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Dialogue on preserving EU industry to lead to action plan

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Carmakers say top concern is 2025 fines of up to 15 bln

euros

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T&E think tank: targets achievable, postponing is

short-sighted

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European Commission stands fast on targets, but may be

flexible

By Philip Blenkinsop

BRUSSELS, Jan 30 (Reuters) - European Commission chief

Ursula von der Leyen hosts auto sector executives, unions and

others on Thursday to debate how to ensure EU car producers can

electrify their fleets and compete with more advanced Chinese

and U.S. rivals at the same time.

The sector, hit by factory closures and job cuts, including

54,000 job losses among auto suppliers last year, also needs to

confront economic threats such as U.S. trade tariffs and a

reliance on China for critical minerals and batteries.

The EU executive's "strategic dialogue" will feed into an

auto industry plan later this year. It has already proposed

discussions on key technologies, energy and input costs, trade,

demand stimulation and regulation.

The European Automobile Manufacturers' Association (ACEA),

representing 16 car and truck makers, said this week that its

immediate priority was for the EU to axe potential fines for any

auto producers that do not meet fleet CO2 emissions targets this

year.

Renault boss Luca de Meo said these could reach 15 billion

euros for European producers, with electric vehicles (EVs)

needing to push beyond a 20% market share to avoid them. The

market share of EVs in Europe dropped to 13.6% last year as

sales fell sharply in France and Germany.

European automakers could choose to meet the electric

targets by reducing petrol or diesel car production or by buying

credits from Tesla or Chinese competitors.

"Basically automakers would buy green credits from the

country which is polluting the most in the world, and fund those

Chinese EV makers on which EU has just imposed tariffs," said

Gianluca Di Loreto, partner at consultancy firm Bain & Company.

Leaders of auto manufacturing hubs Germany, Italy and the

Czech Republic have also urged Brussels to waive penalties or

have them calculated over a longer period. The Commission has

hinted at some flexibility, but so far stood fast.

Pro-environment think tank T&E says this is with good

reason. It says the industry has had since 2017 to prepare with

many new cheaper models now hitting the market, that the 2025

targets are achievable and that carmakers are unlikely to face

penalties, with some credit buying, but also increased EV and

hybrid sales. In the worst case, it says, fines would be below 1

billion euros for the sector.

"If you postpone this by a year or by two years, you're not

going to be in a better position. You're postponing something

that is essential to your future success," said T&E executive

director William Todts, who will also attend the dialogue.

MOVING ON FROM FINES DEBATE

Todts argues that instead of debating fines for months on

end, the dialogue should focus on longer-term policies to help

the European car industry succeed.

These could include improving charging infrastructure and

incentives for consumers to buy domestically produced EVs, in

line with the tax credits the United States Inflation Reduction

Act brought in. This could particularly apply to corporate

fleets, which make up 50-60% of purchases of new vehicles.

Auto suppliers said in a call before the EU dialogue that

the bloc should set clear targets for regional content,

following the North American model, to protect the 13 million

people the sector employs.

Then there is the issue of how to deal with potential U.S.

tariffs, as threatened by President Donald Trump.

BMW CEO Oliver Zipse said he would propose the EU lower its

standard car import duty for U.S. vehicles from 10% to 2.5%,

matching the U.S. rate currently applied to EU car imports.