Forget Brexit, China, tariff wars, weakening markets and the cost of new technology; European automakers face a more imminent and massive challenge in 2020 from harsh new EU fuel economy rules
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According to a report from investment researcher Jefferies, if the auto industry makes no progress from 2018 towards meeting the EU’s 2020/21 regulations, it faces fines totalling 32 billion euros , twice its estimated profits, and be forced to raise prices up to 10%. And if you think the industry is making steady progress towards meeting the rules, hear this.The European Car Manufacturers Association, known by its French acronym ACEA, has said 2018 carbon dioxide emissions actually rose 1.
The Paris-based International Energy Agency says the advent of electric cars actually won’t make much difference to the output of CO2, even after predicting there will be 300 million electric cars on the world’s roads by 2040.“Even if there were 300 million electric cars, with the current power generation system, the impact in terms of CO2 emissions is less than 1% - nothing,” IEA economist Fatih Birol told the World Economic Forum in Davos last January.
Brussels-based lobby group Transport & Environment begged to differ, saying electric vehicles would increasingly drive down demand for fossil fuels, which would ultimately remain in the ground on the grounds of expense. “Should compliance fail, we see all the ingredients for a policy crisis, complete with recriminations from industry, regulators, consumers and lobbies with governments missing their own targets,” Houchois said.
Evercore ISI, which estimated the penalty potential very close to Jefferies’ estimate, at 32.7 billion euros, pointed to BMW and Mercedes as being slow to bring BEVs to market.“To get there we assume hybridization carries an additional cost of €1,500 , PHEV's €3,000 , and BEVs €8,000 , possibly taking average EU post tax prices from €29,000 to €32,000 . The increase compares with 2% a year historically over the past 15 years.
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