04/10/2024 09:50
Updated on 10/04/2024 at 09:50
In 2019, when the auto industry’s first significant emissions targets were about to take effect, Brussels was awash in grim predictions about the astronomical fines automakers would have to pay for failing to meet them.
A 2019 report by JATO Dynamics said that EU carmakers would collectively have to pay €34 billion. Then came 2020, and instead of fines, sales of battery electric cars tripled in one year. The European Union has even surpassed China in the volume of electric cars sold and car manufacturers have achieved record profits.
Once again, it’s the same story, with the moderate target of a 15% CO2 reduction by 2025 looming. Based on the 2023 sales data available so far, Renault is 9 grams off target, Mercedes is 18 grams short and Volkswagen is one . The furthest away is a difference of 22 grams.
This causes a similar reaction. Some have publicly (such as Volkswagen) and many privately called for relaxing targets or not imposing fines. They claim that consumers are not buying electric cars fast enough.
Again, this argument is wrong.
First, the main lesson from the 2020/21 target is that the ability to achieve a future target cannot be predicted on the basis of progress achieved two years ago. EV sales in the EU27 in 2018 were 1%, but jumped to 5.4% in 2020. By comparison, T&E expects EV sales to, on average, reach 20% in 2025, compared to 15% in 2023. This represents an increase in market share of 31%.
31% may seem like a lot, but that’s how EU legislation on carbon dioxide emissions from cars works. Instead of annual improvement, the higher goal takes effect every five years. This, combined with consumer enthusiasm, means the middle years for electric vehicle sales are quieter as automakers prepare for regulations. It’s as simple as dealers adjusting prices and incentives or adjusting model availability when they need to sell more electric cars.
It is true that sales grew more slowly than expected. But the lack of affordable mass-market electric cars is the reason, not a decline in appetite. It is no coincidence that more compact models of this type are expected to hit the market between now and 2025, including cheaper cars from Renault, Skoda and Citroen. 2025 will be a good year for those looking for a decent electric car deal.
Second, EU car regulations do not represent a mandate for electric vehicle sales. Each manufacturer’s goal is to achieve an average CO2 value for all its sales in 2025. This means that there are many options to achieve this goal, such as selling mild hybrids and others – which improve the efficiency of conventional engines – or reducing the size of the most polluting models. . .
Although selling electric vehicles is the best long-term strategy, T&E estimates that a higher efficiency scenario would reduce by more than a quarter the number of electric vehicles that would need to be sold to meet 2025 goals.
Finally, the EU’s CO2 rules for cars include several flexibilities. Manufacturers can choose to “bundle” their sales into a single CO2 value, as Honda, GLR and Tesla did in 2022. Volvo Cars, whose clear electric vehicle strategy is beginning to bear fruit, is already meeting the 2025 target as of 2023 and could be Another goal. Candidate for the group.
For example, in its all-electric vehicle strategy, T&E estimates that 24% of Volkswagen’s sales in 2025 should be electric. Alternatively, if it maximizes engine efficiency and partners with Volvo Cars, 19% of electric vehicle sales would be enough to avoid fines, a percentage that would drop to 15% if it partnered with Tesla.
The bottom line is that there are many options for reaching the 2025 target. Some automakers have already met the target two years earlier or are close to it. For example, Stellantis is a large manufacturer similar to VW, but much closer to its goal thanks to its smaller, more efficient cars.
Always the soft target, 2025 was proposed in 2017 and remains unchanged as a commitment on the road to a higher ambition of 2030 under the EU Green Deal.
More importantly, given the global race to dominate the electric vehicle market, relaxing the only policy that pushes European automakers to invest in electrification would be like shooting them in the foot.
If the EU shows leniency to some car manufacturers or eases fines, other companies will take notice and seek leniency elsewhere. The result could be a dismantling of EU climate rules.
Instead of questioning the rules, European automakers should redouble their efforts to comply with them, and prove to their competitors and shareholders that they are still in the race.
Carlos Rico He is the Technical Director for Policy in Transport and Environment.
