The European Commission will next month outline progress on future emission targets for new cars sold in the EU, giving automakers a clearer look at the billions of euros in investment that will be needed to meet tougher goals.
The commission will outline the next steps it will take on setting CO2 emissions goals after 2021 to automakers and other stakeholders such as consumer groups at a meeting on Dec. 9.
Automakers have already said they need more time to meet the targets. Volkswagen Group CEO Martin Winterkorn warned on Oct. 1 that it would be "fatal" to overburden the auto industry with tougher CO2 emission targets before a market can develop for electric cars, plug-in hybrids and other fuel-efficient models powered by alternative powertrains.
The EU has mandated automakers selling cars in Europe to reduce average CO2 emissions from passenger vehicles to 95 grams per kilometer by 2021, down from about 132g/km in 2012, or they will face heavy fines.
Industry watchers say the next target is even more important because it will be tougher and will further accelerate the push to electrification, which will have a huge impact on the bottom lines of Europe’s money-losing mass-market manufacturers and their supplier base.
Last year, the European Parliament approved an indicative target of 68g/km to 78g/km by 2025. Industry watchers expect a 75g/km target with automakers given until 2030 instead of 2025 to meet the goal.
A 68g/km to 78g/km target would imply that Europe’s car fleet would need to be nearly fully hybridized (meaning that most cars would need Prius-like hybrid engines), according to research carried out by the EU in 2012 assessing the impact of the current target.
"The next step in complying with the targets will be a really big one because it implies a really significant electrification of powertrains," said Arndt Ellinghorst, automotive analyst at Evercore ISI. “To change a powertrain portfolio, and not just improving a gear box and light materials and start stop - for that the industry just needs more time.”
BMW executives recently told investors that “based on latest discussions with the EU, there is a chance a chance that the next target for European CO2 regulation is pushed out to 2030 in order to give the industry a more realistic timeframe to adapt new technologies,” according to an investor note from Evercore ISI.
The Brussels-based Transport & Environment lobby group says new target date should be kept at 2025, not pushed back. “The problem with a delay is we will not get the innovation investment that is needed. The small companies that are developing the technologies now will find their investments will not be interesting to automakers,” said Greg Archer, the group's clean vehicles manager.
The commission is likely to set a challenging target for 2025 or 2030 because it wants to be in the forefront of action against climate change. But in light of Europe’s weak economy and the structural losses suffered by the region’s mass market carmakers, the commission is likely to look closely at the benefits and disadvantages to the industry.