More evidence that electrification is around the corner

Electrification, OEM’s and their CO2 reduction efforts

OEMs who fail to meet 2021 fleet CO2 emissions compliance, for passenger vehicles sold in the European Union (EU) could be fined more than €14 billion in 2021. This is a conclusion based on new analysis from IHS Markit. Electrification could be answer.

As fleets start to switch away from Diesel, and at the same time adopt the SUV form factor, CO2 is on the way up. This is making life very hard for OEMs who need to get their fleet’s weighted average CO2 emissions down to 95 g/km.

For every gram above this limit, car makers are fined €95 per vehicle sold.

If an OEM’s fleet average amounts to 97 g/km, for instance, and it sells 600,000 cars in the EU, it will have to pay €114 million.

WLTP is having an impact

On September 1st 2018, WLTP becomes the type-approval procedure for all new cars sold in the EU. It is more realistic and therefore translates into higher official CO2 ratings.
To counter this artificial inflation, Europe has developed a back-translation method called CO2MPAS. WLTP values are turned into correlated NEDC values to keep the game fair. However, Jato data shows that on average, the correlated NEDC values are 10 g/km higher than the old (‘true’) NEDC ones.

This number is likely to rise, says Jato, because of the limited sample. Only 20 percent of all new car models and versions (in terms of volume) have been WLTP-rehomologated, and the sample has a large proportion of small cars (A and B segment) in it.

We would advise that you look at your choice lists to determine whether the new CO2 ratings could push certain vehicles into new BiK tax bands, or exceed the maximum emissions. If driver choice is being impacted, this may prove to be a good opportunity for a wholesale policy review and an assessment of the suitability of AFV’s.

The manufacturer response so far

The report states that 25 manufacturers are on course to meet the target, and 27 aren’t. FCA seems to be in the least favourable position, based on data published by Citi Equity Research. It is lagging behind in new powertrain development and has no hybrids or electric vehicles available in its European line-up. It needs to get its CO2 emissions down by 6 percent.

Daimler has the best outlook: 3 percent suffices to avoid a fine. Its micro car subsidiary will become entirely electric next year, and it will be launching its electric sub brand EQ in about a year’s time. BMW, Renault and PSA are close to that figure, according to the City Equity Research, while VW needs to step up its game by 4 percent. They too are launching an electric sub brand, I.D., next year.

2020 – the electric year

There is a good reason for car makers to not go all-out on electric before the end of 2019. From 2020 onwards, low-CO2 vehicles are granted super credits.

OEMs need to get their fleet’s weighted CO2 average down to 95 g/km by the end of 2020. To stimulate the development and sales of low-CO2 vehicles, the EU grants OEMs so-called super credits, aka multipliers. Every car sold that emits less than 50 g/km counts as 2 vehicles in 2020. This number becomes 1.67 in 2021, 1.33 in 2022 and 1 from 2023 onwards.

OEMs can pool together to achieve the target. Smart, for example could help offset the high emissions of Mercedes’ luxury SUVs.

So, what does this mean for you?

The evidence is becoming clear that electrification is gaining pace with car manufacturers. The issue faced for most fleets is how and when to electrify and what is the impact on the fleet mobility strategy.

Take a look at some recent articles that goes into more detail on this subject.

The Road to Fleet Electrification

10 steps to Fleet Mobility

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