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The Automotive Industry Faces Potential Loss of €16 Billion in Investment Without CO2 Regulation Review

The Automotive Industry Faces Potential Loss of €16 Billion in Investment Without CO2 Regulation Review

J. Bacorelle

Viernes, 27 de diciembre 2024, 09:30

The year 2024 has shed light on the automotive industry's transformation process towards CO2 emission neutrality, with electrification slowing down and new "bio" and synthetic fuel alternatives emerging as available options for users.

The outlook for 2025 is marked by uncertainty, with economic challenges for major European automotive groups that have made significant investments, which so far have not yielded the expected results.

It is for this reason that the European Automobile Manufacturers Association (ACEA) has urged EU decision-makers to take action on the 'CAFE' CO2 emissions regulations, set to come into effect next year, before the end of 2024, to prevent damage to competitiveness and employment.

The association calls for "clarity on employment and investments before the end of the year to support, rather than hinder, the green transition and avoid unnecessary harm to Europe's competitiveness."

ACEA acknowledges that the European automotive industry remains committed to the EU's climate neutrality goal for 2050 and the transition to zero-emission mobility. However, it notes that as the new CO2 emission limits for cars and commercial vehicles come into force in 2025, manufacturers "will be the only ones to suffer the detrimental consequences if the targets are not met."

ACEA President and Renault Group CEO Luca de Meo argues that "without a clear political statement from the European Commission before the end of 2024, as also requested by the German, French, Italian, and other European governments, the automotive industry risks losing up to €16 billion in investment capacity, whether by paying fines, reducing production, partnering with foreign competitors, or selling electric vehicles at a loss."

In this regard, Luca De Meo emphasizes that waiting for the start of the Commission's strategic dialogue on the future of the automotive industry or the review of CO2 emissions regulations in 2026 "is not an option, no matter how welcome and necessary both may be."

"Manufacturers need clarity now to finalize compliance strategies, make pooling agreements, and other arrangements for 2025," he adds.

The Threat of Million-Euro Fines

The executive of the French automotive group also points out that "in a well-functioning system, paying fines should be the exception, not the norm." Furthermore, he states that avoiding fines should be based on solid criteria, "not causing harm."

"ACEA members have pledged €250 billion for the transition to green mobility, and like everyone else, we want this to succeed. Unfortunately, the honest assessment must be that the transition is not going as planned and that sticking to legal rigidity leads to potentially irreversible damage. Legal flexibility, on the other hand, will keep investment flowing and the transition on track," explains De Meo.

ACEA indicates that the options currently being considered to ease the compliance burden, such as phased introduction or multi-year average compliance, do not alter the EU's CO2 targets or overall climate ambitions but "address market realities beyond manufacturers' control."

In this regard, it names factors shaping this reality, such as trade tensions, rising manufacturing costs, slow growth of charging infrastructure, and declining purchase subsidies. "These options are also already known in EU legislation (for example, for heavier vehicles like trucks and buses) and are used in other major jurisdictions with CO2 reduction legislation," it concludes.

CAFE Regulation

The 'CAFE' regulation (Corporate Average Fuel Emissions) has established that, starting in 2025, CO2 emissions will drop to 93.6 grams per kilometer for cars sold in the 27 EU countries. Any manufacturer failing to comply may face fines of up to €95 for each gram exceeded, according to the law.

The European automotive industry association, therefore, indicates that unlike four years ago, to meet the stricter CO2 reduction targets, "this time a smooth interaction of factors within and outside manufacturers' direct control is necessary."

It also points out that regulatory targets and car supply "alone are not enough" and that the transition must also be market-driven. However, it emphasizes that electric vehicle sales are currently stalled at around 13% of the market share in Europe, which is 10 percentage points below where they should be, "and this gap is too large to close in time."

"A timely and unequivocal statement of support at this crucial moment of the transition is essential to ensure competitiveness and jobs throughout the value chain," adds ACEA.

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