Industry on Pace to Hit EU Emissions Goal, But Some Auto Makers Lagging

PARIS – If the auto industry continues to improve fuel economy this year and next at the current rate, it will meet the European Union’s carbon-dioxide-emissions goal of 130 g/km in 2015.

However, several companies won’t reach that mark unless they gain ground much faster than they did in 2011.

According to analysis by the environmental watchdog group, European Federation for Transport and Environment, Toyota and PSA Peugeot Citroen already have achieved their own 2015 goals and Fiat is a hair’s width away.

All three companies are sure to be well below the mark in 2015, as Fiat is the fastest-improving auto maker, and both PSA and Toyota are reducing mass and adding electrification to their cars.

The European rules give auto makers specific goals based on the sales-weighted average mass of the vehicles they sold in the 27 European Union countries. Fiat, for example, has a CO2 goal of 119.1 g/km, while Daimler’s is 138.3 g/km. The targets represent an 18% improvement over their averages in 2007.

The European Federation for Transport and Environment, based in Brussels, made its calculations on the basis that the average mass for each auto maker would remain the same in 2015 as in 2011.

Of all the volume manufacturers affected by the European rules, Mazda is in the worst shape. The Japanese auto maker is 12.5% behind its 2015 CO2 goal of 128.3 g/km, and between 2010 and 2011 it improved only 1.8%. However, because it sells fewer than 300,000 cars a year, Mazda can apply for a lower goal.

Companies that miss the target must pay fines as high as €95 ($125) per each additional gram of CO2 for each car sold, although until 2018 the fines start at €5 ($7), €10 ($14) and €15 ($21) per gram for the first, second and third gram by which they miss the target.

The industry has made significant fuel-economy progress since the economic crisis hit, in part because the crisis had a tendency to move people into smaller, more fuel efficient cars. Gains in 2008, 2009, 2010 and 2011 were 3.0%, 5.1%, 3.7%, and 3.3%, respectively. The total industry improvement since the law was proposed in 2008 is 14%.

“Over the lifetime of a car, roughly 200,000 km (124,000 miles), this represents 1,800 L (476 gallons) of fuel, which at today’s prices equates to about €2,600 ($3,415) in fuel savings per car sold,” the organization says in a document.

Renault, Ford, General Motors and Volkswagen all were within 4% of their goals at the end of 2011, and all have new 3-cyl. gasoline engines replacing older powertrains that required more fuel.

Renault launched its new engine this year in the Kangoo and Megane. In addition, the auto maker expects to have significant numbers of zero-emissions electric vehicles to factor into its mix in 2015, when the auto maker believes it will be the low-CO2 leader.

Europe’s rules for calculating average CO2 count cars that emit less than 50 g/km as 3.5 units in 2012 and 2013, dropping to 2.5 units in 2014 and 1.5 units in 2015. The multiplier effect will be strong if EV sales approach Renault’s hopes, although this year industry EV deliveries will total about 25,000 units, a drop in the bucket of 12 million cars.

The European Federation for Transport and Environment continues to lobby for tougher fuel-economy regulations.

“CO2 emissions from the transport sector have increased by 27% between 1990 and 2010, whereas those of other sectors decreased by 19%,” argues the group in its report. “The contribution of the transport sector to the EU’s CO2 emissions now stands at 29%, up from 20.5% in 1990.”

But while the Brussels-based ACEA, the European car makers group, agrees the industry is on track or even ahead of schedule for 2105, it emphasizes the huge effort and investment in research and development that will be needed to hit proposed tougher goals for 2020.

“Reaching the 2020 target is challenging, partly due to the difficulties in achieving the necessary market uptake of new technologies, the ACEA says in a written statement to WardsAuto. “To achieve a fleet-average of 95g/km, the industry will have to move more strongly towards hybrid and electric engines.”

Kaushik Madhavan, research director at global consultancy Frost & Sullivan, thinks that commercial pressure could indeed make it difficult for European auto manufacturers to comply with 2020 regulations due to the cost of new technology.

“The real challenge towards 2020 will be how much the (OEMs) are willing to spend per gram of CO2 reduction,” Madhavan tells WardsAuto.

“For volume OEMs, it could be as low as €20-€25 ($28-$35) per gram of CO2 reduction, while for the premium OEMs, it could be as high as €50 ($70),” he adds, noting the impact this will have on retail prices.

– with Carmen Paun in Brussels