14.10.2008 EU car industry wants €40bn to 'go green'

ACEA, the association representing many of the Europe's largest car manufacturers, has outlined plans to bid for a €40billion (£32bn) support package from the EU to help cover the costs of meeting 2012 CO2 emission targets.

Car manufacturers represented by the group are demanding an injection of capital in order to help them green their car fleets; a move which stems in part from the European Parliament's decision to press ahead with legally binding CO2 emission limits of 130g CO2/km.

"On the one hand the industry is hurting from the credit crisis. On the other hand, the industry is facing the prospect that complying with new legislation on emissions is going to cost a lot of money." said Ivan Hodac, Secretary General of the ACEA.

News of the bid followed a US government announcement that it will make $25billion worth of cheap loans available to the American car manufacturing industry in an effort to support it through the financial crisis.

Chief Executive Officer of FIAT, Sergio Marchionne, said: "It would be absolutely necessary that the European Commission do exactly the same thing. It was $25 billion for the US, in our case it's €40 billion because we have twice the capacity. We need a level playing field,"

Prior to the vote in favour of proposals, pressure had been growing on the European Commission. As economic turmoil ensued and the manufacturing sector began to decline, MEPs were the subject of `intense lobbying` by motor manufacturers, aimed at pushing back emissions limits to 2015 and upping CO2 levels. That the EU stood firm under pressure however, has been hailed by some as a `landmark` in the move towards low-carbon transport.

"This is a watershed for climate protection in the European Parliament. MEPs have voted to introduce meaningful rules for tackling the damaging climate impact of cars by reducing their CO2 emissions. It is also a vote for European Consumers: with oil prices so high, more fuel efficient cars will reduce the fuel cost burden…" said Rebecca Harms, a German MEP.

Hodac estimated however that while new CO2 legislation would cost the car industry around €25bn, it would also add roughly €1,500 to the cost of a new car and in doing so leave consumers out of pocket.

Chief Executive Officer of FIAT, Sergio Marchionne, stated: "We’re trying to deal with proposals on the regulatory framework which don't make a lot of sense given where we are… We need to have a much more proactive, a much more intelligent approach coming out of the European Commission."

The combination of economic instability and the introduction of more stringent measures to ensure environmental protection is clearly hitting the car industry hard. Manufacturers of luxury and off-road vehicles are especially sensitive to developments, with data for UK sales showing a drop in larger vehicle segments of over 40% during September alone. Manufacturers of large vehicles now have to struggle with the dual concerns of a shift in car buyer preference towards more fuel-efficient cars and a requirement to sink increasing levels of investment CO2 cutting technologies.

Some however have little sympathy, pointing to a decade of lobbying undertaken by the car industry aimed at undermining efforts to reduce vehicle emissions. George Monbiot, one of the UK’s most outspoken public intellectuals and columnist for the Guardian, commented:

`There is no need to spend a penny of public money on greening the motor industry. As a recent report by the House of Commons environmental audit committee shows, you could achieve the same outcome by creating a bigger differential between vehicle tax bands: it proposes that people buying the least efficient cars should pay around £2,000 more per year than those buying the most efficient. This would kill the market for gas guzzlers and force the industry to make the changes it has long resisted.`