Automakers say the cost to meet tough European CO2 emissions limits that take effect in 2021 is rising rapidly, according to an analyst report. Environmentalists, however, disagree. Based on research by equity analysts at Evercore ISI, automakers will spend 13 billion euros to achieve the lower CO2 emissions goal, up from 12 billion euros a year ago -- and European automakers will carry most of that burden, an estimated 8.5 billion euros.
The cost of reducing emissions is rising because most of the “easy” gains from adding technologies such as start-stop and switching to smaller engines have already been achieved, the report says. More advanced and expensive technology will be needed to reach the EU’s mandatory target of reducing CO2 emissions to 95 grams per kilometer by 2021, down from 127g/km in 2013. That will push costs past the 1,000-euros-per-vehicle level, said ISI. This is a higher figure that the EU’s own estimate of less than 1,000 euros a car because reaching the 95g/km level will require more lightweight materials such as high-cost carbon fiber as well as the further electrification of the powertrain.
“While automakers have made improvements over the last 12 months, recent conversations with manufacturers suggest the cost to reduce CO2 emissions has increased from 30 euros to 40 euros per gram as engineers chase diminishing returns,” Evercore ISI analysts Arndt Ellinghorst and George Galliers said in a recent report.
Automakers selling cars across the 28-nation EU bloc must cut CO2 emissions by 28 percent to a fleet average of 95g/km in 2021 or face heavy fines. Each company has an individual target. Automakers met their 2015 target to cut CO2 emissions to a 130g/km average two years ahead of schedule in 2013.
Europe’s car industry is already the world leader in fuel efficiency because of the EU’s carbon emissions standards, which may get even more demanding when new targets are set. The CO2 rules are widely seen as a major incentive for automakers to develop electric powertrains, which they also sell in other markets. Volkswagen Group, for example, has promised to launch more than 20 electric vehicles and plug-in hybrids in China by the end of 2018. BMW faces a steep climb without hybrids. Its i3 electric vehicle has been well received by critics, but customers continue to prefer the brand’s fuel-powered models. That is why it is quickly adding plug-in hybrid variants to models such as the X5 SUV and 3-series midsize model line.
“What is important is that the plug-in technology will be one of the key levers to bringing high-performance vehicles well below 100 grams per kilometer of CO2, while retaining the driving pleasure,” BMW brand sales boss Ian Robertson told Automotive News Europe.