By AFP - Agence France Presse
European automakers in trouble to talk fines and EVs with EU
Umberto BACCHI
Brussels, Belgium, January 27, 2025
Europe's biggest carmakers will gather in Brussels for talks this week as the EU seeks to chart a way forward for an ailing industry struggling to cope with Chinese competition and climate rules.
Automotive CEOs and European authorities are expected to discuss the sector's problems on Thursday at the first meeting under a new initiative chaired by EU chief Ursula von der Leyen.
The European Commission said its “ambition” is to “roll up our sleeves” and find solutions for “an essential engine for European prosperity.”
The automotive sector employs more than 13 million people, accounts for around 7% of the bloc's GDP, and is in the “midst of profound structural changes”, it added.
The so-called “strategic dialog” aims to increase the sector's competitiveness. However, much of the pre-summit debate focused on the heavy emissions fines that car manufacturers could face in 2025 and their desire to avoid them.
As part of its ambitious efforts to combat climate change, the EU has introduced a set of emission reduction targets that should lead to the phasing out of fossil fuel cars by 2035.
Around 16% of the planet-warming carbon dioxide (CO2) gas released into the atmosphere in Europe comes from car exhausts, according to the clean transport advocacy group T&E.
Starting this year, automakers must reduce the average CO2 emitted by all newly sold vehicles by 15% compared to 2021 or pay a fine, with stricter cuts in the future.
This encourages companies to increase the share of electric, hybrid, and small vehicles they sell compared to, for example, large SUVs that consume a lot of diesel.
However, some manufacturers complain that this is proving more difficult than expected, as consumers have yet to get used to EVs, which have higher initial costs and lack an established used vehicle market.
Sales of electric cars fell by 1.3% in Europe last year, accounting for 13.6% of all sales, according to the European Automobile Manufacturers Association (ACEA), an industry group.
The prospect of sanctions, which according to some estimates could amount to 15 billion euros ($15.7 billion) in total, has caused nervousness in a sector already hampered by high manufacturing costs and what the EU considers “unfair” competition from subsidized Chinese rivals.
German car giant Volkswagen is considering closing factories in its country for the first time, just one of a series of cuts announced by car manufacturers and suppliers.
“The risk of paying heavy penalties... would divert necessary funds from R&D and other investments,” wrote ACEA chief and CEO of Germany's Mercedes, Ola Kallenius, in a letter to the commission.
EU rules, which allow manufacturers who fail to meet the desired levels to avoid fines by buying emissions credits from less polluting competitors, have also been criticized.
Italy's Industry Minister Adolfo Urso this week described the scheme as a “perfect storm” due to the possibility of European companies dodging EU fines by buying carbon credits from foreign electric vehicle manufacturers.
- Europe slow, China fast
Some carmakers and countries, including France and Italy, would like to see the penalties dropped.
But Brussels fears that this would unfairly penalize producers who have invested to come into compliance.
It would also remove a key incentive for companies to speed up their electric transition at a time when Chinese manufacturers have pulled ahead, said Lucien Mathieu of T&E.
“Effectively, this is rolling out the red carpet for Chinese competition, because it's sending a signal to European automakers that they can slow down, even though they're already behind,” he told AFP.
A study carried out by the Brussels-based group in September showed that only Volvo had already reached its 2025 target. Ford and Volkswagen were the furthest behind.
However, the situation was similar when the lower targets came into force in 2021 and producers rushed to meet them, Mathieu said.
Around a dozen new lower-priced European EVs are scheduled to hit the market this year and boost sales, he noted.
In addition to fines, there are other ways in which Brussels, which has already imposed tariffs of up to 35.3% on Chinese EVs, could support the sector.
A senior EU official said that incentives for companies to buy electric vehicles are one option. “Company fleets” account for more than half of new cars bought in Europe, the official said.
The 27-nation bloc could also try to improve a patchy recharging network, modernize grids to allow faster recharging, cut energy costs, reduce regulations, and loosen China's grip on battery production, analysts say.
But some fear the pace of the reforms. The dialog brings together automakers with unions, civil society groups, suppliers, experts, and others. It provides for a series of “thematic working groups” and consultations that are unlikely to produce an action plan in the coming months.
“They are moving very slowly and the Chinese are going very fast,” said Felipe Munoz, an analyst at automotive data company Jato Dynamics.
ub/ec/rlp
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