The EU emissions regulations, due to come into effect from 2025, are likely to make gasoline cars less profitable than electric models, which, according to a senior Volkswagen executive, marks a milestone for the auto industry.
VW, the world’s second largest automaker, plans to invest € 35 billion in electric vehicles as governments try to accelerate the transition to greener cars.
Thomas Ulbrich, head of development for the VW brand, said new engine standards called Euro 7 would be “a huge challenge” for gasoline-based vehicles as they would require more expensive technology to ensure compliance.
“If you ask now, when is the point for? [profits] Equating to an internal combustion engine, you know that Euro 7 poses enormous challenges for the world of internal combustion engines, ”Ulbrich told the Financial Times.
The regulations, due to come into effect around 2025, would require more “technical needs” such as expensive exhaust gas reduction systems in internal combustion cars, he added.
Ulbrich’s forecast is one of the strongest so far for an industry that, with a few exceptions, still earns far more money from selling traditional gasoline engines than from electric drives.
Peugeot owner Stellantis said last week that margins on its electric cars are similar to gasoline models, but government subsidies for the former are likely to be unwound in the years to come. Renault said its electric cars have the same margins as some of its current gasoline pallets.
Global automakers are investing billions of dollars to prepare for the extinction of the internal combustion engine, as the internal combustion engine is known in the industry.
Thomas Ulbrich, VW head of development, says the new emissions regulations will hit smaller cars the hardest © AFP via Getty Images
Smaller cars – like the VW Polo and up! Models – hardest hit because passing on the direct costs of new exhaust systems would drive up the price significantly, said Ulbrich.
The German auto industry lobby VDA has already expressed concern about the Euro 7 rules, claiming that they are five to ten times stricter than the current standards.
“The proposals are still at the limit of what is technically feasible,” said VDA boss Hildegard Müller in April. “We must continue to be very vigilant that the internal combustion engine is not made impossible by Euro 7.”
A month later, the association warned that EU emissions regulations could result in the loss of 215,000 jobs across the industry. VW predicts that a third of its European sales will be electric by 2025 and will increase to 70 percent by the end of the decade.
However, the goals are less ambitious than those of Ford or Vauxhall-Opel, who plan to stop gasoline or hybrid car sales in the region by 2030 and 2028, respectively.
The European Commission will set the expected CO2 regulations for 2030 later this week, which tighten the existing requirements and oblige car manufacturers to significantly increase the production of electric vehicles.