Carmakers face profits threat

Research from credit rating agency Standard & Poors argued that manufactures – most of whom already operate on razor-thin margins – would be hard pressed to comply with the EU emission targets. Industry estimates put the costs of achieving the new standard of 130g/km at between Euro 600 (£408) and Euro 3000 per vehicle. BMW, the most profitable car maker in Europe, generates around Euro 2500 in operating profits per vehicle. With profitability levels lower for volume brands, the study claimed the introduction of this “punitive” legislation posed a real risk to car makers' financial performance.

With profitability levels lower for volume brands, the study claimed the introduction of this “punitive” legislation posed a real risk to car makers' financial performance. To date, progress towards targets has been slow. Although emission levels have declined by 13 per cent, they still amounted to an average of 160g/km for new cars built in 2005. According to a study by the European Federation for Transport and Environment, three quarters of car makers are failing to cut emissions fast enough. Figures showed Nissan making the least progress in Europe, followed by Suzuki, Mazda and Audi. S&P director and author of the report, Maria Bissinger, said that the unknown element in this mix remained consumers and their reaction to car emissions on climate change. “A stronger preference for environmentally friendly, fuel efficient vehicles than has been demonstrated so far could weigh heavily on car makers profitability,” she said.