Automakers face billions in fines as EU emissions rules take effect

by SpeedLux
Images of Volkswagen T-ROC

Strict new emissions controls could see automakers hit with mega-fines in 2020 amid disappointing sales of electric vehicles.

Fines associating with the sales of new cars start on January 1 in accordance with EU emissions standards and are set to deliver another shock to the beleaguered sector.

In 2020, automakers will have to meet controls on CO2 emissions averaging 95g per km on all new cars they sell. As per the EU, this works out at fuel consumption of about 4.1 liters per 100km of petrol and 3.6 liters per 100km of diesel. 

Missing the target will mean a penalty of €95 ($106) every car for each gram per km by which companies miss the target.

The sluggish uptake of zero-emission electric vehicles – which let automakers speed up cuts in average emissions – appears set to push the target out of reach.

Ratings agency Moody’s has estimated that 12 of the biggest-selling motor manufacturers in Europe are in line for fines amounting €2.4bn ($2.7bn) as a result of failing to meet recent emissions controls.

Analysts at the ratings agency stated: “This year will be critical as we still see most manufacturers having to release a large number of new models and incentivize consumers to purchase electrified vehicles in order to avoid penalties. So we would still see a similar sort of gap that the companies have to close, in the face of significant delivery risk.”

This could mean automakers providing electric vehicles at heavily discounted prices in an effort to sell enough to decrease fleet emissions. Any such move would most likely knock profits in the currently under-pressure industry. Electric cars are already observed as low to zero-margin products for many makers, because of the cost of developing and manufacturing new technology.

There is informal evidence of deliveries of electric vehicles sold in 2019 being held back by companies until 2020 to increase their environmental performance. The car industry insisted recently that deliveries of electric vehicles were taking around the same length of time as those of petrol cars, regardless of reports of delays.

Problems have been further worsened by the decrease in sales of diesel cars – which have lower CO2 emissions than petrol  – as suspicion around the fuel lingers following the Volkswagen emissions scandal.

In the UK, diesel now comprises of a quarter of the market, down from over half prior to the Volkswagen emissions scandal. 

Although gaining in popularity, all-electric battery cars made up only 1.5 percentage of car British car sales this year. 

Drivers’ changing tastes could also have an effect, with decreasing sales of smaller cars that are less polluting, while gas-guzzling SUVs continue to increase their market share.

Recent methods of testing vehicle emissions brought after the Volkswagen scandal are also expected to drive up emissions. The system referred to as WLTP, is more accurate than the earlier lab-based regime, resulting in results closer to real-world conditions.

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