In Europe, stringent CO2 emission targets loom for the end of the decade. Europe used to be wedded to diesel as the solution to meet these targets. Then came the revelation that diesel emits huge amounts of poisonous and cancer-causing nitrous oxide. Dieselgate threw a wrench into the diesel engine, and automakers are faced with the alternative of either selling EVs, or transferring large amounts of money to Brussels, as fines for exceeding the 2020 targets.
Now we know why “diesel takes a back seat in Paris,” as AP wrote, and why the theme-song of the show is the overture for a massive wave of their electric cars, timed to saturate Europe at the turn of the decade, because that’s when they will be needed to help automakers comply with EU regulations. Even tougher regs are expected soon after. Also in Paris, at the climate conference in December 2015, 195 countries adopted the first-ever universal, legally binding global climate deal. “What we have seen then was just a pre-party for much tougher regulations to come,” Renault-Nissan CEO Carlos Ghosn told me a few months ago. Regulations, not Musk, force carmakers into EVs, whether they want it, or not.
Compared to what really is behind the sudden onslaught of electric cars, Tesla’s Model 3 is just a footnote in the strategy of EU automakers. Their executives are not worried about a mass desertion of their customers to Tesla’s lower cost Model 3. If Europe’s OEMs know something, then how to produce cars in large quantities. They also are convinced that large quantities of Model 3 are not possible before 2019 at the earliest. What keeps the executives awake is “who will buy our damned electric cars once they arrive in volume,” as a manager of one of the world’s largest automakers told me. To meet EU targets, and to off-set the CO2 created by bigger-bore Mercedes, Audi, BMW et al, significant numbers of those lower or zero emission cars shown in Paris will have to be sold – a few compliance cars like in California won’t suffice. (There is chatter about super credits for EVs, but nothing is decided.) In a few years, EU OEMs will push these cars into the market no matter what, at predatory prices, if necessary. “We either give deals to the customer, or we hand the money to Brussels,” the executive said. Fiat-Chrysler boss Sergio Marchionne once accused Volkswagen of creating a “bloodbath of pricing and a bloodbath on margins.” Imagine the cries of a vociferous Musk when Volkswagen, along with its EU buddies, bleeds Tesla dry.