Tightened European carbon dioxide emission rules could send some automakers into bankruptcy, a top PSA executive said.
Some of the Peugeot, Citroen and Vauxhall brand owner’s rivals will struggle to survive the next decade of carbon regulation, CEO Carlos Tavares told Reuters on Tuesday.
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“I’d be surprised if we didn’t see a few bankruptcies, considering the amplitude of the coming change,” the news agency quoted him as saying.
Noting the numerous new electrified models launched at the Frankfurt motor show, the news agency said the challenge of cutting CO2 to 95g per kilometre for 95% of cars from the current 120.5g average – a figure that has risen as consumers spurn fuel efficient diesels and embrace SUVs – was fraught with danger as the cost of pushing pricey technology on unconvinced consumers could hammer profits in an industry already suffering a downturn in sales. By 2021, all cars sold in the EU must be compliant.
“You have cars that cost an extra EUR10,000 to build, fleet-emissions targets requiring a certain sales volume and consumers who may or may not want them,” an unnamed PSA executive told Reuters.
“All the ingredients are there for a powerful explosive.”
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By GlobalDataThe timing could hardly be worse, the report noted, with the main vehicle markets in decline, the sector braced for a UK exit from the European Union on still-unknown terms, and a lengthy US-China trade war.
The industry has long since given up pushing for the goals to be relaxed – a political impossibility underlined by a resurgent climate protest movement that has added the Frankfurt show to its target list. Greenpeace inflated a large, black CO2 balloon outside a main entrance on Tuesday, Reuters said.
Sales of electric cars will need to triple to 6% of the market by 2021 and rechargeable hybrids surge fivefold to a 5% market share, German engineering firm FEV Consulting estimated.
A further 15% cut in CO2 is required by 2025, extending to 37.5% by 2030. Fines of EUR95 (YS$105) per car, per excess gram of CO2 quickly add up to hundreds of millions.
While Mercedes has “all the right vehicles on offer to reach those targets”, Daimler head Ola Kaellenius told Reuters on Tuesday, “we cannot mandate what the customer buys”.
Mass appetite for electrified cars remains “very unclear”, Reuters cited Bernstein analyst Max Warburton as warning in a recent note.
“It’s going to require the industry to force quite a lot of cars into the market,” Warburton predicted, with carmakers leaning on discounted sales to fleets and their own employees.
Rather than incur fines that could total EUR25bn in 2021 if current model ranges were left unchanged, carmakers are engaged in a huge product overhaul likely to wipe more than half that amount from combined profits, Bernstein projected.
Reuters noted many new electrified offerings – such as from Ford – are arriving just in time – or in many cases too late – for deliveries to begin in January, when less efficient models will also become more scarce.
Launched later than VW’s Frankfurt show debutant, so as not to steal the all-electric ID.3‘s thunder, the eighth generation Golf to be unveiled next month heralds the start of VW’s mass deployment of 48-volt hybrid technology in the top-selling European C-segment.
Reuters said such mild hybrids add less cost, starting at EUR500 per car but bring more modest emissions cuts than plug-in hybrids or pure electrics costing an extra EUR5,000-EUR10,000, by comparison with an equivalent petrol model.
French carmakers face a bigger hit to margins than German rivals, analysts have said, because they lack significant US and Chinese earnings to soften the blow.
Renault, reliant on its ageing Zoe electric car, is rushing to add hybrid versions of its Clio and Captur subcompacts now expected in the second quarter of 2020, Reuters noted.
PSA is counting on pricier PHEV and electric versions of its DS3, Peugeot 208 and Opel/Vauxhall Corsa to claim 7% of its total sales. It has also scrapped less-efficient Opel models and will halt sportier versions including the Peugeot 208 GTi and 308 GT.
The cull of less efficient models and engines is being replicated across the sector, threatening automotive jobs already squeezed by the shift to electrification.
With regulatory softening off-limits, the jobs threat may instead prompt new government sales incentives to limit losses and help steer demand to greener cars, some executives believe, according to Reuters.
The head of German auto supplier Continental appealed on Tuesday for state aid to defend jobs, investment and innovation that he said were endangered by CO2 penalties.
“The time to relieve the burden on industry and consumers is now,” chief executive Elmar Degenhardt told Reuters.
