EU rules likely to make electric cars more profitable than petrol cars

On 12th July 2021, it was reported that one of Volkswagen’s most senior executives Thomas Ulbrich commented on EU emission rules that are expected to come into force starting 2025 and said that these rules are expected to make petrol cars less profitable than electric cars.

Volkswagen (VW) is the world’s second-largest automaker and has devised plans to invest USD 41.5 billion in electric vehicles as European governments try to accelerate the transition to less-polluting cars.

Thomas Ulbrich, head of development at the VW brand, said that the new engine standards, called Euro 7, would pose a “tremendous challenge for petrol-engine as it would require more sophisticated, advance, and efficient technology to ensure that they are complying with the Euro 7 regulations. The regulations are about to come into effect from 2025 and would require expensive emissions reduction equipment in internal combustion engine cars.

Ulbrich said, “If you now ask when is the point for profits becoming equal to an internal combustion engine, you know that with Euro 7 there are tremendous challenges for the internal combustion engine world.”

The forecast for the petrol car industry is very grim from Thomas Ulbrich. The petrol car industry still generates far more revenue than electric cars.

Peugeot owner Stellantis said last week that the margins on the company’s electric cars are very similar to the petrol cars. Renault also said that margins on its electric cars and petrol cars are very similar.

Germany’s car industry lobby, the VDA, has raised concerns over the Euro 7 regulations claiming the new regulations are 5-10 times harsher than the current regulations.

 “The proposals continue to move at the limits of what is technologically achievable. We must continue to be very vigilant that the internal combustion engine is not rendered impossible by Euro 7”, Hildegard Müller, head of the VDA said in April.

The VDA further warned in May that the harsh regulations of Euro 7 could lead to the loss of as many as 215,000 jobs across the industry. Volkswagen expects a third of its European cars sales to be electric by 2025 and expects the figures to rise to 70% by the end of the decade. Volkswagen’s target is still less ambitious than Ford and Vauxhall-Opel with plans to end all their petrol car or hybrid car sales in the region by 2030 and 2028 respectively.