Current events show how they’re all related
by Jacques Gordon
Until last September, it appeared as though the automotive industry had decided upon its next universal air conditioning refrigerant. Cars from several manufacturers were already rolling off production lines in Europe equipped with the new refrigerant when Daimler suddenly announced their decision not to use it. This began what’s turning out to be an extremely interesting chapter in automotive history, with one manufacturer not only bucking the rest of the industry, but also risking fines if the European Union enforces its ban on the old refrigerant. As the world watches and waits for each protagonist’s next move, it’s fast becoming obvious that much bigger things are at stake here.
Bloomberg News reports auto sales in Europe have been declining since 2007, reaching their lowest point in 20 years just last month. Although the decline is slowing, analysts don’t see an upturn any time soon, largely because the euro zone economy is still suffering from the Great Recession of 2007. Bloomberg also reports unemployment over the 17-nation zone is still climbing, reaching a record high of 12.2 percent just this spring. There are nearly 27 million people in the EU economy out of work and unable to buy new cars. Especially hard-hit are young people, the future of the auto market.
Also hard-hit in this economy are sales of luxury cars, particularly those made by Mercedes-Benz. Last April, Bloomberg reported that M-B slipped behind BMW in global luxury car sales in 2005 and fell to third place behind Audi in 2011. By the first quarter of 2013, M-B sales had declined from their peak by more than 50 percent.
As if all this isn’t bad enough, automotive CO2 emissions regulations (similar to our own CAFE fuel mileage regulations) are scheduled to tighten in 2020. The European Commission wants the auto industry to sell more ultra low emission vehicles (ULEV) and electric vehicles (EV). However, those cars cost more and industry analysts are saying that “market uptake” may not be sufficient to meet the emissions target. Meanwhile, luxury-car makers hope to earn and bank emissions credits under the current regulations so they can sell big powerful cars later by ‘spending’ those credits to meet the tighter CO2 emissions regulations. However, a report published last year by energy consultant Ricardo AEA concludes these schemes risk “weakening the effectiveness” of the CO2 emissions regulations.
This all started coming to a head last week when the German government began pressuring other EU countries to weaken or postpone adoption of lower CO2 emissions limits. They have even threatened to curtail or cancel car production at German automakers’ plants in other EU countries unless these concessions are met. A few days later, France announced they will ban the sale of Mercedes-Benz models that do not comply with the EC’s ban of the old refrigerant in new-model platforms. This week, all 28 Member States of the European Union will meet in Brussels to discuss France’s actions, and both France and Germany may suffer “infringement action” over this situation. Agency France Press reports that Germany has until August 20 to answer queries from the European Commission (EC), and the EC then has 10 weeks to decide whether to launch formal legal action.
So now individual governments and the European Commission are involved, and the world is waiting to see how far will this battle will spread beyond the auto industry, and how deeply will it affect an uneasily united Europe. As stated earlier, this is indeed an extremely interesting chapter in automotive history.
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