JOHN COLLINGRIDGE
JANUARY 13, 2020
The Australian
Carmakers face more than £12bn ($22.6bn) in fines for failing to obey stringent new European rules on emissions.
The companies have until next year to meet the European Commission rules on exhaust emissions, but most are expected to miss this deadline and be forced to pay huge fines, according to research from PA Consulting.
Carmakers are expected to focus on selling smaller models to limit the damage.
Europe has taken a lead on cleaning up emissions, putting huge strain on its car companies.
Germany’s industrial base, which relies heavily on the likes of Volkswagen, BMW and Daimler, has been particularly hard hit, with thousands of jobs slashed and billions pumped into switching from combustion engines to electric motors. The emissions-rigging scandal at VW, uncovered in 2015, has intensified that pressure.
Increasing numbers of cities are limiting or banning petrol and diesel cars to tackle air pollution, with Oxford and York in Britain the latest to impose tough new rules. The regulations force carmakers to cut emissions to 95g of carbon dioxide per kilometre.
That will be based on every car sold in the EU in 2021, as averaged out across each carmaker’s fleet.
Despite the looming deadline, however, emissions have actually increased recently, as drivers switch from diesel to more carbon-intensive petrol models.
The popularity of sports utility vehicles has also pushed up carbon emissions.
“All manufacturers are now set to miss their 2021 targets,” said Michael Schweikl, author of the PA Consulting report.
He warned that in some cases the fines will be high enough to have a “material impact on their profitability and reputation”.
Among the carmakers expected to be worst hit are VW, which faces a potential fine of €4.5bn ($8.5bn). VW is launching its new ID.3 car later this year, part of a €60bn spending spree on electric vehicles.
Jaguar Land Rover is expected to be fined €93m and BMW €754m, the report says. Cumulatively, the car giants are expected to face €14.7bn worth of fines.
The emissions purge has forced a wave of mergers, with Peugeot maker PSA joining Fiat Chrysler Automobiles, and Jaguar Land Rover courting rivals for a technology tie-up.
PA also believes the fines will force carmakers to discount electric vehicles — on which few manufacturers make money — and squeeze out bigger vehicles.
“They will optimise their sales portfolios, limiting high-powered or big cars, and push sales of lower-emission ones,” Mr Schweikl said. He said this could lead to smaller sales numbers but reduce the fines.
“There’s a big transition to go through from the existing combustion engines to the new technology,” said PA Consulting auto expert Tim Lawrence.
“That’s going to cost money and that’s why they are all looking at partnering to share the (research and development) costs.
“They are very concerned about consumer adoption of electric vehicles.”
Sunday Times
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