Taking revenge for tariffs by targeting Tesla sales may seem like a smart move, but there’s a sting in the tail. Singling out the beloved car company of US president’s apprentice Elon Musk might seem like shrewd tactic, but it may not provide much succour to European car firms.
The troubles facing European car executives are manifold. Top of the list is a potential tariff war and its potential to unravel extremely complex supply chains.
Then there is the challenge from China, pumping low-cost rivals into European markets that increasingly match home-grown rivals in quality.
Then there are the punitive emissions limits set by the EU, aimed at driving a transition to electric vehicles, even if customer uptake stutters.
Current regulations requires carmakers to reduce their emissions by 15 per cent from a 2021 baseline or be fined €95 per gramme of carbon dioxide per kilometre emitted above the target for each noncompliant vehicle sold in the European Union. The industry has warned this could result in fines of up to €15 billion.
The EU recently extended the initial deadline, but carmakers will still struggle to meet this target – and the limits are only set to tighten further over the next five years, increasing potential fines.
To avoid these punitive payouts, car makers are buying carbon credits from all-electric carmakers. Enter Tesla, which has already struck deals with firms such as Honda, Ford, Toyota, Mazda and Stellantis, the last being the parent of such big European brands as Peugeot, Opel, Citroën, Fiat and Alfa Romeo plus several others.
This has proven a lucrative sideline for Musk’s electric vehicle brand, accounting for $2.76 billion (€2.56 billion) in revenue last year. And that’s before the new EU targets came into full effect.
That revenue stream is now in jeopardy across Europe as its sales slide. European sales of Tesla electric vehicles tumbled 49 per cent in the first two months of the year compared with a year earlier even as overall sales of EVs grew, according to the European Automobile Manufacturers’ Association.
Fewer credits will hit Tesla’s revenue stream from their sales, but it will also leave the dependent car firms with a quandary. European buyers shunning Teslas risk running over the toes of Europe’s car executives in their effort to retaliate against Elon Musk.
