Carmakers face €14bn in carbon fines

Carmakers face €14bn in carbon fines

By Ania Nussbaum

Carmakers failing to cut greenhouse gas emissions risk writing a big cheque to the EU.

Manufacturers ranging from Renault to Mercedes-Benz maker Daimler are on the hook for fines of over €14bn, should they fail to comply with tighter emission regulation phased in from 2020 and in full force the next year, an analysis by IHS Markit shows.

Only a “seismic shift” in demand for electrified vehicles would completely remove the forecast excessive emissions, the forecaster said in a report.


Earlier, analysts at Exane BNP Paribas singled out French carmakers PSA Group and Renault as the most exposed to any payments, with breaches causing such a hit to carmaking profits that failing the new rules was “not an option”.

Carmakers have known for years about the coming change in EU policy, yet many are struggling to drive down average fleet emissions of climate-changing carbon dioxide.

In 2017, CO2 fleet emissions rose for the first time in years after buyers deserted diesel cars, relatively fuel-efficient, in favour of petrol vehicles in the wake of Volkswagen’s emissions cheating.

Consumers also bought more fuel-guzzling sport utility vehicles. Concerns about how carmakers will navigate the unprecedented shift to electric vehicles are weighing on share prices.


VW’s deliberate cheating to circumvent emissions regulation has added to the drag, upending strategies that bet on diesel — which use about a fifth less fuel than equivalent petrol engines — as consumers fret over cities banning diesel cars. Renault shares rose 0.75%, lifting losses so far this year to 12%.

Shares in Daimler, which rose 1% yesterday, have declined 16% this year.

IHS said its forecast indicated an average EU fleet emission level of 122.9g of CO2 per kilometre, 8g higher than an adjusted target.

Carmakers’ plans to offer all-new electric vehicles like the Mercedes EQ C crossover, as well as fine-tuning existing engine-technology, is setting many carmakers on course to meet the tough targets, they said.


“As we continue to follow carmaker technology developments and any regulatory adjustments, our forecasts may be adjusted accordingly,” IHS said.

Meanwhile, in the US, the plan by president Donald Trump’s administration’s to ease vehicle-emission mandates lifts some burdens for carmakers but also would strip away options that have made it easier for them to comply and have encouraged the development of electric cars.