Volkswagen Group faces an £89m fine after failing to meet its EU emissions target

Volkswagen Group’s history of emissions issues has gained another dark chapter after it failed to meet its 2020 target, set by the EU. As a result, the Group is set to be hit with a fine of more than £89 million, despite record sales of electrified cars.

While both Volkswagen and Audi – the Group’s two biggest brands – hit their targets, other companies under the same umbrella let the side down. In isolation, VW was able to achieve a 22 per cent decrease in its fleet emissions, coming in at 92g/km – 5g/km below its legal obligation under the EU rules. Audi achieved 101.5g/km, which is a 20 per cent improvement compared to 2019 and 4.1g/km below its target.

However, other Group brands including SEAT, CUPRA and Škoda brought the overall Group emissions to 99.8g/km of carbon dioxide. Whilst a 20 per cent reduction in Group emissions compared to 2019, it is still half a gram per kilometre above its target. As a result, VW faces a fine of a “very low triple-digit million amount” (of euros) – according to a report by Reuters.

Volkswagen Group was expecting this outcome, however, and has set aside money to cover the fines and avoid impacting its fourth-quarter earnings. And in fact, it was thanks to a late year push that Volkswagen individually was able to push below its 95g/km target, with the benefits of the ID.3 – which was the second-best selling car in Europe in December – and the ID.4 coming home to roost. Both of these models also helped Volkswagen accumulate so-called ‘Super Credits’ for vehicles emitting less than 51g/km of carbon dioxide.

If you want to find out more about carbon credits and the EU’s rules, see our opinion piece.

Group CEO, Herbert Diess, pinned the failure of the overall Group to meet its target on the covid-19 pandemic, however, he is confident that the brand will easily attain its target in 2021. 

Pooling to ensure success

Manufacturers can engage in a cynical (yet completely legal) method of ensuring they’re not hit with fines. Called CO2 pooling, it allows several manufacturers to come together so that their fleets are essentially considered as a single entity under EU regulations. For example, what was FCA (and is now Stelantis) pooled with Telsa in 2019 in a deal with 1.8bn euros to avoid fines for its comparatively poor emissions performance.

Volkswagen pooled with SIAC, the Chinese automotive group which owns MG in autumn 2020 in a bid to avoid end of year fines – albeit even that wasn’t enough to bring the Group’s emissions down to meet its target. The deal with SIAC runs through to 2022 and given the Chinese group’s ever-increasing number of EVs entering the European market (such as the MG ZS EV and MG5), it will be beneficial to Volkswagen. Light commercial vehicles are also covered within the deal.

Discover EV’s take

Volkswagen Group’s narrow failure to meet its target is a shame more than it is a significant failure on the company’s part. Coronavirus no doubt had a significant impact, though whilst we don’t necessarily agree with it, we can’t help thinking that a better pooling strategy would have got the Group out of trouble. That said, the rapidly expanding fleet of EVs and PHEVs, and their derivatives across Group brands, should ensure emissions success by the end of 2021. It’s also worth noting that £89m isn’t catastrophic when set against billions in profit.

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