Automakers on a drive to sell electric cars in Europe
Carmakers are under pressure in Europe to sell more electric cars or face huge fines for breaching new emissions rules aimed at tackling global warming.
The European Union set automakers a target to cut carbon dioxide emissions by 40% between 2007 and 2021, but they are collectively far short of this goal due to the popularity among drivers of heavy, polluting models such as SUVs.
EU lawmakers also agreed in December 2018 a further cut in CO2 emissions from cars of 37.5% by 2030 compared with 2021 levels - raising the bar just as the fines from the previous target are about to kick in.
They have set a general target that emissions from all new cars should on average not exceed 95 grams of CO2 per kilometre by 2021. However, the target for individuals carmakers varies because it takes into account the starting weight of each companies’ fleet in the base year of 2007.
Manufacturers with fewer than 300,000 new passenger car registrations in a given year will also be able to apply for exemptions, according to the European Commission.
They will face a penalty of €95 for each gram of excess CO2 they emit compared with their individual targets.
Evercore ISI analysts estimate carmakers face up to a combined €33 billion in fines based on reported 2018 CO2 emissions levels.
Fitting more electric components will cost carmakers between €800 and €5,000 euros per vehicle to ensure compliance with 2021 targets, Evercore ISI say.
Mild hybrid systems - where electric motors are used to assist a combustion engine - give rise to an additional cost of between €800 and €1,200 per vehicle, while plug-in hybrids - where the electric motor can take over - add 2,000-5,000 euros.
Until now, the auto industry has relied on profits between €500 and €1,500 euros per vehicle in the mass market, and between €2,000 and €5,000 for a premium vehicle.
The industry has been slow to embrace electric cars for a variety of reasons including a lack of charging infrastructure, a threat to employment, and uncertainty over demand.
Three-quarters of all charging points in Europe are located in four countries that only cover 26% of the continent’s total area, the European Automobile Manufacturers’ Association (ACEA) says.
Out of the 144,000 charging points available across the EU, more than 26% are in the Netherlands, 19% in Germany, 17% in France and 13% in the United Kingdom, according to ACEA’s website.
Germany’s auto industry association VDA has said a ban on combustion engine vehicles in 2030 would threaten more than 600,000 German industrial jobs, of which 436,000 are at car companies and their suppliers.
Jobs will disappear because it takes less time to build an electric car than a conventional one. A combustion-engined car has 1,400 components in the motor, exhaust system and transmission. An electric car’s battery and motor has only 200 components, according to analysts at ING.
In Europe, there are about 126 plants making combustion engines, employing 112,000 people. The largest is Volkswagen’s factory in Kassel, Germany. A shift to plug-in hybrid cars would help to protect jobs since they take 50% more time, or up to 9 hours longer, to make than cars with only a combustion engine. But pure electric cars are much less complex. For example, while a Volkswagen Golf has around 50 ball bearings, the electric Chevrolet Bolt has only six.
The drive to sell more electric vehicles, which has increased the industry’s reliance on Asian battery cell makers, has led to supply bottlenecks even before measures to contain the coronavirus caused further supply-chain disruptions.
Audi has had to slow down production of electric cars at its plant in Brussels due to a battery cell shortage. Volvo and Volkswagen may also face challenges after battery supplier Samsung issued a profit warning due to the coronavirus outbreak.
“We have flown parts in suitcases from China to the UK,” Jaguar Land Rover Chief Executive Ralf Speth said last month, as Britain’s biggest carmaker warned of the impact of the virus on supply chains.
Volkswagen Group said in March 2019 it planned to launch almost 70 new electric models by 2028.
BMW has said it plans to offer 25 electrified models by 2023, with more than half fully electric, and expects their sales to rise on average by 30% a year until 2025.
