Month: September 2022

CLEPA | Winter will be difficult – Is the EU ready?

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The problem is obvious, but hard to resolve. In the EU, the price of gas is on the rise and so is the price of electricity.

in CLEPA, by Benjanim Krieger, 29-09-2022

This is a serious issue for citizens and businesses, particularly for energy intensive manufacturing but not only. Automotive suppliers and vehicle manufacturers also feel the pain.

The year 2022 has been difficult: One in three automotive suppliers recorded an operational profitability of less than 1% in the first half of the year. The impact of the high energy costs is likely to cause even more pressure in 2023, as energy contracts for next year are up for renegotiation and prices are expected to multiply. Reducing consumption can only realise marginal relief and will reduce productivity and revenues.

Passing on cost increases to customers, even if only in fractions of the actual burden, requires very difficult negotiations. Energy prices were already high in the EU before the current crisis, lowering the competitiveness of industry in comparison to other regions, such as North America and Asia. Recent developments compound and exacerbate lingering distortions of the supply chain. The term deindustrialisation is being used in the public debate, with some justification.

CLEPA is following and contributing to the debate on political support. Price caps, solidarity contributions, filling of gas storages and other measures will provide some relief. Furthermore, there is a need for transparent and up to date information on policy measures, including possible mandatory energy consumption reduction rules. Businesses and supply chains in distress will likely need public financial support, requiring a pragmatic application of state aid rules, without distorting competition in the Single Market. A delicate balance to strike. Ultimately, the supply of affordable energy from sources in Europe or beyond has to be secured.

The key role of diversification

Similar questions arise in other policy areas. The automotive industry is transitioning towards electric mobility, which will strongly contribute to reducing CO2 emissions but also risks new dependencies. The key role diversification plays in guaranteeing the energetic independence of Europe was stressed by the European Commission President, Ursula Von der Leyen, in her 2022 State of the Union Address. Adding later: “Lithium and rare earths will soon be more important than oil and gas.”

We should be aware of trading off such energy dependencies for materials. In the case of electric vehicles (EVs), most of the lithium for vehicle batteries is dominated by only one country, China. We welcome the Critical Raw Materials Act announced by the Commission, but the current scenario shows increased prices of raw materials for batteries, mostly coming from non-EU sources. In the meanwhile, the European Chemicals Agency seeks to classify lithium as a reproductive toxin, putting a further burden on European companies in securing this metal to produce electric vehicle batteries.

“We must give industry a clear signal and allow them to plan investments going forward”, said Commission Executive Vice-President Frans Timmermans in June, before the debate on CO2 standards for cars and vans in Parliament. We agree with such an approach, and we would like to see it implemented in coherent and coordinated policy frameworks, based on pragmatic proposals that avoid unnecessary burdens on European companies.

CLEPA has long advocated for technology diversity, harnessing the full innovative power of the industry. The ongoing trialogues on CO2 for cars and vans are looking at a marginal clause, which would not close the door completely on the further use of internal combustion engines (ICE), that can be climate neutral when running on sustainable renewable . As we asked in a joint letter with 72 other associations, allowing the use of renewable fuels on a voluntary basis would allow users and providers of technology to determine whether it would be a competitive solution. Not least, increasing the use of renewable fuels is the key to reducing carbon emissions from the existing fleet. Maintaining technology diversity and affordability of mobility should also guide decisions on the upcoming proposal for new pollutant standards (EURO7) expected this year.

Complementary solutions to e-mobility would also mitigate the impact on jobs, as showed by our study, and would provide the industry with additional resources to invest in the market development of climate-neutral technology. Groupe Renault suggests in their recent announcement that it will continue to sell ICE cars as long as possible through the DACIA brand to support the electrification of the Group. “Each has its role to play”, commented Dacia CEO Denis Le Vot, emphasising how this clear-cut choice is driven by the risks associated with electrification.

During the year, many authoritative voices expressed their opinion in the debate on the Commission’s proposal pointing out the limitation of an EV-only approach. Such as Andy Palmer, former Nissan CEO who launched the first mass-market electric vehicle and pointed out embedded emissions in the production of EVs. Peugeot CEO Linda Jackson confirmed the role of the combustion engine for international markets and Stellantis CEO Carlos Tavares, who underscored the risks associated to the political decision of phasing out the ICE. Lately, Hildegard Müller, president of the German VDA, warned “against pushing the ambition level even higher in the EU legislative process”, and also the new Volkswagen CEO Oliver Blume seems to look more favourably on renewable fuels.

