After repeated delays, the European Commission this month released its proposed Euro 7 pollution rules, succeeding Euro 6, which came into force in 2014. The tighter vehicle emission rules create some new realities for automakers across the multination market.
Euro 7 will most likely be the final internal combustion engine regulations enacted in Europe, since the EU is requiring the sale of only zero-emission vehicles after 2035.
Automakers had fought against the new rules, arguing that money spent on new compliance measures could better be invested in lowering the cost of electrification. They argued that there will be little need for new rules because the proportion of internal combustion engine sales will continue to fall ahead of the 2035 zero-emission deadline.
Stellantis CEO Carlos Tavares recently called Euro 7 a “diversion from the major goal of electrification.”
The recent surge in inflation — especially in vehicle prices — in Europe has added to that argument. Whether it had any effect on the European Commission’s rule-writing is unclear, but the proposed Euro 7 rules are not as strict as some automakers had feared.
However, they do mark a clear break from Euro 6, notably unifying the standards for diesel and gasoline vehicles on pollutants such as nitrogen oxides (NOx), toughening targets for trucks and buses, and setting limits on brake dust and tire particles — which will make up the main source of pollution from road transport in the zero-emission age.
The regulations are now subject to ratification by the European Parliament and Council. The expectation is that they will go into effect for passenger cars and vans in July 2025, with trucks and buses in 2027.
Reaction to the proposal was mixed last week, but there are some clear (and not so clear) winners and losers.
Air quality: The European Union says that longtime exposure to pollution from fine particulate matter and NOx from road traffic was responsible for more than 70,000 premature deaths in 2018, with 300,000 deaths from all air pollution. Road transport accounted for 39 percent of harmful NOx emissions that year, the EU says.
Urban residents: City dwellers across Europe who frequently do not own cars, are particularly affected, since road transport accounts for 47 percent of NOx emissions in urban zones. Limiting such pollutants could save thousands of lives. The EU says that in 2035, Euro 7 regulations will cut passenger car and van NOx emissions by 35 percent and those by buses and trucks by 56 percent. Brake particulates will be cut by 27 percent.
The emissions control industry: AECC, the trade group that lobbies on behalf of companies that make catalysts and filters, such as Johnson Matthey, NGK and Vitesco, had called for an “ambitious” Euro 7 proposal. It did not necessarily get that, but any tightening of pollution regulations means more content per vehicle for its member manufacturers. The official reaction from AECC is that it “welcomed” the Euro 7 proposal — and, not surprisingly, pressed the European Parliament and Council to adopt the rules as soon as possible. But in the long run, the EU’s effective ban on internal combustion engines after 2035 means that these companies’ revenues in Europe will decline sharply.
Brake and tire suppliers: A central promise of Euro 7 is that it will set limits for particulate matter from brakes and tires, which means that companies such as Brembo and Michelin will be able to market new technologies at what is almost certain to be higher cost to their customers. Brembo, for one, says its Greentive brake disc, when combined with a special friction material for pads, can decrease emissions of particulate matter by 50 percent.
Of note, brake dust limits for vehicles 3.5 metric tons or less are set at 7 mg/km until 2035, and then 3 mg/km thereafter; limits for tire emissions have not yet been set.
European automakers: At first glance, any regulation that increases costs and requires new technologies to be developed and certified looks like a loss for automakers. But only diesel vehicles — a market that is already declining sharply — face notably tougher pollutant standards. On balance, it could have been much worse. And automakers have been simplifying their combustion engine offerings and reducing or eliminating R&D budgets as electric vehicles take a greater and greater share.
Nonetheless, the regulations will not be pain-free: A report from Morgan Stanley found that Europe’s biggest automaker, Volkswagen Group, could face more than $400 million in compliance costs on its car sales, with No. 2 Stellantis at more than $350 million. The regulations will also apply to higher and lower temperatures — or a bigger “thermal window.”
This could further impact sales of small cars, which are disproportionately affected by any manufacturing cost increase. Most European automakers already have abandoned the minicar segment, saying it would be too expensive to add more equipment to them, either to reduce tailpipe pollutions and emissions, or to hybridize small engines.
Heavy trucks and buses: Diesel-powered trucks and buses will need to reduce their NOx output by 78 percent, to 90 milligrams per km, from 400 mg/km. This will lead to compliance costs of $2,800 per vehicle, the European Commission says.
Even if those vehicles cost much more than passenger cars, that money could still have been used for investments in battery electrification or hydrogen fuel cells, and it could increase transport and shipping costs for all goods.
European consumers: The European Commission estimates that the regulations will add an average of more than $300 in regulatory costs to new-vehicle sticker prices, which already have been rising because of inflation, higher energy costs and semiconductor shortages. In the meantime, automakers will be struggling to roll out affordable battery-electric vehicles, and the EV charging infrastructure remains a weak point.
Diesel engines: Under the proposed Euro 7, diesel cars will have to cut NOx emissions by 25 percent to 60 milligrams per km, from the current level of 80 called for under Euro 6. Any added costs are sure to hasten the decline of diesel offerings, which has been an attractive option for those who regularly travel long distances.
Higher costs or not, the market for diesels has been declining since the early 2010s. The downward trend accelerated sharply after the 2015 VW emissions-cheating scandal. Many cities are now enacting bans on older diesels, with plans to ban all models in the future. A decade ago, diesels accounted for as much as 70 percent of all vehicle sales in some countries. But in recent months, combined sales of full-electric and plug-in hybrid models have outstripped diesel sales in many markets.