EU 2035 Emissions Rule and Chinese Exports Cut European Automaker Margins to 1.8 Percent
Aggressive EU emissions deadlines produced capital allocation that diverged from actual purchase patterns, allowing Chinese exporters to capture margin and volume. Resulting write-downs and layoffs quantify the cost of policy precedence over observed demand signals.
The European Commission’s 2023 regulation requiring 100 percent tailpipe CO2 elimination from 2035, later adjusted to 90 percent, compelled Volkswagen to commit $193 billion to electrification by 2023. Stellantis recorded 22.2 billion euro write-downs in 2025 after overestimating demand. Global EV sales rose 20 percent to over 20 million units per IEA data, yet European producers recorded the steepest margin compression as Chinese models priced near $10,000 entered the market.
European Commission: EV share of new EU registrations falls below 22 percent by Q4 2027 absent new national purchase incentives
Sources (3)
- [1]European Commission Regulation (EU) 2019/631 as amended 2023(https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32019R0631)
- [2]IEA Global EV Outlook 2025(https://www.iea.org/reports/global-ev-outlook-2025)
- [3]Volkswagen AG Annual Report 2025(https://www.volkswagenag.com/en/investors.html)