SUMMARY:
The European
automotive
industry
is facing
a HUGE
challenge
over the next
two years.
Starting with
big investment
demands,
for the switch
to electric vehicle
production, and
development
of the EV
supply chain,
such as battery
manufacturing
plants.
Financial Times
has estimated
the German
auto industry
directly employs
830,000 people,
and supports
two million
workers in the
wider economy.
FT says automakers
will be forced to
invest €40 billion
into battery-powered
technologies, over
the next three years.
On top of that,
all EU automakers
face implementation
of new legislation
designed to reduce
overall fleet
emission levels.
That's a big problem,
because there's a
large imbalance
between what
EU consumers
want to buy,
and what the
EU manufacturers
will need to sell them,
to avoid large fines.
Europe,
once the home
of very small,
fuel-efficient,
diesel engine,
manual shift,
cars ... has
fallen in love
with the SUV.
40% percent
of autos sold
in the E.U.
are now SUVs.
As a result,
total automotive
CO2 emissions
increased
for the first time
in a decade.
Potential fines
for missing new
fleet CO2 emission
limits are huge.
Every gram
over the target
incurs a penalty
of €95.
A €95 penalty
applies to
every vehicle
sold by the
manufacturer.
If the EU
auto industry
sold the same
product mix
of vehicles
in 2021,
as it did in 2018,
they would face
total penalties
of €25 billion,
according to the
Financial Times.
This challenge
may not
be feasible.
The need for
a rapid switch
from
diesel engines,
to gasoline and
electric engines,
has been
in progress
for a few years.
I believe
EU legislators,
and the
EU auto industry,
will have to act fast
to find solutions,
that may require
penalties and
incentives.
Unusually fast
technological
innovation
in the next
few years
is unlikely.
DETAILS:
Europe’s automakers have
about 14 million workers
across the continent.
Each manufacturer
faces its own CO2 target,
based on the weight
of its vehicles.
For example:
PSA is a business
selling mainly
smaller cars.
So PSA will have
a lower CO2 target
than Mercedes-Benz,
with a heavier
average vehicle.
The targets vary
from around 91 g/km
to just over 100 g/km.
PSA has made
good progress
switching less
fuel-efficient,
four-cylinder
GM engines
in their new
Astra range,
to new
three-cylinder
PSA engines,
improving
efficiency
by 21%.
Of course
PSA does not
have many
luxury cars
and SUVs
in their lineup.
But Daimler,
BMW and
Jaguar-
Land Rover
sure do.
And their situation
is made worse
by a rise in sales
of such gas
guzzling vehicles
in recent years.
This comes
on the back
of 17 months
of slowing
car sales in China,
Germany’s biggest
auto export market.
EV sales in Europe
have stalled without
heavy subsidies:
the public is
losing interest.
European
carmakers
are already
reining back sales
of very profitable
gas guzzlers,
such as Mercedes'
high performance
AMG models,
to help meet new
emissions targets.
Job losses
in Germany
are expensive --
an axed position
is estimated to
cost the employer
around €100,000.
In 2019, German
automakers
and part suppliers,
from Daimler and Audi,
to suppliers including
Continental and Bosch,
have announced
50,000 jobs
will be lost,
or are at risk,
as their traditional
businesses become
less profitable.
Job losses so far
have been limited
by the automakers’
healthy profits
in the past decade.
Automakers'
CO2 emissions
will be measured
on only 95%
of the fleet
in 2020,
giving some
breathing space
to continue
selling 5% of the
most-polluting,
and often
most profitable,
vehicles longer.
But unlike the U.S.,
European firms can't
buy and sell credits,
they can only pool
overall fleet results
with competitors,
which carries a cost.