Carmakers press for EU and UK subsidies after slump in demand

Carmakers are negotiating with the EU and UK for subsidies to help boost demand for new vehicles, but campaigners are concerned that the stimulus could end up paying for pollution unless emissions restrictions are imposed.

The carmakers argue that subsidies would help kickstart demand as lockdown measures ease and factories reopen, preventing tens of thousands of job losses amid a global slump in car orders.

Bosses such as BMW’s chief executive, Oliver Zipse, have publicly called for grant support to apply across traditional internal combustion engines as well as battery-powered cars and hybrids.

The heads of European carmakers including BMW, Daimler, Fiat Chrysler and Jaguar Land Rover discussed the plans last week with Frans Timmermans, the European commission’s executive vice-president for the green deal. The carmakers pushed for a Europe-wide scheme part-funded from the EU budget.

Last month Timmermans backed tying carbon dioxide emission limits to any subsidy package, but the carmakers have called for a coordinated stimulus across EU countries that would apply to all cars that meet the Euro 6d standard, effectively meaning any new car would be eligible.

In the UK, the car industry has focused its efforts on allowing car dealerships to reopen, but the Vauxhall owner Peugeot confirmed that early discussions over a stimulus scheme covering both battery and internal combustion cars were under way.

Talks are being led by the business department under Alok Sharma. The UK already subsidises the sale of battery electric cars, which are generally more expensive than internal combustion cars.

Environmental campaign groups have said giving subsidies to all cars would be a missed opportunity to promote a green recovery and to help carmakers move towards all-electric cars with zero carbon dioxide exhaust emissions.

Greenpeace said any subsidies should be targeted at less wealthy people and should be conditional on internal combustion engine production ending by 2028.

“Only purely electric, small and light vehicles should be eligible,” said Lorelei Limousin, a climate and energy campaigner at Greenpeace. “If the green recovery means something, these should be binding conditions across the EU. Any financial support for the car industry should also be conditional on the sector taking concrete steps to rapidly end its growing impact on climate breakdown and our health.”

A rise in SUVs has meant average car emissions have risen even as combustion engines have become much more efficient. In other words, a scrappage scheme meant to push consumers towards newer cars could raise emissions.

“We need to encourage carmakers to take the leap into electric vehicles rather than help them finance getting rid of their SUV and high-emissions vehicle stocks,” said Pascal Canfin, a French MEP for the liberal Renew Europe group who chairs the European parliament’s environment committee.

He added that support should not “repeat the same mistake we did after the 2009 financial crisis, when we reinvested in the economy but deprioritised the environmental crisis. We lost a decade. Today, we do not have a decade left to lose.”

Any increase in demand for cars with higher carbon dioxide emissions would run contrary to the direction of travel for the European industry. Under regulations that came into effect at the start of 2020, carmakers who fail to meet carbon dioxide reduction targets will be fined. The UK is planning to mirror the regulations.

Julia Poliscanova, the clean vehicles director at the campaign group Transport & Environment, said subsidies must not endanger the recent progress made on electric vehicle sales because of the rules.

Electric car sales across Europe doubled year-on-year in the first three months of 2020, according to industry data.