There is a growing awareness within the automotive industry that fossil fuels should be banned, but not technology. The advanced ICE still has a role to play. But if this were not enough, the geopolitical changes triggered by the outbreak of war in Ukraine have forced European countries to consider their energy policies and the consequences they may have on their own citizens more carefully.

Benjamin Krieger

CLEPA’s Secretary General

 

 

Joint letter to European policymakers on CO2 standards for cars and vans

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CO2 standards for cars and vans: Automakers, Auto Parts Industry and Fuel Manufacturers call for Trilogue negotiations to fully implement the outcome of Council General Approach to enable, after 2035, ICE vehicles registered to run exclusively on CO2-neutral fuels [1].

in CLEPA, 20-09-2022

We, automotive companies, fuels manufacturing companies and industry associations are planning our industrial future to be fully consistent with the 2050 climate neutrality goal for Europe.  But our concerns are growing that the limited pathway provided by the Commission’s proposal for a regulation on “strengthening the CO2 emission performance standards for new passenger cars and new light commercial vehicles in line with the Union’s increased climate ambition”, with its current test and certification protocol, creates unnecessary risks; industrial, economic, social and in terms of delayed GHG reductions.  We all fully support that electrification will be the major technology for light road transport decarbonisation. However, recent geopolitical developments have underlined the uncertainties related to the pathway to full electrification of new cars by 2035.

Since the publication of the Commission’s proposal for CO2 standards in cars and vans in July 2021, the geopolitical landscape has changed dramatically, with implications for energy and raw material dependencies. This is likely to have an impact on the speed and economic efficiency of the electrification of the new light-duty vehicles fleet.  In particular:

  • Increased prices of raw materials for batteries and supply constraints will jeopardise the availability of affordable cars for many citizens and therefore delay the fleet turnover. These risks extending the demand for fossil fuels and slowing down the pace of GHG emission reductions;
  • Access to the necessary battery raw materials is a challenge with concerns over narrowing dependency on non-EU sources;
  • In response to the energy crisis, that is reshaping the energy policy in Europe, the average GHG intensity of EU electricity is potentially increasing as coal use is expected to grow. There is no guarantee that we will have sufficient renewable electricity to satisfy the increasing demand from electrified transport, with the risk that marginal electricity consumption may even come from coal. The current vehicle standards, based solely on the tailpipe emissions, does nothing to prevent this, to the detriment of the overall GHG emissions reduction;
  • The deployment of recharging infrastructure throughout Europe is increasing but a sufficiently dense charging network across the EU is not yet guaranteed. This creates uncertainty which keeps many drivers from switching to electromobility.

The Commission’s impact assessment publication in September 2020[2] only briefly addressed some of these issues, although recent developments have made them critical.

The current situation requires a difficult rethink of long-held assumptions how we can best reach climate neutrality in 2050 while ensuring a just transition of the EU industry. In this light, all solutions that are able to deliver a reduction in GHG emissions should be considered.

The fuels industry has set out that production of sustainable, advanced and synthetic fossil free fuels can be ramped up[3]. A needed enabler for this to occur is the clear recognition in regulation and society that ICE, HEV and PHEV vehicles exclusively using sustainable renewable and synthetic fuels can be very low in GHG footprint or even fully climate neutral.  Significant volumes can be made from waste and residue feedstocks and from renewable energy sourced in EU and imported. Highly credible academic studies demonstrate that this combination can equal that of the EVs in terms of decarbonisation of road transport.

An important but often neglected consideration is the resilience of the EU transport value chain: additional routes to meet the GHG targets mean lowering the associated risk brought by an exclusive electric approach. The use of sustainable renewable and synthetic fuels is an ideal complement to the electrification strategy.

The fuels industry has also set out that the strategy for renewable liquid fuels for aviation and maritime sectors will benefit from parallel supply to some sectors of road transport, as investment cases will be stronger, allowing a faster ramp up of investments, supply chain development, and associated job creation.

