Europe’s electric vehicle (EV) market has seen a truly record comeback in sales ever since the start of 2025. By July, BEV sales were booming — in the EU and in the UK. They soared an astounding 30% over the previous year! Yet a number of factors stoked this resurgence. One major factor was a recent amendment passed by the European Council, providing automakers additional flexibility to comply with CO₂ emissions standards.
In May 2025 the European Council approved a major amendment to its emissions standards. The amendment makes the period 2025 to 2027 a three-year compliance window. It swaps out the strong, strict annual targets for a much weaker alternative—one plugged with the express purpose of lowering future fines for auto makers. Under these updated rules, automakers are required to reduce fleet-wide CO₂ emissions by 15% on average. This savings will be measured against 2021 levels and begins in 2025 and continues through 2029. There’s no question that stricter targets for 2030 and 2035 require much more immediate action. Under these reforms, new cars would have to reduce their emissions by 55% on their 2021 levels and new vans by 50%.
The Impact of Regulatory Changes
The revised regulations mark a notable pivot in the EU’s approach to supporting its automotive industry and pushing for progress on climate issues. The flexibility offered through the compliance period has been viewed as a necessary adjustment for manufacturers facing various challenges, including rising costs of essential components like batteries and motors.
“Following the presentation of the Industrial Action plan for the European automotive sector, on 5 March 2025 the European Commission put forward a targeted amendment to the CO₂ standards for new cars and vans… it basically allows manufacturers to balance any excessive emissions in one or two of these years by outperforming the target in the remaining year(s).” – Carlo Zarcone
This regulatory breathing room has arrived at a critical juncture. The European EV industry has faced serious headwinds in recent years. Fierce competition from Chinese manufacturers and the recent removal of government incentives have both put a damper on EV purchases. Germany terminated its ‘Umweltbonus’ subsidy at the end of 2023. As a result, EV sales plummeted. The Netherlands’ grant fund for EVs ran out by November of 2024, adding even more pressure to the market.
In spite of these difficulties, the first half of 2025 proved a tipping point for the state of Europe’s EV industry. By July 2025, European EVs had an incredible 29.4% year over year market share gain. This dramatic increase is a sign that consumers are more eager than ever to embrace sustainable transportation alternatives.
The Role of Consumer Demand
The recent BEV boom is mostly explained by consumer preferences shifting. The EU policies at play here being as effective as they have been. This information illustrates clearly that automakers need to sell many more electric vehicles. Buyers are thrilled with these modifications too!
“The EV sales rebound shows that the existing EU target is working. Require carmakers to sell more electric cars and the buyers will come.” – Julia Poliscanova
This change isn’t positively impacting every segment of the market in equal measure. Premium brands used to dominate the EV landscape, making up nearly half of all EV sales in early 2024. By August 2025, their market share had fallen to a mere 39%. This marks a major change in the landscape – the wider acceptance of EVs among mainstream consumers, now that more affordable options continue to hit the market.
Along with technological advancements that enhance charging infrastructure, projections show that BEV sales will see ongoing, explosive growth. Analysts warn this shift won’t come without significant challenges.
“Until recently BEV sales were overweight in the premium segment. Of course, that has to change if the entire market is to shift to BEVs as required by 2035 by EU policymakers. Our forecasts for BEV sales indicate continued growth as CO₂ rules get tougher, technology improves, infrastructure expands and BEV prices come down. However, it may be a bumpy road.” – Al Bedwell
Challenges Ahead for Automakers
Sales of EVs are certainly enjoying some benign tailwinds. Yet for automakers, the challenge ahead is monumental as they work to adapt to the new regulatory landscape while meeting the growing consumer demand. The automotive industry is at a critical juncture as it seeks to adapt to stringent emission targets amid global competition.
Daimler CEO Ola Kaellenius and Siemens Mobility CEO Matthias Zink have publicly lamented on the challenges of the industry’s shift. They argue that much more detailed and realistic policy planning is needed in order to enable this transformation.
“We want to make this transition work – but we are frustrated by the lack of a holistic and pragmatic policy plan for the automotive industry’s transformation.” – Ola Kaellenius and Matthias Zink
They say they are troubled over the heavy-handed restrictions placed on manufacturers in this critical turning point.
“We are being asked to transform with our hands tied behind our backs.” – Ola Kaellenius and Matthias Zink
The terrain is made more difficult by the economic headwinds, including increased production expenses. High unit costs for batteries and other key components are posing major challenges for automakers. As a result, their ability to provide competitively-priced electric vehicles (EVs) is severely hampered.