EU Automakers to Raise Gas-Powered Car Prices Due to Net-Zero Fines

A VW Tiguan (C-L) and an ID.7 electric car inside the car storage tower at the Wolfsburg Volkswagen Plant, the worldwide headquarters of the Volkswagen Group, in Wolfsburg, Germany. Tobias Schwarz/AFP via Getty Images

European automakers are raising the prices of combustion-engine cars as penalties on net-zero carbon dioxide (CO2) emissions are set to go into effect in the new year.

From Jan. 1, the European Union-wide targets will require a 15 percent emission reduction from new cars and vans, with industry estimates suggesting that about 22 percent of new car sales may need to be electric to reach those targets.

Carmakers are now increasing prices for petrol vehicles, according to industry insiders.

“Carmakers have started with their pricing strategy to steer demand towards battery EVs [electric vehicles] in order to reach the CO2 targets and avoid potential fines,” said Beatrix Keim of the Center Automotive Research.

In its Automotive Supplier Outlook 2025 report, S&P Global stated that stricter CO2 regulations may “challenge the automotive sector by raising consumer prices and dampening demand for new vehicles unless the EU and the United Kingdom adjust internal combustion engine (ICE) phase-out timelines.”

However, only 14 percent of sales are electric, according to the car lobby group European Automobile Manufacturers’ Association (ACEA).

ACEA also said the industry potentially faces 15 billion euros ($15.8 billion) of fines for failing to meet the 2025 targets.

On Dec. 19, speaking ahead of a summit of EU countries’ leaders, German Chancellor Olaf Scholz said it did not make sense to add to the difficulties the industry faces.

“The commission should therefore find a way to ensure that the fines, if they become necessary, do not affect the financial liquidity of companies that now need to invest in electromobility,” Scholz told reporters.

Despite the targets, data from the auto industry body indicate that European EV sales are plummeting as companies face intense competition from Chinese EV manufacturers.

For example, sales of fully electric cars slumped by 43.9 percent in August, as the bloc’s biggest EV markets, Germany and France, recorded drops of 68.8 percent and 33.1 percent respectively, according to numbers from the ACEA.

Germany’s Volkswagen early this year announced that it is considering factory closures in the country for the first time amid growing pressure from cheaper Chinese EVs.

The automaker is targeting $11 billion in savings by 2026 to navigate the transition to electric cars.

Scholz, who is facing a snap election in February next year, said he will discuss the state of Europe’s auto industry with European Commission President Ursula von der Leyen on Dec. 19.

Campaign to Change CO2 Rules

Earlier this month, the center-right European People’s Party (EPP), which bills itself as the “largest and oldest group in the European Parliament” and is affiliated with Von der Leyen, launched a campaign to change the car CO2 rules.

“As a key pillar of the economy, the automotive sector provides over 13.8 million quality jobs across the entire value chain and contributes 7 percent to the EU’s GDP, generating wealth across all Member States. For more than 150 years, it has been a key driver of prosperity in the region,” it stated.

The party noted that the sales market for “electric cars is not developing as expected.”

“Sales figures are lagging behind expectations, and manufacturers are at risk of failing to reach their 2025 emission reduction target, resulting in potential fines in the billions,” EPP stated. “In the current crisis, manufacturers need their revenues to master the transformation.”

The European Commission said in a statement that it will launch a “strategic dialogue” with the automotive sector in January, “with a view to swiftly proposing and implementing measures the sector urgently needs.”

The Epoch Times asked the European Commission if the move is connected to EPP’s campaign.

A spokeswoman referred to a statement released on Dec. 19 that said the strategic dialogue supported “the sector’s decarbonization, in an open technological approach, given its role in achieving Europe’s ambitious climate goals.”

Despite calls for the EU Commission to change course, the body has signaled that it will not back away from its climate legislation.

EU climate commissioner Wopke Hoekstra was asked on Dec. 12 if he would back down on CO2 rules.

“No,” he said. “The answer is no.”

Reuters contributed to this report.