Before Covid-19 wreaked havoc on European carmakers’ supply chains and assembly lines, executives were focused on the race to meet strict EU emissions targets, which were phased in at the start of 2020 and carry the threat of huge penalties for non-compliance.
Under the new rules, mass-market manufacturers have to ensure that on average, the cars sold over the year emit 95g of carbon dioxide per km driven, with some leeway given to those whose fleets contain heavier vehicles.
Carmakers differed wildly in their strategy to meet the rules. France’s PSA sought to reduce emissions by improving the overall fuel efficiency of its combustion engines and was among the first to fulfil its requirements. Fiat Chrysler (FCA) formed a so-called “pool” with Tesla, which as a purely electric carmaker accrues credits for every vehicle sold.
The world’s largest carmaker by volume, Germany’s Volkswagen, relied more on the launch of its flagship ID. 3 electric vehicle and the sale of other battery-powered models in the second half of the year, to counterbalance emissions from bestselling SUVs.
The pandemic threw such plans into disarray. Dealership closures and a sharp downturn in car sales across Europe, which have fallen by almost 30 per cent so far this year, led to speculation that those not already compliant, especially VW and German rival Daimler, would struggle to avoid fines or be forced to buy credits from those who have surpassed the standards.
Nonetheless, as the recommended deadline for announcing a “pool” between carmakers looms at the end of October, new data suggest that generous subsidies for electric vehicles, especially in Europe’s largest market Germany, have helped CO2 laggards reach the finish line or near enough.
“We are in striking distance,” Ola Kallenius, chief executive of Daimler, which has several heavily polluting models in its line-up, said this month. He added this was “quite remarkable considering where we started a year ago and the Herculean effort that we needed to make this happen with the profile of our portfolio”.
Daimler had a gap of 9g/km at the end of the first half of the year, according to pressure group Transport and Environment. But recent calculations by German bank MainFirst found the Mercedes maker would overachieve its targets, if growing demand for lower emission models continues beyond September.
“The rising share of hybrids, and especially plug-in hybrids, likely fuelled by government incentives, helped Daimler make up ground,” said Daniel Schwarz, an analyst at MainFirst. Deliveries of Smart cars, a Daimler sub-brand that is now fully electric, also contributed, he added.
VW, conversely, still faces a race to meet its targets despite pooling with its Chinese joint-venture partner SAIC, which sells electric cars in Europe via its subsidiary MG.
But sales of the ID. 3 were beginning to increase in September, helped by a €6,000 subsidy per vehicle from the German government that will stay in place until the end of 2021, and barring further lockdowns, the Wolfsburg-based group could still come close to the finish line.
The EU standards are tightened in 2021 when super credits, which allow carmakers to count each electric car sale twice, begin to be phased out. The scheme can only be used to make up a 7.5g gap in total and many carmakers will have used a large part of that in 2020.
But despite the havoc wreaked by coronavirus this year, “most companies will not pay fines and if they do it won’t be much”, Mr Schwarz said. Nor are they likely to strike deals with competitors.
“I don’t think that pooling is much better in terms of image than paying fines,” he added.
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