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Various Mercedes-Benz vehicles are assembled in the “Factory 56” production hall.
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Car manufacturers have several ways to mitigate the impact of the European Union crisis. stricter emissions targetsalthough analysts say all options are likely to come at a significant cost.
The prospect of hefty fines for failing to meet the bloc’s new emissions standards has sparked a heated debate within the automobile industry, especially considering that the sector is currently not on the way to achieve this year’s goal.
A perfect storm of challenges in the The path to total electrification ensured that major OEMs endured a torrid time in 2024, and few expect 2025 to be much better.
The European Union limit on average emissions from new vehicle sales falls to 93.6 grams of carbon dioxide per kilometer (g/km) in 2025, reflecting a 15% decline from a baseline of 2021 110.1 g/km.
Overcoming those limits, which were agreed in 2019 and are part of the 27-nation bloc’s ambition to reach climate neutrality by 2050 — can lead to fines of several billion euros.
“Everyone doesn’t know anything about this issue,” Rico Luman, senior economist in the transportation and logistics sector at Dutch bank ING, told CNBC via video call.
“It’s a big problem because they are still struggling to make the change and restructure, as we have seen with everything that is happening in VW over the past few weeks and months as we adjust the organization to the new world,” Luman said.
“There’s a long-term interest in terms of keeping up with competitors. I mean, the direction of travel is pretty clear. So, in the end, they’re going to have to make it, but in the short term, it’s not as attractive.” for them because it hurts them in many ways,” he added.
What measures can be taken?
Most of Europe’s major auto giants are currently far from reaching the EU’s new CO2 target, ING’s Luman said, meaning action is needed to mitigate the impact of financial sanctions.
Some of the options on the table include boosting sales of battery electric vehicles (EV) by launching more affordable models and lowering prices, reducing production of conventional internal combustion engines (ICE) in favor of plug-in electric vehicles and hybrid models, and “grouping” with competitors that already meet the objective. Alternatively, car companies could simply pay the fines.
Bundling refers to the process in which car manufacturers come together to be considered as a single entity when calculating their performance against a CO2 emissions target.
Today, Sweden volvo It is believed to be the only major automaker to have managed to meet the target, along with the American electric vehicle maker. tesla and some Chinese companies.
The Volvo emblem is seen on the front bumper of a vehicle at the Volvo Cars of Austin dealership on September 4, 2024 in Austin, Texas.
Brandon Bell | fake images
Stephen Reitman, head of European automotive research at Bernstein, said automakers operating in Europe face a “huge emissions gap” this year due to tightening EU regulations.
“Now they can mitigate that by partnering with companies that have excess greenhouse credits. But those companies are one, Tesla, and the other big one is Volvo, which is owned by (China’s) Geely,” Reitman told CNBC .Squawk Europe Box” on Thursday.
“And many of the cars that Tesla sells in Europe, which generates its greenhouse credits, come from China. So, basically, you are seeing a transfer of money from European automakers to Chinese entities or to companies that have originated in China, which may not be the best look for the EU and for national governments,” he added.
A heated debate
Some of Europe’s OEMs have expressed concern on tightening carbon regulations in Europe, particularly as demand for electric vehicles falters.
The European Automobile Manufacturers Association (ACEA), an industry lobby group, has called the European Commission to provide “urgent relief measures” on the new rules, while German Chancellor Olaf Scholz has saying There should be no fines for car companies that do not comply with the new rules.
Joint press conference by the President of the European Commission, Ursula von der Leyen, the President of the European Council, Antonio Costa, and the Prime Minister of Hungary, Viktor Orban, following the conclusion of the European Council summit and the meeting of the EU leaders at the European Union headquarters in Brussels, Belgium, on December 19, 2024.
Nurfoto | Nurfoto | fake images
For some, any move to relax or delay the EU’s stricter carbon rules would be tantamount to scrapping regulation altogether.
Julia Poliscanova, senior director of vehicle supply chains and e-mobility at campaign group Transport and Environment, told CNBC last month that the rules are designed to help make carmakers more competitive, even if it is in to the detriment of some of its main manufacturers. profit margins in the short term.
“We are behind on electrification. So how can it help the industry to delay the goal and set us back even further? I don’t understand it. I just don’t understand how it helps the transition they have to make.” until the end,” Poliscanova said.
The president of the European Commission, Ursula von der Leyen saying at the end of last year that would convene a strategic dialogue on the future of the European automobile industry.
The dialogue, scheduled to officially launch this month, is designed to quickly implement measures urgently needed by the sector.
