EU hits VW with €150m in fines after missed emissions targets

Volkswagen, the world's largest car manufacturer, will have to pay around €150 million in fines after narrowly falling short of the EU's strict emissions targets last year, despite launching its flagship electric vehicle.

The automotive group, which owns Porsche, Audi and Seat brands, said it fleet-wide emissions in the EU were just half a gram short of the target set by Brussels, standing at 99.8 grams of CO2 per kilometre driven.

The near-miss is a blow for Volkswagen which, in the wake of the diesel emissions scandal, has been trying to rehabilitate its image as an electric vehicle superpower, with plans to surpass Tesla by selling 26 million battery-powered vehicles this decade.

Read more: Volkswagen faces Germany's biggest ever lawsuit over "dieselgate"

Daimler and BMW, both domestic rivals of VW, were able to comply with the new rules, due to a surge in demand for plug-in hybrids late last year.

The company began last year with a promising outlook with the scheduled rollout of the ID.3, its flagship mass-market electric car.

However, the rollout did not go as planned and the model was dogged by problems with its software, leading VW to buy carbon credits from Chinese automotive companies, including Aiways, MG and Geely's electric black cab maker LEVC, to as a means of offsetting the problem.

Nonetheless, the tie-ups were not sufficient to enable VW to comply with the targets, though the group said the possibility of fines were already factored into previous quarters and would not affect profits.

Read more: European electric & hybrids market "almost equal with China", figures show

Volkswagen CEO, Herbert Diess, said the company had been "thwarted by the Covid-19 pandemic" in 2020 and the planned launched of electric models throughout the next few months would help it reach the targets in 2021.

The EU targets were designed to hasten development and boost sales of electric vehicles as the bloc pushes towards its own 2050 net-zero target.

Despite the pandemic, demand in Europe for fully electric and hybrid cars rose to 10% across the continent last year - a record high - in part thanks to subsidies in many EU member states.

The fines for missing the targets are €95 for every gram of CO2 over the limit, multiplied by the number of vehicles sold across the bloc.

Volkswagen sold over 3.6 million cars in Europe in 2020, including non-EU member states. Calculations indicate that the company will face a fine of around €150 million.

Read more: German auto sector's EV push leaves Tesla in the dust

Most European carmakers managed to comply with the targets and avoid penalties, though Jaguar Land Rover also admitted it fell short, though the targets are more lenient because it is a smaller manufacturer.

The rules allow for carmakers that find themselves unable to meet the targets to "pool" emissions with cleaner rivals.

Fiat Chrysler pooled with Tesla, while Ford teamed up with Volvo after delays to its hybrid vehicles.

Despite not reaching the EU targets, Volkswagen more than quadrupled its EV sales in Europe last year, delivering a total of 315,400 battery-powered vehicles, well up from 72,600 the previous year.

The German company is the largest EV producer in western Europe with a market share of around 25%.

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