Emissions regulations pose existential risk for OEMs

CO2 emission regulations

Escalating fines over CO2 and fuel standards, especially in Europe and China, are set to have significant impacts across the supply chain and OEM investment plans, according to a new report by Automotive from Ultima Media.

OEMs face punitive fines that could cost them billions of dollars if their vehicles do not comply with escalating CO2 emissions and fuel economy standards on the sale of new vehicles, especially in the EU and China. These fines are set to decimate already slim margins.

A new report from Ultima Media analysing financial, regulations and technology risks for the automotive supply chain highlights that the squeeze for many OEMs will start next year, as the EU phases in new rules before they come into full force by 2021. While OEMs are investing heavily in electrification that will reduce emissions, some of the financial pain could be hard enough so as to hinder current investments, according to the report.

Global manufacturers will face further challenges as they try to manage growing regulatory divergence in emissions regulations across major regions. For example, the US standards are less strict than the European and Chinese standards, and could diverge even further based on plans by the Trump administration.

To meet these standards, automotive OEMs are facing a number of options ranging from fully paying the fines, to heavy compliance costs. And there are other options including CO2 ‘pooling’ deals with rivals, or even making radical decisions on model offerings. Nonetheless, many OEMs are facing severe fines that will impact their profitability and even the viability of their business models. 

More details on the regulatory costs for emissions regulations and OEMs’ strategies is in the full report, ‘Automotive headwinds align into a perfect storm’, produced by the global business intelligence unit of Automotive from Ultima Media. Ultima Media is also the publisher of Automotive Logistics.

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