EU car lobby mulls two-year delay of 2025 emissions targets

BRUSSELS: The European Union should use emergency regulation to delay its 2025 emissions targets for automakers by two years, according to a draft proposition from the industry lobby seen by Bloomberg.

EU rules targeting a CO2 fleet emission of about 95 grams of CO2 per kilometre per vehicle would require automakers to either halt production of about 2 million cars or be exposed to fines that could reach €13 billion (RM62bil) for passenger cars, according to estimates by the European Automobile Manufacturers’ Association contained in the draft and seen by Bloomberg.

Van manufacturers could also face paying an additional €3 billion (RM14.3bil) for falling short of targets, said the group that’s currently headed by Renault SA chief executive officer Luca de Meo.

"The EU is in a crisis caused by low consumer demand for EVs and unfair competition from third country EV manufacturers, meaning that the EU industry will not be able to meet these reduction targets,” the informal document said.

"EU industry will have little choice but to significantly cut production, which threatens millions of jobs in the EU, harms consumers, and adversely impacts the EU’s competitiveness and economic security.”

Renault’s de Meo has already raised the threat of potential billions in euros in fines due to the slowdown in EV demand, leaving a range of manufacturers including Volkswagen AG likely short of the stricter EU rules as of next year.

In an interview on French radio on Sept 7, he said the European Commission should have "a bit of flexibility” regarding upcoming targets.

ACEA hasn’t issued a position paper nor has it yet taken a formal stance on the matter, according to a spokesperson, saying the document wasn’t "an ACEA paper.” A media representative for Renault declined to comment.

Europe’s auto sector is struggling with cheaper models from China, high energy costs and slow consumer demand with sales remaining well below levels from before the pandemic.

The developments are putting pressure on the EU’s deadline to effectively ban sales of new combustion-engine cars from 2035.

"The EU automotive industry has invested billions in electrification to put vehicles on the market, but the other necessary ingredients for this transition are not in place and the competitiveness of the EU is eroding,” ACEA said in a statement on its website on Sept 12.

For the overall EU auto market to be compliant with the stricter 2025 emissions rules, the EV share of passenger cars and vans should be about 20% to 22%, while the level has currently stagnated at less than 15% for cars and much lower for vans, according to the draft.

"It’s a difficult path,” said Robin Loos, deputy head of energy transport and sustainability at BEUC, the European Consumer Organisation. But "these targets were set six years ago - this last minute call is representative of what part of the industry has not well anticipated.”

Volkswagen, Europe’s biggest automaker, is worst positioned among European car manufacturers for compliance with stricter 2025 CO2 rules, Jefferies analyst Philippe Houchois wrote in a note this month.

Longer term, the EU is planning to phase out the sale of new combustion engine-powered vehicles by 2035, and a review of the target is due in 2026.

The scope for regulatory lenience is low, and the 2025 rules could accelerate capacity restructuring within the industry, Houchois said.