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The new EU-Emission regulation 2025 are yet a serious game changer!
Car manufacturers currently have a serious challenge. Their average CO2 emissions from vehicles sold is too high and that is going to earn them huge EU penalties. Billions of euros! Companies like Stellantis, Toyota, Ford, Subaru and Mazda already seem to have an almost irrecoverable gap in their average EV sales. The emissions of their package cars are simply too high due to too high a proportion of ICE and hybrid cars. And that’s going to cost money. The choice: an EU fine or a deal with a competitor with positive CO2 credits…..
The rescue plan could be named “TESLA”: because it -as a 100% EV manufacturer- has quite a bit of contingent left over. And so Tesla can make extra profits on the backs of floundering competitors. A fantastic present given by the EU!
Saved by the (TESLA) bell…….
By making a deal with such a 100% EV producer, manufacturers such as Ford, Stellantis (Citroen/Peugeot/Fiat/Alfa/Lancia/Jeep and Opel), Toyota, Subaru and Mazda may be able to save their butts for a while. They are busy forming alliances to secure contingents. Tesla can sell emission credits to these companies that are seriously short of cash. Just business, in other words.
Isn’t this a sort of “Consorting with the enemy”?
But isn’t this already a rearguard battle? because the gap is already very large ! That promises something, because the peloton seems to be losing here the connection with the leading group! And in cycling you know: you just have to cycle up that mountain by yourself. Making appointments in the peloton is ultimately not a long term strategy and in the end not compliant. Isn’t it just consorting with the enemy, driven by panic?
By the way, a good alternative to Tesla is still Geely/Volvo: they can make good money on it because its mix , together with sister Polestar, also seems to be in good order. Especially for Mercedes, this could be the right partner in crime. Suzuki also seems to have been working with Volvo/Geely in this area since October 2024. The question is whether, as a manufacturer, you can continue to wash your hands in this way.
So how does such a CO2 alliance work?
Car manufacturers with too low a quota, whose mix does not meet the EU’s stricter 2025 emissions rules, can buy CO2 credit from companies that only produce EVs and thus amply meet the standards. Those have CO2 credit left over so to speak.
The lead group sells to the pack of followers and runs out even further….
The pack of manufacturers with too wrong a mix of cars sold then “deal” with the pack of EV leaders. By buying emission credits from the leaders they can lower their overall average. This move could save them hundreds of millions of euros in fines. Question is how long the EU is going to tolerate that of course.
EU in the split, a diabolical dilemma
The EU is of course ok in a self-created dilemma. Because on the one hand, they impose very strict rules on manufacturers. On the other hand, the -mostly European- companies are getting into serious trouble and of course the profits, jobs and dependence on the US and China come to the table. A diabolical dilemma it seems. For now, the EU is going in with a straight leg.
Meanwhile, European automakers are raising gasoline car prices. They had to do so anyway because from July 1 they have to meet the much stricter Euro-7 standard. The extra components required (sensors, particulate filters, etc.) make all cars more expensive. But they want and MUST regulate more CO2 reduction in their sold fleet. Dis become petrol cars more expensive and EVs cheaper. And they already had to do that to counter the Chinese invasion, which seems to be working reasonably well with the help of additional import taxes.
Sharply reduced emissions caps in 2025
As of January 1th ’25 the EU is dramatically lowering carbon dioxide emission caps for cars. The effect is that a manufacturer must do at least 20% of its sales in BEV. to avoid heavy fines. And that is not succeeding because buyers are not yet biting.
Simply too low a proportion of EV’s sold for EU targets.
By 2024, only 13% of all vehicles sold in the region will be electric, data from the lobby group of European car manufacturers (ACEA) show. While the European auto industry already has massive overcapacity , partly due to strong competition from China. The profit warnings, working time cuts and announced plant closures do not lie.
Selling more EVs: “we must!”
And now that things are already not going well, manufacturers must also sell more EVs. While consumers wait and see. Less subsidy on EVs. Less solar back deliveries, an overloaded grid and a wait-and-see attitude don’t help either. The break-even point between gasoline and Electric driving has shifted quite a bit and many people are waiting first. The negative opinion about the possible lifetime and repair cost of an EV battery doesn’t help either.
Just now manufacturers need to sell more EVs, which are really more expensive to make than internal combustion engine vehicles. And this at a time when political and economic uncertainties and declining EV subsidies are discouraging consumption.
Are car manufacturers losing their way?
Many car manufacturers seem to be getting off track. What will the car fleet be in 7-10 years? Some are betting on hybrid only, some on EV only and there are some who believe in hydrogen (Toyota, BMW, Hyundai, Renault). Logical, because for vans that drive a lot, different challenges apply and perhaps hydrogen is the right technology. But clearly there is panic because no one knows what exactly is going to happen.
Artificial price control BEV? Or will Hybrid prove to be the real winner?
It seems that Volkswagen, Renault and Stellantis and have in the past two months raised the prices of models with gasoline engines by several hundred euros, Perhaps to limit “polluters” in favor of more expensive EVs. This is how they want to steer demand, the question is whether they will succeed. But are the EU and the manufacturers still market-oriented? Because who may be asking for pause for thought at the moment and clearly choose hybrid and not BEV.
Temporary lifeline?
All these artificial discounts will make manufacturers’ margins fall. So the laughing thirds here could be Tesla and Geely, making extra profit….
