Ivan Hoda?: ‘We have reconciled ourselves to the 95g CO2 target’

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Europe's car industry has reconciled itself to EU plans to limit emissions from cars to 95 grams of CO2 per km (g/km), and from vans to 147 g/km, Ivan Hoda?, secretary-general of the European Automobile Manufacturers Association, tells EURACTIV.

Ivan Hoda? spoke to EURACTIV’s senior journalist Arthur Neslen.

Global sales of cars manufactured in the EU are up – is this the best year ever for exports of cars manufactured here?

It is very difficult to say. Global exports are going up – mainly in the US, China, Brazil, Russia and partly India. Japan is stagnating but it is not bad. I think it would be correct to say that for the industry globally it might be a very good year. That’s what it is. It is not only a question of the exports but also what we are making and selling and in the third markets.

It will be probably the worst year for car sales in Europe. We went down 8.5% last year – 2012 was the worst year since 1995 – and 2013 will be 5%–8% down probably. It will pick up when we see an improvement in the economic situation. It is really linked directly to the economic situation in Europe.  

It seems to be mainly German manufacturers who are doing extremely well, in comparison to their Italian and French counterparts. Do you think the German model is applicable across Europe to other countries, which have different wage and social policies?

It is not only wages and social policies – that is obviously part of it. The other part is that there is a demand for premium brands outside Europe and, to a certain extent in 2012, it was the same in Europe and seems to be again. We do not export small and medium size cars – or if we do they are very few – so the German car industry has the big advantage that they are producing very competitive premium brand that are being sold and are successful in places like Japan and Korea, the US, Russia.

I don’t want to go into the details of the social model but the European premium brands are easier to sell than European volume cars when you look at the structure of the exports.

You appear to be saying that these the best of times for exports, the worst of times for the European market. Do you think we are heading for a general period of consolidation in the European market, in which French and Italian manufacturers will be hit particularly hard?

We have seen a certain reduction of capacities already in 2012 and before. Some companies have closed down and moved production. So at a certain level of reduction of capacities, Europe cannot continue running its automotive industry on the basis of 30%-35% of over-capacity, it is not possible in the long term. We have factories in Europe that are running at below 50% capacity, between 15-20 of them.

Is there going to be a consolidation? Probably yes, but I can’t tell you where it is going to be. We have to reduce capacity in one way or another. The problem is that the capacity is not distributed equally across Europe – we have less over-capacity in Germany and more in other countries.

Which ones?

Probably, France, Italy. I think that we have some of the companies running well below 100% capacity even in countries like the Czech Republic.

What implications does that have for policy-makers in Europe?

The implication is that it is extremely difficult to have a European policy. We have seen in the US that Obama has given loans to at least two of the three big manufacturers in exchange for reducing capacity and stripping the industry. Today the US is a very profitable market and production is going up. The sales are up and probably it is the most profitable market [for] Europe [whereas] 4-5 years ago, it was somewhere completely else. But that is at the level of one country.

It is extremely difficult to do it across the EU, where you have 27 different member states and you don’t have the policies or instruments to deal with it at the European level. So what will have to happen – what is happening now unfortunately – is that we see that these things are being dealt with at the national level. The over capacity is not divided equally.

Moving on, do you support the EU’s proposed fuel efficiency target for 2020 of 95grams of CO2 per km (g/km) for cars and 147 g/km for vans?

We have never said anything against the 95g/km or 147g/km.

So should we understand that you have reconciled yourself to it?

Let me put it this way: We have reconciled ourselves with it. We think that we will do what we can to meet the targets – and I think that it will be very costly but I think that we should be able to do that.

But that’s also the limit that we can do – in 2020. I think you should never forget that these targets are tougher than anywhere else in the world. There is no other country that has the same targets for 2020 and consequently, the investment industry will have to make in reaching these targets will be substantial and in the present economic situation – because you have to invest now, not in 2018 or 2019 to meet the target – the industry is not exactly in an economic situation in which it can spend so much money for the investment but we are going to do it.

