Volkswagen Fears Colossal Emissions Fine is Coming

The VW Group has put its immensely costly Dieselgate scandal behind it, but it’s still facing an uphill battle to meet emissions regulations. For 2025, the European Union is lowering CO₂ targets by approximately 15% compared to 2021 levels. For each gram above the threshold, automakers must pay €95 ($98). That doesn’t sound like much, but the fine is applied to each car sold. When you’re an automotive juggernaut, it quickly adds up.

Bloomberg cites Rolf Woller, Head of Volkswagen’s Group Treasury and Investor Relations, as telling analysts that the automaker is bracing for an astronomical fine at the end of this year. The Group estimates it will have to pay around €1.5 billion ($1.56 billion) for exceeding emissions. That’s still a drop in the bucket compared to Dieselgate, which cost the automotive conglomerate €31.3 billion ($32.7 billion at current exchange rates) by 2020.

What can VW, Skoda, Audi, Porsche, and the other members of the Group do to avoid the massive fine? Ideally, they should sell more plug-in hybrids, and especially pure EVs. This would compensate for the more polluting ICE cars and lower the emissions fleet numbers. Stellantis is considering an unorthodox alternative: reducing the production of gasoline and diesel cars.

There is a third method. Automakers could (and likely will) form alliances by pooling with greener brands to meet the EU’s stricter emissions targets. Automotive News reports Toyota, Stellantis, Ford, Mazda, and Subaru are teaming up with Tesla, while Mercedes is in cahoots with Volvo and its Polestar spin-off brand. Buying emissions credits will still cost these automakers money, but they’ve probably done the math and determined it will be less expensive than paying fines. It’s all a numbers game, and Tesla, with its EV-only lineup, stands to benefit the most.

Last year, Renault boss Luca de Meo warned that automakers operating in the EU could face €15 billion ($15.6 billion) in fines. The Financial Times quoted Barclays Bank as estimating the penalty would be less than this but still over €10 billion ($10.4 billion). Several automakers have been pressuring the EU to loosen its draconian emissions requirements for 2025, but to no avail.

Based on the sales results for 2024 in the EU posted this week by the European Automobile Manufacturers’ Association, the situation is looking grim. ACEA notes that fully electric cars had a market share of 13.6%, down by 1% compared to the previous year. In addition, PHEVs dropped from 7.7% to 7.1% in 2024. If we’re talking strictly about the VW Group, deliveries of electric cars fell by 5.2% to 447,900 last year.

Looking ahead, the EU will lower fleet emissions targets once again for the 2030-2034 period before reaching 0g/km for 2035 and beyond. This means that, in just 10 years, automakers operating in the EU will be prohibited from selling cars that generate harmful emissions, effectively instituting a ban on combustion engines. However, there could be some exemptions for synthetic fuels, though it’s difficult to see e-fuels gaining significant traction in just a decade.