LONDON, Sept 19 (Askume Breakingviews) – European carmakers are seeking help over EU carbon emissions rules that could mean hefty fines from next year. Governments could help the industry get back on track relatively smoothly, but the big question is whether politicians are willing to take the steps needed to help achieve ambitious long-term EV targets.
The European Automobile Manufacturers Association (ACEA) on Thursday called for a “relaxation” in the 2025 carbon target, fearing it could lead to fines of “billions of euros”. At first glance, this sounds like a special plea, especially since automakers have been well warned. The rules require a 15% reduction in average carbon emissions per vehicle per kilometer relative to 2021 levels. It has been clear for years that car groups with large fossil fuel fleets would face fines.
However, the responsibility does not lie solely with these companies. One problem is that electric car sales are reversing across the EU. ACEA said the share of battery-powered rideshares in total sales fell to 14.4% in August from 21% a year earlier, making it difficult to meet targets. This is partly due to the high cost, which could be made worse by limited state subsidies and a lack of car charging station options. Vehicle manufacturers have also not hesitated to invest in and electrify their fleets: capital spending has surged in recent years.
Luca de Meo, head of the lobby group and CEO of France’s Renault (RENA.PA), said the total fines could reach 15 billion euros. Such huge fines would be equivalent to about 20% of next year’s pre-tax profits for Volkswagen (VOWG_p.DE) , Stellantis (STLAM.MI) , BMW (BMWG.DE) , Mercedes-Benz (MBGn.DE) and Renault , according to data from the London Stock Exchange Group. It’s a painful blow at a time when the groups are struggling with an economic slowdown and the emergence of competition from China. Instead, the fines could set them back on the path to electrification.
Fortunately, in theory, the EU can help the industry through some relatively simple extensions to the 2025 target. That will save you time. Automakers are preparing new electric models that will help EV sales next year. Volkswagen is likely to be the big European carmaker most affected by the 2025 target, with the company planning to launch 30 new cars next year, half of which will be electric. The proliferation of affordable electric cars like the 25,000-euro Renault 5 will help.
The complex question is what happens next, requiring a 55% cut in emissions by 2030 and a full phase-out by 2035. ACEA estimates that by 2030, around 1.4 million charging stations will need to be installed each year, almost 10 times the 2023 level. The car group needs a stable and reliable source of batteries at a time when geopolitical risks are rising and European champions such as Northvolt are struggling. To achieve these long-term goals, governments need to put their hands in their pockets.
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The European Automobile Manufacturers Association (ACEA), an industry group representing the region’s carmakers, said in an open letter on September 19 that they face penalty cuts if they do not meet carbon emissions targets that take effect in 2025.
The group also called for an early review of the EU’s broad carbon targets, which include phasing out internal combustion engines by 2035.
“We lack the key conditions needed to boost the production and adoption of zero-emission vehicles: charging and hydrogenation infrastructure, a competitive manufacturing environment, affordable green energy, procurement and tax incentives, and a secure supply of raw materials, materials, hydrogen and batteries,” ACEA said in a statement.
“This raises the frightening prospect of either billions of euros in fines, which could otherwise be invested in the zero-emissions transition, or unnecessary production cuts, job losses and a weakening of European supply and value chains at a time when we are facing fierce competition.