The problem here again might be that there is a wide discrepancy between the German and the French and Italian car industries, in terms of their profitability and the amount of investment that they are prepared to make for this.

I haven’t said it, you said it. I think that the cost of the moving towards the 95g/km target is split across the industry. I am not saying that somebody has a better ability than the others but there might be countries – I am not going to name them – for which it might be slightly easier. There might be some for which it is slightly more difficult but for the industry as such, it is extremely challenging.

Certainly, VW said that it will meet the 2020 target…

So did many others. I think that Volvo has said it and a number of others. I think it is better to look at it from other side. VW said it at the Geneva Motor Show, and nobody said that they would not meet the 95g target.

Peugeot also announced the new Air car which I think is due to do 80miles per gallon at a cost of less than a Prius. Does that suggest that the 95g target might not be ambitious enough?

No, absolutely not. Let me put it bluntly: I think that the ones saying that the 95g target is not challenging enough don’t know anything about the automotive industry. It is unbelievable. Even the Commission has recognised that it is extremely challenging. The [EU] impact assessment shows that the investment will cost anything from €1200-€1500 per car. So I don’t accept the statement that the 95g is not challenging. Lets compare it to rest of the world. If somebody can show me a major car producing country, like Japan, Korea…

The US..?

.. The US, Brazil – do they have targets as tough as 95g? And somebody has the idea that this is still not challenging enough! I think that what this industry is doing on reducing CO2 emissions is not seen anywhere in the world. I would like to see another industry that can say that they are reducing their CO2 as much as we are.

You said that you couldn’t meet the 2020 target by starting a year or two before, and industry does need long term predictability, so how much lead-in time do you believe the auto-industry needs for any new CO2 targets in 2025 or 2030? 

We need something like eight years lead time. You remember that when there was a discussion in 2008 about the 2012 and 2015 targets, it was too late then, so there was a recognition there would be a phase in, in 2015. But it is not only a question of the lead-in time. What is extremely important is that those long term targets – in 2025 or 2030 – are not political targets. The Commission has clearly recognised that the long-term target for 2025, or whenever, has to be based on a proper impact assessment, and a knowledge of the situation of the industry, and the technical developments that will likely exist, at that moment, and also the ability and willingness of consumers to buy these more fuel efficient cars, which are normally more expensive.

Without a proper impact assessment and, obviously, knowledge of the test cycle on which these figures will be based, there is absolutely no reason, need or justification to set long term targets that are just political figures. All the figures that we’ve seen flying around from T&E and now also in the European Parliament to some degree are strictly political. Even the Commission and Climate Commissioner Hedegaard have recognized that the next post-2020 long-term target should not be a political figure. We want to see a realistic figure, that the industry can reach in such a way that it doesn’t endanger the global competitive position.

You mentioned the Geneva Motor Show. There, Martin Winterkorn, VW’s president said that the company wasn’t speculating about using super-credits to meet the 2020 targets. Obviously the German car industry is in a better position and VW are bang on the average mass of a car. But if VW are not going to use super-credits, why should anyone else?

Everybody operates in a different environment and everybody is in a different situation. I’m sorry but super-credits aren’t here for VW, they’re here for the industry and they exist in Japan, Korea, China, the US. Why cant they exist here? Why do we again have to operate in a vacuum?

The super-credits are here to give industry an incentive to put the cleanest possible vehicles on the market – in this respect, plug-in hybrids and a few electric vehicles. Those are the ones that would fall within the range. These cars are extremely expensive to develop, the market intake is not easy and there’s no incentive financially from governments or the EU so as an incentive to the industry for developing these vehicles, we see the super-credits as being one of the best means for doing that.

They are simply an incentive to bring on the market and develop the most fuel efficient cars. And by the way, the super-credits are here for the 2012/15 targets, why shouldn’t they be there for the 95g target? There is no justification or logic.

Well BMW made record profits last year and they want a super-credit that can be banked up until 2023. Environmental critics would say that this is a loophole that is being pushed by companies in inverted proportions to their economic success.

