Emissions Risk

Electric cars are looking even better to German carmakers

electric cars
Everybody's doing it! Source: Reuters

One number says it all: If VW sold the same proportions of gasoline, diesel and electric cars in 2023 as it currently does, it would have to pay a fine of €4 billion ($4.75 billion). Calculations by the CAR Institute at Duisburg University show that Volkswagen would flagrantly miss an EU target to reduce CO2 emissions in this scenario, triggering the penalty. Domestic rivals BMW and Daimler face the same fate, though their fines would be lower, because they sell fewer cars than VW.

Starting in 2021, new automobile models released in the EU must emit less than 95 grams of carbon dioxide per kilometer driven. The goal is part of the European Union’s plan to cut greenhouse gases. The new cars must reach this target on average per carmaker, or the company has to pay €95 per gram over the goal, multiplied by the amount of cars sold in a year. The fines are due every year as long as a carmaker misses the target for new cars. VW, Europe’s largest carmaker, would suffer the most: It sold 3.5 million cars in the 28-nation EU last year.

Currently, all major carmakers selling vehicles in Europe are missing the target, on average by 30 percent. Selling electric cars could be the carmakers’ panacea. Aside from however the consumed electricity is produced, electric vehicles don’t emit any carbon dioxide or any other toxic gases, such as nitrogen oxide, a pollutant created by diesel cars. German carmakers have always argued for diesel-powered vehicles, which emit less carbon dioxide on average than gasoline cars, but heavier diesel SUVs have not helped cut average CO2 emissions.

21 p18 Carmakers may face steep fines-01

Electric cars could radically cut greenhouse emissions for a carmaker’s fleet. If a company achieves a certain level of zero- or low-emission vehicle sales in the EU, it will also have a more lenient CO2 target. In short, every electric car sold is a home run. Ferdinand Dudenhöffer, head of the CAR Institute, calculated that VW could avoid the fine if it sold about 350,000 e-cars in 2023 in the European Union, about 9 percent of total annual car sales. “The analyzed scenario underscores that electromobility is many times more important for the VW Group than diesel,” Mr. Dudenhöffer said.

Based on the calculations, it would make sense for VW to subsidize consumers’ purchases of electric cars. Shifting state subsidies from diesel cars to environmentally friendly technologies, such as e-cars, would help as well, as VW’s boss Matthias Müller suggested last week in an interview with Handelsblatt. At VW’s headquarters in Wolfsburg, everyone knows that such a shift in government incentives would not only help boost Germany’s electric car market, but also reduce their chances of having to pay billion-euro penalties.

Another development is also expected to reduce the importance of diesel cars for German carmakers: Gasoline-powered vehicles with 48-volt technology are as energy-efficient as their diesel counterparts. These so-called mild hybrids, which are coupled with a battery and a secondary power supply system, are likely to additionally replace diesel engines in mid-range and high-end classes of cars. For compact cars, diesel engines are already being phased out, because the emissions cleaning system is too expensive in relation to the vehicle’s price.

As cities such as London, Paris and Madrid want to ban all gasoline and diesel cars in the distant future and other urban areas consider diesel bans, signs point in one direction: electric cars and other low- and zero-emission vehicles.

Markus Fasse specializes in aviation and automobile industry news and works from Handelsblatt’s Munich office. To contact the author: fasse@handelsblatt.com

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