March 3, 2020 / 12:48 PM / a month ago

EXPLAINER-Why automakers are on a drive to sell electric cars in Europe

    FRANKFURT, March 3 (Reuters) - Carmakers are under pressure in Europe to
sell more electric cars or face huge fines for breaching new emissions rules
aimed at tackling global warming.
    The European Union set automakers a target to cut carbon dioxide emissions
by 40% between 2007 and 2021, but they are collectively far short of this goal
due to the popularity among drivers of heavy, polluting models such as SUVs.  
    EU lawmakers also agreed in December 2018 a further cut in CO2 emissions
from cars of 37.5% by 2030 compared with 2021 levels - raising the bar just as
the fines from the previous target are about to kick in.
    
    WHY HAVEN'T ELECTRIC CARS GAINED TRACTION SO FAR?
    Battery-driven cars take longer to recharge compared with the roughly three 
minutes needed fill up a petrol or diesel tank, although the exact time depends
on the type of charger and the vehicle. Many countries have also been slow to
roll-out charging points.  
    According to Volkswagen's             subsidiary Electrify America, a
240-volt charger can add 20 to 30 miles of driving range in an hour, depending
on the capability of the vehicle, and a direct current fast charger takes
between five and 30 minutes to add 100 miles of range.

    WHO IS FORCING CARMAKERS TO SELL LOW EMISSION CARS?
    EU lawmakers have set a general target that emissions from all new cars sold
by an automaker should on average not exceed 95 grams of CO2 per kilometre by
2021. However, the target for individuals carmakers varies because it takes into
account the starting weight of each companies' fleet in the base year of 2007.
    Manufacturers with fewer than 300,000 new passenger car registrations in a
given year will also be able to apply for exemptions, according to the European
Commission's website here
    
    WHAT IS THE PENALTY FOR NON-COMPLIANCE?
    Manufacturers will face a penalty of 95 euros for each gram of excess CO2
they emit compared with their individual targets. 
    Evercore ISI analysts estimate carmakers face up to a combined 33 billion
euros ($37 billion) in fines based on reported 2018 CO2 emissions levels. 
    Analysts at PA Consulting estimate fines for individual carmakers would have
been as follows, based on 2018 fleet emissions. The actual penalties are likely
to be lower as carmakers sought to sell more hybrid and electric cars in 2019.
    
CARMAKER        2018    2021 target    2021 projection     Penalty
Toyota            100.9    94.9        95.1            18 million euros
PSA            110.4    91.6        95.6            938 million euros
Renault/Nissan    108.2    92.9        97.8            1,057 million euros
Hyundai-Kia        118.9    93.4        101.1            797 million euros
VW Group        121.1    96.6        109.3            4,504 million euros
BMW            123.6    102.5        110.1            754 million euros
Ford            122.7    96.6        112.8            1,456 million euros
Daimler        130.4    103.1        114.1            997 million euros
Honda            126.8    94        119.2            322 million euros
FCA            125.4    92.8        119.8            2,461 million euros
Volvo            129.5    108.5        121            382 million euros
Mazda            134.8    94.9        123.6            877 million euros
JLR            151.5    130.6        135            93 million euros   
    
    WHAT INVESTMENTS ARE REQUIRED?    
    Fitting more electric components will cost carmakers between 800 and 5,000
euros per vehicle to ensure compliance with 2021 targets, Evercore ISI say. 
    Mild hybrid systems - where electric motors are used to assist a combustion
engine - give rise to an additional cost of between 800 and 1,200 euros per
vehicle, while plug-in hybrids - where the electric motor can take over - add
2,000-5,000 euros. 
    Until now, the auto industry has relied on profits between 500 and 1,500
euros per vehicle in the mass market, and between 2,000 and 5,000 euros for a
premium vehicle.
    
    WHY HAS THE INDUSTRY BEEN SLOW TO EMBRACE ELECTRIC CARS?
    Reasons include a lack of charging infrastructure, a threat to employment in
the industry, and uncertainty over levels of customer demand.
    Three quarters of all charging points in Europe are located in four
countries that only cover 26% of the continent's total area, the European
Automobile Manufacturers' Association (ACEA) says.
    Out of the 144,000 charging points available across the EU, more than 26%
are in the Netherlands, 19% in Germany, 17% in France and 13% in the United
Kingdom, according to ACEA's website.
    Germany's auto industry association VDA has said a ban on combustion engine
vehicles in 2030 would threaten more than 600,000 German industrial jobs, of
which 436,000 are at car companies and their suppliers.
    Jobs will disappear because it takes less time to build an electric car than
a conventional one. A combustion engined car has 1,400 components in the motor,
exhaust system and transmission. An electric car's battery and motor has only
200 components, according to analysts at ING. 
    In Europe, there are about 126 plants making combustion engines, employing
112,000 people. The largest is Volkswagen's factory in Kassel, Germany. A shift
to plug-in hybrid cars would help to protect jobs since they take 50% more time,
or up to 9 hours longer, to make than cars with only a combustion engine. But
pure electric cars are much less complex. For example, while a Volkswagen Golf
has around 50 ball bearings, the electric Chevrolet Bolt has only six.
    
    SUPPLY BOTTLENECKS
    The drive to sell more electric vehicles, which has increased the industry's
reliance on Asian battery cell makers, has led to supply bottlenecks even before
measures to contain the coronavirus caused further supply-chain disruptions.
    Audi has had to slow down production of electric cars at its plant in
Brussels due to a battery cell shortage. Volvo and Volkswagen may also face
challenges after battery supplier Samsung SDI             issued a profit
warning due to the coronavirus outbreak.                          
    "We have flown parts in suitcases from China to the UK," Jaguar Land Rover
(JLR) Chief Executive Ralf Speth said last month, as Britain's biggest carmaker
warned of the impact of the virus on supply chains.              
    LAUNCH PLANS
    Volkswagen Group said in March 2019 it planned to launch almost 70 new
electric models by 2028.             
    BMW           has said it plans to offer 25 electrified models by 2023, with
more than half being fully electric, and expects their sales to rise on average
by 30% a year until 2025.
    Fiat Chrysler Automobiles (FCA)           plans to offer 12 electrified
models by 2021, including both hybrid and full electric vehicles of all types.
    Italy's Ferrari           has said it plans to have "a full hybrid range" by
2021 and wants 60% of its cars sold by 2022 to be hybrids, but will not release
a fully electric model until after 2025.
    ($1 = 0.8964 euros)

    
 (Reporting by Edward Taylor, Tommy Lund, Zuzanna Szymanska and Bartosz
Dabrowski; Additional reporting by Giulio Piovaccari, Joern Poltz, Jan Schwartz
and Joe White; Editing by Mark Potter)
  
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