It’s not hard to see why Volkswagen wants EU regulators to ease up.
It’s not only in the U.S. that electric-vehicle (EV) mandates are threatening to cause havoc. The problems of the German economy, a legacy, primarily, of the neglect and negligence of the Merkel years, are no secret. There are now increasing worries that the EU’s industrial powerhouse is beginning to deindustrialize, not least because of the way that that the high energy prices that (in part) are the consequences of its climate policies are making it worthwhile for some of Germany’s more energy-intensive companies to relocate production abroad.
But the climate cull won’t end there.
Volkswagen AG wants European regulators to walk back emissions targets that are set to kick in next year and expose Germany’s biggest carmaker to hefty fines.
VW needs to reduce emissions by about 15% next year, according to market researcher Jato, just as EV demand in Europe is taking a hit. From 2025, automakers in the EU have to lower the amount of CO2 emitted across new vehicle fleets. . . .
Carmakers are feeling the strain from the cooling EV shift with new buyers getting harder to win over as incentives fall away and vehicle prices remain high. Stellantis NV CEO Carlos Tavares in January warned the rush to offer affordable electric vehicles will end in a “bloodbath” because of high production costs.
Tavares has been warning for some time that the speed of the coerced switch to EVs is such that it is not giving Western manufacturers enough time to work out how to cut costs by enough to win over consumers.
But back to Germany. It turns out that sales of EVs have fallen sharply there since Germany abandoned subsidizing their purchase. We are repeatedly told that consumers are excited to buy products that are “sustainable,” and we are repeatedly told that EVs represent a great advance for the automobile, and yet it seems that without sticks and carrots EVs cannot attract enough buyers. Very odd.
But wait a minute, here’s a report from Bloomberg on March 13 quoting Germany’s economy minister, Robert Habeck, a Green, explaining what has been going on:
“[T]echnical developments and, above all, social acceptance, do not develop in a linear fashion.”
Translation: EVs are not ready for prime time, and consumers are not yet ready to buy them (in sufficient numbers), two problems that could have been avoided if EVs had been rolled out in response to signals from the market rather than state diktat.
But what about the plan, the targets, the quotas?
Habeck has acknowledged that Germany will not reach its target of having 15 million EVs on the road by 2030, something of a central-planning fail — in fact, as central-planning fails go, quite a big one.
Sales of new EVs would have to quadruple in the next three years and rise sixfold by 2030 to reach Germany’s goal of having 15 million such cars on the road, according to a lobby group for the renewable-energy sector.
A more likely outcome is the country will have only 10 million electric cars and will fall short of its greenhouse-gas emissions goal by about a third, the group, known as BEE, said in a study.
That’s not the best news for Volkswagen, which has sunk billions into EV production, and is rolling out more EV models this year.
Making matters worse is that the way of measuring CO2 emissions is going to be toughened.
Bloomberg (March 14):
European carmakers’ average-fleet CO2 emissions will be subject to tougher Worldwide Harmonised Light Vehicle Test Procedure (WLTP) regulations from 2025, replacing New European Driving Cycle (NEDC) rules — for which they’re compliant at 95 g/km. Volkswagen needs to lower its 2025 emissions by about 15%, based on analysis from [market researcher] JATO. . . . Failure to comply with the new rules will trigger a €95 fine for every vehicle registered in the EU, multiplied on an annual basis by each CO2 g/km above the target.
Those curious about the WLTP regulations can turn to Wikipedia for an answer:
The WLTP was adopted by the Inland Transport Committee of the United Nations Economic Commission for Europe (UNECE) as Addenda No. 15 to the Global Registry (Global Technical Regulations). . . .
Hmm. . . .
Meanwhile, the same (March 14) report included a reference to VW’s task being made harder by Chinese competition. The threat that imported Chinese EVs pose to Europe’s carmakers is well-known, but for Volkswagen, that story comes with an extra twist: China has accounted for around half of its profits. Until recently, Volkswagen was China’s leading brand, something brought to an end by BYD Auto, mainly because its EV sales were failing to keep up (it has a market share there of around 5 percent).
The Financial Times (March 13):
Many executives who have worked in the market privately admit that western carmakers’ days there are numbered. The business cannot count on Chinese money forever. . . .
A favourite hobby of hedge funds is to draw up a list of which carmakers are most vulnerable in the long run. VW is frequently the top pick. Porsche is a cash machine but the core brands barely make money and apart from China, VW is heavily reliant on Europe, a market that will come under growing siege from cheaper Chinese models. Then there is VW’s bet on the US, an $8bn gambit on the resurrection of the Scout brand. Trying to crack the US market was what originally led to dieselgate. . . .
It’s not hard to see why Volkswagen wants EU regulators to ease up.