Fleet News

New fines will increase new car prices

Fleets could be paying substantially more for new cars from 2012 if European Commission proposals to fine manufacturers who fail to meet stringent carbon dioxide (CO2) emission targets become law.

Fleets will not only be paying more for new vehicle technologies that help cut emissions, but they will also be helping to foot the multi-billion euro fines.

Carmakers have warned that the proposals could add at least Euro 3,000 (£2,230) to the cost of every new car.

“For many consumers, cars could become unaffordable,” warned a spokesman for ACEA, the European automobile manufacturers’ association.

“The resulting side effect – an even slower renewal of the existing car fleet on Europe’s roads – is detrimental to improving the environmental performance of road transport.”

However, Environment Commissioner Stavros Dimas said: "The legislation will ensure important fuel savings, which will translate into considerable benefits for consumers.

"Moreover, it will encourage the car industry to invest in new technologies and actively promote eco-innovation, which is a driver for more and high-quality jobs."

The Commission has stated that its preferred target is an average emission level of 120g/km of CO2 per car by 2012.

If Volkswagen AG, Europe’s biggest carmaker which produces marques ranging from the high-polluting Bentley to the everyday Skoda, misses that target by just 5g, it will face an annual £1.1 billion (Euro 1.5 billion) fine.

Europe’s second largest car making group, PSA Peugeot Citroen, which does not make any very high polluting vehicles, will be fined £744.4 million (Euro 1 billion), and the smaller Fiat Group, which makes Ferraris as well as the dinky new Fiat 500 city car, will still be hit with a £446,000 (Euro 600,000) fine.

The industry says it will have no choice but to add the cost of these fines to the price of new cars.

Several manufacturers will be able to group together to form pools, which can act jointly in meeting the emissions targets.

However, it is still predicted that many carmakers will fail to meet the proposed 2012 targets.

Today, the current average new car pumps out 160g of CO2 every kilometer.

Based on 2006 figures, the VW group must still cut on average another 31g/km of CO2, while the PSA group has just 16g/km to find.

Carmakers will also have to cut another 10g/km through additional solutions such as alternative fuels and energy saving tyres.

Over the past ten years, carmakers have only managed to reduce CO2 emissions from new cars by just 15%.

The proposals, which if left unchallenged will become law within 18 months, have got Europe’s carmakers seriously worried.

They say the fines are not only unrealistic but are also unfair and will make the European automotive industry uncompetitive.

“There is a total disconnection between the legislators and reality…CO2 emissions from cars need to be reduced in a cost-effective way,” said Ivan Hodac, secretary general of ACEA at the recent Fleet News Europe conference.

“The level of the compensation payments should be no higher than for other sectors that miss their CO2 emissions targets.”

He points out that under the current proposals, carmakers will be paying up to 100 times more than other industries penalised for excess carbon emissions.

The European automotive industry says it will put immense pressure on the legislators in the run up to the proposal becoming law.

But as Mr Hodac conceded, Europe’s carmakers have a real battle on their hands. “It is going to be a long and uphill struggle,” he said.

The European Commission said the carmakers should be able to reach the targets.

“Most manufacturers are expected to meet the target set by the legislation, so significant penalties should be avoided,” said a Commission spokesman.

“Our investigations show that cars will rise in price by a certain amount - but this will be compensated by fuel savings.

"On average purchase prices may increase by up to 6%.”

The Commission also said that any increase in prices will be “more than compensated by lifetime fuel savings”.

Not only will ACEA be pressing for fairer penalties, but it will also demand a longer lead-in time – 2015 rather than 2012 – so that carmakers have time to integrate new greener technology into their upcoming models.

But the European Commission is adamant that it will stick to the targets and points out that the money raised from fines will be used to fund research and development to help the automotive industry develop greener cars in the future.

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