|  The diesel Smart car emits 90 g of CO2 per km driven, compared to the Lamborghini Murcielago LP640, which spews out 495 g/km. Between those two extremes is an EU target of 130 g/km by 2012, the exact details of which are at the centre of a furious argument between car makers and Brussels. Prepare for a car chase with more twists than an alpine pass, journey time spilling over into 2008.
The obvious question is whether Lamborghini will be forced off the road completely, with all of Europe crammed into tiny eco-vehicles and the halcyon days of European motoring wrapped up once and for all. This spectre haunts European car makers because the new EU target will be mandatory. It follows the complete and utter failure of the industry to come even close to the voluntary target it set itself in 1998, of reducing CO2 emissions to an average figure of 140 g/km by 2008. After nine years of car makers deceiving the public about their green intentions, only Italian company Fiat has met the target; the rest remain far adrift, with fleet averages in the 170-200 g/km range. Driving the EU is not only Commissioner José Manuel Barroso, whose Damascene conversion to the green cause last year has been widely reported, but also the awkward fact that transport is the worst-performing sector in the EU’s attempt to meet its Kyoto target of reducing CO2 emissions by 8% of 1990 levels by 2008-12. EU transport emissions instead grew by 32% between 1990 and 2004, threatening to wreck the rest of the EU’s Kyoto strategy and even future attempts to address global warming. The battle ahead is a very complex one, not least because both sides suffer from internal splits. EU enterprise and industry commissioner Günter Verheugen has sided with the German car makers, accusing Brussels of being gripped by climate “hysteria”. The car makers have meanwhile aligned themselves along a north/south divide, with French and Italian brands PSA Peugeot Citroën, Renault and Fiat siding against Germany and Japan.  The elephant in the room is undoubtedly Germany, the world leader in high-consumption vehicles. Of 92 cars qualifying last year for the US’s “gas guzzler” tax, 65 were German. In an EU-sponsored European Federation for Transport and Environment report published last October, the four largest German brands came near the bottom of the league for global warming. Mercedes-Benz, Volkswagen, BMW and Audi had 2005 fleet averages of 185, 159, 192 and 177 g/km respectively, compared to Fiat’s score of 139, Citroën’s of 144 and Renault’s of 149.
Awkwardly for German chancellor Angela Merkel, who is otherwise keen to flaunt her green credentials, Germany has the world’s largest automotive industry, worth €235bn in sales in 2005 and comprising half of Germany’s export surplus and nearly 800,000 jobs. The ugly central divider slammed across this particular intersection is the fact that the car makers closest to the EU emissions targets are financially the most precarious, whereas gas guzzlers tend to be highly profitable. Naturally, that’s not the whole picture. Fiat is resurgent under Canadian-Italian CEO Sergio Marchionne, while you only need to look at General Motors to see that doggedly focusing on higher-margin SUVs is no guarantee of profits. Yet the most profitable car company in the world, Stuttgart-based Porsche, sells a fleet of vehicles averaging a spectacularly polluting 300 g/km, while PSA Peugeot Citroën’s new CEO Christian Streiff, fresh from Airbus, recently admitted that the company would only achieve a 2% profit margin in 2007. This contrast is typical for the industry, where mid-market volume producers seem to constantly dip in and out of the red while sharply focused brands like Toyota and BMW are highly profitable. The other problem is globalisation, and the fact that there is persistent and growing overcapacity in the global car business. The question for Europe’s car makers is broadly the same as it is for most other areas of manufacturing – whether to leave the cheap sector to China and focus exclusively on luxury products. |