Since the transition towards a fully electric mobility will be progressive, sustainable biofuels, renewable fuels and e-fuels are a reliable solution to reduce emissions of the transport sector in the short, medium and long term, ensuring at the same time the use of the existing fleet (so-called legacy fleet) and infrastructure. Electrification and CO2-neutral fuels should be seen as complementary solutions.

Finally, the EU transport value chain is already developing a methodology to certify the exclusive use of CO2-neutral fuels in individually identified vehicles.  In this way, a robust certification standard can support the implementation of Council General Approach Recital 9a to fully enable a complementary route of CO2-neutral fuels to give maximum probability of reaching GHG reduction and unlock industrial investments. In the revised regulation, Recital 9a should be complemented by the introduction of a new article establishing the relevant legally binding provision.

The Trilogue is taking place in a very different world from a year ago.  We are not arguing for reduction in real GHG reduction ambition. We are not arguing for an extension of the use of fossil fuels in new vehicles from 2035. We are making the case for an important additional technology route to meet Europe’s industrial and social objectives as meeting climate goals.

We call on Trilogue participants to:

  • Incorporate Recital 9a into the Articles of the agreement;
  • Introduce a new Article to establish the content of Recital 9a as a legally binding provision;
  • Set a deadline as early as possible, but at the latest one year after the entry into force of the regulation, for the Commission to present a proposal on how to register vehicles running exclusively on CO2-neutral fuels.

The signatories

[1]  The term “CO2 neutral-fuels” is included in Recital 9a of the Council General Approach on the subject regulation. In this letter such term is used to indicate non-fossil, sustainable renewable and synthetic fuels.

[2]  “Impact Assessment accompanying the document Stepping up Europe’s 2030 climate ambition” SWD (2020) 176 final

[3] Home – Clean Fuels for All

 

 

CLEPA | Time to act: Vehicle electrification will reshape the European Aftermarket

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  • Electric vehicles are set to make up 53 to 82% of all new vehicles below 3.5 tons sold in Europe by 2030
  • Aggressive sales scenario: 2038 could be the first year with more than 50% battery-electric vehicles on the road
  • Electric cars need around 30% fewer aftermarket components, but create significant new opportunities

in CLEPA, 08-09-2022

The ongoing electrification transition in the automotive sector indicates a massive change for the European aftermarket. The reasons: Battery electric vehicles (BEVs) have around 30% lower demand for traditional aftermarket components and BEV sales forecasts project a 53 to 82% market share in 2030. These are the findings of a joint study by Roland Berger and CLEPA, the European Association of Automotive Suppliers. The authors have formulated three future scenarios and recommend steps the industry can take to shape the transformation.

“For automotive aftermarket players, planning for the transition to electrification is a very complex business because many vehicles in our fleet will still have an internal combustion engine after 2035,” says Hasmeet Kaur, Partner at Roland Berger. “Even though electric vehicles currently make up only 0.8% of the vehicle parc, players need to reposition themselves now to ensure their success going forward.”

The automotive industry has been undergoing a rapid transformation for several years now. A combination of technology trends, changing customer behavior, the various supply shortages and the proposed regulation of the European Union (EU), which only recently was agreed on by the EU council, have put companies under pressure. Electrification is expected to massively impact the forces at play in the aftermarket.

The EV transition is underway: Outlook for 2030 and 2035

The study authors developed three scenarios and in each of them calculated the effects of the different pace of electrification on the automotive aftermarket. The most bullish scenario (“Radical Electrification”) sees electric mobility making a rapid breakthrough. This causes the share of battery-electric vehicles in total new vehicles below 3.5 tons sales to rise to 82% in 2030 and reach 100% from 2035 onwards.

The middle scenario (“Ambitious Transformation”) is based on the policy and corporate goals as they currently stand. In it, prices for the raw materials needed to manufacture batteries stabilise, and a suitable charging infrastructure is established. As a result, the share of electric cars in total vehicle sales grows to 68% by 2030 and hits 100% from 2035 onwards.

