(March 3): European Commission President Ursula von der Leyen said the bloc would grant carmakers a three-year window in which to hit carbon dioxide emissions targets that were originally set for this year.

The targeted amendment to give the auto sector flexibility under the 2025 emissions rules will be proposed later this month, according to von der Leyen. In effect, the changes will mean that carmakers can miss the target this year as long as they outperform in the next two.

Shares of European automakers including Volkswagen AG, Mercedes-Benz Group AG and Renault SA jumped following von der Leyen’s remarks, sending the Stoxx 600 Automobiles & Parts Index up almost 3% in intraday trading.

“Instead of the annual compliance, companies will get three years on the principle of banking and borrowing,” she said on Monday in a press briefing. “The targets will stay the same but it means more breathing space for industry and more clarity, without changing the agreed targets.”

Europe’s carmakers have pushed to change the 2025 goal after an electric vehicle (EV) sales slump last year, which made it more difficult to hit the target and may have entailed billions of euros of fines. They could have circumvented a portion of those penalties by pooling sales with carmakers further along the transition, but concerns were raised that it would unduly benefit the likes of Elon Musk’s Tesla Inc and Chinese manufacturers.

While the move will provide some respite — Volkswagen had warned that it was on the hook for a €1.5 billion (RM6.94 billion) hit due to the rules — other companies like Volvo Car AB have called on the commission to stick to its goals to help provide regulatory certainty for those who have already invested heavily in new technology.

Less than two hours before von der Leyen’s comments, Volvo said adjustments to the rules may delay the shift to EVs. Set years ago, the EU standards gave the industry plenty of time to prepare and several mechanisms to comply, Volvo chief executive officer Jim Rowan said in an emailed statement.

Volvo “has made the heavy investments needed to be ready for 2025,” Rowan said. “Companies like ours should not be disadvantaged by any last-minute changes to legislation.”

Volvo was among the automakers poised to benefit from over-complying with the EU’s regulation. Analysts at UBS Group AG have said they expect the company to be paid as much as €300 million by peers wanting to pool their fleet with the manufacturer. It’s not fully clear what von der Leyen’s extension means for pooling.

Environmental groups also criticised the additional flexibility, saying that it risked further undermining the competitiveness of European carmakers during the transition. The advocacy group Transport & Environment described the change as “an unprecedented gift to Europe’s car industry in the middle of a compliance year.”

“Weakening the EU clean car rules rewards laggards and does little for Europe’s car industry except to leave it further behind China,” William Todts, T&E’s executive director, said in an emailed statement. “The EU risks creating very damaging uncertainty about the electric vehicle transition in Europe.”

The proposed amendment will need to be signed off by member states and the European Parliament.

The commission is set to publish on Wednesday its action plan to help Europe’s embattled car industry, with the relief on the 2025 targets to be supplemented with longer-term measures, like encouraging the corporate car sector to incentivise the purchase of EVs. Von der Leyen announced that the EU would set up an industry alliance to promote technological advances, particularly in autonomous driving.

She also said that the bloc would explore direct EU support for its battery makers, including gradually introducing European content requirements for batteries. 

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