is the trajectory toward the 2035 targets? What is the evolution in model offerings? What are the energy efficiency and economic benefits for consumers choosing electric? What are the climate and health impacts of combustion or hybrid engines? How developed is the charging infrastructure network? What are the implications of Europe’s actions for the competitiveness of its industry compared with the rest of the world?
The answers to these questions are provided by ICCT’s report ‘EV Transition Check’, published today in partnership with ECCO and other European think tanks and organisations. The report offers a picture of the EU light vehicle market, focusing on passenger cars – which account for 90% of such vehicles – using data and analysis that will inform dialogue on the intertwined future of the automotive industry and climate policy.
Growth in the EV market and progress towards climate goals
In the first half of 2025, registrations of battery electric vehicles (BEVs) made up 17% of the market, approximately 40% more than in the same period of 2024. This growth has allowed a reduction in the emissions from newly registered vehicles from 108 gCO₂/km at the end of 2024 to 102 gCO₂/km, just 9 grams above the target of 93 gCO₂/km to be reached in the next two and a half years (it should be noted that the target was originally for 2025, but was moved to 2027 via a regulatory amendment in May 2023 to give manufacturers more flexibility): a goal that looks well within reach under the current rules, which allow manufacturers to pool their compliance. This also applies for individual groups, with the possible exception of Mercedes, as per detailed monthly data from the market monitor promoted in Italy by ECCO: in July 2025 the gap to the 2027 targets was +1 gCO₂/km for BMW, +6 for Renault, +12 for Stellantis, +13 for Volkswagen, +21 for Mercedes (Volvo, with its electric strategy, is already 33 gCO₂/km below the 2027 target).
Perhaps this explains why the Mercedes CEO and ACEA President, Källenius, in a recent Financial Times article, proposes modifying the CO₂ standards regulation to favour plugin hybrids (PHEVs) and suggests a European version of China’s ‘technology neutral’ approach. Yet Chinese policies are moving in the opposite direction. In real world driving cycles, PHEVs emit far more than their homologation tests indicate, due to underestimated ‘utility factors,’ i.e. the proportion of driving that is actually electric. For that reason, the Chinese government is reducing the contribution of PHEVs toward its internal efficiency targets, a decision that analysts expect will reduce credits, fiscal incentives and, consequently, sales of those models. If these vehicles do not find a strong market in China, they will likely be pushed onto Europe, especially considering the absence of tariffs on these engines and the risk of regulatory amendments in Europe that could further loosen rules on utility factors. In fact, such a strategy would favour PHEVs with no clear climatic or economic logic: they emit up to 3.5 times more than estimated, are on average more expensive due to their complexity (having two engines and a battery), and their consumption is comparable to that of traditional cars because of the extra weight. Who benefits from this? Certainly not consumers.
Driving electric is more affordable
Analysing the economic cost of driving a car, the report highlights the clear advantage of BEVs over all other types of engines, including PHEVs, which cost more than €2 extra per 100 kmt. This advantage is largely due to the superior efficiency of electric motors, on average three times greater than internal combustion ones, with room for further improvement. Additional savings could arise from reforming energy taxation, particularly charging costs.
In Italy, average charging prices are among Europe’s highest, both for low power alternating current charging points and high power fast direct current chargers. Much of this difference is due to the weight of parafiscal components in the price of energy – especially the ASOS components of general system charges, which burden the cost of charging. The result is a tax burden on electric charging up to four times greater than that applied to fossil fuels: a kind of “reverse carbon tax”, where those who pollute are in fact subsidised (for example via discounted excise duties), while those using electricity – largely renewable and efficient – end up paying more.
Falling purchase costs for EVs
In terms of purchase costs, the report shows that the number of affordable BEV models has increased sharply in recent years, rising from 2 in 2020 to 21 in 2025, with further expansions anticipated from 2026 onward. This growth has been driven largely by a fall in battery costs, which account for roughly 3040% of a vehicle’s total cost. However, the report points out that battery prices in Europe (US$139/kWh) remain higher than the global average (US$115/kWh) and especially than in China (US$94/kWh), highlighting the need for a European plan for large-scale cell and battery production, with direct involvement of manufacturers in the required investments, avoiding the risk of withdrawal, as seen in Termoli, Italy.
