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Europe’s biggest carmakers will converge on Brussels for talks this week as the EU seeks to chart a way forward for an embattled industry struggling to cope with Chinese competition and climate rules.<\/p>\n
Automotive CEOs and European officials are expected to discuss the sector’s troubles on Thursday in the first meeting held under a new initiative chaired by EU chief Ursula von der Leyen.<\/p>\n
The “ambition” is to “roll up the sleeves” and find solutions for “a core engine for European prosperity”, the European Commission said.<\/p>\n
The auto sector employs more than 13 million people, accounts for about seven percent of the bloc’s GDP, and is in the “middle of\u00a0deep structural shifts”, it added.<\/p>\n
The so-called “strategic dialogue” aims to boost the sector’s competitiveness. But much of the pre-summit debate has focused on the steep emission fines that car manufacturers could face in 2025 — and their desire to avoid them.<\/p>\n
Under ambitious efforts to combat climate change, the EU introduced a set of emission-reduction targets that should lead to the sale of fossil fuel-burning cars being phased out by 2035.<\/p>\n
About 16 percent of the planet-warming carbon dioxide (CO2) gas released into the atmosphere in Europe comes from cars’ exhaust pipes, according to clean transport advocacy group T&E.<\/p>\n
As of this year carmakers have to lower the average CO2 emitted by all newly sold vehicles by 15 percent compared to 2021 or pay a penalty — with tougher cuts further down the road.<\/p>\n
This incentivises firms to increase the share of EVs, hybrids and small vehicles they sell compared to say big diesel-guzzling SUVs.<\/p>\n
But some manufacturers complain that is proving harder than expected as\u00a0consumers have yet to warm to EVs, which have higher upfront costs and lack an established used-vehicle market.<\/p>\n
Sales of electric cars slid by 1.3 percent in Europe last year, accounting for 13.6 percent of all sales, according to the European Automobile Manufacturers’ Association (ACEA), an industry group.<\/p>\n
The prospect of sanctions, which some estimate could reach up to 15 billion euros ($15.7 billion) in total, has sent jitters through a sector already hobbled by high manufacturing costs and what the EU deems “unfair” competition from subsidised Chinese rivals.<\/p>\n
German car giant Volkswagen is weighing factory closures at home for the first time, just one of a string of cuts announced by auto manufacturers and suppliers.<\/p>\n
“The risk of paying heavy penalties… would divert necessary funds from R&D and other investments,” the head of the ACEA and CEO of Germany’s Mercedes, Ola Kallenius, wrote in a letter to the commission.<\/p>\n
EU rules allowing manufacturers who fall short to avoid fines by buying emissions credits from less polluting competitors have also come under fire.<\/p>\n
Italy’s Industry Minister Adolfo Urso this week described the scheme as a “perfect storm” due to the potential for European firms to dodge EU fines by buying carbon credits from overseas EV-makers.<\/p>\n
– Slow Europe, fast China –<\/p>\n
Some carmakers and countries including France and Italy would like to see the penalties ditched.<\/p>\n
But Brussels worries this would unfairly penalise producers who have invested in order to comply.<\/p>\n
It would also remove a key incentive for firms to speed up their electric transition at a time when Chinese manufacturers have raced ahead, said Lucien Mathieu of T&E.<\/p>\n
“Effectively, this is rolling out the red carpet to Chinese competition, because it’s sending a signal to European carmakers that they can slow down even though they are already late,” he told AFP.<\/p>\n
A study by the Brussels-based group in September showed only Volvo had already reached its 2025 target. Ford and Volkswagen were the furthest away from it.<\/p>\n
Yet the situation was similar when lower targets came into force in 2021 and producers made a late dash to comply, Mathieu said.<\/p>\n
About a dozen lower-priced new European EVs are slated to come onto the market this year and boost sales, he noted.<\/p>\n
Fines aside, there are other ways Brussels, which has already imposed tariffs of up to 35.3 percent on Chinese EVs, could support the sector.<\/p>\n
A senior EU official said incentives for businesses to buy electric are an option. “Company fleets” account for more than half of new cars purchased in Europe, the official said.<\/p>\n
The 27-nation bloc could also seek to improve a patchy charging network, modernise grids to allow for faster charging, bring down energy costs, cut regulations and loosen China’s grip on battery production, analysts say.<\/p>\n
But some fret about the pace of reforms. The dialogue brings together carmakers with trade unions, civil society groups, suppliers, experts and others. It foresees a series of “thematic working groups” and consultations that are not expected to produce an actionable plan for months.<\/p>\n
“They’re moving very slow and the Chinese are going very fast,” said Felipe Munoz, an analyst with the automotive data company Jato Dynamics.<\/p>\n
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