Ursula von der Leyen Persuaded to Protect ICE Cash Cows — How to Make the Most of This

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Ursula von der Leyen proudly announced final week that she would assist the EU automobile trade to adjust to the EU’s CAFE rules in a extra lenient manner. They may take three years to succeed in compliance with the regulation’s new CO2 limits, slightly than doing so this yr. With out this leniency, they had been dealing with over €8b in fines. At the very least, that’s what monetary and automotive insiders had been telegraphing to the press. In actuality, there are sufficient methods to conform with out paying any fines. However all these methods require promoting much more BEVs and even fewer automobiles with a tailpipe.

The present era of ICE-powered automobiles is the final of its form. Lengthy, lengthy, way back, after I was taught the fundamental ideas of enterprise administration, we had been made conscious of a humorous, very worthwhile scenario. When a product reached technical EOL however was nonetheless in style out there, it grew to become a cash-cow. No extra bills for enhancements or the following era of the product. No extra investments to maintain the manufacturing traces updated. Hold promoting it till both the manufacturing traces or the market collapse.

Petrol-powered automobiles have by no means had the revenue margin they’ve now. In fact, OEMs wish to preserve promoting them so long as potential. One in all their instruments shouldn’t be bringing higher BEVs to market and maintaining the value of them as excessive and uncompetitive as potential.

As I perceive the proposal made by Ursula von der Leyen, the trade will get a reference interval of three years to conform. I translate it as, for instance, first yr reaching 80% of goal, subsequent reaching 100%, third yr compensating first yr by reaching 120%. This implies the trade should promote the identical variety of electrical automobiles to conform, they’re solely given an extended interval to take action.

If that assumption is appropriate, it’s acceptable to me IF, for the remainder of this 5-year interval, the corporate’s goal is the best yearly share on this three-year interval. Forcing laggards to carry out.

This leniency has execs and cons.

• A professional for the trade can be a brief profit in earnings.
• One other professional might be for much less want to purchase credit from Tesla. (Sure, I’m anti-Tesla now with Musk attacking the USA economic system and the protection of Ukraine.)
• An important professional for the trade shouldn’t be paying fines or having to purchase credit from opponents.
• A con for the EU trade is dropping market share to the Chinese language automobile trade.
• One other con can be slower improvement of contemporary small BEVs at aggressive costs.
• Additional, there’s the con that the market is rising slower. Although, whereas the trade doesn’t prefer it, the market will develop annually. There will probably be extra demand than the regulation’s quota requires.
• There is no such thing as a con for the EU of missed fines as a result of the trade was by no means going to pay fines. They’ve sufficient capability to promote sufficient, or almost sufficient and within the worst circumstances purchase credit.

Infinitely higher can be to change to growing CO2 targets yearly for the final two years of this era. The rise must be primarily based on the distinction between the 2025 goal and the 2030 goal. In 2028, the goal must be elevated by one third of the distinction; the 2029 goal by two thirds of the distinction. This could create the fixed shift to emission-free driving that’s the objective of the regulation.

This could be a deal I might be behind. The trade should perceive that There Ain’t No Such Factor As A Free Lunch, aka TANSTAAFL. The value for leniency now’s higher efficiency later.

P.S. That is a part of a package deal to strengthen the EU automotive sector, push native battery manufacturing, and general localize the availability chains. And I’m a supporter of Ursula von der Leyen. The EU wants a powerful chief with all of the turbulence in Europe, somebody who shouldn’t be the chief of one of many member states. As overseas diplomats and heads of presidency used to say: “Who do I call when I need Europe?” It was for over a decade Angela Merkel. Now this function is claimed by Ursula. She is in competitors with the UK’s Keir StarmerFrance’s Emmanuel Macron, and probably Germany’s Friedrich Merz. Some see Volodymyr Zelenskyy on this function, however that’s for when Ukraine is an EU member state and he succeeds Ursula as head of the fee.