First, we reported the Volkwagen ID.3 had issues with its 12V battery. Then, we learned there were many more issues involving it and that they were caused mostly because VW was trying to avoid emission fines and started selling the car before it should. The question is: will that pay off? Volkswagen executives are not very confident, according to Automotive News and Financial Times.
According to the former, during VW's Q3 earnings call on October 29, sales chief Christian Dahlheim said that the company was still struggling to comply with European emission regulations. VW’s CFO, Frank Witter, even set aside “a couple hundred million” euros to pay the emission fines if results confirm them.
In case you are curious about what these regulations are, they establish that all carmakers selling in Europe have to have a CO2 emission average of 95 g/km or lower for its fleet. In 2020, 95 percent of sales will count for that target, which gives manufacturers some relief. In 2021, 100 percent of sales will be considered.
This emission average is based on the weight of each company’s lineup. In other words, if it sells electric cars, but its best-selling model is a gas-guzzler, it will probably be penalized. Apart from selling low or zero-emission vehicles, OEMs also have to make them attractive.
If the fleet emission average surpasses 95 g/km in 2020, the respective company has to pay €95 per additional gram of CO2 multiplied by the number of new vehicles it sold until the end of the year.
We already said Volkswagen bets on a large scale with the ID.3, but it is also the name of the game for its SUVs, luxury sedans, and so forth. That implies it always has big numbers to present.
In 2019, the Volkswagen brand alone sold 6,278,300 cars in the world and 1,763,800 in Europe, according to Best-Selling-Cars.com. According to PA Consulting projections, the company would achieve a fleet emission average of 96.6 g/km in 2020. It also predicted the 13 automakers in Europe would pay €14.5 billion in fines in 2021. Volkswagen alone would have to pay as much as €4.5 billion due to its sales volume.
Back to the 2020 numbers, 96.6 g/km may seem like a minimal number, but the bigger picture shows otherwise. Multiply 1.6 grams by €95 and you get €152. Now multiply that by 1,763,800, and the result is an emission fine of €268,097,600. That fits the “couple hundred million” euros Witter probably was talking about.
That number was confirmed by an interview Herbert Diess gave to the Financial Times. He told the British newspaper that the company was still fighting to achieve the target. He also said that, if VW missed it, it would be by “a gram or so.”
While Honda and FCA have paid Tesla for its carbon credits, Volkswagen has a deal with MG, but the Chinese company does not sell that many vehicles in Europe. Despite eventually missing the emission goal in 2020, Diess is confident that it will not be a problem in 2021 and later.
The company expects to solve the ID.3 software issues in January 2021. It also believes the ID.4 will help meet emission targets in 2021, and other products with the MEB platform will keep coming. In other words, Volkswagen may face fines in 2020, but it does not have plans to team up with anyone else in 2021 because it will handle emission targets on its own. And that demands selling as many EVs as it can produce. Hopefully, in a more mature fashion.