Pressure Is Mounting – Automakers Need to Deliver

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The current standard in all things transportation is China. It makes policy with which even automakers in Germany need to comply if they want to keep their foot in the door. Air pollution in many large Chinese cities is so high that politicians have been forced to take drastic measures. It is the reason why the government is providing massive amounts of subsidies to promote electric transportation, which has led to half of all electric vehicles worldwide being manufactured in China – and driven there as well. But that’s not all: The People’s Republic could soon implement a production quota, earlier than most had hoped.

One country where the announcement of a quota has caused great unease is Germany, as the design of the related policy could have serious consequences for the domestic automotive industry. It came as no surprise then that there had been several rumors making the rounds and many attempts to intervene on the industry’s behalf.

Initially, the plan was to set the share of electric – or at least, hybrid – vehicles sold by each manufacturer to 8 percent from January 2018. It was to rise by 2 percent each year thereafter and non-compliance would result in a penalty.

When Sigmar Gabriel went on his first visit to China in his new capacity as Germany’s foreign minister in May, German associations injected themselves into the debate and even Chancellor Angela Merkel felt the need to mention the quota when meeting China’s Premier Li Keqiang. In response, Beijing seemed willing to consider other options and the German automotive industry had new hope that they would get more time and fewer restrictions. One car expert, Ferdinand Dudenhöffer, subsequently explained: “The carmakers are gaining valuable time that they should use to the best of their abilities.”

In June, however, it was said that the rules were not going to be introduced later than planned, nor would they be watered down. This prompted several carmakers to jointly write a letter to the Chinese government, discussing openly the possibility of a trade war. It seemed as if China was very much intent on following through with its policy proposals, but news outlets reported in late September that their implementation might be postponed by one year.

What about Europe?

Meanwhile, there are more and more voices within the EU calling for the establishment of a quota. As the Energate magazine reported this June, some of the staff from the office of EU Commissioner Maroš Šefčovič had floated the idea of targeting a mandatory electric vehicle share in new car sales. A spokesperson for the commission did deny the report in September, but two other German magazines – Handelsblatt and Climate Home – said shortly thereafter that the idea was not off the table. It was “increasingly clear” that there would be a decision in fall to establish an up to 15 percent minimum for sales in the EU from 2025.

Even in Germany, there have already been discussions about some type of mandatory share. In mid-August, during the election campaign, the Social Democratic candidate for chancellor, Martin Schulz, spoke in favor of it as part of a five-item agenda and announced on the Spiegel online website: “We will put mounting pressure on the industry.” In contrast, the Stern magazine had reported earlier that lobbyists from the automotive industry had spoken out against a quota and a much more ambitious electric vehicle program, on which the ministries had agreed in September 2015.

The amount of economic incentive, which was originally supposed to be financed through a bonus-malus system and not by using tax money to cover half of it, had been planned to go up to EUR 5,000. One expert working in the environment ministry, however, had warned that even this amount could be too low considering the difference in price between electric and fossil fuel vehicles.

Driving bans in sight?

Both the French and British government confirmed that they intend to ban sales of new fossil fuel-powered cars by 2040. Likewise, the Austrian transportation minister announced a 2030 target of only zero-emission vehicles in new registrations. Additionally, metropolitan areas such as Athens, Madrid, Mexico City and Paris are planning to prevent diesel cars from driving into their inner cities from 2025.

In Germany, the Green Party and former environment minister Barbara Hendricks from the Social Democrats have called for a ban on selling any more cars powered by gasoline and diesel from 2030. Hendricks said at this year’s eMobility Summit in Berlin that the exit from fossil fuels was doable and that by 2030, German engineers would “easily be able to design zero-emission vehicles.”

Alternative fuels

So far, the most popular alternative fuel is liquefied petroleum gas or LPG, which is offered by 7,000 stations across Germany. While 448,025 LPG cars had been sold until the start of 2017 and the number of new registrations jumped by 38.3 percent during the first half of the year compared to the same period in 2016, diesel car sales dropped by 9.1 percent and registration figures for vehicles powered by compressed natural gas (77,187 units / 900 stations) by 41 percent. The number of hybrids added up to 165,408; battery-only ones stood at 34,022.

Hydrogen breakthrough

The outlook for hydrogen vehicles seems pretty positive. At the beginning of the year, auditors from KPMG had published the “Global Automotive Executive Survey 2017,” according to which 78 percent of all managers in the automotive industry fully or partly agreed with the statement that fuel cells would help electric transportation to succeed and 62 percent expected battery-powered engines to fail.

Essential infrastructure

Meanwhile, the EU Commission has reminded Greece, Ireland, Malta, Romania, Slovenia and the UK to submit their national strategy for setting up an alternative fuel infrastructure based on the 2014/94/EU directive. This includes the installation of both charging points for electric vehicles and refueling stations for natural gas and hydrogen. The Commission said: “Accelerating alternative fuel infrastructure deployment is indeed essential to clean and competitive transportation for all Europeans.”

Author: Sven Geitmann, written in September 2017

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