Out with the old (engines), in with the new

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV.COM Ltd.

VW's first act when reopening factories was to send workers back to the site that makes its ID:3 electric car. [Photo: VanderWolf Images]

Europe is at a crossroads, thanks in part to the coronavirus outbreak’s massive impact on the economy. Julia Poliscanova explains which fork in the road the car industry should take and the role electric vehicles should play.

Julia Poliscanova is director of emobility at Transport & Environment (T&E).

Almost two months after most Europeans went into confinement and the economy came to a halt, life is slowly returning to normal. Our heart goes with all those that lost their loved ones. But alongside the health crisis, another gloom is entering our lives, the economic recession.

For many, the hard times will continue.

Many governments and the EU are hastily putting in place hefty public stimulus programmes to relaunch the economy and bring jobs back. But we should not return to fossil-based business as usual that has driven our planet’s climate and nature to the brink of collapse.

NGOs, many businesses and the majority of EU environment ministers have all asked for the recovery to be green. What does this mean?

Take cars as an example. Governments such as Germany are already mulling over financial support to ensure the car industry can sell cars again, referred to as scrappage schemes. But anyone who followed such measures in the aftermath of the financial crisis in 2009 would tell you they are a waste of taxpayer’s money.

People on low incomes or who just lost their job do not go out to buy a new car, even with a discount. Instead, those that would have bought a new car anyway simply bring their purchase forward.

The lockdown has disproportionately hit small businesses, shops, art clubs and restaurants who lost any substance to survive. Instead of handouts to pay for new cars, a more fair and effective way would be to support the sectors hit hardest. This will boost the overall consumer purchase power. Then people will buy goods again, including cars.

So how should governments support the car industry?

The lockdown has shown to many what our cities (and skies!) can be like without toxic fumes from vehicle combustion engines. Recovery money should not bring back pollution and lock ourselves into fossil fuel technology, even the latest Euro 6d cars that can still be very polluting. It would be ludicrous to pay people to buy cars that cities want to ban soon after.

It is critical to secure workers’ jobs. This means the €5bn the French government has handed to Renault must not be used to pay dividends or buy back shares, but support employment.

It also means that only future-proof powertrains should be supported to safeguard those jobs. The principle should be no state aid guarantees to produce more diesel or petrol engines.

Rebooting demand is also crucial to the car industry’s recovery. But no penny should be spent supporting purchase of CO2-emitting engines.

Carmakers need to comply with the 95g EU CO2 standard in 2020-21, it would be irresponsible for governments (or indeed the EU) to promote schemes that make achieving these legally binding goals harder.

This includes diesel, petrol and natural gas; old and new. This is not only about upfront purchase incentives. It is also about hidden tax breaks, including an idea in Germany to cut benefit-in-kind rates for combustion cars. Now is not the time to give new diesel SUVs a discount.

The only acceptable public support is to accelerate the uptake of zero-emission, clean solutions. This means that incentives should only target zero-emission models, notably battery electric vehicles, with special support for lower income buyers and second hand EVs.

Private and public fleets should be supported in purchasing new electric cars and vans, while spending should be boosted on public transport and shared mobility, like electric buses, and public investment should go into charging infrastructure in private & public buildings. Fast charging hubs for taxis, ride-hailing vehicles and vans should also be included.

Additionally, where state aid is given to ailing carmakers directly, it should come with conditions attached (no new combustion engine development) and support electric car production and supply chains such as batteries.

How will this help the car industry?

Before COVID-19 brought the economy to a halt, the electric car market in Europe was booming. This was in response to the EU car CO2 rules, as (95% of) cars sold throughout 2020 have to be under 95g CO2/km.

In Germany and France the sales of electric cars in March hit a record 9.2% and almost 12%. The sales have soared elsewhere in Europe’s largest vehicle markets.

It is no surprise that one of the first factories VW reopened is in Zwickau where the landmark VW electric car, the ID.3, is manufactured.

Across Europe carmakers are investing dozens of billions into e-mobility and EV supply chains. Around 3.5 million electric cars are set to be produced in Europe in 2020-21, and a dozen battery gigafactories by 2023.

Just as COVID-19 hit, Europe’s carmakers were finally closing the gap with China and Tesla (whose stock is valued more than VW’s but it manufactures a fraction of vehicles). Now is not the time to slow down and go back to engines. Now is the time to double down on electrification.

Each electric car sold creates demand for charge points at our homes and work, creates a business case for the battery supply chain and repays the huge R&D investment Europe has already made. So supporting a recovery rooted in zero-emission mobility and electrification is also smart industrial policy.

With activity in lockdown and huge public investment poured to reboot the economy, now is the chance to shape the recovery and build the mobility system we want as a society. But green should not be an empty word companies and politicians add to the technology they want.

As state aid and recovery packages are announced across Europe, the Commission should ensure only support for zero-emission technology and infrastructure are permitted.

It’s time to put the money where grand words are. Propping up cars run on combustion engines will make the car industry’s business model obsolete.

Back in 2009 we spent billions on new cars that were promised to be clean, only to be repaid by the Dieselgate scandal a few years later. Let’s not make the same mistake twice. Out with the old, dirty engine, and in with the new zero-emission motor.

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