In the least progressive scenario (“Regulatory Compliance”), progress towards BEV-only is moderated by various headwinds, including rising battery raw material costs. The share of electric cars in total vehicle sales rises to 53% in 2030 and 96% in 2035, before reaching 99% in 2040.

Drop in demand for traditional drivetrains and engines

The increased market penetration of battery-electric vehicles will change both the importance of the various product categories in the aftermarket and the roles of the companies that operate in it. The authors analysed 250 components along 53 vehicle systems and expect battery-electric vehicles to offer about 30% lower sales potential for traditional aftermarket components, compared to internal combustion engine vehicles. The reasons: battery-electric vehicles are built with fewer components and there is less wear and tear on the engine, the drivetrain and the brake components, among others.

For each of these components, the study estimates the impact, both negative and positive, on “gross” demand on the aftermarket (excluding additional demand for new components and services, such as labour in workshops or software updates). In order to show the impact of electrification clearly, the study specifically excludes other macro factors such as the impact of the expected overall growth of the vehicle parc or inflation, and technical trends such as Advanced Driver Assistance Systems. In the Radical Electrification scenario, a drop of 12% by 2035 and 17% by 2040 is forecasted. The product categories most affected are the internal combustion engine and the drivetrain, where demand will fall by 49 and 51%, respectively. In the Regulatory Compliance scenario, the impact is expected to be reduced to -13% by 2040.

New opportunities for industry players across the board

Electrification also opens up new opportunities along the value chain for the various suppliers in the industry. Parts manufacturers, for example, can shift their portfolio to battery-specific components but also expand their business model by remanufacturing or refurbishing components. A further opportunity is to offer diagnostics and flashing solutions to support workshops, particularly with the challenging software and data management of battery-electric vehicles with new electronics and connectivity platforms. Partnering with battery specialists can help both the traditional aftermarket supplier and the battery specialist.

“It will be especially important for aftermarket players to develop remanufacturing and repairing capabilities for battery systems, electric motors, e-axles and power electronics,” says Frank Schlehuber, Senior Consultant Market Affairs at CLEPA. “We expect to see a shift in aftermarket services from hardware to software. Preventive maintenance will also gain relevance, given that the battery is safety-critical.”

Wholesale distributors will be able to assist in the management of end-of-life components, becoming providers of recycled materials or offering their logistics networks to new customer groups. And workshops have the option of positioning themselves as battery-electric vehicle specialists and offering services to generalist workshops in their area. They can also offer their services to OEMs looking for IAM workshop partners to strengthen their service network.

 

READ THE FULL STUDY

 

 

CLEPA welcomes Benjamin Krieger as new Secretary General

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As of today, the European Association of Automotive Suppliers (CLEPA) welcomes Mr Benjamin Krieger as its new Secretary General. Mr Krieger succeeds Ms Sigrid de Vries, who held the position for the past five years.

in CLEPA, 01-09-2022

The appointment was announced on 9 June in Brussels during the association’s annual General Assembly by Mr Thorsten Muschal, CLEPA President and EVP Sales & Program Management at Forvia Group.

Originally from Germany, Benjamin has led CLEPA’s government affairs department over the last four years, focusing on carbon and pollutant emissions standards, the wider sustainability agenda, digitalisation of mobility, international trade, and competitiveness.

“I am both pleased and honoured to take on the role of Secretary General at CLEPA during such a transformative time. Today, automotive suppliers are confronting unique challenges, undergoing the twin transition towards digitalisation and climate neutrality, in an unpredictable economic environment. The role of the vehicle in society may be changing, but mobility, and specifically personal mobility, will stay important in the future. We stand ready to contribute to a balanced debate on the responsibilities but also society’s needs for mobility.”

 

 

About Benjamin Krieger

Benjamin Krieger is the Secretary General at CLEPA, the European Association of Automotive Suppliers. He has worked in EU policy and communications for the past 15 years. A journalist by training, Benjamin started his career in the European Parliament, first managing the office of a Member of the European Parliament (MEP) and later becoming the spokesperson to a delegation of 12 MEPs. He also worked as a consultant advising clients on a broad range of topics at the intersection of sustainability, digitalisation and trade across different sectors. Most recently, Mr Krieger led government affairs at CLEPA.

Originally from Germany, Mr Krieger speaks English, German and French.