Car industry rallies to meet demands for lower emissions

By Anna McLauchlin

Date: 23/09/04

The European Commission is gearing up for more negotiations with the industry on decreasing CO2 emissions.

COMPETITION between the world's richest carmakers combined with regulation from governments will radically change the cars that we drive and the face of the car industry.

"It's regulation more than anything else that dictates the market," says Paul Nieuwenhuis of the Centre of Automotive Industry Research at the University of Cardiff. "Look at the range of lower- emission cars on offer now, they are all small diesel cars. What's going to happen to the BMWs and Mercedes of this world?"

Under a voluntary agreement reached with the European Commission in 1998 the European Automobile Manufacturers Association (ACEA), which includes all the significant European carmakers, promised that by 2008 it would reduce the average emissions produced by its cars to 140 grammes of CO2 per kilometre.

Japanese and Korean associations agreed in 1999 to meet the target by 2009 and all three associations are "on track to meet the target", the Commission says.

This regulatory pressure has forced the manufacturers of bigger cars to invest in making vehicles lighter so they will consume less conventional fuel. Jaguar's XJ body is now made almost entirely from aluminium, as is BMW's 6 series Coupé.

The Commission is now gearing up for another round of negotiations with the car industry on how further to decrease CO2 emissions.

Car manufacturers have protested against plans to demand a further cut to 120 grammes of CO2 per kilometre by 2012, claiming the potential for technological innovation is insufficient to reach the target.

Last week the Commission published the contract notice for a study to discover exactly what the costs of reducing emissions from passenger cars might be and how the reduction might best be achieved.

"The car industry might only be part of the reduction," said an EU official. "We could look at increasing the use of biofuels, for example, or changing the way cities construct their roads.

"Stopping at six sets of traffic lights on a main road can push up carbon dioxide emissions by as much as 2-3%."

The final agreement, the official said, will depend on the outcome of the study, which should be finalized by next summer.

But he predicted that it would stop short of a Californian regulation coming into force next year that will require 10% of all carmakers' fleets to be zero- emission vehicles.

Nevertheless, a complex interplay has begun between regulation and competition. The regulatory drive to push down CO2 emissions has forced companies to compete against each other on environmental criteria, with Toyota leading the way.

"Toyota has said it wants to compete on an environmental level and it is an exceptionally rich company that can afford to force the market," says Nieuwenhuis.

But any company that already has cars meeting the EU criteria for emissions has an immediate competitive edge over a company that does not, he says.

"Renault has no hybrids but its diesel engines are very fuel efficient and within the EU threshold, which gives them an edge," he said.

Technological advances have reduced CO2 emissions from diesel engines, which already have the advantage of lower fuel consumption over conventional petrol engines.

Clearly the switch from petrol to diesel has helped reduce CO2 emissions in Europe, but diesel engines produce greater particle pollution, particularly in built-up areas.

Environmentalists have lobbied for stricter regulation of the harmful particles released by diesels. The Commission is now set to demand that all cars be fitted with particle filters in the next round of legislation on emissions standards. The commission will adopt the stricter standards - known as "€5" - in the middle of next year, proposing to the Council of Ministers and the European Parliament that they be fully implemented in the EU by 2010.

The problem for those manufacturers that have poured money into diesel technology is that particle filters raise the level of CO2 emissions by around 2% or 3%, possibly giving companies which have invested in other technologies, such as electric hybrid cars or biofuels, a competitive advantage.

But then again, another potential advantage of investing in diesel is, according to Nieuwenhuis, that the fuel might well become so clean that the US - currently opposed to diesel because of the particles problem - could open its doors to the fuel by 2010. "That would give EU manufacturers a real boost in the US."

So how are the largest carmakers tackling the competitive and regulatory conundrums?

Toyota

Toyota, which had global sales of €153 billion in 2003 and 5% of the European market, has one hybrid car on sale in the whole world called the Prius, which it launched in 2000. Hybrids have a normal engine which generates electricity to drive the motor when the car is moving in slow traffic. Toyota has sold nearly 5,000 Prius models in Europe in the first six months of this year and more than 28,000 cars in the US in the same period. Other hybrid models are on sale in Japan: the Crown, Estima, Alphard, Coaster, Dyna and the Highlander, but these have yet to be marketed elsewhere. Toyota considers the hybrid system to be a "core technology that will become more and more relevant", and has announced that future vehicles will also be equipped with a second-generation hybrid concept. On 16 September Toyota signed a deal with the Chinese First Auto Works Group to jointly promote the widespread use of hybrid vehicles built in China. The group also invests in other technologies such as hydrogen fuel cells and "clea" diesel fuels.

