Car-part makers nervously watch EU efforts to ban fossil-fuel cars

Stefano Caprio frets the EU’s plan to end the sale of new fossil-fuel cars from 2035 is going to cause big problems for his Turin-based engineers trying to clean up the combustion engine.

The chief operating officer of Punch Hydrocells, a unit of Belgian automotive supplier Punch, will be watching closely on Tuesday as EU environment ministers decide whether to back the European Commission’s timeline for slashing car and van CO2 emissions to zero by 2035 under the Fit for 55 package of green laws.

If that happens, Punch’s plans to develop engines that run on hydrogen — a clean fuel that emits only water — will be in trouble.

“For the workers in the plant, this will be a major hit for them,” Caprio said, speaking by videoconference from Punch Hydrocells’ headquarters in northern Italy, adding that the emissions reduction from running internal combustion engines with hydrogen was “really, really strong.”

The problem is that Punch’s prototype hydrogen engines use lubricants and so emit less than 1 gram of CO2 per kilometer — which is more than the EU’s 100 percent cut would allow. It would also rule out engine retrofits allowing hydrogen to be blended with conventional fuels, reducing emissions by around 90 percent, Caprio said.

Punch employs 2,000, mostly in Europe, producing everything from engine parts to transmissions for clients such as Ford and Volvo-owner Geely. Many of those jobs are uncertain if ministers back the 2035 mandate. The European Parliament already voted to support the idea.

“In case this kind of mandate comes into force … this will be a major change for the market, and a very strong stop in sales already in 2031 or maybe 2032,” said Caprio, adding that if the rules change his company can diversify into software, but those jobs will be different than today’s.

Big change

Most large carmakers support a 2035 phaseout as they’re making huge investments in electric cars, but the transition threatens large parts of the ecosystem of parts suppliers as EVs need fewer components than conventional cars.

“The EU is the only region to consider a tech ban, compromising our competitiveness and putting half a million jobs at risk,” said Sigrid de Vries, who runs Europe’s car parts lobby CLEPA.

Instead, de Vries said ministers should “hedge our bets” by offering the industry more flexibility to work on using hydrogen, along with alternative fuels such as biofuels, biogas and synthetic fuels, in current engines.

In the case of Punch, that means the EU should allow emissions in limited circumstances from hydrogen-equipped engines.

Agreeing to that leeway would have two critical benefits, de Vries argued, since it would give the industry an incentive to work on technologies that could reduce emissions from the millions of vehicles that will still be on the road after the 2035 ban on the sale of new polluting cars goes into effect.

It would also help save jobs. In a study published in December, CLEPA argued that even after factoring in the jobs created in the battery cell production industry, going all-electric would cost a net 275,000 jobs across Europe.

Showdown

The final EU 2035 text will have to be worked out in talks between the Parliament and the Council, but the trajectory will be clear if ministers join both the Commission and MEPs in backing the 100 percent reduction target.

However, not all member countries are on board.

“The 100 percent target for 2035 … I am not as confident that it will remain unchanged,” said one diplomat involved in the talks.

Last week, Italy, Bulgaria, Portugal, Romania and Slovakia suggested pushing the phaseout date to 2040 and trimming the 2035 target to 90 percent.

“We don’t know exactly what will happen in the future with the massive production of batteries that will be strongly dependent on the rare earths from China and from different markets,” Italy’s Minister for Ecological Transition Roberto Cingolani said on Monday.

Previously, the Czech and French governments signaled skepticism about a fixed zero-emissions mandate.

It’s also uncertain whether Germany will back the 2035 plan despite making an earlier commitment to do so; Finance Minister Christian Lindner said he’ll block any attempt by the coalition government to support the engine ban.

In Friday’s steering discussion on the legislation among EU ambassadors, Germany’s envoy didn’t clarify Berlin’s stance, according to officials in the room.

Those supporting an end date argue it’s needed to give the auto industry planning certainty for the decades ahead. Those against say it’s too rigid for a sector facing supply chain shocks on everything from semiconductors to raw materials used in battery cells.

But many advocates of a 2035 ban give short shrift to additional experimentation on new technologies over a rapid rollout of already existing battery electric vehicles.

“The climate crisis is now and we already have a scalable zero-emission solution in electric cars,” said Alex Keynes, clean vehicles manager at Transport & Environment, a green NGO. “We can’t carve out exemptions for hypothetical solutions that don’t exist yet.”

Keynes blamed “industries that have refused to adapt, wanting to milk the profits from polluting engines for longer” for the effort to blunt the 2035 deadline. He said Tuesday’s Council session will “show how serious European governments are about their climate promises to the voters.”