European carmakers are raising prices on gasoline cars and preparing discounts on electric vehicles to face a new challenge: tougher emissions rules, which threaten to further reduce profits for a struggling sector. difficulty.
The European Union will slash its cap on carbon dioxide emissions from January 1, meaning that at least a fifth of most carmakers' sales will have to be electric vehicles in order to avoid heavy fines.
However, since the start of the year, only 13% of vehicles sold in the region have been electric vehicles, according to data from the European Automobile Manufacturers' Association (ACEA) lobby group.
“The gap is really significant,” said Marc Mortureux, director of the PFA, the French auto lobby.
The tougher rules come as the sector already faces overcapacity due to sluggish sales and growing Chinese competition, prompting Volkswagen, Stellantis and others to issue profit warnings in recent months .
Companies will now have to sell more EVs, which are more expensive to manufacture than traditional vehicles, at a time when political and economic uncertainties and falling EV subsidies are discouraging consumption, Mortureux said.
In a sign of growing concern over the rules, Stellantis CEO Carlos Tavares abruptly resigned this month, in part over a disagreement with the board over how to handle the issue.
DIRECT DEMAND
A few weeks before the deadline, European politicians are urging Brussels to rethink the objectives. But carmakers are getting to work, seeking above all to avoid fines that could reach 15 billion euros ($15.76 billion) based on current sales, said Luca de Meo, president of ACEA .
VW, Stellantis and Renault have raised prices of gasoline-engined models by several hundred euros over the past two months, in what analysts say is an attempt to reduce demand for the most polluting vehicles and make more expensive electric models attractive.
“Automakers have started their pricing strategy to shift demand toward battery EVs to meet CO2 targets and avoid potential fines,” said Beatrix Keim of the Center for Automotive Research.
Last month, Peugeot, which is owned by Stellantis, increased the price of all its models in France by 500 euros, except for fully electric models.
The Renault group increased the prices of some pure gasoline models, for example by adding 300 euros or 1.6% to the Clio SCE 65, but kept the prices of hybrid versions unchanged.
Peugeot called the new pricing an “economic increase”, while Renault said an increase was “normal” over the lifespan of a car.
However, this strategy could backfire. Rising prices for gasoline cars should help close the gap with more expensive EVs, but given weak market growth it may not generate enough EV sales, a source close to one said. major European automobile manufacturer.
Sales in the region are about a fifth lower than before the COVID program was implemented.
“In reality, increasing the price of combustion engine cars means reducing production (…) and the entire value chain and suppliers will suffer,” the source added.
DISCOUNTS AND POOLING
According to Denis Schemoul, an auto analyst at S&P Global, the price increases will help fund future EV discounts, acting as an “indirect subsidy” for buyers of electric cars by buyers of combustion engines, but most likely harming margins.
VW, which is expected to be hit hardest by the new targets due to its high sales volumes, has already cut the price of its ID3 electric compact car in several markets in recent months, taking it below the 30 mark. 000 euros in Germany.
“That's probably what will happen next year,” said Alastair Bedwell, head of powertrain forecasting at GlobalData, who forecasts EV sales in Europe, including the EU as well as Great Britain. Brittany, Iceland, Liechtenstein, Norway and Switzerland will increase by 41% compared to this year to reach 3.1 million units in 2025.
Discounts aimed at boosting sales, however, come at a cost. In the UK, the industry has warned that EV targets will cost carmakers 6 billion pounds ($7.6 billion) this year, including around 4 billion pounds in rebates.
“Emissions pooling, or buying credits from those with a large share of the EV market to reduce emissions averages, could prove less costly, according to analysts at Barclays.
Japan's Suzuki agreed in October to pool its emissions with Geely-owned Volvo from 2025, a spokeswoman said.
The deal will almost completely eliminate any threat of fines for Suzuki, said Charles Lester, head of data at Rho Motion, a battery consultancy, given the large number of EVs Volvo offers.
ENOUGH IS ENOUGH
However, all options will reduce the meager profits of the industry, which still hopes that Brussels will relax its targets.
“At some point, enough is enough,” Luc Chatel, president of the PFA, told reporters in October, ahead of the Paris motor show.
“I can't sell enough electric vehicles and I'm going to be penalized on my thermal vehicles. What do they want me to do, horse-drawn carriages?”
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