Major EU brand criticises emission rules: Mercedes-Benz calls out new European emissions laws, fears over demand shortage and market instability

The European Union's new emissions regulations proposal is receiving criticism from Mercedes-Benz.

Mercedes-Benz has raised concerns over the European Union’s revised vehicle emissions targets, citing fears over market instability and demand fluctuations, according to reports.

Chief Executive Officer Ola Kallenius recently spoke at a conference, where he said the EU’s new plan could cause the same issues as the previous proposal.

Kallenius’ comments come after reports the EU is proposing to scrap its 100 per cent mandatory CO2 reduction by 2035, in favour of a 90 per cent target.

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Under the December 2025 proposal, carmakers would need to ensure 90 per cent of all new vehicles sold are zero-emission.

Kallenius said that while the reduction to a 90 per cent target looks like a relaxing of regulations, other hidden legislative demands will ensure similar pressure remains on carmakers.

For example, the EU will place expectations around low-carbon steel and synthetic fuels, making up for the 10 per cent shortfall.

“Ninety per cent must not turn into a hidden 100 per cent,” he said.

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The proposal states that seven of the 10 per cent reduction will be accounted for by the use of low-carbon steel, but Kallenius raised concerns about the viability of achieving this.

“I know the market for green steel and how unrealistic those expectations are,” he said.

He also said the rules could trigger a collapse in demand and distort the market.

In addition to Kallenius’ concerns, the CEO of the German giant manufacturer said brands need to be given more time to meet emissions requirements.

Mercedes-Benz incurred no NVES liabilities for the 2025 performance period.

Manufacturers are still subject to tightening CO2 requirements before 2035, but the EU has been extending the compliance windows for these.

For the latest round of compliance, brands will be tested over an average three-year period between 2025 to 2027, as opposed to single-year assessment, as in Australia.

Kallenius said this period should be extended to five years.

In Australia, brands recently discovered their National Vehicle Emissions Standard (NVES) fate, with Mercedes-Benz in a strong position, having accumulated no liabilities for the 2025 period.

As in Europe, emissions standards in Australia will continue to tighten in the coming years.