Troubled European carmakers to talk fines and EVs with EU

Europe’s biggest carmakers will converge on Brussels for talks this week as the EU seeks to chart a way forward for an embattled industry struggling to cope with Chinese competition and climate rules.

Automotive CEOs and European officials are expected to discuss the sector’s troubles on Thursday in the first meeting held under a new initiative chaired by EU chief Ursula von der Leyen.

The “ambition” is to “roll up the sleeves” and find solutions for “a core engine for European prosperity”, the European Commission said.

The auto sector employs more than 13 million people, accounts for about seven percent of the bloc’s GDP, and is in the “middle of deep structural shifts”, it added.

The so-called “strategic dialogue” aims to boost the sector’s competitiveness. But much of the pre-summit debate has focused on the steep emission fines that car manufacturers could face in 2025 — and their desire to avoid them.

Under ambitious efforts to combat climate change, the EU introduced a set of emission-reduction targets that should lead to the sale of fossil fuel-burning cars being phased out by 2035.

About 16 percent of the planet-warming carbon dioxide (CO2) gas released into the atmosphere in Europe comes from cars’ exhaust pipes, according to clean transport advocacy group T&E.

As of this year carmakers have to lower the average CO2 emitted by all newly sold vehicles by 15 percent compared to 2021 or pay a penalty — with tougher cuts further down the road.

This incentivises firms to increase the share of EVs, hybrids and small vehicles they sell compared to say big diesel-guzzling SUVs.

But some manufacturers complain that is proving harder than expected as consumers have yet to warm to EVs, which have higher upfront costs and lack an established used-vehicle market.

Sales of electric cars slid by 1.3 percent in Europe last year, accounting for 13.6 percent of all sales, according to the European Automobile Manufacturers’ Association (ACEA), an industry group.

The prospect of sanctions, which some estimate could reach up to 15 billion euros ($15.7 billion) in total, has sent jitters through a sector already hobbled by high manufacturing costs and what the EU deems “unfair” competition from subsidised Chinese rivals.

German car giant Volkswagen is weighing factory closures at home for the first time, just one of a string of cuts announced by auto manufacturers and suppliers.

“The risk of paying heavy penalties… would divert necessary funds from R&D and other…