Coronavirus reopens battle for car emissions

Madrid

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The automobile industry has launched a cry for help to the European Union. With practically all of the continent’s vehicle manufacturing plants closed, most of their employees unemployed or subjected to temporary unemployment regimes and sunk demand, the main industry associations in the sector are demanding a moratorium on the European Union. demanding emission targets that came into effect in January this year, and which could represent large fines for the sector from next year.

In a joint letter, the presidents of the Association of European Automobile Builders (ACEA), Mike Manley; from the European Automobile Components Association (Clepa), Thorsten Muschal; from the European Association of Tire and Rubber Manufacturers (Etrma), Franco Annunziato, and from the Committee on Trade and Vehicle Repair (Cecra), Jean-Charles Herrenschmidt, explain to the President of the European Commission, Ursula von der Leyen that under current conditions “no production, development, testing or homologation work (of vehicles or components) is being carried out”.

[[Check the letter here, in English].

“This disrupts the plans that we had drawn up to prepare ourselves to comply with the existing and future regulations of the European Union within the deadlines established in those regulations,” explain the representatives of the sector. “Therefore, we believe that an adjustment should be made to the terms of these regulations.” Despite this request, the sector insists that it is not its intention “to question the legislation or to lower its objectives regarding road safety, climate change and protection of the environment.”

Since January, the average emissions of new vehicles it must not exceed 95 grams of CO2 per kilometer, a goal far from that registered in 2019, when 118 were reached. This year it already affects 95% less polluting of vehicles sold; and it will reach 100% in 2021. Who exceeds it will have to face a sanction of 95 euros per gram and kilometer exceeded, which would translate, with the 2019 data in hand -when 1,258,260 cars were sold-, up to 2,750 million for its sales in Spain. At European level, the estimate ranges from 12,000 million that Moody’s calculates to 34,000 that the consultancy JATO foresees.

The new limit is equivalent, in consumption (a variable closely linked to emissions) to 4.1 l / 100 km of gasoline or 3.6 l / 100 km of diesel, not for a specific vehicle but for the average of all those sold by each automobile group. It is, therefore, an average calculation, since the objective for each company is established based on the average mass of the vehicles it markets (95 g / km is an average figure, calculated on the theoretical basis that all cars that a manufacturer sold would weigh 1,379.88 kg).

The legislation is intended to incentivize sales of zero and very low emission models, that is, plug-in hybrids and electrics, which would offset excessive emissions from conventional models. For example, an electric car counts as two vehicles in 2020, 1.67 in 2021 and 1.33 in 2022, depending on the correction factor introduced by the European Union. But it will also be necessary to sell diesel models, which emit less CO2 than gasoline cars, the great beneficiaries of the uncertainty unleashed in recent months.

Although the investments for the development of electric and hybrid models have already been made, and many models are already on the market, in a scenario of uncertainty such as the current one, it is difficult to think that buyers will bet massively on electric models, they fear in the future. sector. Your price, for now, is greater than that of its combustion counterparts, and its benefits, especially autonomy, minors.

In addition, although with less impact than emissions, manufacturers also have to adapt to comply, from 2022, with the new standards contemplated by the General Vehicle Safety Regulations. For example, to compulsorily equip new cars with speed assistants, black boxes or autonomous braking assistants. The price of these assistants is calculated 50 and 250 euros per vehicle. This year it was also planned to establish the new cybersecurity requirements for vehicles.

All this implies significant development costs for manufacturers, who already warn, in the aforementioned letter, that “without new income many companies will face major liquidity problems in the short and medium term”. Although the situation varies, “many companies could be in trouble in a matter of weeks,” they warn.

In a letter to his employees, the president of PSA (Peugeot, Opel, Citroën, DS) warns on Wednesday that a company of his size «can’t resist long with almost complete absence of income»Because of the stoppage in production and sales that has occurred with the confinement measures for the coronavirus, which have caused« an extremely violent and brutal shock for all of us ». “We must prepare to return to business,” explained Tavares, also former president of ACEA, “ensuring a permanent flow of deliveries of our stocks to customers waiting for their vehicle and suspending all possible expenses, always respecting our associates.”

