Diesel Collapse Gives Automakers Carbon Headache

A Toyota Auris Hybrid is uncovered at the International Motor Show on March 6, 2018 in Geneva, Switzerland. One of the pioneers of hybrid technology cars, Toyota is better placed than many manufacturers as the market lurches away from diesels. Robert Hradil/Getty Images

GENEVA—The accelerating demise of diesel, long used by carmakers to boost fuel-efficiency, is undermining their plans to meet looming European Union CO2 goals, and avoid big annual fines.

Executives gathered on Tuesday at the Geneva auto show are grappling with unpalatable choices: re-engineer existing vehicles at huge expense, restrict sales of some profitable models; or risk hundreds of millions of euros in penalties.