Europe’s carmakers are asking for help on the bloc’s carbon emissions rules, which imply steep fines starting next year. Governments can help the industry swerve the crunch relatively easily, but the bigger question is whether politicians are willing to do what’s necessary to help hit ambitious long-term electric-vehicle goals.
The European Automobile Manufacturers’ Association (ACEA) on Thursday called for “relief” on 2025 carbon targets, which it fears could result in “multi-billion euro” fines. At first glance, it sounds like special pleading, not least because the carmakers were well-warned. The rules require a 15% cut, relative to 2021 levels, in the average amount of carbon emitted per car per kilometre. It’s been obvious for years that auto groups with fossil fuel-intensive fleets would face fines.
Yet the blame doesn’t lie exclusively with the companies. One problem is that electric-vehicle sales are going into reverse across the bloc. The share of battery-powered rides in August fell to 14.4% of overall sales from 21% a year earlier, the ACEA said, making it hard to meet the targets. It’s partly down to high costs, arguably worsened by limited state subsidies, and the scant options for car-charging stations. Nor have carmakers shirked when it comes to investing and electrifying their fleet: capital expenditures have surged in recent years.
Luca de Meo, who heads the lobby group and is also the CEO of France’s Renault (RENA.PA), has suggested that penalties could reach 15 billion euros overall. A fine of that magnitude would amount to nearly 20% of Volkswagen (VOWG_p.DE), Stellantis (STLAM.MI), BMW (BMWG.DE), Mercedes-Benz (MBGn.DE) and Renault’s pre-tax profit next year, according to LSEG data. That’s a painful hit at a time when the groups are contending with a sluggish economy and the emergence of Chinese competition. Perversely, the fines could set them back on the path to electrification.
Luckily, the EU could in theory help the industry with some relatively simple delays to the 2025 targets. That would buy time. Carmakers are cranking out new electric models, which should help EV sales next year. Volkswagen, probably the most steeply affected by 2025 targets of the large European carmakers, is planning to launch 30 new cars over the next year, half of which are electric. The proliferation of cheaper battery rides, like the 25,000-euro Renault 5, will help.
The tougher issue is what happens next, with a 55% cut to emissions required by 2030 and a total phaseout by 2035. Getting there requires a dramatic increase in electric-vehicle demand. ACEA estimates that some 1.4 million charging points need to be installed per year through 2030, nearly 10 times the 2023 level. And auto groups require a steady and reliable source of batteries, at a time when geopolitical risks are rising and European champions like Northvolt are struggling. To hit those longer-term targets, governments will need to put their own hands in their pockets.
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CONTEXT NEWS
The European Automobile Manufacturers Association (ACEA), the industry group representing carmakers in the region, called in a Sept. 19 public letter for relief on looming fines if they miss carbon emission targets that come into force in 2025.
In addition, the group called for an earlier review of the EU’s broader carbon targets, which include a phasing out of internal combustion engines by 2035.
“We are missing crucial conditions to reach the necessary boost in production and adoption of zero-emission vehicles: charging and hydrogen refilling infrastructure, as well as a competitive manufacturing environment, affordable green energy, purchase and tax incentives, and a secure supply of raw materials, hydrogen and batteries,” ACEA said in a statement.
“This raises the daunting prospect of either multi-billion-euro fines, which could otherwise be invested in the zero-emission transition, or unnecessary production cuts, job losses, and a weakened European supply and value chain at a time when we face fierce competition from other automaking regions.”
