Starting this year, the European Union is cutting the average carbon emissions that new vehicles sold in the 27-country bloc are permitted to produce, with steep fines if auto manufacturers fail to comply.

Carmakers had expressed concern that they would not be able to meet the target because of lacklustre sales of electric vehicles.

Member states on Tuesday adopted a proposal put forward by the European Commission in March that allows companies to comply with the targets by averaging their emissions over three years from 2025 to 2027, rather than each individual year.

This means they will not be fined if they fail to meet the 2025 target by December 31 this year.

The changes aim "to grant car manufacturers the flexibility required to meet their emissions targets", said the European Council, the body representing member states.

The amendment is to enter into force after publication in the EU's official journal.

Brussels has made it a priority to support businesses and revamp the economy in the face of fierce US and Chinese competition.

The automotive sector is the jewel in Europe's industrial crown, employing around 13 million people and contributing some seven percent to the EU's economy.

But with factory closures in Europe and US President Donald Trump's tariffs threatening to upend the global trading system, the industry faces increasing risks.