This is not the position of BMW but of industry, which is asking for exactly what we’ve said. It has nothing to do with economic performance of companies. Super-credits exists for companies that do and do not make money from them in the US and elsewhere.

Some people say this is part of a wider issue about exploiting loopholes and they cite the recent T&E report on testing which found that official fuel consumption figures cited by manufacturers were on average 25% higher than what was achieved in reality. They say that this is part of an auto-industry culture of ‘juking the stats’ and using loopholes to fiddle the figures…

We don’t use loopholes and we don’t fiddle. Let me put it in bold. What we do is comply with the existing legislation. The vehicles are being tested in official laboratories and they are certified and that’s the end of the story. We comply with every piece of legislation. If they want to show us that we don’t, well then they will have to show it to us. But we do comply with the requirements and there the discussion stops. We are not using loopholes or cheating.   

Has the rift which emerged last year between Sergio Marchionne, the president of ACEA, and VW, been healed?

I have no comments about problems between Volkswagen and Sergio Marchionne. The industry is working in the association together. What is happening outside, I have absolutely no comment to. That’s where it ends.

Would you talk about the March 2012 ACEA board meeting in Madrid? 

No. That is internal.

And on the question of utility grants, the co-efficient gradient slope – the structural divisions, if you like, between car manufacturers over these issues, does it pose challenges for you as an organization to present a united view? 

Yes it does. You have the slope if you remember. The 60% [figure] was a compromise and it benefits some more than the others. The co-efficient has been changed by the Commission and we have at the end of the day, decided to leave it out of the ACEA position. We are not addressing it to the left or to the right. But it has been changed strictly by the Commission. We had nothing to do with it. The co-efficient is obviously important in the division of the burden sharing, because don’t forget the whole thing is an average of the industry.

The 95g is an average of the industry, out of which you then derive what the different manufacturers have to make.

What did you think of the recent IKA study, commissioned by the VDA, which found that CO2 emissions could only be reduced for light vans by a maximum of 19% and at a cost of 8,000 per vehicle?

I agree with the results of the study – and don’t forget that one of the problems with light commercial vehicles is that it is really a manufacturing tool. It is not the same – you can’t compare the light commercial vehicles and passenger cars. Consequently, any increase in cross-purchase costs has a subtle repercussion on the business of the people who are using them.

The study was criticized for saying that there are no LCV hybrids. It discounted the possibilities of hybrids, whereas in fact they exist.

There will in the future be LCV hybrids.

With the clean transport package, do you feel that the Commission has done enough to incentivise and promote electric vehicles or would you like to see it do more?

I think that the last development goes in the right direction. The question of the directive, or the infrastructure directive, the fact that the Commission has asked the member states to build infrastructure for charging electric vehicles and for infrastructure for other natural gas, fuel cell and hydrogen vehicles is a step in the right direction.

But we have to have it. Without the charging infrastructure, nobody will buy those vehicles. We can put them on the market but nobody will buy it. I have a house so I can put the car in a garage to recharge it. But if my children were living in an apartment house, where do they recharge the car? Unless you have a proper infrastructure, these vehicles will not take off.

I think the same goes for the harmonisation of plugs and charging of these vehicles. I think they are now trying to do the right thing. It goes in the right direction but it has to happen faster. On the harmonization of plugs and charging on the whole, I think that we need global harmonization.

What body should do that?

It could come from the Commission. It could come from CEN, or in Geneva at the UNECE.

Do you think that carbon leakage is taking place in the industry at the moment with manufacturers moving outside of Europe to places with less strict fuel efficiency standards?


What do you think of the Ricardo-AEA study that found that low carbon vehicles would create 443,000 new jobs?

I don’t know on what it is based, how they came to those conclusions. This industry is losing jobs, and closing factories. Do you believe that the electric vehicles or plug-in hybrids will come at the top of the existing fleet or that they will replace the existing fleet? I’m extremely surprised that they come with those figures. And I do not believe that the conclusions are reliable.

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