PA Consulting Group’s annual forecast of car manufacturers’ performance against mandatory EU CO₂ emissions targets suggests that Ford, BMW, Volkswagen, Fiat Chrysler, Peugeot Citroen including Opel/Vauxhall and Hyundai-Kia will miss their 2021 targets, leaving them facing fines into the billions.
Car manufacturers face the reinvention of their industry as they need to reduce CO₂ emissions to meet the EU’s fast approaching 2021 target. There have been a recent swathe of government announcements of plans to ban internal combustion engines, as early as 2025 in Norway and the Netherlands, and by 2040 in the UK and France. A similar ban is on the agenda in Germany and China.
PA’s 2017 ranking analysis shows that only four out of 11 carmakers are forecast to meet the EU 2021 CO₂ emission target, with the rest facing significant fines. The majority of carmakers will face penalties of €95 for every gram of CO₂ above the limit, multiplied by the number of cars they sell in 2020. These fines could reach or rise above the €1bn mark for carmakers.
At the current rate, VW is expected to face the biggest fine of €1.7bn, followed by Fiat Chrysler with €1.2bn. The biggest fall from grace is Peugeot Citroen, who was set to meet EU emissions targets, but turn red this year, following the merger with Opel and Vauxhall. This affects their forecast until 2021. In addition, German carmakers, particularly VW and BMW face higher penalties and are still suffering from bigger gaps in CO₂ performance for 2021, primarily due to the decline of diesel in their portfolio without direct alternatives in place today.
At the other end of the scale, there have been some positive developments, with Volvo, Toyota, Renault-Nissan and Jaguar Land Rover expected to meet the EU emissions targets. There has been a huge change at the top of the table, with Volvo a new number one, up from seventh last year. This is based on their strategy to not launch any more new models with combustion engines from 2019 onwards, which has resulted in a huge improvement in CO₂ performance ahead of 2021.
Jaguar Land Rover turns from amber to green for the first time now for 2021, achieving their specific target based on good progress for CO₂ performance in their fleet portfolio. Toyota remains number two, but also with significant improved CO₂ performance for 2021.
Emissions performance varies across countries but Norway leads the way. Norway has the lowest level of emissions and the highest use of plug-in hybrids and electric vehicles, which made up 29% of new car sales in 2016, reflecting its policy of banning the internal combustion engine by 2025.
In comparison, meeting the UK’s ambitions to ban combustion engines by 2040 will be a challenge, due to the automotive sector’s reliance on conventional engines, with the UK appearing towards the bottom end of the scale of European countries. Developments of alternatives lag behind other countries and it is not currently well placed to drive this shift to electric options, given it produces 2.5 million combustion engines a year, 15% of European total.
Car manufacturers face considerable challenges in meeting the 2021 CO₂ emissions targets. It is also obvious that almost all are now making significant investments in hybrids and electric vehicles to improve their performance. While some of these developments will come too late for the rapidly approaching 2021 deadline, we are seeing an increasingly sharp focus from manufacturers on new models and new approaches. These will be available to customers soon and could drive a significant change in the cars we buy.
Thomas Goettle, head of automotive, PA Consulting Group says: “Carmakers across Europe need to make radical changes in order to meet the EU CO₂ emissions targets for 2021. Many of them need to focus now on developing new models that will appeal to the consumer and help them meet their targets. There is nothing less than a revolution facing the car industry and those manufacturers who fail to keep up face potential fines in the billions."
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