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Top car makers could face €14.5bn fines for missing the EU’s CO₂ emissions targets

Image credit: Matti Blume | Wikipedia

CO₂ emissions are increasing again and car makers must act immediately, recent industry analysis has revealed.

Europe’s 13 top car manufacturers are on course to miss their 2021 emissions targets and could face fines of more than €14.5bn, according to a PA Consulting forecast.

The consultancy produces an annual forecast of car manufacturers’ performance against mandatory EU COemissions targets.

After four years of progress towards meeting these emissions targets, PA Consulting’s latest research indicates a step backward by European automakers.

Emissions have increased across the board, mainly due to customers buying SUVs; strong demand for high-powered and heavier cars; a lack of low-emission options in car showrooms, and the shifting preference for petrol cars after the dieselgate scandal.

Some car makers could be facing penalties significantly high enough to have a material impact on their profitability and reputation. Volkswagen, for example, could be fined as much as €4.5bn due to its high sales volumes across Europe.

Equally, previous top performers such as Renault-Nissan-Mitsubishi, Volvo and Jaguar Land Rover all look set to fall short. Even Toyota, the market leader in hybrid vehicles, is forecast to miss its target. Jaguar Land Rover would face the biggest impact from fines based on earnings before interest and taxes (EBIT), with a projected fine of  93 million euros, which would represent 400 per cent of its 2018 profit.

Michael Schweikl, automotive expert at PA Consulting, said: “Despite this ‘four steps forward, one step back’ situation, the good news is that there are many options open to car makers to reduce emissions and minimise future fines - but the urgency of the situation means they have to act quickly.

“Car makers are running out of time to improve performance quickly enough to avoid fines. Marketing, sales and pricing strategies that increase the take-up of low-emissions vehicles will be essential in getting manufacturers closer to the targets.

Possible solutions put forward by PA Consulting include:

•    Discounting electric and plug-in hybrid vehicles to boost their sales, taking high-polluting vehicles off the market.

•    Developing service schemes that increase low-emission vehicle use.

•    Exploring mergers with other car makers and the supply chain, as exemplified by the coming together of the Fiat-Chrysler Automobiles (FCA) Group and the Peugeot Group (Groupe PSA).

•    Developing open platforms, such as Volkswagen’s MEB (in German: Modularer E-Antriebs-Baukasten) platform, to extend electric drive-train and battery technology.

“They need to take these actions in 2020 to reduce CO2 emissions further in the future and win new customers,” said Schweikl.

PA Consulting ranks each manufacturer by their CO2 performance forecast for 2021. Toyota remains the best performer, while PSA is now second, overtaking Renault-Nissan-Mitsubishi. Volvo, Volkswagen, Daimler and BMW are further away from their target than they were last year. Jaguar Land Rover still has the highest CO2 emissions and is now in danger of missing its specific target.

PA Consulting auto emissions 2019 chart

Image credit: PA Consulting

The scale of the challenge facing car manufacturers is clear. Analysis shows that they would need to sell more than 2.5 million extra battery-electric vehicles to stand any chance of meeting their targets – an unlikely 1,280 per cent increase by 2021. Production capacity constraints make this figure almost impossible: Volkswagen’s new production lines for its new all-electric ID3, for example, have a capacity to produce 100,000 units in 2020.

Looking at the figures from a national perspective, the report shows that all countries saw a worsening in their overall figures, with the exceptions of Norway and the Netherlands. Norway has reduced emissions from 83.7g CO2/km in 2017 to 72.4g CO2/km in 2018 and sales of electric vehicles accounted for 31.2 per cent of new car sales. The Netherlands was the second-best performer, albeit a long way behind Norway, with emissions of 106g CO2/km and sales of fully electric vehicles making up six per cent of the total.

The UK saw a decline in emissions performance, rising from 120.8g CO2/km to 125.1g CO2₂/km, although there was a small increase in electric vehicles sales to 0.7 per cent of all new registrations. Germany also suffered an increase in emissions from 126.2g CO2/km to 129.1g CO2/km, offset by a similarly slight increase in electric vehicle sales (up from 0.7 per cent to 1.1 per cent).

Schweikl concludes: “Car makers will need to adapt to an enormous change in what they do as they move from the technology of combustion engines to low-emission electric vehicles. While much exciting technological development is already under way, manufacturers cannot underestimate the complexity, cost and cultural change required.”

A copy of the PA Consulting report is available online: http://www.paconsulting.com/co2

In related news, European campaign group Transport and Environment (T&E) said that new diesel vehicles are exceeding the limit for particle emissions and called on EU lawmakers to make emissions testing and regulations stricter.

Five years after Volkswagen admitted to cheating US diesel engine tests, new tests of two of 2018’s top-selling diesel car models in Europe showed their particle pollution spiked to 1,000 times normal levels during the regular process of cleaning out their anti-pollution filters, the group said.

The tests, conducted on the Nissan Qashqai and Opel/Vauxhall Astra models, showed they were 32 per cent to 115 per cent over the legal limit of 600bn particles per km during the automated filter cleaning.

In response to the tests, a spokesman for Opel/Vauxhall said it couldn’t comment because it was not aware of the details of T&E’s report. Meanwhile, a Nissan spokesman said that “all Nissan vehicles and DPF (diesel particulate filter) devices fitted in our vehicles fully comply with applicable emissions legislation”, adding that the company supported new, stricter emissions tests and has introduced new technology to meet them.

T&E said more than 45m vehicles carry particle filters in Europe, leading to 1.3bn filter cleanings per year. This process can occur every two weeks and can last for 15km.

In its report, T&E added that under current European rules, if filter cleaning occurs during an official test the results do not count, “meaning that 60-99 per cent of regulated particle emissions from the test vehicles are ignored”.

Tests of the two so-called Euro 6d-Temp vehicles - which refers to cars that came to market after September 2017, were carried out by European vehicle test lab Ricardo in July and August 2019.

In these tests, the lab found that Astra emitted the largest number of particles when full filter regeneration took place, with 1,300bn particles per km. Meanwhile, the Qashqai’s filter regeneration tests showed emissions of between 790bn and 850bn particles per km, exceeding the limit by 32 per cent to 411 per cent.

According to the World Health Organisation (WHO), particle pollution affects more people than any other pollutant. Also, the European Environment Agency found that three in four inhabitants of European cities are exposed to unsafe levels of particles.

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