Fit for 55 | After the summer enthusiasm, prudence seems to be gaining ground – Newsletter Editorial February 2022
Something seems to have shifted in the past few months. The enthusiasm triggered last summer by the European Commission’s ‘Fit for 55’ proposal on CO2 standards has been somewhat replaced by pragmatism, and a more sensible approach seems to be spreading among EU legislators.
As I already noted in my July 2021 editorial, rather than a political pact, the legislative initiative came in the form of a technology ban, de facto prescribing what automakers can produce, and what consumers can buy: full electric battery vehicles only as of 2035. Back then concerns were raised, and not only from the automotive supplier industry, but the emphasis often went to the positives, of which there are many, but that doesn’t take away from the fact that this transformation concerns people and businesses in a very real and disruptive way.
This is why CLEPA recently commissioned a study, carried out by PwC Strategy&, to better understand the practical implication on the 600K+ jobs currently in the Internal Combustion Engine (ICE) powertrain domain, with the aim to provide fact-based evidence and inform policy decisions to avoid unintended consequences. The results of which sent a stark warning that over half a million jobs in the powertrain domain are at risk until 2040 with an Electric Vehicle (EV)-only policy approach.
From a global perspective, no other major auto market has opted for a technology ban, instead recognising the importance of a mixed technology approach
One of our key arguments has been that maintaining a technology neutral approach, which includes rapid electrification in combination with sustainable renewable fuels, will enable us to reach carbon-neutral mobility while mitigating job losses and maintaining our global leadership position.
Let’s zero-in for a moment on this last issue – global competitiveness. Indeed, one way to maintain EU leadership is to ramp up electrification and to establish a battery supply chain, which the supplier industry not only fully supports but is actively investing in, despite existing uncertainties. And many automakers have, accordingly, revised their long-term strategies under regulatory pressure, with various announcements on ‘electrified engines only’ after X date. However, that’s basically only in Europe. From a global perspective, no other major auto market has opted for a technology ban, instead recognising the importance of a mixed technology approach.
In the U.S., the Federal government is pushing to scale up the sale of EVs and charging infrastructure, but without making commitments to ban ICE vehicles. China is betting on a multi-tech approach with an increasing market penetration of New Energy Vehicles, with no bans though. Such an approach was reflected in the last COP26, where the EV-only scenario lacked global consensus and failed to get the endorsement of main mobility-tech States and industry players, citing considerable social impacts, without ensuring an efficient and effective transition to reaching climate goals, as it left behind a wide range of green technologies (not to mention a wide cross-section of consumers). And in fact, in recent weeks, what seemed like a foregone EV-only conclusion has turned into a more measured discussion on, quite literally, leaving our options open.
Andy Palmer, the former CEO of Nissan, the man behind the launch of the first mass-market electric vehicle, warned legislators about the danger of focusing solely on electric vehicles to decarbonise mobility. Then Peugeot’s new CEO Linda Jackson, in an interview following her appointment, stressed that there is still a need for ICEs cars around the world. In the Financial Times, at the beginning of January, statements appeared from Toyota, Stellantis and BMW in a long-read piece, noting their hesitation to go ‘all in’ on electric vehicles. Shortly afterwards, BMW also announced that it is continuing to invest in advanced combustion engine technology, while Carlos Tavares, CEO of Stellantis, pointed out in an interview with four major (French, German, Italian and Spanish) newspapers the risks involved in a transition linked to “a technology chosen by politicians, not by industry.” Porsche announced investments in renewable fuels in South America, where there is an abundance of renewable energy, and its boss, Oliver Blume, highlighted the importance of needed solutions to address the 1.3 billion ICE vehicles running today worldwide, while Hyundai has denied that it is abandoning the development of combustion engines after a news report had claimed the contrary.
We would be wise to take note of the global context and what a one-size-fits-all solution in the EU would actually mean for our global competitiveness.
Of course, that’s not to say that these industry leaders aren’t fully dedicated to the mobility transition. All major OEMs are heavily invested in rapid electrification and committed to climate goals, but some have chosen to keep a technology open approach to address different market uncertainties and diverse consumer needs. We would be wise to take note of the global context and what a one-size-fits-all solution in the EU would actually mean for our global competitiveness. In fact, there are already signs that some foreign manufacturers are gaining new market share in European markets thanks to EVs, where they historically had difficulties competing with European manufacturers. Further, given that other markets will continue to sell ICE vehicles for the foreseeable future, Europe would be doing itself a disservice not to leverage the many years of investments and expertise in advanced combustion engine technology, bearing also in mind that investments into EVs will need to come from somewhere.
While the road to electrification is well marked, how we should transition is not. The complexity of the social and economic implications did not get enough attention at the start of this discussion, and certainly much work remains to be done, but it would appear that prudence is slowly but surely, at least starting to balance the haste.
With the on-going discussions in the Parliament, we have seen more than 650 detailed amendments tabled in the ENVI committee, including on the de facto ban on all but electric vehicles, and whether that decision is too soon to take now, or if we should hold off until 2028 to see how the transition is evolving, including the development of much needed charging infrastructure. Amendments calling for a voluntary fuel crediting mechanism, to account for the contribution of sustainable renewable fuels to emissions reductions, are being contemplated, as well as a derogation for Plug-in Hybrid EVs. In the Council, heavyweights like Germany and France will play an important role in the outcome.
As our President, Thorsten Muschal, rightfully noted, “the fog in which we find ourselves is all the more reason to push ahead towards the certainty of climate neutrality. But this will require a full commitment to innovation coupled with a flexible regulatory framework that facilitates investment, anticipates change, and allows for the full scale of technological progress.”
Let us see if prudence is indeed hastened, towards a green AND just transition.
Sigrid de Vries
CLEPA’s Secretary General
In: CLEPA News