The Cost of Electric Cars
2025 represents a turning point for the European automotive industry and the global automotive sector. While 2035 is known as the year for the definitive farewell to internal combustion engines, 2025 anticipates this transformation with stringent regulations on CO2 emission reduction. Car manufacturers are facing an ambitious goal: to lower average emissions to 93.6 g/km, compared to the 115.1 g/km established for the 2020-2024 period. This change will have a direct impact on consumers, influencing the price of gasoline cars and favoring the electric car market.
Why Will Gasoline Cars Cost more?
Car manufacturers that do not comply with the new CO2 emission limits will be forced to pay penalties of 95 euros for each gram of CO2 exceeding the limit, multiplied by each vehicle sold. For example, groups like Ford and Volkswagen risk paying billions of euros in fines if they fail to reduce emissions.
To compensate, companies might choose to:
- Reduce the production of gasoline cars. A lower supply will inevitably lead to an increase in prices
- Transfer the costs of fines to consumers. This could make gasoline cars significantly more expensive
Many manufacturers are already announcing production cuts for internal combustion engine vehicles. For example, Stellantis has stated that from 2024 it will cut the production of traditional models to comply with regulations. A stable demand for gasoline cars, combined with a lower supply, will lead to a natural increase in prices. In recent years, problems related to the supply chain and scarcity of raw materials have already negatively affected car prices. In 2025, with a further reduction of traditional cars on the market, a new surge in prices is expected for both new and used vehicles.
Why Will Electric Cars Cost less?
To comply with emission limits, manufacturers must increase sales of electric cars, aiming for a market share of 20-25%. To do this, they might launch aggressive promotional campaigns, offering discounts and incentives to stimulate purchases.
For example:
- More competitive prices on electric models
- Incentive packages linked to financing or leasing
Battery technology is rapidly evolving, with a progressive reduction in production costs. Moreover, the higher production volume of electric vehicles will allow for economies of scale, making these cars more accessible to the general public. Dealers may also be incentivized to promote
Advice for Consumers: Buy or Wait?
Those who wish to purchase a traditional combustion car should move quickly. Prices are set to increase as early as 2024, especially for vehicles with emissions above 100 g/km. If you’re leaning towards an electric car, it might be advantageous to wait. With the increase in promotional offers and the likely drop in prices, 2025 could be the ideal time to purchase an EV.
Hybrid and Plug-In Cars: a Special Case
Plug-in hybrid cars (PHEVs) represent an intermediate solution. Thanks to the low emissions declared in the
Which Automotive Groups are at the Highest Risk?
Not all car manufacturers are equally close to the 2025 targets. According to data, Ford and Volkswagen are among the groups furthest from the new limits, with a gap of over 25 g/km. On the other hand, Volvo and the Tesla-Honda-Jaguar Land Rover pool are already compliant thanks to their strategy focused on electric vehicles.
“Pools” and the Role of Collaboration between Groups
To meet the limits, some car manufacturers are forming alliances, called “pools”. These agreements allow manufacturers with high emissions to offset their balance by associating with groups that have a strong share of electric vehicles. For example:
- Toyota has collaborated with Mazda, Subaru, and Suzuki
- Suzuki has recently joined Volvo
Exceptions and Future Strategies
Some niche brands, such as Ferrari and Lamborghini, are exempt from the new limits until 2035, while manufacturers like Porsche benefit from derogations until 2029. However, even for them, electrification is inevitable.
(image source: Freepik)