Car prices set to go up due to environmental requirements

Vehicles in a car dealership
Vehicles in a car dealership Source: Siim Lõvi /ERR

Tougher environmental requirements are set to hike the prices of many models using internal combustion engines. The Estonian Vehicle Dealers and Services Association (AMTEL) believes that some carmakers could pull larger models from the European market.

Because the European Union aims to curb CO2 emissions, the average new passenger vehicle must not emit in excess of 95 grams of CO2 per kilometer by late 2020. Carmakers the average of which exceeds this limit will have to pay a fine.

Executive manager for AMTEL Arno Sillat told ERR that tougher requirements have resulted in higher prices of vehicles with internal combustion engines and that the hike will continue next year.

"Fines are not the only cause of this. The other reason is efforts to bring electric vehicles to market," he said. "Manufacturers are subsidizing them to retain their normal expenses level. They are forced to hike the prices of some vehicles and lower those of others to meet in the middle."

A part of manufacturers are collecting fine money using their importers' networks. The larger the vehicle, the smaller the profit margin, with manufacturers forced to accept lower profitability.

"There are even rumors that some carmakers will pull larger models from European markets that might mean they will come here slightly used," Sillat said, adding that a client who wants a big car will still get one, the manufacturer will still make it and pollute the environment; there will simply be a detour.

Sillat said politicians have made decisions that have run away from available technology and the negative effects of which they failed to anticipate. This has caused a problem for manufacturers that will carry over to everyone who uses a car.

"This decision by EU politicians will be paid for by citizens, not the manufacturers or someone else. Buying a car, taking a taxi or public transportation – this price hike will be included everywhere," the AMTEL manager said.

Sillat added that CO2 emissions have risen in the past three years as a result of the war on diesel. The relative importance of diesel vehicles has fallen from 51 percent to 34 percent, whereas most have been replaced by gas-powered vehicles that emit more CO2, not electric or hybrid vehicles.

"Increased emissions was the first result, while the drastic price advance we're looking at is the second. The price of transport affects all other prices, and we will all end up paying for it."

Some manufacturers already meet the targets and have set aside fine money. Sillat also said that there has been talk of automotive mergers.

"Tesla is a brilliant bride today. Tesla would allow any major manufacturer that is not currently compliant to hit the target immediately, whether it's Fiat Chrysler or someone else. That would make it possible to keep manufacturing ordinary cars in recent volumes," he said.

Sillat said that because the industry is looking to electric cars, the situation might cause a boom and slash prices, while it is also possible that will not happen. The first years will be difficult, and people will feel the price hike personally.

CEO of Toyota dealer Amserv Raivo Kütt said the problem concerns Toyota the least as they are set to hit the target.

"The 95 grams per kilometer requirement is not daunting for Toyota; rather, the carmaker is hoping to hit 87 grams per kilometer in 2021," he said.

Kütt said Amserv forecasts increased Toyota sales for next year.

"We look to the future with optimism," he said.

CEO of Honda Baltic Tõnu Vahtel told Maaleht on Thursday that the price of the Honda CR-V SUV has already gone up. "The situation is difficult and the factory hiked prices for some products by 10 percent this year," he admitted.

Requirements for CO2 emissions for new passenger vehicles and vans will become even stricter from 2025.


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Editor: Marcus Turovski

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