AUTONEWS

European Union presents emergency measures to overcome the challenge of vehicle electrification in the face of competition from China

The president of the EU executive, Ursula von der Leyen, announced at the end of January an action plan that will address a range of issues relevant to the sector, such as ensuring access to talent and resources, promoting technological innovation and the development of next-generation vehicles, and establishing a pragmatic and predictable regulatory framework, according to a statement.

For the Commission leader, "the European automotive industry is at a turning point" and the European Union (EU) is acting quickly to help it meet the challenges.

The 22 participants include Volkswagen, BMW, Mercedes, Volvo and Renault, as well as equipment manufacturers, trade unions, non-governmental organisations and consumer representatives.

On Monday, the EU executive announced a flexibility mechanism to prevent car manufacturers that fall behind on their CO2 emissions reduction targets from having to pay fines this year.

Ursula von der Leyen stressed that the mechanism involves taking emissions into account over three years, from 2025 to 2027, instead of just one year, which will give those lagging behind time to catch up, without penalising good performers who will themselves receive an emissions credit.

The European automotive industry faces fines this year that could total €16 billion, according to industry estimates, for failing to comply with current regulations, which require cars sold in 2025 to emit 15% less CO2 than in 2021.

The sector employs around 13 million people in the EU and accounts for around 7% of its Gross Domestic Product.

New emissions rules divide European car industry... European Commission (EC) President Ursula von der Leyen proposed a change to the CO2 regulations yesterday, and reactions from the car industry have been mixed.

After several complaints from several manufacturers regarding the difficulties in meeting the new emissions targets for this year, the EC proposed a change in the deadline for meeting these targets. Instead of one year, the Commission proposes three.

That said, several builders have spoken out about this decision and opinions differ.

Who is in favor?...The Volkswagen Group, Stellantis and the Renault Group welcomed the measure. The German manufacturer, which is one of the manufacturers most exposed to the proposed targets in 2025, praised the approach, characterizing it as “pragmatic”.

Stellantis considered the decision “a significant first step” to maintain competitiveness and accelerate electrification, according to a statement. Regarding Renault, she highlighted the flexibility of the proposal, which allows carmakers to reduce emissions without putting their competitiveness at risk.

However, the reactions did not stop with the builders. The Italian and Czech governments have approved the change, although the Czech government is more ambitious as it wants to extend the deadline to five years, Czech Transport Minister Martin Kupka said.

The European Automobile Manufacturers' Association (ACEA) and the European Automotive Suppliers' Association (CLEPA) were cautious. While on the one hand they considered the proposal positive, on the other they warned that meeting the goals remains a major challenge.

“We welcome these steps, but let me be clear about our main concern: How are we going to make the transition to electrification work?” said Ola Källenius, ACEA chairman and Mercedes-Benz CEO, in a statement.

Who is against it?...On the other side of the coin is Volvo. The Swedish construction company was the main voice against this possible change, warning that it could delay the transition to electrification. Volvo argues that the targets were set years ago and that companies like its have already invested billions to meet them.

“Companies like ours shouldn’t be hampered by last-minute changes in legislation,” said Jim Rowan, CEO of Volvo. Remember, Volvo is one of the few automakers that benefits from the current rules. Since it is well below the targets set for this year, the construction company has carbon credits to sell. In this sense, Suzuki and Mercedes-Benz have already joined Volvo to jointly calculate emissions.

According to UBS Group, the company could raise up to 300 million euros from competitors who want to “bundle issuances” to avoid fines.

The environmental association Transport & Environment called the decision an “unprecedented gift” for the automobile industry. “Weakening EU emissions rules rewards the lazy and does little for the European car industry, leaving it further behind China,” said Chief Executive William Todts.

What now?...It is important to keep in mind, however, that this is just a proposal and that it needs to be approved by the European Parliament and the European Council.

Tomorrow, March 5, the EC will present an Action Plan to save the European automotive industry. In addition to the issue of the emissions target for 2025, measures will be presented to encourage the purchase of electric vehicles in member states and to support European battery manufacturers.

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