Volkswagen Faces Up to €1.5 Billion in Fines for CO2 Emissions Violations (2025–2027)

Volkswagen Group expects it will fail to meet the European Union’s fleet-wide CO₂ emissions targets between 2025 and 2027, potentially incurring fines of up to €1.5 billion. Arno Antlitz, the group’s Chief Financial Officer and Chief Operating Officer, stated that annual costs related to carbon emissions are projected to range between €300 million and €500 million, amounting to nearly €1.5 billion over three years. To lower its overall fleet emissions, Volkswagen needs to sell more electric vehicles (EVs) to offset emissions from internal combustion engine (ICE) vehicles. However, EV profit margins remain significantly lower than those of ICE models. Although the company plans to launch the ID. Polo in 2024 and an even smaller, more affordable all-electric model by 2027, it still anticipates difficulty in achieving the required emissions targets. In the first quarter of 2024, Volkswagen delivered 176,400 electric vehicles in Europe, an 11.5% year-over-year increase. In Western Europe, roughly one-fifth of its sales consisted of vehicles without internal combustion engines. Nevertheless, despite EVs accounting for 20.6% of new vehicle registrations across Europe, Volkswagen believes its EV sales must exceed natural market demand levels to effectively mitigate the risk of fines. The group expects that EV profitability will only reach parity with ICE vehicles toward the end of this decade, once new models based on its unified Scalable Systems Platform (SSP) are launched. In the interim, Volkswagen is working to narrow the profit gap between EVs and ICE vehicles. For example, the upcoming crossover version of the ID. Polo is targeting a profit margin equivalent to 70–80% of that of the T-Cross ICE model. The EU has set clear targets requiring automakers to cut CO₂ emissions by 55% by 2030 compared to 2021 levels, and by 90% by 2035. Although the full ban on sales of new ICE vehicles scheduled for 2035 has been temporarily paused, the industry widely expects that virtually no new pure ICE models will be sold by then, with mainstream offerings dominated by battery-electric and various hybrid powertrains.