ACEA head de Meo warns pollution rules could bring factory closures

The proposed Euro 7 pollution regulations could force automakers to close factories in Europe, Luca de Meo, the new head of the European lobbying group ACEA, said, adding that investment to meet the rules would be better allocated to increasing electric-vehicle adoption.

De Meo, the CEO of Renault Group, gave his first address as head of ACEA on Tuesday. The organization has been shaken by the departure last year of Stellantis, Europe’s second-biggest group by volume after Volkswagen, as well as Volvo Cars. 

The European auto industry is at a crossroads, de Meo said, facing pressure from regulators to sell only zero emission cars by 2035 while facing competitors from the U.S. and China with favorable trade measures.

"They are not banning or regulating, but rather massively stimulating their industries," de Meo said, as he urged European regulators to respond to U.S. President Joe Biden’s Inflation Reduction Act, or I.R.A., which seeks to lure electric vehicle suppliers with $370 billion worth of clean-technology subsidies.

European governments have criticized the I.R.A. as a protectionist measure.

De Meo described as "asymmetrical" the business and technological environment facing European automakers. "We've been open to welcoming newcomers," he said, noting that domestic automakers were losing share in Europe,  "but are we properly watching out for the reciprocity principle that should normally regulate global trading architectures?" 

He emphasized that point in an open letter to EU regulators and elected officals released by ACEA on Tuesday afternoon. 

"We are therefore urgently calling on Europe to put in place an ambitious and structured automotive industrial policy, to rival those of other world regions – while safeguarding and promoting free trade across the globe," the letter said.

De Meo singled out the Euro 7 regulations, which govern the release of tailpipe particulates, as being counterproductive to the goal of reducing CO2 emissions. A draft version was released in November 2022, with the goal of implementing them by July 2025. Critics have said that time frame is too short to finalize the rules and homologate thousands of versions of cars offered for sale, and that filters and catalysts needed to meet the targets are prohibitively expensive.

As proposed, Euro 7 would increase the cost per vehicle by 1,000 euros for automakers, and twice that for consumers, de Meo said, although the European Commission has said that figure is lower. 

The price increase could cut sales of new vehicles by 7-10 percent he said, and lead to the closing of, for example, four factories at Renault Group. He did not specify what types of plants are at risk, but automakers are struggling with the question of how to wind down their internal-combustion powertrain businesses in the shift to electric cars.

"We could achieve a far better cost-benefit ratio if we reorient the huge investment in Euro 7 to accelerate electrification by making EVs more affordable or reducing current fleet emissions, for example via low carbon fuels," he said.

De Meo is expected to serve a two-year term as head of the group, which rotates leaders among Europe-based automakers. He takes over from Oliver Zipse of BMW. 

ACEA is facing a challenge from the departure of Stellantis, which plans to host its own "mobility forum" at the end of March with representatives of various stakeholders, as well as that of Volvo Cars.

De Meo acknowledged those automakers’ decisions to quit the group, and said his task was to reinforce the credibility of ACEA "and the impact we have on the debate." 

"We want to be straightforward and tell the truth, not necessarily our truth," he said. "I’m optimistic that we can stick together as an industry because we have a lot of common ground."