ILMA Compoundings – September 2019 - 14

INDUSTRY RUNDOWN

Time Is Running Out
for Automakers to Lower
CO2 Emissions
European Environment Agency (EEA) data shows that
average carbon dioxide (CO2) emissions from new passenger cars registered in the European Union (EU) are
on the rise for the second year in a row. The 2018 data
shows levels at 120.4 grams of CO2 per kilometer, up 2
grams from 2017.
That rise is bad news for car manufacturers, considering
that in four months, no more than 5% of each manufacturer's new cars can exceed a target of 95 grams per kilometer.
In 2021, all newly registered vehicles will have to be below
that mark. Should the manufacturer's fleet exceed its target
in a given year, it will have to pay an excess emissions premium for each car registered. That premium is 95 euros for
each gram per kilometer the vehicles go above the target.
Missing that mark is going to have a negative impact
on the carmaker's bottom line. According to a report in
Bloomberg, the industry is looking at an estimated 34 billion
euros ($39 billion) in penalties.
Moreover, those penalties are just one problem among
many faced by automakers. Vehicle sales have been falling in
the U.S., China and Japan, in addition to Europe, and trade
issues between the U.S. and China, as well as with the EU,
are causing costs to rise. Then there is the fact that buyers
prefer automakers' highest-emission-producing cars.
In fact, buyer choice is identified by the EEA as one of the
main contributing factors to increased passenger car emissions -
1 out of 3 cars sold in the EU and Iceland is an SUV.
While sales of plug-in hybrid electric vehicles (PHEV) and
battery-electric vehicles (BEV) continue to increase, they still
make up only 2% of all sales in the EU. With 2020 quickly
approaching, manufacturers are going to need to accelerate
those sales if they want to meet their targets. Understanding
Nordic drivers might shed light on just how to do that.
EEA data shows that the combined shares of PHEV and
BEV sales were highest in Iceland (15%), Sweden (8.4%)

SEPTEMBER 2019

| COMPOUNDINGS | ILMA.ORG

and the Netherlands (6.8%). Together with Estonia, Finland
and Malta, these were the only countries where the average
emissions of new cars decreased from 2017 to 2018.
Who is going to be hit the hardest by emissions penalties?
According to research firm Jato Dynamics, Volkswagen
AG, the world's biggest carmaker, faces the most significant
penalty at about 9 billion euros, based on 2018 reported
emissions. On the other end of the spectrum, Toyota Motor
Corp., maker of the Prius and several other hybrids, was the
only automaker to see its emissions fall last year in Europe,
according to Jato.
Bloomberg reported that carmakers were hoping their
diesel fleets, which emit about one-fifth less CO2 than
equivalent gasoline cars, were going to help them meet the
tighter regulation. Unfortunately for them, some European
cities have started to ban diesels, leaving those vehicles
sitting on dealer lots.
There is at least one way for manufacturers to avoid the
stiffest of penalties. During the 2020 phase-in period, cars
that emit less than 50 grams of CO2 per kilometer will count
for two vehicles. That's sparking some automakers to pair up
with makers of low- or zero-emission vehicles, much like the
agreement between Fiat Chrysler Automobiles and Tesla.

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ILMA Compoundings – September 2019

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