The illiquidity It is precisely the most immediate problem facing the sector. On Wednesday, the rating agency Moody’s downgraded the rating of the car company BMW from ‘A1’ to ‘A2’, keeping it investment grade, while placing manufacturers Daimler, Jaguar Land Rover, PSA Group, Renault, Volkswagen, Volvo Cars and McLaren in a downgrade review position for the coronavirus outbreak. “The automotive sector has been one of the sectors most affected by the ‘shock’, given its sensitivity to demand and the consumer situation,” he stressed.

The National Association of Vehicle Manufacturers (Anfac), predicts that this March there will be a reduction in production of between 50 and 60%. Approximately 157,000 vehicles will be discontinued. On the other hand, the consulting firm MSI estimates that passenger car sales will decrease 29.3% in 2020 in Spain, with just 883,000 units. By channels, companies and rental companies would buy 38.7% and 35.1% less; and individuals 26.3% less, just 439,000 units.

In their letter, the European employers insist that “there is no doubt that the impact on our sector (of the coronavirus) is unprecedented. Both the production and sale of vehicles and components have suffered a sudden halt in Europe and other regions. Most of our employees are technically unemployed or working from home when possible. No one knows for how long. We have never experienced anything like this.

“For a capital intensive industry like ours, the implications are dire. Companies require constant refinancing for their operations. That is a great challenge in a situation like the current one, ”continues the letter, which thanks the Commission for the measures it has already taken, such as the relief to the states through the clause of the Stability Pact and the proposal to inject 37,000 million euros through cohesion funds, but he asks that he make sure that liquidity ends up reaching companies, both large and small.

The car employs, directly and indirectly, about 13.8 million people in the European Union. This represents 6.1% of the active community population; and generates a trade surplus of 84.4 billion euros.

A matter of time and duration

However, it will not be easy for manufacturers to achieve their goal. It is not even certain that there will be unanimity in the request to Brussels, since last week both BMW and the Volkswagen group assured, in their respective results conferences, that it was not necessary. Also Porsche, with the nuance that a two or three week break is not the same that if it lasted for two or three months. “If the crisis lasts until summer we will have to discuss it, this is clear. It is not realistic to have limitations that later cannot be met, “explained Lutz Meschke, number two of Porsche and head of Finance, in a virtual round table in which ABC participated.

Julia Poliscanova, responsible for clean vehicles and electric mobility of the environmental federation Transport & Environment, asks that the community CO2 objectives not be relaxed. The targets, agreed in 2008, are an average for the fleet. A drop in vehicle sales does not automatically affect compliance, “he muses. Second, electric car sales have set records in Europe in the first two months of 2020. We expect demand for electric cars to remain strong. And third, most electric cars to comply with the regulation are not yet in production. If factory shutdowns are short-lived, electric vehicle production should not be affected.

“Finally, although a recession is bad news for manufacturers and employment benefits, it does not have to imply an increase in emissions from new cars. In 2009, amid the financial crisis, emissions fell 5.1%, a record. That was because smaller, less powerful cars were sold, with generous incentives for scrapping old vehicles. An increase in sales of this type of smaller car would also help now. And there are already affordable electric models on the market. “

In another reflection, published on March 20, Hans Bruyninckx, director of the European Environment Agency, admitted that the expansion of the coronavirus “supposes an unprecedented crisis of public health”. Although it recognizes that “it can have a strong impact on production and consumption, and on mobility – which the agency will evaluate – (…) without a transformation in the way we produce and consume, any reduction in emissions is likely make it short-lived. Europe aims to achieve climate neutrality through gradual and irreversible emission reductions, setting long-term goals to build a resilient economy. This current crisis shows why we also need the transition to be fair, offering new opportunities and support to those most affected. ”

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