Europe Challenges Automakers with Emission Reduction Goals

In addition, eco-innovation credits will be given for technological improvements that reduce emissions. Manufacturers may pool their credits with other manufacturers to meet their CO2 targets.

Mechanisms, including penalty fees, have been introduced to ensure compliance with the new regulations and the verification of emission reduction.

The United Kingdom issued a plan to cut carbon emissions to net zero by 2050. Britain moved up its ban of new gasoline and diesel cars (including hybrids) to 2035, five years earlier than its previous target of 2040. Norway has set a zero-emission target for vehicles even sooner, 2025.

The UK will host the United Nations climate summit, COP26, in Glasgow in November. Prime Minister Boris Johnson, announcing the summit last week, said the world has seen “a catastrophic period of global addiction to hydrocarbons that got totally out of control.

“We have to deal with our CO2 emissions. And that is why the U.K. is calling for us to get to net zero as soon as possible, for every country to announce credible targets to get there — that’s what we want from Glasgow,” Johnson said. “And that’s why we have pledged here in the UK to deliver net zero by 2050.”

UK automakers criticized the decision to move up the ban on gas and diesel cars. The Society of Motor Manufacturers & Traders, representing UK automakers, said the government needs to clarify its plans for the industry.

“It’s extremely concerning that government has seemingly moved the goalposts for consumers and industry on such a critical issue,” said SMMT CEO Mike Hawes. “Manufacturers are fully invested in a zero emissions future, with some 60 plug-in models now on the market and 34 more coming in 2020.”

“This is about market transformation, yet we still don’t have clarity on the future of the plug-in car grant – the most significant driver of EV uptake – which ends in just 60 days’ time, while the UK’s charging network is still woefully inadequate,” added Hawes. “If the UK is to lead the global zero emissions agenda, we need a competitive marketplace and a competitive business environment to encourage manufacturers to sell and build here. A date without a plan will merely destroy value today.”

Most automakers that produce or sell into the European and British market say they will sell as many electric vehicles as they can to avoid paying fines for not meeting regulations. Until infrastructure is in place to re-charge vehicles, however, it is uncertain how enthusiastic buyers will be to purchase EVs.

LMC Automotive says automakers will want to avoid “the payment of large fines and the potentially unquantifiable losses that would stem from image damage in these environmentally conscious times.

“Our default position is that automakers will do everything in their power not to miss CO2 targets,” said LMC.

LMC sees a relatively flat year for European light vehicle sales as OEMs move registrations of high CO2 emitting cars from 2020 into Q4 of 2019. Overall sales for 2020 are forecast to be down 1 percent from 2019.

“Electrification will of course see a significant boost,” adds LMC. “We anticipate that the Europe Big 5 market plug-in share of new car sales will leap from 2.4 percent this year to 8 percent in 2020 and to 12 percent in 2021. In that year, electrified cars of all types (the ‘xEV’ share) will achieve almost 30 percent market share.”

U.S. Automakers Look to Comply

During the fourth-quarter earnings call, FCA CEO Mike Manley discussed the new EU regulations.

“We know the regulatory hurdles get much tougher this year and, as a result, this has caused the heightened concern by some in the financial community about the ability of certain OEMs to meet their new CO2 targets. And one of the biggest uncertainties is regarding market demand for EVs and the potential for margin erosion in the event that demand has not naturally materialized.”

FCA has developed a multi-pronged plan to achieve CO2 targets in 2020 without paying fines, which includes the launch of several electric and hybrid vehicles and a credit-pooling arrangement with Tesla.

“When taken all together along with the 5 percent compliance exemption allowed this year, we fully expect to achieve an average CO2 result for our fleet that is below the expected compliance target,” stated Manley.

Manley noted that the industry is in a transition phase and infrastructure to support electric vehicles is still lacking.

Developing a flexible platform that is cost effective and capital efficient is “absolutely vital as we make this transition,” said Manley. “London’s banning everything from 2035 will become the norm.”

“Our company will not be driven by compliance targets,” he added. “It will be driven by what we believe are the right and appropriate corporate sustainability, corporate governance targets. And I think that’s a very important statement to make. We are going to be part of the solution, but we’ll do it in our normal way. And that’s the most cost-effective way we possibly can.”

Ford President & CEO James Hackett said his company is serious about meeting the region’s new carbon footprint requirements. “We launched our first ever fully electric vehicle in China with a version of Territory, and we announced we would introduce more than 30 market-specific Ford and Lincoln vehicles. Ten of these will be electrified over the next three years, and our all-new Mustang Mach-E will reach customers late this year. Now, all of these products support Ford’s commitment to achieve the Paris Climate Accord glide path for lower CO2 emissions.”

Joseph Hinrichs, president of automotive, said Ford has known about the regulations for years and has been planning business accordingly. “We do expect to be able to achieve the new CO2 requirements without incurring fines or purchasing credits. I want to make that clear.”

“By the end of 2020, we will have 14 new electrified offerings in the market in Europe, and by the end of ’24 we expect to have 17 electrified vehicles, including a number of mild hybrids, plug-in hybrids, some full hybrids,” said Hinrichs “Our plan is definitely product driven, and we do not expect to incur any fines, have to pool with anybody else, or purchase credits.”

In the U.S., General Motors is already on board with a commitment to an all-electric future for vehicles as well as powering 100 percent of its global facilities with renewable energy by 2040.

“We strongly believe that focusing on interim technologies such as hybrids and multiple solutions for multiple states actually slows the adoption of full battery electric vehicles,” said CEO Mary Barra.

“We’ll continue to advocate for policies that are aligned with our vision. Because we believe climate change is real, it’s a global concern and the best way to remove automotive ambitions from the environmental equation is an all-electric zero emissions future, and it needs to be done on a national level and then a global level. We believe that the National Zero Emissions Vehicle program that we have proposed across all 50 states will help accelerate the transition to EVs and all of the benefits that come to the environment and to society.

”It would also position the United States as a leader in electrification. It would create economic growth and make EVs more affordable for more customers more quickly. If we want true electrification across the country, which we do, we need the infrastructure, the education and the incentive programs to all align and work together.”