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Billion-euro fines threaten car manufacturers: 'Stop selling SUVs with 400 hp'

The article was first published in Dutch in de Volkskrant

Billion-euro fines threaten car manufacturers next year if they fail to meet the new European emission standards. PA industry expert Michael Schweikl explains why CO2 emissions from cars aren’t decreasing.

If you look at car manufacturer advertisements in magazines and see their commercials on TV, you might get the impression that the sustainable, climate-friendly future of the electric car has arrived. But the opposite turns out to be true: CO2 emissions from cars are on the rise. No manufacturer will meet the strict European CO2 standard that will enter into force at the end of this year, causing a total of no less than 14 billion euros in fines, according to PA Consulting.

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The European Commission has stipulated that from next year onwards, all new cars must not emit more than 95 grams per kilometre on average. This strict standard has major consequences for many car builders, such as Volkswagen, which will exceed the standard. Because the group builds ten million cars a year, the fine will be correspondingly high: the Germans may be presented with a bill of 4.5 billion euros from Brussels. Even Toyota, which switched early on to fuel-efficient hybrid technology and was well on its way, is likely to exceed the European limit. A fine of 18 million is still imminent.

PA Consulting charted the average CO2 emissions of the main European car manufacturers for the fifth time. The latest report paints a bleak picture. Instead of decreasing, emissions are again growing across the board, according to PA expert Michael Schweikl.

[Journalist]: The industry has known for years that the strict standard is coming. How can it be that companies don't reach the targets and will soon receive fines of millions?

[Michael Schweikl]: “There are a few causes. For example, there's a huge demand for SUVs. Because they are heavier, they use more fuel and therefore emit more CO2. In addition, since the diesel scandal, motorists have switched from diesel to petrol, also for their SUVs. A comparable petrol engine emits more CO2 than a diesel. If you put it in a large SUV, the emissions increase even more. Furthermore, manufacturers continue to build cars with a lot of power.”

[J]: Manufacturers are in a mess. The customer wants SUVs and they make a lot of money with them. Should they stop doing that?

[MS]: “No. But their SUVs need to be more efficient. Build more cars with plug-in hybrid (cars that can drive several tens of kilometres fully electric, after which the fuel engine takes over) and stop selling SUVs with 400hp. Are they really necessary?”

[J]: Motorists can buy an electric car, can't they? It doesn't officially emit any CO2.

[MS]: “That's right. But the high price is still a hurdle for many consumers. And the availability of e-cars is too small. That's another reason why CO2 emissions are not falling enough.”

[J]: To meet the standard, Volkswagen would have to increase the production of e-cars 26 times in a year, you have calculated.

[MS]: “That's not going to work. They can probably increase the production of their all-electric ID.3, but it won't be enough. Even tripling it is a challenge, because this is a new type of car, with a lot of complex software still under development. The ID.3 is actually one or two years too late.”

[J]: So there's a fine.

[MS]: “The question is whether car manufacturers do indeed have to pay. That's not certain yet. There will be a lobby. Car manufacturers will say that they already have to incur enormous costs for electrification. That sales are collapsing. That there will be job losses if the fines are imposed.

“It will probably turn out to be a compromise. Perhaps there will be a fund filled with the fines, which will be used to stimulate electric driving, for example by building more infrastructure and supporting start-ups. But then manufacturers will have to make it clear how they are going to meet the even stricter targets of 2025. This will be a discussion between industry and politics.”

[J]: In the last decade, Europe has been lenient for industry on emissions standards for diesels. We all know where this has led. Brussels can't be weak again.

[MS]: “Certainly. But there is now a risk of an atmosphere in which everyone is blaming each other: politicians, industry, the public, environmental organisations. That doesn't take us any further. It is better to look together to see how we can achieve the goals. Those of 2021 will not be achieved. In my opinion, the best thing is to work together to achieve the goals of 2025. It takes four years to develop a car. So you have to make the plans now in order to meet the standard of the future.

Passenger cars have been emitting more CO2 in recent years instead of less. The reason: Europeans have started driving SUVs en masse.

The plug-in hybrid, a car that can run on petrol as well as electric, quickly seemed to disappear from the picture. The tax advantage disappeared, sales collapsed and the bad image didn't cooperate. But last year sales increased again. Does this type of car deserve a second chance?

Governments that want to stimulate sustainable innovation in the car industry should study Machiavelli. Divide and rule helps break the status quo at established car manufacturers, who are more likely to abandon their resistance to innovation and invest separately in innovation.

Diesel is no longer sacred to Volkswagen. One year after the diesel scandal, the car manufacturer turned to electric cars. The I.D. has to become the new Golf.

Driving into a low emissions future: How can car makers look beyond 2021

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