Carmakers in Germany, France, Britain, Spain, and Italy are facing CO2 fines of about $36 billion if they failed to meet the European Union's emission goals set for 2020 to 2021. The amount is twice most of their profits according to investment researcher Jefferies.
To pay the fines, these automakers may be compelled to raise prices to as much as 10% for their electric vehicles or cut the number of their workers. The ideal scenario, of course, is that they increase the production of electric vehicles. Ordinary Europeans with families, however, may not afford EVs.
The best decision would be for carmakers to prioritize producing smaller and affordable electric cars - but, then again, this will take a couple of years more. With that, analysts agree that automakers face the dim reality that they will have to pay hefty fines.
New EU Commission leader Ursula von der Leyen said that carmakers should now abide by the requirement of a 40% reduction in CO2 emissions up until 2025. Moving forward, that requirement would be reduced to at least 50% by 2030. The problem is that, even plug-in hybrids re unlikely to achieve that goal after 2025.
Still, some remained to be optimistic, saying that electric car sales in Western Europe will increase in 2020 to 700,000 more units sold. By 2021, carmakers in the region could sell about 1 million by 2021.
There are generally mixed reactions among carmakers in the EU. Mazda Europe said the company's profitability will surely be affected even if it recently launched the full-electric vehicle, the MX-30. The company said it still is currently working on a 2020 budget, hinting that management remains unsure how many of the clients can afford to buy the full-electric vehicle.
Daimler, the parent company of Mercedez Benz, is leaning toward more into the negative side, saying that it is facing roughly $3.526 billion in fine. The company said it might only be able to achieve 138g/km of emission requirement this year.
Observers said Daimler may decide to limit productions of its popular models like the A 180 sedan which puts out 128g/km of emissions, the GLC 200 4Matic with 162g/km, and the GLC 64 4matic with 278g/km output.
Elsewhere in the EU, governments are planning to subsidize the fines both for private and public fleets in fear of mounting job loss among residents. Governments agree that with challenges faced by their respective automotive industry, the labor force will always bear the brunt of any repercussions and big decisions.
