Various Mercedes-Benz vehicles are assembled in the “Factory 56” production workshop.
Image Alliance | Image Alliance | Getty Images
Carmakers have a number of ways to mitigate the impact of the European Union’s tougher emissions targets, although analysts say all options could come at a high price.
The prospect of facing hefty fines for not complying with new EU emissions standards has sparked fierce debate within the automotive industry, especially given the industry’s current not on track to achieve this year’s goals.
A storm of challenges on the road to full electrification has given major original equipment manufacturers (OEMs) a rough patch in 2024, but few expect 2025 to be much better.
The European Union has lowered the average emissions cap for new car sales to 93.6 grams of carbon dioxide per kilometer (g/km) in 2025, a 15% reduction from the 2021 baseline of 110.1 g/km.
Exceeding the limits – which were agreed in 2019 as part of the 27-nation bloc’s ambition to become climate neutral by 2050 – could result in fines of up to billions of euros.
“Everyone is in the dark about this issue,” Rico Luman, senior sector economist for transport and logistics at Dutch bank ING, told CNBC via video call.
“This is a big deal because they are still trying to transform and reorganize, as we’ve seen with everything Volkswagen has done over the past few weeks and months as they adapt their organization to the new world,” Luhmann said. That way.
“There’s a long-term interest in keeping up with the competition. I mean, the way forward is very clear. So ultimately, they need to achieve that, but in the short term, it’s not that attractive to them. , because it hurts them in many ways,” he added.
What actions can be taken?
ING’s Luhmann said most of Europe’s top car giants were currently far from meeting the EU’s new CO2 emissions targets, meaning action was necessary to mitigate the impact of financial penalties.
Some options on the table include boosting electric vehicle (EV) sales by launching more affordable models and lowering prices, reducing the production of conventional internal combustion engines (ICE) in favor of plug-in electric vehicles and hybrid models, and “pool vehicles”. ization” with competitors who have already achieved their goals. Alternatively, the car company could simply pay the fine.
Bonding is a process whereby carmakers join together to be treated as one entity when calculating performance against CO2 emissions targets.
Currently, Sweden’s Volvo is believed to be the only major automaker to achieve this goal alongside the U.S. electric car maker Tesla and some Chinese companies.
A Volvo logo appears on the front bumper of a car at the Volvo Cars Austin dealership on September 4, 2024 in Austin, Texas.
Brandon Bell | Getty Images
Stefan Reitmann, head of European automotive research at Bernstein, said carmakers operating in Europe face a “huge emissions cliff” this year given the tightening of EU regulations.
“Right now they can mitigate the problem by joining forces with companies that have too many greenhouse gas credits,” Reitman told CNBC’s “Squawk Box Europe.” But one of those companies is Tesla and the other big company is Volvo, which is owned by (Chinese) Geely Automobile.
“Many of the cars Tesla sells in Europe are coming from China, and those cars are generating greenhouse gas credits. So basically, you’re seeing European automakers moving money to Chinese entities or businesses that originate in China. In China, this may not be the best option for the EU and national governments,” he added.
a heated debate
some european original equipment manufacturers express concern On tightening carbon emissions regulations in Europe, especially as demand for electric vehicles declines.
Industry lobby group European Automobile Manufacturers Association (ACEA) called European Commission offers “urgent relief measures” on new rules, while German Chancellor Olaf Scholz says explain There should be no fines for car companies that don’t comply with the new standards.
After the European Council Summit and the meeting of EU leaders at the EU Headquarters, European Commission President Ursula von der Leyen, European Council President Antonio Costa and Hungarian Prime Minister Viktor Orban held a joint press conference 2024 Held in Brussels, Belgium, on December 19th.
Noor Photos | Noor Photos | Getty Images
For some, any move to water down or delay the EU’s tougher carbon rules is tantamount to scrapping the regulations altogether.
Julia Poliscanova, senior director of vehicles and electric vehicle supply chain at the Transportation and Environment Campaign group, told CNBC last month that the rules are intended to help automakers become more competitive, even if it hurts them some of the higher levels.
“We’re behind on electrification. So how exactly does pushing back the target and making us further behind help the industry? I don’t understand. I just don’t understand how that helps the transition that they have to make to pass,” Poliskanova said .
European Commission President Ursula von der Leyen explain Late last year, she was to convene a strategic dialogue on the future of the European automotive industry.
The dialogue is due to officially launch this month and aims to quickly implement measures that the industry desperately needs.
About The Author
