The European Commission adopted Regulation number (EU)2019/631, setting new EU fleetwide CO2 emission targets for 2025 and 2030, for newly registered passenger cars. Automotive manufacturers must determine their targets for CO2 targets based on their fleets’ weight in 2021. These standards, which will become stricter by 15% in 2025 and 35% compared to 2021, cannot be achieved without fleet electrification. This study compares ICEVs fleet replacement effects by BEVs and PHEVs on CO2 compliance and production costs. To address this tradeoff, we minimized the production costs of replacing ICEVs with BEVs and PHEVs for 12 scenarios: 4 vehicles Segments and three years: 2021, 2025, 2030. Results show that for all vehicles Segments, the introduction of BEVs and PHEVs into the vehicle fleet reduces the costs of CO2 compliance relative to a pure ICEV scenario. Automotive manufacturers must sell required quotas identified in this study, depending on the vehicle’s Segment, BEVs, and PHEVs, to ensure minimum costs. Results show that it is more beneficial for automakers to respect the CO2 engagement than to pay penalties. Generally, the minimum costs are achieved favouring PHEVs rather than on BEVs, regardless of the Segment, because of the fewer battery installed. Finally, we analyse the results and compare them to the directive of the European Commission. We recommend future research to consider the vehicle’s real fuel consumption instead of standard cycle fuel consumption.