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Automakers could be fined €14 billion for emissions in 2021
06 August 2018
Automakers failing to meet 2021 fleet CO2 emissions compliance,
for passenger vehicles sold in the European Union (EU) could be
fined more than €14 billion in 2021, based on new analysis
from business information provider IHS Markit (Nasdaq: INFO).
Legislators in the European Union (EU) are imposing a new
passenger car fleet CO2 emissions target of 95 g/km, to be phased
in during 2020, with 100% application in 2021 on Worldwide
Harmonized Light Vehicle Test Procedure (WLTP).
New passenger car fleets that fail to meet compliance are set
for potentially substantial fines in both 2020 and 2021.
The IHS Markit baseline scenario (one of various scenarios)
suggests that the EU28 sales-weighted passenger car phased (best 95
percent) fleet CO2 average in 2020 is likely to reach 102.3 g/km
(NEDC). This includes 4 g/km of CO2 reduction derived from super
credits and a further 2 g/km of CO2 reduction from forecasted
eco-innovation technology deployment. In 2020, fines paid by OEMs
could amount to €11 billion.
Furthermore, with a 2021 target set at 114.9 g/km (as the 95
g/km New European Driving Cycle (NEDC) target is adjusted to an
equivalent WLTP value), IHS Markit forecasts that the
sales-weighted passenger car fleet CO2 average will reach 122.9
g/km (WLTP). If this level of excess emission is unable to be
curtailed, it could lead to a total of €14 billion in excess
emission premiums.
"The current expectation considers each OEM we expect to be
selling cars in the region during the forecast horizon," said Vijay
Subramanian, associate director for the IHS Markit powertrain and
compliance business in EMEA. "As we continue to follow OEM
technology developments and any regulatory adjustments, our
forecasts may be adjusted accordingly."
The analysis shows that 25 OEMs are however, on course to meet
targets in 2020 and 2021, given developments and initiatives toward
electrification and hybridization of their fleets.
Despite the continued collapse of the European diesel passenger
car market, a technology that is generally helpful in CO2
abatement, the implementation of other impactful technologies,
including LED lighting, thermal encapsulation, highly efficient
alternators and other relevant technologies are proving to be
helpful in offsetting some, it not all, of the diesel headwind
effect in the 2020 and 2021 periods.
Several automakers are also observed as clearly pursuing, or
leveraging a super credit strategy, designed to supplement
engineering strategies and will help some achieve targets and avoid
fines. In addition, some manufacturers may plan, under parent
company umbrellas, to pool resources in order to avoid fines.
In comparison, 27 manufacturers could share the forecasted
€14 billion in 2021 penalties due to non-compliance. This,
despite efforts to build a super credit strategy and investments
into hybridization and electrification. These OEMs are not expected
to stop work on compliance solutions and strategy, yet are expected
to continue to struggle to bring forward the fruits of commensurate
investment, leading to compelling product with enough demand at the
correct time for compliance.
"If they are unable to meet compliance targets in time, IHS
Markit forecasts that average fines for those not complying could
reach €624 per vehicle at the end of 2020, with a further
€190 increase in 2021 as a function of the shift to WLTP,"
said Subramanian.