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Coronavirus Damage To Auto Sales Will Benefit CO2 Compliance

Coronavirus Damage To Auto Sales Will Benefit CO2 Compliance.

We  see  VW  as  the  prime  beneficiary  of  higher  German  subsidies,  followed  by  BMW. Daimler  has  a less  competitive  EV  product”

As German politicians squabble about the scale and detail of its massive stimulus package, the impact of the coronavirus looks like actually helping European auto manufacturers to meet harsh fuel consumption standards because they will have to sell fewer electric cars than anticipated.

Because sales of conventional cars and SUVs have slumped so badly, it has become easier to meet the European Union’s (EU) average CO2 emission standards because the targets are based on electric car sales meeting a certain percentage of these now drastically reduced numbers of internal combustion engine (ICE) vehicles.

Investment bank UBS said in a report fines from the EU are likely to much smaller than feared. Berlin-based Matt Schmidt, publisher of The European Electric Car Report, said in his monthly publication the number of battery-electric vehicles required to meet CO2 standards has now fallen because of a depressed market environment.

Schmidt said in his report that in April sales of battery-electric vehicles in Western Europe accounted for a record 6.6% of the overall market, mainly because sales of conventional vehicles collapsed. Schmidt reckons though that sales will still hit a share of 5% by the end of 2020. That would be double 2019’s share at 556,000.   

According to a report from investment researcher Jefferies last year, if the auto industry made no progress from 2018 towards meeting the EU’s 2020/21 regulations, it faced fines totalling about $36 billion, twice its estimated profits.

UBS said it had expected manufacturers to face a hit of about 8 billion euros ($9 billion) between 2019 and 2021, but thd current situation looks much less drastic.

The EU Carbon Dioxide (CO2) rules insists sedan and SUV makers raise average fuel efficiency from the equivalent of about 57 miles per U.S. gallon in 2020/2021, up from 41.9 mpg in 2015, and rising again by 15% in 2025, hitting 92 mpg by 2030.

UBS said in its report –

  • Due to the pandemic, the absolute number of low profit margin car sales need to reach compliance is lower than expected.
  • Planned auto stimulus in the EU, Germany, and France will be strongly geared towards low-emission cars.
  • The efficient ICE cars will likely also receive fiscal stimulus, lowering fleet average emissions further.

According to UBS, this is good news all round for auto manufacturers.

We  see  VW  as  the  prime  beneficiary  of  higher  German  BEV (battery electric vehicle) subsidies,  followed  by  BMW. (Mercedes parent) Daimler  has  a less  competitive  EV  product  near  term,” UBS analyst Patrick Hummel said.

“The  planned  moderate  increase  in  French  EV  subsidies  should  help  both  Groupe PSA  and  Renault. (Fiat Chrysler Automobiles) FCA  is  likely  to  benefit least as its portfolio still excludes electric vehicles and its EV compliance is achieved via the pooling with Tesla Inc,” Hummel said.

Daimler, BMW, Renault and Fiat Chrysler Automobiles (FCA) were previously seen as most at risk from EU fines, the report said.

Meanwhile, according to Reuters, German politicians, the governing grand coalition includes Angela Merkel’s conservatives, and the Social Democrats (SPD), were in extended negotiations about the stimulus plan’s details. 

Economy Minister Peter Altmaier wants support for the automobile industry, including subsidies for environmentally friendly technologies and cash incentives to buy new cars with zero or low CO2 emissions, according to Reuters. The SPD wants no support for ICE vehicles.

The talks are expected to continue late into the night.


 

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