VW vans unit seeks to cut CO2 emissions after missing 2020 targets

Volkswagen Commercial Vehicles aims to lower its CO2 emissions compliance gap this year, after its failure to meet 2020 targets led to regulatory fines for parent company VW Group.

VW Group has said it expects it will have to pay the EU a sum in the low hundreds of millions of euros for its emissions results in 2020, but it should avoid new fines in 2021 for passenger-car emissions thanks to new full-electric vehicles such as the Skoda Enyaq and Audi Q4 e-tron. 

Its light commercial vehicles division, which will post a second straight year of losses in 2021 as it invests in electrifying its fleet, also sells passenger derivatives of its commercial vans. Roughly half of its European volume from the small Caddy model line and 40 percent from its medium Transporter family are subject to car emissions targets rather than those for light-commercial vehicles.

Holger Kintscher, Volkswagen Commercial Vehicles chief finance officer, said the unit was expecting to again miss its overall target this year. "We're expecting a decline in CO2-related headwinds, but they will still be in the triple digit millions of euros," he told reporters last week.

That money does not represent fines that will be paid to Brussels, but rather are internal transfers to VW Group largely as compensation for vans failing to meet passenger car fleet emission obligations. 

Kintscher said the overwhelming majority of the 340 million euros in CO2 compliance costs the vans unit  incurred last year (also in the form of internal transfers) were for passenger vans such as the Caddy Life and Transporter Multivan, which that are classified in Europe as passenger cars, or M1.

As a result, those vehicles factor into the calculation for the VW Group's overall CO2 target of 98.8 grams per kilometer in 2020. Even with the help of an "open pool" that included electric vehicles from competitors' brands, it was only able to achieve emissions of 99.3 g/km. The Group's emissions on its own were 99.8 g/km. 

In comparison, commercial vehicles (classified as N1) are allowed a fleet average of 147 g/km. That meant that models such as the Volkswagen Caddy Cargo or Transporter panel van had a much easier target to reach, despite being broadly identical to their passenger (M1) versions. As a result, a far lower portion of the 340 million internal payment was attributable to missed commercial van targets.

"The bulk of compensation payments this year will again be for M1," Kintscher said in reference to the passenger versions, "but the level will decline gradually, since the T7 Multivan plug-in hybrid is due in the second half of this year."

To help reduce CO2 emissions this year, the core medium-size T Models will be split between older and new generation models. The N1 commercial vans like the Transporter will continue to be sixth-generation models, and will remain in the lineup until a Ford-engineered version is introduced under a technology-sharing arrangement. VW has also entered into a pooling agreement with Ford for their N1 related European fleet targets. 

A seventh-generation T series will launch this year for M1 vans such as the Multivan. These vehicles will now be built on the group's MQB platform, a lighter architecture engineered for passenger cars that can help reduce CO2 emissions. 

Looking ahead, Kintscher said he expects no European CO2-related fines in 2022 after the introduction of the ID Buzz electric van and its commercial equivalent.