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European Auto Sales Spike To Avoid 2020 Penalties

European Auto Sales Spike To Avoid 2020 Penalties.

“new EU CO2 rules will have a major dampening effect on sales”

European Union (EU) car and SUV sales zoomed ahead by just over 20% in December, as buyers sought to take advantage before tax breaks ran out, while manufacturers dumped gas guzzling vehicles on the market before they become virtually unsellable in 2020 as harsh new CO2 regulations kick in.

Overall in 2019, the EU market rose a more modest 1.2% to 15.3 million, marking the 6th year in a row of growth. In December sales rose 21.7% to 1.2 million. 

Analysts expect a similar slow rate of growth in 2020, which will mask much turmoil under the surface as manufactures try to sell expensive electric cars to a wary public. If they don’t sell enough electric and hybrid vehicles to meet the CO2 (carbon dioxide) rules, manufacturers face swingeing fines.

Standout negative performer in 2019 was Nissan, with sales down 19.9% to 381,000, while FCA’s Fiat sales dropped 7.2%. Market leader Volkswagen and its army of brands beat the market with a gain of 3.1% to 3.7 million. Groupe PSA, now including Opel, Vauxhall, DS and Citroen, faltered with a 1.1% fall to 2.4 million.

According to the European Auto Manufacturers Association, known by its acronym in French of ACEA, said sales were boosted in France and Sweden because buyers sought to make deals before tougher tax rules start in 2020. In the last months of 2018, sales were inhibited by changes in the European rating system for fuel efficiency.

Manufacturers had been seeking to dump gas guzzling cars and SUVs on the market in 2019, while holding back electric vehicles until 2020, when EU penalties start.

Not all forecasters are so sanguine about 2020’s apparent consensus that sales will rise modestly.

Investment researcher Evercore ISI said new EU CO2 rules will have a major dampening effect on sales, which will fall 3%, with Germany, Europe’s largest market, down about 6% and France perhaps 4% lower.

Huge, maybe impossible
The EU has mandated average fuel economy across manufacturer’s fleets the equivalent of about 57 U.S. miles per gallon in 2021, up from 41.9 miles per U.S. gallon in 2015, and 92 by 2030.

This can only be achieved by a huge, and maybe impossible, contribution from expensive electric cars. Even plug-in hybrids, which offer about 30 miles of battery-only range, are unlikely to be able to meet the rules after 2025.

Investment researcher Jefferies has said if the auto industry makes no progress in curbing CO2 from 2018 towards meeting the EU’s 2020/21 regulations, it faces fines totalling the equivalent of $36 billion, twice its estimated profits, and could be forced to raise prices by up to 10%.

And new EU Commission leader Ursula von der Leyen announced current targets for emissions reduction of 40% below 1990 levels by 2030, should be raised to at least 50%.


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