Carmakers can avoid billions in CO2 fines by launching EV car sharing
The EU (European Union) has set mandatory emissions-reduction targets for new cars, with legislation requiring car manufacturers to achieve a fleet average of 95 grams of CO2 per kilometer for cars they sell in the EU by 2020.
The European industry’s fleet average emissions decreased from 158.7 g/km CO2 in 2007 to 117.8 g/km CO2 in 2016, which equates to a 4.5 g/km per year reduction. So, the 2015 EU fleet emissions targets of 130 g/km CO2 were broadly achieved. But, recent years have seen average emissions actually increase, just as the next major milestone for 2020-2021 specifies a significant drop to 95 g CO2/km.
There a number of factors responsible for the adverse trend, but most significant is the shift from diesel to gasoline cars as a consequence of “Dieselgate” (CO2 emissions of diesel cars are 10% to 15% lower than comparable petrol cars) and the continuous increase of SUV sales (which are less fuel efficient due to their size and weight) from 4% EU market share in 2001 to 34% in 2018. Compounding the issue is the change in the official emissions-testing procedures, from the outgoing New European Driving Cycle (NEDC) to the new Worldwide Harmonised Light Vehicle Test Procedure (WLTP), resulting in more stringent and more realistic testing and higher CO2 values for the same vehicles.
As a result of these forces, fleet average emissions increased to 118.1 g/km CO2 in 2018, and are estimated to increase further to 120.5 g/km CO2 in 2019, based on an analysis of 23 European markets. This leaves carmakers at risk of crippling fines in 2020 and 2021.
While vehicle manufactures are looking at a number of strategies to avoid the potential billions of euros in fines that will be leveraged in 2020, many OEMs are projected to miss the targets. They must act fast if they are to transform their practices and avoid impending fines. And we believe that 2020-2021 is just the beginning. There will be far greater challenges to come. In fact, average CO2 emissions from new passenger cars and vans registered in the EU will be required to be a further 15% lower in 2025, and 37.5% lower in 2030, compared to their respective limits in 2021, leaving manufacturers with bigger and bigger challenges, and stricter targets to meet.
There are three mechanisms made available by the EU to provide a path for carmakers to achieve the emissions targets: super credits, eco-innovations, and pooling. Super credits will allow manufacturers adding low-emissions vehicles to their fleets in 2020-2023 to gain extra credit in the average fleet emissions calculations; EVs introduced in 2020 will count as double in the calculations. In terms of eco-innovations that manufacturers can also use to reduce CO2 emissions, only seven have been approved by the EU; these include LED lights and efficient alternators. Pooling sales figures can also help manufacturers avoid fines, the most notable recent example being the agreement between Tesla and Fiat Chrysler Automobiles.
We believe that super credits, specifically realized through democratizing EVs, are the most effective solution for carmakers when it comes to reaching the mandatory targets to avoid or significantly reduce the fines.
Our research points to car sharing as an especially effective solution, with significant short-, mid-, and long-term advantages for car manufacturers. This is particularly relevant in the context of the EU fleet average emissions targets: for 2020, each EV registered in the EU will count as double in the fleet average emissions calculations.
Carsharing is an efficient way for manufacturers to start to minimize the impact of these changes, and reduce the fines that they are faced with. It also has other added benefits such as reducing local pollution in cities and reducing the number of vehicles in built-up urban environments.
Promoting EV uptake via private users has faced significant challenges, including range anxiety, cost, and charging worries. But our experience indicates that car sharing could remove some of the barriers for OEMs, allowing them to place thousands of EVs directly into major cities. And it presents consumers with a strong message about the repositioning of the brand towards a more sustainable, zero-emissions product portfolio.
According to our calculations, a car manufacturer with a market share of around 5% sells around 800,000 cars per year within the EU. If the manufacturer’s average fleet CO2 emissions stand at 99 g/km with a target of 95 g/km, it would incur fines of €304 million.
If the same car manufacturer introduces a fleet of 5000 shared electric vehicles in 2020, its fleet average emissions would be reduced to 97.8 g/km, and the fine would fall to €211 million in 2021. This would save a manufacturer around €90 million.
Carsharing is the first logical step to reducing urban congestion and pollution and providing convenient transport in cities, but longer term we see the future of car sharing as autonomous. In late 2018, we partnered with Akka Technologies to integrate our AiMA car sharing platform into an autonomous vehicle, and successfully completed an autonomous car sharing trial on closed roads in the city of Nice. The future is certainly electric, and we believe it will also be about autonomous shared mobility.
We are ready and able to integrate this technology when it has reached maturity, and a major step in that direction is for carmakers to commit to electric car sharing—for their own benefit and that of the society as a whole.
For more information, please take a look at the full whitepaper.