ACEA — 2023-06-30
Automotive Industry
Message from ACEA’s Director General – June 2023
Spain last held the EU presidency in 2010, when the EU was mired in one of its most severe economic crises. 13 years later, Spain now has the chance to make its mark at a time when the economic forecast for Europe’s industries is increasingly uncertain.
But time is running out – fast. Spain’s presidency is the last in which the EU institutions can work at full capacity – the so-called ‘golden’ presidency – and close big legislative files before the Commission’s term ends.
An avalanche of major legislative files is set to land on Spain’s shoulders at a time when the US and China are stepping up efforts to attract investment from the greenest and most innovative industries, including European auto companies.
The Euro 7 proposal, new rules on heavy-duty vehicle CO2 emissions, the Weights & Dimensions Directive review, and expiring rules on EU-UK tariff-free trade loom over the Spanish presidency. Auto makers fear that regulatory roadblocks could derail the sector’s zero-emission transformation.
With vital auto industry investment in Europe under threat, ACEA calls for a common-sense and competitiveness-oriented presidency to unleash Europe’s green investment potential. But what steps can Spanish politicians take to get the EU on the right track?
Time for a serious rethink of Euro 7
The Spanish presidency must further scrutinise the Euro 7 initiative. While proposals for tyres and brakes provide a future-orientated option, excessive rules on tailpipe emissions could inevitably have a counterproductive effect on the environment.
Auto makers have already massively switched their investment focus to zero-emission vehicles, with the combustion engine for cars and vans set to be phased out by 2035. The Spanish presidency must ask itself to what extent can Euro 7 make a sizeable difference in reducing pollutant emissions.
The facts tell a different story. The existing Euro 6 proposal and electrification can reduce nitrogen oxides (NOx) emissions by a massive 80% by 2035. Compare this to an additional tiny 2-4% reduction that Euro 7 can achieve. In return, auto makers will be forced to direct resources to comply with stringent testing conditions based on unrealistic driving conditions.
In the case of trucks, the European Commission must calibrate the proposed rules for HDV exhaust emissions (and related test methods) to a level which does not distort the huge efforts and investments that will have to be made in the context of the CO2 regulation.
With a sizeable auto sector in Spain, representing 18% of the EU’s vehicle production and employing more than 200,000, law makers must seriously consider whether the trade-off is worth it.
Let’s get the focus right on CO2 emissions for trucks and buses
The EU’s ambitious proposal for revised CO2 standards for HDVs is also set to fall into the hands of the Spanish presidency at a crucial phase in negotiations. While there is no question that commercial vehicle manufacturers are ramping up production of zero-emission trucks and buses – charging and refuelling infrastructure, not vehicle technology and availability – is the problem. Indeed, there is an almost complete absence of private and publicly accessible infrastructure for these specific vehicle types in literally all member states.
The Spanish EU presidency must now take the opportunity to link regulation with enabling conditions. To match the ambition set for and by vehicle manufacturers, law makers must establish the right enabling conditions, such as carbon pricing measures and incentives for operators to accelerate fleet renewal and tackle massive infrastructure gaps. Unlike passenger cars, commercial transport operators operate in a B2B market and invest in vehicles if they can use them as seamlessly and at least as profitably as conventionally powered diesel trucks.
This task now falls squarely in the hands of EU and member state decision makers. Vehicles are available, and manufacturers are ready to deploy them. But frankly, achieving the CO2 regulation’s ambitious targets will be impossible without the right enabling conditions. That’s why ACEA urges the Spanish presidency to ensure that targets for truck makers are well synchronised with enabling conditions. They must be closely monitored with a solid ‘emergency break’ if the conditions for operators to switch remain constrained.
Troubled waters for EU-UK electric vehicle trade
Spain also takes over the helm of the EU at a time of great uncertainty for EU-UK trade. The current rules of origin under Trade and Cooperation Agreement (TCA) will expire by the end of this year. This means that all battery parts, and some critical battery material, must be produced in the EU or the UK to qualify for tariff-free trade from 2024.
While there has been massive investment to shore up a European battery supply chain, auto manufacturers still rely on battery cells or materials imported from Asia. In the face of inaction, the 10% tariff on electric vehicles would cost €4.3 billion over the next three years, hitting European production by up to 480,000 units. With Chinese manufacturers already making up a sizable one-third of the UK electric vehicle market, failure to extend tariff-free trade would increasingly sideline EU manufacturers in their largest export market. ACEA urges the Spanish presidency to prioritise this issue before time runs out.
Decision makers must not neglect the Weights and Dimensions Directive
Finally, decision makers should not overlook the revision of the Weights and Dimensions Regulation which also falls within the Spanish presidency’s busy agenda. The revision is set to have far-reaching implications for new battery-electric and hydrogen-powered vehicles, where additional weight allowances and adjusted axel weight provisions could help accommodate vehicle space and weight requirements. For ACEA, the revision is an opportunity for the Spanish presidency to simplify the Directive and ensure uniform member-state implementation. Moreover, failure to remove barriers envisaged under the Directive risks hindering market uptake of zero-emission trucks and buses.
Reprioritising EU industry policy
Current events force a reality check to ensure we get things right when implementing the EU Green Deal. The competitive pressures from the US, China, and others, pose an existential risk to the European auto industry, and any regulatory proposal must take this into consideration. Spain has an opportunity to send a strong signal to these actors that the EU is determined to stand up for its industries and keep green investments in Europe. The auto industry is Europe’s largest R&D investor, representing almost a third of all R&D spending. Like the US and China, the EU must reprioritise industrial competitiveness to make the Green Deal a reality. Our one wish for the Spanish presidency: establish the right enabling conditions so that auto makers can deliver on zero-emission transport by 2050.