Honda

Although not in the top six with annual sales of only €63.4bn, Honda is a leader in hybrid and hydrogen fuel cell innovation. The company currently has two hybrid cars on the market: the Insight launched in the US in 1999 and the Civic Hybrid which went on sale in 2002. In 2003 the Civic Hybrid accounted for half of all hybrid sales in the US and around 3% of total Civic sales. In 2005 Honda plans to introduce a hybrid version of its Accord sedan model in the US.

Ford

In 1990 Ford was the first company to invest in a Norwegian company producing zero-emission electric "Think" cars. But after importing hundreds of the cars to the US for testing, Ford pulled the plug on the operation in late 2002 to concentrate on alternatives like hybrids and hydrogen fuel cells. Last week it agreed not to destroy 300 of the cars and to return them to Norway after the government and Greenpeace argued that at least 200 Norwegians were on waiting lists to buy the cars. Ford launched the world's first hybrid sports utility vehicle on 9 August in the US with an initial production run of 20,000, but for the moment the company does not plan to sell it outside North America. It is however working on a "micro-hybrid" concept Fiesta for release in Europe. The car will go into "sleep" mode when stopped and then wake up automatically when the brake pedal is released. It uses a braking system that recaptures valuable energy that would otherwise be lost during braking. "Depending on the market this could be introduced by 2006," a spokesman said.

Renault

The Renault-Nissan alliance has combined sales of €89bn and an 11.1% market share in western Europe. The company spends 50% of its R&D investment on reducing pollutants through ever more advanced diesel technology and claims 25% of Renault car sales in France are models which emit less than the projected Commission target for CO2 emissions of 120g/km by 2012. Renault Nissan has no plans to release a hybrid model soon although the company said earlier this year that it was developing two models: one for short trips with a small electric motor and one with a large electric motor and a diesel thermal engine. Renault Nissan also has a broad range of liquid petroleum gas cars but the company says consumer take-up has been very slow.

Volkswagen

"Hybrid and fuel cell cars are just a part of our fuel and power strategy," says a VW spokesman. "The first step will be to optimize our current engines and we are also looking at synthetic fuels and biofuels for the future." All of the group's diesels are biodiesel-compatible. The group, which has global sales of around €81bn, has not yet commercialized any hybrid cars and there are no imminent plans to do so. However, research projects include a Golf EcoPower diesel hybrid that VW will present at the Challenge Bibendum 2004 rally in Shanghai in October. And the company has produced a Touran powered by a hydrogen fuel cell that it entered in California's 2004 Fuel Cell Vehicle Road Rally - Los Angeles to San Diego on 17 September.

General Motors (GM) - Opel

GM is the market leader in compressed natural gas cars after selling more than 11,000 vehicles since 2001 and all its diesel and petrol engines can run on blended fuels with biofuels content of up to 5%. It is also currently developing a "flex-fuel" two-litre Saab 9-5 to run on any mixture of ethanol and conventional fuel which is expected to go on sale next year. A hydrogen-powered Opel Zafira prototype set a distance record travelling from Norway to Portugal this summer. The company has no plans to commercialize a hybrid car in the near future, although a spokesman said the group is channelling resources into "affordable and effective hybrid technologies". GM holds a 10% share of the European market and in 2003 managed €185.5bn in sales.

DaimlerChrysler

Daimler is convinced that in the short- and medium-term petrol and diesel engines are the way forward and it is trying to penetrate the US market with diesel powered models. Next year the company will launch a clean diesel Jeep Liberty, the first light off roader to be powered by diesel in the US. And its Mercedes E 320 CDI, a low-consumption diesel saloon available since 2001 in the EU, was launched in the US three months ago. Since the 1980s the company has developed more than 20 hybrid prototypes - an interim solution along the road to zero-emission technology, but there are no models as yet on the market.

Article reports on the European Commission's plans to further reduce CO2 emissions from cars and examines leading car makers responses in this field.

ACEA: Publications: ACEA's CO2 commitment, September 2003 http://www.acea.be/ACEA/20040317PublicationEmissions.pdf

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