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CO2 targets make car manufacturers sweat

PA Consulting’s Michael Schweikl, automotive expert, is quoted in an article in Finanz und Wirtschaft. The article explains that due to cars in the EU emitting more CO2 rather than less, manufacturers face difficulties in meeting their emissions targets.

The article goes on to say that in the automotive industry, all newly registered passenger cars have to comply with an average emissions target of 95g CO2/km. For some manufacturers the value of the target is higher due to the positioning of their fleet (weight etc.), for others it is lower. 95g corresponds to a test cycle consumption of 4l petrol or 3.6l diesel per 100 kilometres. Manufacturers that fail to meet their targets will have to pay 95 Euros for each gram above the target, multiplied by the number of their vehicles registered in the EU in the respective year.

The piece draws on PA’s research which found that hardly any of the leading car makers in Europe will meet their targets. In total, there will be fines of 14.5 billion Euros in 2021. The forecast penalties vary in their share of operating profit in 2018 between the individual groups. While it amounts to less than a tenth for BMW and Daimler, Volkswagen and Fiat-Chrysler would have to pay a third or half of their profits. The analysis for 2021, produced by PA Consulting annually, is subject to change. In last year's study, the predicted CO2 emissions levels for Volvo, Toyota, Renault-Nissan-Mitsubishi, Honda and Jaguar-Land-Rover were still below their respective target values. Volkswagen were expecting a fine of just 1.4 billion euros and Fiat-Chrysler half of that.

The article outlines the view of Michael that the reasons for this year’s results are the high demand for SUVs and for heavier and more powerful vehicles, as well as the shift in share from diesel to petrol as a result of the diesel scandal. In the short term, the main action that can be taken is to direct sales through pricing mechanisms – incentives for electric cars and plug-in hybrids can play an important role.

Plug-in hybrids have a combustion and an electric engine and, due to larger battery packs that can be recharged from the power supply, can drive 30 to 70 kilometres on purely electric power, depending on the model. Even heavy SUVs can emit under 50g CO2/km. In counting these vehicles in the calculation, the regulations provide a multiplier for these hybrids to encourage the transition. This multiplier decreases from a factor of two for 2020 to one from 2023. The penalty can also be reduced via pooling, in which manufacturers such as Fiat-Chrysler and Tesla as well as Mazda and Toyota are teaming up to offset their CO2 emissions.

By 2025 and 2030, fleet emissions in the EU are expected to decrease by a further 15 and 37.5% respectively on top of the 2021 targets. This can only be achieved through a high proportion of electric vehicles – which should then have a competitive cost profile. Michael also sees politics in play. Politicians should ensure that the fines are used sensibly and that the framework conditions are in place in order to keep the European automotive industry competitive in the global market.

Read the full article in German in Finanz und Wirtschaft

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

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