EU Gears Up For Billion Dollar Climate Fine For VW

Most carmakers are still sailing a course into swingeing punitive fines by the European Union for missing their CO₂ emissions targets with Volkswagen topping the list.

That’s the assessment of a innovation and transformation consultancy in its fourth year or research assessing the state of automakers’ chances of meeting EU climate change targets set for 2021. PA Consulting’s annual forecast of car manufacturers’ performance against these mandatory targets suggests that eight out of 13 car manufacturers will face significant fines.

Volkswagen could be fined up to €1.4Bn ($1.6Bn) while the PSA Group faces the biggest impact from fines based on EBIT with a fine of €600M ($683M), representing 20% of its 2017 profit. At the same time, Toyota remains the best performing manufacturer in the ranking, the Renault Nissan Mitsubishi Alliance lists second and Volvo third, down from second last year, and Honda the last of the carmakers who will comfortably meet the EU’s targets. Ford and Volkswagen have both slid backwards even further and are now in 10th and 11th place respectively. Daimler and BMW are making progress towards their targets while Jaguar Land Rover still has the highest CO₂ emissions yet is on course to meet its own specific targets.

The worldwide harmonized light vehicles test procedure (WLTP) cycle will make meeting regulations even harder for carmakers. The WLTP, which is part of the 2021 regulations, introduces on the road testing conditions, providing a more accurate basis for calculating fuel consumption and CO₂ emissions. It is predicted that the tests will increase CO₂ emissions by an average of 20% over the previous laboratory style test conditions.

From a regional perspective, Norway still leads the way seeing a significant reduction on CO₂ emissions from cars. All other European countries lag behind with CO₂ levels staying broadly the same or even increasing since 2015. Germany is one of the worst performing countries, only ahead of Switzerland in the league table.

Michael Schweikl, automotive expert at PA Consulting, said: “Carmakers are running out of time to improve performance quickly enough to avoid fines. Marketing, sales and pricing strategies that increase the take-up of low emissions vehicles will be key in getting manufacturers closer to the targets.”

The calculation of fines is based on the deviation between the emission level automakers will most likely achieve and their forecasted target. For each gram of CO₂ above the target car makers will be charged €95 ( $108) per car registered in the EU.

— Paul Myles is a seasoned automotive journalist based in London. Follow him on Twitter @Paulmyles_


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