To attract investment, it is essential to create the conditions for a dynamic consumer market. In this respect, Italy lags behind major European markets in electric vehicle sales, with a share of just 5% compared to a European average of 17%. Over the years, the country has failed to ensure consistency and impact of EV incentive policies. Alarmingly, just days ago, the CEO of Stellantis, Filosa, said that the Italian Plan for the automotive industry will depend on the relaxation of European rules. In practice, this could mean that Italy will focus mainly on continuing production of internal combustion and hybrid cars, thus sidelining electric vehicles, risking substantial production losses in the medium to long-term. Meanwhile, Stellantis’ ‘state-backed electrification’ will continue to develop in France, where systemic support for the transition remains strong despite possible regulatory changes. There is also interest from BYD in building manufacturing plants in Italy, including for batteries; one hopes this prospect will prompt a clear shift in government policy to favour electric mobility.
Lower impacts of EVs, even when compared over the full life cycle with biofuels
ICCT data shows that BEVs offer clear climate and public health advantages, reducing air pollution relative to all other engines. This is an extremely relevant factor, especially in Italy.
Considering full life cycles and the current mix of renewable energy in electricity generation, the CO₂ emissions of BEVs are about four times lower (73%) than those of petrol and diesel vehicles, and about three times lower than PHEVs, even when the latter use biofuel blends. The study also finds that increasing biofuel blends does not lead to proportional emission reductions. The decarbonisation potential of biofuels remains limited by the raw materials used. Biofuels from dedicated crops, the most common today, involve significant emissions linked to land use change, as well as from fuel production itself. Conversely, low emission biofuels produced from waste and residual materials are extremely limited in availability, making their use in pure form, i.e. without mixing them with fossil fuels, impractical – a path the Italian government wishes to pursue.
Charging infrastructure and electricity grids
On charging infrastructure, ICCT confirms that in Europe the public charging network for electric vehicles is growing rapidly. By 1 July 2025, there were already over one million public charging points, with a total installed power of 44 gigawatts. Since 2020, charging points grew by 45% annually on average, and power by 63%, figures well above the EU’s minimum targets of 14% and 13% respectively. Relative to the European AFIR Regulation, which sets minimum power and network coverage requirements, the report indicates that almost all Member States have already exceeded the targets, by nearly four times on average. Considerable progress is also being made along the Trans European Transport Network (TENT), with charging points every 60 km, especially in northern Europe, though delays remain in southern and eastern Europe.
On these latter points, Italy must catch up, improving its organisational capacity for planning and allocation of public investment, while stimulating the market with risk guarantees for private investment and energy taxation reform. To reduce public charging costs by removing general system charges from electricity bills, new funding could be sourced by reforming SADs, for example by aligning excise duties between diesel and petrol. Italy must also accelerate the integration of electric vehicles into the electrical grid, leveraging them to manage demand during peak times, increase flexibility and reduce waste, while modernising grid infrastructure.
European automotive sector competitiveness
From a trade perspective, the EU remains a net exporter of passenger cars: in 2024 it exported 5.4 million vehicles and imported four million, with a trade surplus of €89.3 billion. The same applies to electric vehicles: 35% of BEVs produced in the EU are exported, while 31% of EVs sold are imported. Regarding batteries, almost half of those used in EVs built in Europe are locally produced. However, Europe accounts for only 7% of global battery production, compared with China’s 80%. Over the coming years, with expansion in EU and US production capabilities, China’s share is expected to fall to about two thirds of the total.
Part of this European growth will also be driven by the entry of Asian manufacturers into the European market. In this respect, it remains strategic to identify and standardise across Member States methods of industrial cooperation within a regulatory framework favourable to the European ecosystem, starting with local content policies.
The EU aims to build a complete battery ecosystem that includes not only cell production, but also extraction and processing of materials, component manufacturing (cathodes, anodes) and recycling. This path is supported to a large degree by the Critical Raw Materials Act, which sets national targets by 2030 for production, processing and recycling of strategic raw materials. Rigorous timelines, strict CO₂ emission standards for light and heavy-duty vehicles and public resources, such as those allocated under the Battery Booster (€3 billion, €1 billion available from 2024), the Innovation Fund (€1.8 billion) and InvestEU (€200 million), can stimulate private investment and strengthen industry capacity. Involvement of Asian partners in this process remains strategic.
What is still missing, as reflected in industry calls for greater flexibility in CO₂ standards regulation, is the willingness of manufacturers and politicians to assume the risk of responsibility that the Green Deal implies, including the social costs related to the impact of workforce transitions.
“Millions of Europeans want to buy affordable European cars. So, we should also invest in small, affordable vehicles,” said President von der Leyen in her State of the Union address.
The key challenge today is to transform electric mobility into a true mass reality, expanding production of compact, affordable electric cars, meeting citizens’ mobility needs and strengthening Europe’s automotive industry resilience and competitiveness.
Countries that fail to create favourable conditions for a private electric mobility transition risk slowing down the European automotive industry’s transformation, with negative economic and employment consequences, jeopardising their own growth and development.
Photo by Markus Spiske
