Expensive Emission Laws Complicate Covid-19 Lockdown Smackdown For Europe’s Automakers

Europe’s biggest automakers spent years planning out their model rollouts to slide safely beneath Europe’s punishing 2020 EU7 emissions rules, and then Covid-19 came.

And then again, in the last week, Covid-19 came again.

And every automaker that waited until the back end of 2020 to load their sales up with plug-in hybrids (PHEVs) and electric cars (BEVs) was shocked to find themselves suddenly in deep trouble.

Ford, Jaguar Land Rover (JLR) and, the biggest of them all, Volkswagen, now admit that meeting their 2020 emissions obligations will be either impossible or, in the case of the Volkswagen Group, a “tough race”.

The scale of the trouble is highlighted by the punishments meted out by the European Commission. The industry-wide target is 95 grams of CO2 emissions per kilometer, and any automaker missing their individual targets will be fined €95 for each car sold, multiplied by each gram the target is missed by.

Even small misses could end up costing larger companies billions of euros, and JLR last week admitted it had set aside £90 million (118 million euros) to pay its way out of trouble at the end of the year. Jaguar has its own BEV in the World Car of the Year-winning I-Pace and several plug-in hybrids in the Land Rover and Range Rover stables.

As allowed under the EU’s Open Pool regulations (Article 6(5) of Regulation (EU) 2019/631 (passenger cars)), Ford has joined the Volvo pool of emissions credits in a move uncovered today by the European Electric Car Report’s Matthias Schmidt.

The forced delivery stop of its Kuga compact PHEV – the model conceived to make the rest of Ford compliant – threw the entire company over the limit.

Seven Kugas have caught fire in customer hands, leading to a stop-sale and a recall of 20,500 cars, but without Volvo’s early immersion in the PHEV world, the consequences for Ford would have been considerably more expensive than a typical recall.

Volvo plans to deliver 10,000 Polestar 2s this year, while its year-to-date PHEV model mix was 30 percent at the end of September.

JLR has already had troubles with its corporate target due to a sales-stop on the Range Rover Evoque and Land Rover Discovery Sport PHEVs after to a discrepancy with its stated emissions figures.

It already has PHEV versions of the Range Rover Velar, the Land Rover Defender and the Jaguar F-Pace, while a PHEV E-Pace compact SUV will be launched next year.

The biggest issue of all could be the Volkswagen Group, which admitted today that it had gone from full confidence in meeting its emissions obligations to being in a “tough race” to get there.

It revised its 2020 BEV model mix in Europe down from more than six percent to between five and six percent.

It has taken steps to hedge against missing its targets by a small amount by pooling its emissions with both its Chinese joint-venture partners SAIC’s European operation and Chinese EV maker MG, but their sales might not be enough.

Missing the target by a large amount could push Volkswagen into the arms of its leading European sales rival, Renault, to tap into their surplus CO2 capacity.

Renault opened their Pool up to offers earlier this month.

Groupe PSA had space on its emissions limits, too, though they will likely end up helping its new merger partner FCA (though the Italian-Americans have already paid up at Tesla for credits for 2020).

The key issue for Volkswagen and Daimler, in particular, is that they had back-ended the year for PHEV and BEV launches, incentives and marketing pushes, but Germany, France and Italy have all enacted soft lockdowns to battle Covid-19.

The resurgent virus has lead to Germany, closing theatres, cinemas, bars, restaurants, swimming pools and gymnasiums until the end of November.

Chancellor Angela Merkel confirmed that schools, nurseries and shops would stay open, though there has been no word on auto dealerships.

In Italy, all bars, restaurants and cafes will be forced to close after 6pm until at least November 13, with shopping centers closed on weekends.

There is a curfew in place from 11pm until 5am, all sports competitions have been suspended, while secondary schools have reverted to home schooling.

There has been no mention of auto dealerships, though new car sales were banned in the original lockdown, with the only exceptions being for Government use, to replace damaged vehicles or for essential workers.

France has issued curfews from 9pm until 6am – even in French Polynesia.

The closure of Europe for the second quarter of 2020 drove car sales down by more than 30 percent and automakers are fearful the next lockdown could do the same thing – and the EU still has no force majeur or get-out clauses for anybody missing the target.