The economic downturn, high location costs and sluggish sales of electric cars combined with a high need for investment are causing problems for European car manufacturers, to which many companies from Austria supply. From January onwards, many car manufacturers will face further hardship if the EU’s CO2 fleet limits fall. That’s why there are increasing calls for easing from Germany and the Czech Republic – and the French government is in favor of suspending the penalties.
The suspension should apply if car manufacturers do not comply with the stricter EU fleet limits from next year. But it is right to stick to the end of the combustion engine in 2035, said Economics Minister Antoine Armand to the newspaper “Les Echos”. “But we shouldn’t shoot ourselves in the foot”: Massive penalties for domestic manufacturers would only strengthen competition from the Far East. The EU Commission was cautious.
The German Economics Minister Robert Habeck (Greens) recently appeared open to easing restrictions. The FDP would like to go one step further and completely abolish the fleet limits, including the resulting ban on combustion engines, from 2035.
Car traffic causes 16 percent of CO2 emissions
The EU states have agreed that they want to be climate neutral by 2050. Until then, greenhouse gas emissions must fall massively and the remaining emissions must be compensated or captured. Car traffic accounts for 16 percent of CO2 emissions.
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Since 2012, the EU has been giving car companies binding requirements for the so-called fleet limits: the maximum average emissions of their new cars. In 2019 and 2023, the regulations were adapted to the goal of climate neutrality. By 2035, all new cars in the EU should no longer emit any CO2.
From January, the fleet limits will be further reduced by 15 percent compared to 2021, which was decided in 2019. On average in the EU, new cars are then allowed to emit 93.6 grams of CO2 per kilometer. For comparison: a Renault Clio with a combustion engine emits around 120 grams, a Clio with a hybrid drive 95 grams. Electric cars are emission-free.
So far, manufacturers have generally complied with the fleet limits. Between 2019 and 2022, the average CO2 emissions of all newly registered cars in Europe fell by 27 percent, primarily due to the increase in the share of electric cars. However, sales have stalled since the end of last year and the share of electric cars has even declined at times. Many manufacturers are not on track for 2025.
Anyone who sells too many polluting cars in 2025 will face high penalties. If the average CO2 emissions of a manufacturer’s new vehicle fleet exceed the target in a particular year, it must pay 95 euros per gram of excess for each of its new vehicles registered that year. The economic consultants at Alix Partners assume that manufacturers will face possible fines of 50 billion euros between 2025 and 2029.
To avoid penalties, manufacturers can buy emissions credits from competitors such as Tesla or Volvo that sell exclusively or mostly electric cars. Honda and Jaguar have done this in the past. This sale of indulgences would probably be cheaper than fines – but the money would then flow into the coffers of the competition.
**Interviewer:** Welcome to our segment on the evolving landscape of the European automotive market. Today, we’re joined by Dr. Clara Schneider, an expert on auto industry economics and sustainability. Dr. Schneider, thank you for being here.
**Dr. Schneider:** Thank you for having me!
**Interviewer:** There’s been a lot of conversation surrounding the EU’s CO2 emission targets and how they affect car manufacturers. Could you explain the current challenges these manufacturers are facing?
**Dr. Schneider:** Certainly. The economic downturn has put significant pressure on European car manufacturers. We’re seeing high production costs, sluggish sales of electric vehicles, and a pressing need for further investments. As we approach the end of 2024, strict CO2 fleet limits will be introduced, and many manufacturers are struggling to comply, which raises concerns about financial penalties and competitiveness.
**Interviewer:** It’s a tough situation. There have been calls from countries like Germany and the Czech Republic to ease these restrictions, especially regarding penalties for non-compliance. What are your thoughts on this?
**Dr. Schneider:** While I understand the concerns about competitiveness, especially with car markets in Asia, it’s crucial we don’t lose sight of the ultimate goals of reducing emissions and achieving climate neutrality by 2050. Easing restrictions could be a short-term solution, but it could undermine the long-term commitment necessary to phase out combustion engines by 2035, which is still a vital step for decarbonizing transportation.
**Interviewer:** How important is the transition to electric vehicles in meeting these CO2 reduction targets?
**Dr. Schneider:** Electric vehicles, specifically battery electric vehicles (BEVs), are essential for meeting these targets. They are expected to contribute a significant portion of the necessary CO2 reductions for car manufacturers. The forecast suggests that up to 60% of the required reductions in emissions could come from BEVs, which means a rapid increase in their market share is crucial.
**Interviewer:** Speaking of market share, predictions suggest electric cars could reach up to 24% of the market. Is this realistic given the current challenges?
**Dr. Schneider:** It’s ambitious but not impossible. The key will be how quickly manufacturers can adapt, innovate, and scale their production of EVs. However, this transition is heavily influenced by factors like consumer demand, charging infrastructure, and government policies. If these aspects align positively, we could very well see that market share realized.
**Interviewer:** Thank you, Dr. Schneider, for your insights into this complex issue. As we continue forward, it will be fascinating to see how these dynamics play out in the European automotive landscape.
**Dr. Schneider:** Thank you for having me!