Auto lobby renews plea for leniency over failure to meet CO2 standards

Ahead of talks with European Commission president Ursula von der Leyen on the future of the EU’s troubled car industry, the European Automobile Manufacturers’ Association (ACEA) has renewed a call for relief from huge fines manufacturers face for failing to meet vehicle emissions standards set back in 2019.

“The European Green Deal must be subject to a reality check and a realignment – to make it less rigid, more flexible and to turn the decarbonisation of the automotive industry into a green and profitable business model,” ACEA’s newly appointed president Ola Källenius wrote today in an open letter to EU leaders.

Speaking on the sidelines of the annual Brussels Motor Show, the Mercedes-Benz CEO, who was appointed head of the influential lobby group last month, denied that the car industry – which faces billions in fines this year as tighter CO2 emissions limits kick in – had brought its predicament upon itself.

This year, the maximum per kilometres CO2 output falls by around a fifth to just under 94g. The limit has been in place since 2019, but carmakers have continued to push large, profitable gas-guzzling SUV models, hoping to offset their carbon footprints through rising sales of zero-emissions electric models.

But those sales haven’t materialised: ACEA’s data – it plans to publish a full market report on Tuesday (21 January) – shows that only 13% of car sales in Europe were electric last year, a slight drop on 2023. The penalty is set at €95 per vehicle for every gramme they exceed the target.

“There needs to be relief – I think that needs to be a very clearly understood,” Källenius said, claiming that neither the industry nor policy makers could have predicted in 2019 that electric car sales would “actually go backwards instead of forwards” last year.

He placed much of the blame on Germany, which abruptly cancelled one of Europe’s most generous subsidy schemes – up to €4,500 for an all-electric car – at the end of 2023.

“If you, in by far the biggest market in Europe, from one day to the other fully eliminate the incentives for electric vehicles, it has an effect on the market,” Källenius said.

Pushed on whether carmakers should have been promoting smaller, cheaper electric cars, and more fuel-efficient petrol and diesel models, the industry executive said booming sales of larger combustion engine or hybrid models was a result of “natural market” demand.

He said “inherent variable costs” meant electric cars have typically cost upwards of €35-40,000, but that some producers – although not Mercedes Benz – were now “getting closer to the 20,000 mark, which is a little bit of a magical number”. Such more affordable models on display at the Brussels show, he said, although chunky SUV models were also on prominent display.

But apparently these economies of scale come too late for carmakers to comply with EU environmental law. With the automotive industry also facing competition from China, where domestic sales of electric vehicles have already reached 40%, and nervous about a potential trade dispute with the US, von der Leyen has taken personal charge of a forthcoming ‘strategic dialogue’ with the industry.

Källenius said he hoped the process would begin in the coming weeks, but the ACEA had no specific new demands at this point, beyond the general call to waive financial penalties relief and ensure good trade relations.

“We didn’t want to come into that dialogue as an industry and say, okay, here is the list of ten demands,” he said. “Clearly, we have ideas, but you enter such a dialogue with a more open mind.”

The EU’s new transport commissioner Apostolos Tzitzikostas said during his confirmatory hearing in November that the EU must “stick to the plan” for vehicle emissions cuts in 2025 and 2030 on the way to a de facto ban on sales of new petrol and diesel models from 2035.