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Tough European CO2 Targets Will Help Keep Region’s Fuel-Efficiency Lead

Automakers in Europe are speeding up the introduction of alternative fuel powertrains as they push to cut CO2 emissions by nearly one-third by 2021.The European Union is demanding that average CO2 emissions from new cars sold in Europe are reduced to 95 grams per kilometer in 2021, down from about 132g/km in 2012. The 2021 target equates to fuel use of 4.1 liters per 100km for gasoline cars and 3.6 l/100km for diesel models.


Carmakers’ targets vary depending upon the weight of the average vehicle sold. Most automakers selling cars in Europe are on track to meet the targets if they keep up with their past progress, said Transport & Environment, a clean-air lobby group that monitors vehicle manufacturers’ annual progress toward meeting the goals.

Toyota, PSA/Peugeot-Citroen, Renault, Ford and Daimler and Volvo will reach their CO2 targets before 2020, while Volkswagen Group and Nissan are on schedule to achieve their assigned goals by 2021. Fiat and BMW, however, may miss their targets, T&E said.

Fiat has traditionally been among the most “green” carmakers in Europe because of its expertise in small engines. The company has lagged behind rivals in introducing electric cars and hybrids because it has delayed investment due to slumping car sales in its home market of Italy. Fiat, however, said in May its upcoming product plan calls for hybrid minivans. “We intend to meet the targets,” a Fiat spokesman told Auto Riff.

T&E’s study doesn’t take into account new more energy-efficient cars automakers will launch in the future, according to ISI, an equity research company, which disagrees with the T&E findings in the case of BMW. The premium automaker has invested heavily in its new i subbrand, which includes the i3 electric car and the i8 plug-in hybrid.

BMW also lobbied hard in Brussels for more generous supercredits that were eventually approved. A BMW spokeswoman said the automaker’s future product portfolio will have the mix of vehicles needed to comply with the rules.

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Some Asian carmakers will have to speed up their introduction of emissions-cutting technology. The T&E study shows that Suzuki would need until 2023 to reach its target with Hyundai and Mazda taking until 2025 and Honda until 2027. These companies have just announced a collaboration to improve the efficiency of engines by 30 percent by 2020, T&E noted.

VW Group faces the highest cost to comply with the rules because of its large fleet of heavy cars. But it also has the biggest profits, so in terms of percentage of gross earnings, it is less onerous for VW than for its struggling southern European competitors such as Fiat and PSA/Peugeot Citroen despite their lighter fleet size and smaller engines.

Risk of fines

Automakers that miss their target will have to pay a fine of 95 euros for every excess gram over the target multiplied by the total number of vehicles sold. Few analysts expect the automakers to ever pay any fines. More likely, carmakers that risk fines will tweak their targets at year-end by registering a large amount of electric vehicles or hybrids, and possibly passing them off to fleets of rental or car-sharing services, analysts say.

Besides developing smaller gasoline and diesel engines that offer the performance of larger powerplants, known as downsizing, automakers are ramping up the launches of fuel-efficient alternative drivetrains. VW will introduce a plug-in hybrid version of its Golf later this year, sharing a lithium ion battery with its more expensive sibling, the Audi A3 e-tron. BMW is promising its X5E Drive plug-in hybrid SUV early next year.

“We are starting to see mainstream auto manufacturers introduce multiple plug-in hybrid models ahead of the 2021 deadline,” said George Galliers, car analyst at ISI. “It’s difficult to assess the extent to which this might not have happened without the 2021 targets. But it’s clear that the EU regulation helped to drive it.”

The surge of plug-in hybrids and electric vehicles is only the most visible effect of mandatory emissions targets that will shape the industry for years to come. Another big impact of the targets is that more fuel-efficient engines mean lower fuel costs for European consumers. An EU study says drivers in 2021 will enjoy fuel-cost savings per car of about 340 euros in the first year, and an estimated total of 2,904 euros to 3,836 euros over the vehicle’s lifetime, as compared with the 2015 target.

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