The European Auto Industry Is Racing To Ditch Diesel

As if the downturn due to a trade-war-induced slowdown in China were not enough, the European automotive industry is facing the challenge of a rapid switch from diesel to petrol engines that has been gathering pace for the last two years. At the same time, the industry has also had to deal with the implementation of new legislation designed to reduce car makers’ overall fleet emission levels. An article in the Financial Times explains the impact of the new legislation on Europe’s automakers, an industry that supports some 14 million workers across the continent. Quoting Max Warburton, an auto analyst at Bernstein, the article says each carmaker faces its own CO2 target based on the weight of its vehicles. A business selling smaller cars, such as PSA, therefore has a lower CO2 target than a company with a heavier average vehicle, such as Mercedes-Benz owner Daimler. The targets for each company vary from around 91 g/km to just over 100 g/km. Some carmakers, like PSA, have already made good progress, switching less fuel-efficient, four-cylinder GM engines in their new Astra range to new three-cylinder PSA engines has improved efficiency by some 21 percent. However, carmakers like PSA do not have a lot of luxury saloons and SUVs in their lineup. Daimler, BMW and JLR do, and the situation is made worse by a rise in sales of such vehicles in recent years. Europe — once the home of the small, fuel-efficient compact — has fallen in love with the SUV.  Some 40 percent of cars sold in the E.U. are now SUVs and automotive carbon emissions have, as a result, risen for the first time in a decade...MORE

And, of course, there is the loss of jobs: 

European carmakers are already reining back sales of luxury gas guzzlers like Mercedes AMG range in order to help meet the new targets, but those are by far the most profitable part of their range — putting overall company profitability under pressure. Job losses, even in highly protected job markets like Germany where an axed position is estimated to cost the employer around €100,000, are likely over the next 2-3 years. A separate Financial Times article states in the next decade almost a quarter of a million auto jobs will be lost in the country, quoting Ferdinand Dudenhöffer, the director of the Center for Automotive Research at the University of Duisburg-Essen.The article goes on to report German automakers and part suppliers, from Daimler and Audi to suppliers including Continental and Bosch, have already announced around 50,000 jobs will be lost or are at risk so far this year, as their traditional businesses become less profitable.