Auto companies doing business in European Union member countries are about to face tougher laws as regulators have given the green light for the long-awaited Emission Law starting January 1.
Manufacturers of light-duty vehicles will have to sell many more hybrid and electric vehicles or face heavy penalties, a scenario that is similar to the rules in China.
For car manufacturers with product lineups with few electric vehicle offers, they will have to sell lots of conventional cars and trucks and use the profits to pay the fines. Industry analysts expect hybrid plug-in, electric battery, and hybrid vehicle sales shortly to rise.
The EU adopted carbon emission targets for 2030 earlier this year, which will be 37.5 percent lower compared to the fleet cap of 95 grams per kilometer in 2020-21. The automotive industry lobbied for a more realistic 20 percent reduction goal, claiming that they needed more time to plan and avoid huge financial hits.
Automakers and their supplier partners argued that a very expensive transition to electrified vehicles in their portfolio of new vehicles sold would result from starting the process over 2020-21 and through the 2030 deadline.
Next will be private truckmakers. Heavy-duty vehicles in Europe will have to emit 30 percent less greenhouse gas by 2030. Regulators from the European Union say about 20 percent of their carbon dioxide and greenhouse gases come from light-duty vehicles, and heavy-duty trucks add even more to that share of emissions.
At the beginning of 2020, when the new rules take hold, car manufacturers must comply with strict new laws on exhaust emissions or face significant fines. For each kilometer of driving, the upper limit is set at 95 grams of carbon dioxide.
Passing the cap would mean paying a fine of €95 ($106.44) per gram per kilometer above the limit, multiplied by the total number of cars sold by the seller. For example, if the current rules were in place in 2018, it would have cost more than €33 billion ($37 billion) to automakers.
But for some companies that will not happen: they are going to have to build the expense into their business plans for years to come. Felipe Muñoz at Jato Dynamics, an automotive consulting firm, says certain manufacturers will still need to sell lots of traditional gas and diesel-powered vehicles and use the profits to pay the fines.
Julia Poliscanova, Director of Clean Vehicles at the European Union for Transport and Environment, says that manufacturers are postponing ramping up for high volumes of hybrid and electric vehicles.
