Europe’s Tough 2035 CO2 Laws Give Supercar Makers A Free Pass

Europe’s most exclusive carmakers, from Ferrari and McLaren, to Koenigsegg and Pagani, and from Lotus to Donkervoort, this week dodged a CO2 emissions bullet fired at carmakers by the European Parliament.

While every other automaker will only be allowed to sell new zero-emission vehicles from 2035, the ultra low-volume carmakers will be allowed to continue using internal-combustion engines – indefinitely.

After years of negotiations, it came as no shock that the EU approved a law that effectively bans the sale of new petrol-, diesel- and hybrid-powered vehicles in the EU by 2035.

While the European Parliament agreed to the legislation in October last year, its formal approval by the Council of the European Union is expected within a few weeks.

“This regulation encourages the production of zero- and low-emission vehicles,” The EU Parliament’s lead negotiator for the law change, Jan Huitema, said in a statement.

“It contains an ambitious revision of the targets for 2030 and a zero-emission target for 2035, which is crucial to reach climate-neutrality by 2050.”

The new law will also brings in an interim step, forcing a 55% reduction in CO2 emissions from all new cars and SUVs in Europe by 2030 (compared to their 2021 levels) and a 50% reduction for vans.

Boutique carmakers (those selling fewer than 1000 vehicles a year in Europe) will be exempted indefinitely from both emissions cuts, provided they can show they are improving their emissions.

Car makers selling between 1000 and 10,000 cars in Europe a year, like Ferrari, are exempt from the interim emission cut, but not the 2035 rule (the same goes for van makers selling up to 22,000 vehicles a year).

While Ferrari sold 13,221 cars in 2022, it only sold 5958 of those in EMEA (Europe, the Middle East and Africa), so falls well below the threshold figure. It has also already announced its first full EV supercar.

Arch-rival Porsche ticked over an incredible 309,884 sales to be regarded as a mainstream manufacturer, which is why it has EV versions of the Macan and the Boxster/Cayman on their way.

The European Small Volume Car Alliance (ESCA) represents manufacturers with volumes up top 10,000 cars a year, and pushed back against the EU demands for zero-emission vehicles on the grounds of financial viability.

McLaren’s investor report showed it sold 1395 cars in the first three quarters of last year, but less than 1000 of those went to Europe, while Donkervoort built less than 100 cars in 2022, so both are considered “ultra small volume”.

”EU legislation recognizes the unique circumstances for small and ultra-small volume manufacturers and allows for flexibilities prior to 2035 if the manufacturer has agreed a clear CO2 reduction plan with the EU,” a statement from McLaren explained.

Industry insiders have cautioned that the new legislation will usher in a cat-and-mouse game for manufacturers, as they attempt to stay under the 1000- or 10,000-car barriers by juggling their sales distribution outside Europe.

Other brands in ESCA include Alpine, Alpina (now owned by BMW), Aston Martin, Bugatti (now owned by Rimac), Ineos, KTM, Lotus (now owned by Geely), Pagani, Praga, Ruf, Wiesman, Groupil and Radical.

They aren’t the only ultra-low volume brands in Europe, though, with Morgan, Ariel, Caterham, Marcos, Bristol and the troubled TVR lurking in the UK alone. Europe also has Dallara, Apollo and Zenvo, and Australia even boasts the reborn Brabham.

The biggest and most polluting engine in ESCA is the quad-turbo W16 in the Bugatti Chiron Pur Sport, with combined WLTP emissions of 571.6 grams/km, though Pagani’s naturally aspirated V12 AMG motor isn’t far behind.

But not every member of the ESCA is a hypercar maker, with Groupil (owned by Polaris) making small electric utility vehicles for workshops and councils. Ineos has plans to exceed the ESCA maximum volume of 10,000 cars a year, but until it does, its Grenadier off-roader still qualifies.

And not all other low-volume makers build supercars, with France’s Aixam making low-horsepower, entry-level cars that can be driven without a licence, as does Ligier, which is what remains of the once-glorious French Formula One team.

“The ultra-small vehicle manufacturer ((U)SVM) sector is structurally affected by continuous regulatory changes, while large volume manufacturers can benefit from economies of scale to recuperate the investments needed for technological change, this proves challenging for (U)SVMs, which only register significantly lower amounts of vehicles per year in the EU,” ESCA President, Pagani’s Federico Righi said in its CO2 proposal late last year.

“(U)SVMs produce and export worldwide some of the most iconic, desirable and innovative vehicles. The combined total turnover of our members has a value of over €2 billion, while ESCA members’ R&D spend is worth over €200 million and we continue to break new ground in industry expertise and in the development of new technologies.

“Our members employ over 8,000 thousand people directly across borders and hundreds more through their supply chains.”

Righi explained the emissions from boutique car makers might be higher, but its members’ cars rarely do more than 5000km a year, and are rarely discarded, living long lives with regular mechanical attention.

“Vehicles produced by ESCA members also have a much longer use cycles and residual value, and are often prized possession by their owners, not meant for everyday driving,” Righi said.

“Not granting sufficient transition periods for (U)SVMs to adapt to new regulatory requirements would therefore have a dramatically negative economic impact on our sector, with negligible environmental benefits (as (U)SVMs are responsible for a very limited quota of emissions – both CO2 and pollutants – within the whole road transport sector).”

The boutique hypercar business is already electrifying, with Rimac starting as a pure EV maker, and sharing its EV architecture with Pininfarina for its Bautista. It has also bought Bugatti, in a complex share swap arrangement that will see the former Volkswagen Group brand switch to EVs when its Chiron Pur Sport’s reign is over.

Sweden’s Koenigsegg has already developed its own electric motor, its own inverter and its own e-drive unit, while McLaren’s Artura already uses a hybrid powertrain

Croatia’s Rimac qualifies for an exemption, even though it only sells electric cars.

Ineos has an EV planned for 2026, and has a zero-emission fuel-cell EV version of its Grenadier in the works, while Alpina is piggy-backing BMW hybrid and EV tech.

Meanwhile, in the US

There are three ways a low-volume automaker can enter the US market. It can come in via the Federal rules, apply for the EPA rules or use the California Air Review Board (CARB) rules.

The Federal rules insist a brand should sell no more than 5000 cars a year on average over its last three years.

The EPA uses an EU-equivalent rule set, while the CARB rules are more complicated.

CARB insists a low-volume maker cite an equivalent footprint, weight and style of car from a mainstream automaker as a comparison, then CARB will determine an emissions target based on that.

However, the automaker is allowed to use the emissions targets of another vehicle that uses the same powertrain (like Donkervoort, for example, whose F22 uses the Audi TT RS and RS 3 engine, but weighs only 750kg). Low volume makers are also allowed to use emissions credits.