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In the “Factory 56” production hall, various Mercedes-Benz vehicles are assembled.
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Car manufacturers have a number of ways to mitigate the impact of the European Union stricter emissions targetsalthough analysts say all options are likely to be costly.
It has raised the prospect of hefty fines for failing to comply with the bloc’s new emissions rules heated debate within the automotive industry, especially considering that the sector exists today not on the way to achieve this year’s goal.
A perfect storm of challenges the path to complete electrification ensured that major original equipment manufacturers (OEMs) endured a terrible time in 2024, and few expect 2025 to be much better.
The European Union’s average emissions limit for new vehicle sales drops to 93.6 grams of carbon dioxide per kilometer (g/km) in 2025, reflecting a 15% reduction from the baseline of 110.1 g/km in 2021.
Overcoming these limits was agreed in 2019 and is part of the ambition of the bloc of 27 nations. Climate neutrality by 2050 — can result in fines of several million euros.
“Everyone is in the dark on this question,” Rico Luman, senior economist for the transportation and logistics sector at Dutch bank ING, told CNBC via video call.
“It’s so big because they’re still struggling to make change and restructure, as we’ve seen with everything that’s going on. VW over the past two weeks and months as the organization adjusts to the new world,” Luman said.
“There’s a long-term interest in staying with the competitors. I mean, the direction of travel is pretty clear. So eventually, they’ll have to make it, but in the short term, it’s not that attractive to them because it hurts them in so many ways,” he added.
What measures can be taken?
Most of Europe’s major car giants are currently far from reaching the EU’s new CO2 target, ING’s Luman said, which means measures to mitigate the impact of economic sanctions are needed.
Options on the table include boosting sales of battery electric vehicles (EVs) by rolling out cheaper models and lowering prices, reducing conventional internal combustion engine (ICE) production in favor of plug-in EVs and hybrid models, and pooling. with competitors who already meet the goal. Otherwise, car companies can pay fines.
Pooling refers to the process by which car manufacturers come together to be considered as one entity to calculate their performance against a CO2 emissions target.
Today, from Sweden Volvo it is believed to be the only major carmaker to have met the target, along with the US electric vehicle maker Tesla and some Chinese companies.
The Volvo logo 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 | Getty Images
Stephen Reitman, head of European Automotive Research at Bernstein, said carmakers operating in Europe will face “massive emissions” this year as EU regulations tighten.
“Now they can mitigate that by merging with companies that have greenhouse gas 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 Box Europe“Thursday.
“And a lot of the cars that Tesla sells in Europe, which is creating greenhouse effect credits, come from China. So you’re basically seeing a transfer of money from European automakers to Chinese entities or start-ups. In China, it might not look the best for the EU and the government for nationals”, he added.
Lively discussion
Some European OEMs have it expressed concern Regarding the tightening of carbon regulations in Europe, especially as the demand for electric vehicles decreases.
The European Automobile Manufacturers Association (ACEA), an industry lobby group, has called To give “urgent relief measures” to the European Commission regarding the new rules, while German Chancellor Olaf Scholz he said there should be no fines for car companies that do not meet the new standards.
Joint press conference of 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, after the conclusion of the European Council summit, the meeting of EU leaders at the headquarters of the European Union. Brussels, Belgium, December 19, 2024.
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For some, any move to water down or delay tougher EU carbon rules would be tantamount to scrapping the regulation altogether.
Julia Poliscanova, senior director of vehicle and e-mobility supply chains at the campaign group Transport & Environment, told CNBC last month that the rules are designed to help automakers be more competitive, even at the expense of some at the top. profit margins in the short term.
“We’re behind in electrification. So how the hell is he delaying and delaying us even further to help the industry? I don’t get it. I don’t understand how it helps with the transition they have to go through,” Poliscanova said.
Ursula von der Leyen, President of the European Commission he said that at the end of last year he would call a strategic dialogue on the future of the European automotive industry.
The dialogue, which is expected to be officially launched this month, is designed to quickly implement the measures urgently needed by the sector.
