European automakers are increasing petrol car prices and discounting electric vehicles (EVs) in response to tougher EU emissions regulations starting January 2024, Reuters news report said.
Companies like VW, Stellantis, and Renault have raised prices for petrol models by several hundred euros in recent months. The EU will significantly lower its carbon dioxide emissions cap, requiring at least 20 percent of car sales to be EVs to avoid heavy fines. However, current EV sales in the region are only at 13 percent, far below the target.
Automakers face additional pressure from declining sales, overcapacity, and growing competition from Chinese manufacturers. The cost of producing EVs remains higher than traditional vehicles, compounded by reduced EV subsidies and uncertain economic conditions.
In an effort to shift demand toward EVs, companies are adjusting their pricing strategies, although concerns remain that these moves may not be sufficient to meet the targets or sustain growth. Discounts on EVs are being funded by price hikes on petrol cars, effectively subsidizing the transition but hurting profit margins.
Some automakers are “pooling” emissions by partnering with firms that exceed EV targets to avoid fines. An example is Suzuki teaming up with Geely-owned Volvo for compliance. To meet emissions targets, new affordable EV launches are planned for 2024, and analysts predict a 41 percent increase in EV sales across Europe by 2025 despite the challenges.
However, automakers warn of significant costs tied to meeting EV targets, with billions of euros at stake in subsidies and discounts. Industry leaders, like Luc Chatel of the PFA, have criticized the strict rules, questioning the practicality of current strategies to meet emissions goals and expressing concern over further profit declines and supply chain impacts.