Commentary: Bluster about the fleet limit value

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It's hard to stop being amazed, even though it has a long tradition: New emissions standards or the upcoming tightening of the fleet limit value seem, if the media consumer follows the official statements, not only to come rather suddenly for the industry. And not only that: they are also basically almost impossible to achieve. Either the mass loss of jobs or the complete demise of the entire car industry is propagated. What is astonishing is that, apart from the big headlines, in most cases the manufacturers themselves are of course not only aware of new tightening measures, but are also prepared for them. So what's all the fuss about?

It's that time again

From 2025, the so-called fleet limit value will be tightened. Put simply, each manufacturer will be assigned a CO₂ limit value based on the unladen weight of their vehicles, among other things. Across all vehicle manufacturers, the groups must achieve a value of 94 grams of CO₂/km. Unlike before, this value is finally, it has to be said, issued in the current WLTP cycle. The previous average value of 95 grams of CO₂/km was still determined in the NEDC –, a consumption recording system that has actually been dormant since 2017.

The old penalties apply to the new limit value: if a manufacturer exceeds its individual limit value, it must pay a fine of 95 euros per gram of excess for each car sold in the EU in the respective reference year – regardless of whether the individual model complies with this limit value or not. To demonstrate this briefly by way of example: A manufacturer sells one million cars per year and exceeds its individual limit value by 5 grams. Then the fine for him looks like this:

5 grams/CO₂ x 95 euros x one million euros equals 475 million euros

The new limits are undoubtedly a challenge for manufacturers. The efforts that need to be made vary from company to company, as not all are equally close to their target. Almost everywhere, it can only be achieved by increasing the proportion of new cars with battery-electric drive systems.

Of course, the manufacturers are not unprepared or defenceless in the face of this. On the contrary, they have been aware of this timetable for many years and are preparing for it. Nobody should forget that the car industry has an excellently supplied lobby that "supports politicians in word and deed" with such decisions. Neither side has any interest in imposing requirements on a key industry that are impossible to meet. The legend of the car industry being presented with unsolvable tasks by politicians is being sold to the outside world with astonishing success. Despite the constant repetition, it is not true.

What can manufacturers do?

Car manufacturers have been steering the market for many years, around two thirds of which is accounted for by commercial registrations in Germany. The company car business is therefore vital for most manufacturers, which is why battery electric cars and plug-in hybrids in particular receive so much tax support. If a drive type is also to be pushed into the market as a priority for a limited period of time, a provider will help with special offers and downright astonishing leasing rates. This is nothing new, but has been common practice in this market economy for decades.

Two examples illustrate how closely manufacturers are looking at meeting the fleet limit value. Volkswagen's forecast for 2024 was slightly above its limit value. As a result, prices for the ID.3 electric car temporarily – fell to just under 30,000  euros for the base model by the end of the year.

My colleague Christoph M. Schwarzer recently sent me a local offer for a brand new Kia EV3. The base model of this car is officially offered from 35,990 euros, while the offer for the highest equipment line including a large battery was 33,500 euros. We may see bargains like this more frequently in the coming year, whenever the forecasts suggest that a car manufacturer is threatened with a fine if its individual limits are exceeded. These will be avoided by lowering the price of electric cars for as long and as far as is necessary until the supplier is "on target" again. Supply, demand and the threat of penalties shape the price.

Noise

Of course, rattling is part of the trade. After all, loud complaints increase the political pressure to use taxpayers' money to get under the wings of the beleaguered industry. So it should come as no surprise that the President of the European Automobile Association Acea, Luca de Meo, warns of possible "billions in fines" that the car industry could face as a result of stricter fleet limit values. However, it is highly unlikely that they will be imposed. The manufacturers will know how to avoid this by means of a sophisticated offer design. It is foreseeable that there will be losers in this race.

Should politicians nevertheless contribute financially, it will go in one direction above all: into the pockets of the corporations. After the sudden end of purchase support, some manufacturers were able to massively reduce the prices of e-cars almost astonishingly quickly, which reinforces the suspicion that the manufacturer's share had previously been priced in as a matter of course. This should come as no surprise to anyone, as car manufacturers are not committed to the common good, but to maximizing profits.

In this mixed situation, it is therefore quite remarkable when the current Federal Minister for Economic Affairs, Robert Habeck (Greens), comments: "I think it's fine if, in this difficult situation for the automotive industry, we don't take an additional billion euros out of the companies." Habeck argues that this should rather be invested in the ramp-up of e-mobility, for example. Well, those responsible in the automotive industry have almost certainly already thought of this. Contrary to what is currently being reported in many places, there are people there who think beyond the day-to-day and have therefore long since pulled out all the stops to avoid penalties and spend the money themselves if necessary. Most of the horror scenarios that are currently being painted in dazzling colors serve to optimize margins – ideally with the help of taxpayers' money.

(mki)