Central European auto sector seeks to drive changes to EU-wide emission limits

18-04-2018

Auto associations from the Czech Republic, Slovakia, Poland, and Hungary, have met in Prague to compare their responses to crucial European proposals for further curbing emissions of key pollutants. The future emission limits are clearly aimed at paving the way for low emission and no emission vehicles, such as electric cars. And that represents a radical challenge to the sector across the region.

Illustrative photo: Michal MalýIllustrative photo: Michal Malý Cars are reckoned to be responsible for around 12 percent of Europe’s carbon dioxide emissions. It’s no big surprise then that the European Commission is seeking more curbs on current pollution limits from both cars and vans in the near future. In a proposal unveiled in November last year, proposals were made for a 30 percent drop in CO2 emissions by 2030 compared with those planned for 2021. And to make sure there is no last minute rush to deliver those cuts, a midway target of a 15 percent reduction is being sought for 2025.

And the proposal also involves incentives for car manufacturers to start switching production to low and zero emission cars as soon as possible. Those car makers which exceed proposed targets for manufacturing zero and low emission vehicles, with the benchmark set at 15 percent of new cars in 2025 and 30 percent for 2030, will be rewarded with lower CO2 targets overall. The overall package is part of the European Union’s moves to fulfil its Paris climate change commitments aimed at combatting climate change. And it clearly comprises both an element of the stick and the carrot.

One of the manufacturing revolutions of the past 20 years has been the modernisation and tooling up of the Central European car manufacturing and components sector to now represent a sizeable force in the European industry overall. South Korean, Japanese, and US car manufacturers have also launched plants in the region and dozens of components companies have flocked in.

ʺIt is very important that we find a place in this new reality.ʺ

Slovakia stands out as the country with most at stake with 13 percent of GDP bound up in the sector and the biggest per capita rate of car production in the world. Hungary follows with 10 percent and the Czech Republic third with 9 percent. Poland comes a long way behind with around 3.8 percent of annual national wealth creation stemming from car and van production. And auto industry associations from all four countries have problems with the Commission proposal while, of course, stating that they are all on board as regards the general target of cutting carbon dioxide emissions.

Meeting at a so-called Visegrad Four Auto Summit in Prague at the end of last week, this is how Poland’s auto industry association’s, Jakub Faryš described the situation facing the countries producers:

ʺFor the last 100 years, the idea of the car was more or less the same: four wheels, engine, transmission, seats, body, brakes, steering wheel. Of course we are talking about the idea and not how the car looks like. Today we are in front of big change. I don’t want to say it is a revolution but for sure it is re-evolution. And we should find a place in this evolution, and probably in the nearest years a revolution. It is very important that we find a place in this new reality.ʺ

Bohdan Wojnar, photo: CTKBohdan Wojnar, photo: CTK The new reality the car makers clearly see on the horizon is the demise of the internal combustion engine as they have known it for more than 100 years. The writing is clearly on the wall. The problems with diesel cars and moves in many cities to ban them is just a taster. And the Commission proposal to encourage the take-up of electric cars and hybrids clearly shows which way it is leaning.

Bohdan Wojnar is president of the Czech automobile association AutoSAP.

ʺThe emission targets and other parameters will have a fundamental impact on future automobile production. It will have a significant influence on our future economy, employment, and education. The automobile industry in the Visegrad region directly employs almost 640,000 and indirectly around 2.3 million. Therefore for us it is fundamental how ambitious the targets are and what the timetable is. If targets are agreed which are close to the Commission’s original proposal, then producers from around 2025 will be forced to produce large amounts of cars with zero emissions.ʺ

And those mid-term 2025 targets are one of the constructors’ biggest problems. They argue that they will only know the precise emission limits in 2022 and this will not give them enough lead time to react. The Visegrad Four countries just want the longer term 2030 target to apply. And instead of the proposed 30 percent cut, they argue that a 20 percent reduction would be more realistic.

ʺWe are talking about a new reality and we don’t know what it will look like up to 2050, for example.ʺ

They also add that the Commission proposal will probably discriminate between different types of low emission vehicles, possibly penalising some options, such as hybrid vehicles, which could be a valuable transition to full blown electric cars.

Clearly one of the auto sector’s major concerns is being committed to producing low and zero emission vehicles without knowing how well the preparations for such vehicles will play out since many other players, not just the manufacturers, are involved in that.

And that’s a big issue for the Central European constructors since electric cars have so far not been one of their biggest priorities and electric car sales have been slow to say the least. A few numbers illustrate the last point: Poland leads the pack with just under 46,000 electric cars sold so far; the Czech Republic comes second with 7,900 cars; Hungary has 7,500 electric cars registered; and Slovakia has just over 3,600.

So one of the things the car makers are looking for is clear government support for the roll out of electric cars and low emission vehicles, such as tax incentives that will help with their sales, and the infrastructure, such as charging stations, that they will require.

Jakub Faryš again:

Jakub Faryš, photo: CTKJakub Faryš, photo: CTK ʺWe have to remember one thing, that if we are talking about electric vehicles, every country in Europe where there have been quite big sales of such vehicles they have been supported by the government and that means the taxpayers. So if there is the political and social decision that we have to split [opt] for electric vehicles, for example, there must be support in the beginning. The question is for how long. It is not direct support, such as paying for electric vehicles or something like that but to have support for a system supporting an idea, to have new mobility or electric vehicles or whatever. We are talking about a new reality and we don’t know what it will look like up to 2050, for example.ʺ

And the large amounts of uncertainty wrapped up in this evolution, re-evolution, or revolution means that the auto makers want the Commission targets qualified by so-called conditionality mechanisms which would allow the goalposts to be altered according to ‘market reality.’ They don’t want to be landed with more low emission and electric car production than they can offload on final customers.

The countries from all EU countries are not all on exactly the same page at the moment on what they want from the European Commission and how they should react. The result of the V4 summit suggests those four countries are speaking more or less with the same voice.

But are national governments on board as well and will push the car and van makers’ positions when it comes to the final debates on the proposals in the European Council, where countries get their say? Bohdan Wojnar believes that the Czech government is already supportive and, back that up, points to the fact that the current caretaker government has said it will back a long time framework for the development for the auto sector in the Czech Republic. That should be reviewed and fleshed out at the end of this year.

Illustrative photo: Klára StejskalováIllustrative photo: Klára Stejskalová ʺIf I should speak about the Czech Republic, I think that very generally we have very good cooperation with the industry minister and we can very closely align our positions.ʺ

Wojnar also points to very close cooperation with Slovakia but suggests Hungary and Poland might have some catching up to do to ensure that their governments’ fully understand the sector’s concerns:

ʺI think we should a little bit improve this discussion in our countries as well because in other countries there is a little bit different situation. Traditionally we have very good cooperation with the Slovak Republic and there is very deep exchange of information. Hopefully we can extend that to Poland and Hungary as well.ʺ

18-04-2018