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Coronavirus & CO2 Rules Create Perfect Storm For European Auto Industry

Coronavirus & CO2 Rules Create Perfect Storm For European Auto Industry

By Paul Homewood

From Forbes:

As the European automotive crisis deepens, with plants closing temporarily and demand likely to fall by up to 20% this year, the industry needs the EU to step in, concede its rules are going to cause irreparable harm to the business and its huge, highly skilled workforce, and either dilute the demands, or delay them for a while.

Instead, the EU is currently working on actually making the rules even more stringent. The industry seems too fearful of offending politicians to plead for some protection against the malign impact of the rules, which demand the equivalent of an average 92 miles per U.S. gallon by 2030.

The European Automobile Manufacturers Association, known by its French acronym ACEA, was asked if it planned to seek protection from the impact of the rules because of the crisis. In response, ACEA issued a statement seeking national government and EU financial support for the industry, which supports about 14 million jobs, unspecified measures to avoid undermining the industry, and a general stimulus to Europe’s economy. The fuel economy rules didn’t even get a mention.

The EU Carbon Dioxide (CO2) regime insists carmakers raise average fuel efficiency from the equivalent of about 57 miles per U.S. gallon in 2020/2021, from 41.9 mpg in 2015, rising again by 15% in 2025, and hitting 92 mpg by 2030. That compares with current U.S. draft legislation calling for a 40.5 mpg fleet average by 2030.

According to a report from investment researcher Jefferies last year, if the auto industry makes no progress in curbing CO2 from 2018 towards meeting the EU’s 2020/21 regulations, it faces fines totalling the equivalent of $36 billion, twice its estimated profits, and could be forced to raise prices up to 10%. Latest data suggests in 2019, the industry went backwards not forwards in production of CO2 thanks to the popularity of SUVs and the demise of diesel.

The industry is also spending vast sums investing in research and development of electric cars, and at the same time withdrawing big profit margin gas guzzling top of the range sedans and SUVs to help beat fuel economy fines, while pushing forward low or non-existent profit margin small cars.

Full story here.

It appears that the European car industry is being hit by a perfect storm. The ludicrous CO2 emission targets were always going to be damaging to the industry, going against customers were demanding.

Added to that is the soon to come phasing out of all conventional engine cars, which will only benefit Asian manufacturers, while costing European companies a fortune in developing EVs.

And now Coronavirus could leave the European car industry on its knees even sooner than expected.

If Europe is serious about its car industry having a long term future, it has no alternative but to ditch its climate targets.