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Auto giants are getting nervous about the prospect of mega fines as EV demand falters

Europe's top car giants appear to be increasingly concerned about the prospect of massive fines, particularly as electric vehicle demand falters ahead of the next tightening of carbon regulations.

Automakers operating in Europe face stricter emission targets from next year as the EU cap on average emissions from new vehicles sales falls to 93.6 grams of CO2 per kilometer (g/km), reflecting a 15% decrease from a 2021 baseline of 110.1 g/km.

Exceeding those limits — which were agreed in 2019 and form part of the 27-nation bloc's ambition to reach climate neutrality by 2050 — can result in hefty fines.

Rico Luman, senior sector economist for transport and logistics at Dutch bank ING, said Europe's carmakers had every reason to be concerned about the scale of the financial penalties.

"The fines are massive actually. When you calculate it … it easily comes to many millions based on the volumes they produce," Luman told CNBC via videoconference.

Renault CEO Luca de Meo said last month that if EV sales remain at current levels, the European auto industry may have to pay 15 billion euros ($16.5 billion) in financial penalties or give up the production of over 2.5 million vehicles, Reuters reported, citing an interview with French radio.

The European Automobile Manufacturers' Association, or ACEA, says the industry is missing "crucial conditions" to support the zero-emission transition, "with concerns about meeting the 2025 CO2 emission reduction targets for cars and vans on the rise."

The car lobby group, which represents the likes of BMW, Ferrari, Renault, Volkswagen and Volvo, warned that the EU's current rules "do not account for the profound shift in the geopolitical and economic climate" in recent years.

"European auto

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