Wednesday 3 April 2019 1:13 pm

European car makers face €7.4bn bill to meet looming EU emissions rules

City A.M’s industry and manufacturing correspondent. You can follow me on @alexmdaniel, or email:

City A.M’s industry and manufacturing correspondent. You can follow me on @alexmdaniel, or email:

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The biggest car manufacturers in Europe are careering towards a €7.4bn crash in profits from the cost of meeting the EU’s emissions rules, UBS has warned.

Regulations set to come into effect in 2021 will force car firms such as Volkswagen, BMW and Renault to produce no more than 95g of CO2 per kilometre, but analysts said the burden of meeting this is underestimated.

Read more: SEC sues Volkswagen over 'massive fraud' on US investor

Manufacturers would have to reduce emissions by around one-fifth in the next two years to meet the rules, otherwise they face a fine of €95 for each gramme of CO2 they are over the target.

Analyst Patrick Hummel said: “All European car makers are still well above where they need to be in 2021.”

All companies have said they intend to avoid the fines, even if they have to reduce sales and profits.

But complying will cost a total €7.4bn in lost earnings across an industry which is already facing hard times from economic factors such as Brexit and waning demand in the key Chinese market.

Peugeot looks set to be hit the hardest, at 25 per cent earnings per share, while Fiat Chrysler face a 20 per cent hit.

Manufacturers are turning to electric vehicles to help solve the problem, but this is inflicting huge research and development bills. The automotive industry around the world is planning a £227bn surge in spending on electric vehicle technology over the next five to 10 years.

As a result, many are teaming up with research firms to develop electric systems such as battery cells.

Read more: How prepared are London boroughs for the ultra-low emissions zone?

Last month, Volkswagen announced it had partnered with Swedish battery maker Northvolt to cut costs on making the cells it hopes to one day install in its cars.

The German firm drew headlines in 2015 when it emerged it had fitted software which cheated on emissions tests, to convince regulators 11m cars were giving off less Nitrogen Oxide than they were.