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The automotive sector is key to the economic growth of the EU

The automotive sector is key for sustaining and improving the economic strength of the European Union, ensuring future prosperity of its citizens. There is a clear need to establish a policy framework that nurtures the automotive industry, the “engine of Europe”. CARS 21 (Competitive Automotive Regulatory System for the 21ST century), a multi-party project to improve EU automotive regulation, has put an important process in motion. Now, it is time to implement its outcome with precision and care.

Revitalising EU Growth

The European Commission has put growth and jobs at the heart of its re-launched Lisbon strategy and recognised that, in order to revitalise the EU’s economic performance, “the EU and Member States need to further develop their approach to regulation to ensure that the defending of public interests is achieved in a way that supports and does not hinder the development of economic activity”1. This important statement underlines that acknowledgement is rising regarding the fact that the cumulative cost of regulation considerably affects the competitiveness of the automotive industry. Two years ago, it was decided that urgent action was needed to address this issue. Since then, a Highlevel Group on the competitiveness of the automotive industry and the Commission’s DG Enterprise, have worked towards establishing a better regulatory framework. By the end of 2005, the High-level Group had concluded a set of recommendations and a roadmap.

Optimism alongside doubts

In February 2007, the Commission sent a Communication on CARS 21 to the EU Council and the European Parliament to take the recommendations from the CARS 21 High-level group a step further into the institutional process. The Commission’s Communication gives many reasons for optimism but also sheds some doubts.

The Commission clearly emphasises the necessity of sharing responsibility when dealing with important societal challenges such as road safety and improving the environment. The right policy framework should entail that all relevant stakeholderswhether the industry, legislators, road users or drivers – have to play their part to achieve an effective, and more importantly, a cost-effective result. Therefore, the acknowledgment that an integrated approach is needed to CO2 emission reductions and to road safety improvements is of particular importance. This acknowledgement forms the heart of the CARS 21 High-level group recommendations, together with the aimed further simplification of legislation, improvement of third market access, enforcement of intellectual property rights and prioritisation of R&D activities towards renewable fuels, clean and intelligent vehicles.

Cost-effectiveness key

Still, the Commission’s Communication has not fully incorporated the recommendations of the High-level Group CARS 21. It does not consistently adopt cost-effectiveness as guiding principle, and the proclaimed integrated approaches are not holistic in a true sense. Too often, policies focus in essence on vehicle technology only, without having a factual basis for this choice.

Also, and despite their critical weight in the context of a competitive regulatory framework, “better regulation” principles have not been given enough importance in the February 2007 Communication. These principles provide industry with a coherent and transparent policy process. While the Commission has made better regulation one of its priorities, in the field of the automotive regulatory framework, this is not accurately reflected. Too many examples show that, in spite of what is being claimed, policy measures do not build on methodical assessments of their potential impact on the competitiveness of European economy.

Because of long development, investment and production cycles, planning certainty and proper lead-time are of crucial importance to the automotive industry. The tenyear regulatory road map, developed by the High-level Group, meant to provide a sound basis for policy-making over the upcoming years. It is difficult to comprehend why the roadmap was not adopted as an integral part of the Commission Communication.

Balancing interest

The CO2 emissions dossier is one of the most important challenges the automotive industry faces today. The CARS 21 recommendations from the High-level group sketched a framework to balance economic and environmental interests. These interests are not opposite ones: they should and can be addressed in a comprehensive, cost-effective way, leading to the results society demands.

Regrettably, the integrated approach to CO2 emission reductions, as adopted by the High-level Group, is reduced in scope by the February 2007 Commission proposal on CO2. This proposal focuses mainly on vehicle technology and does not respect the inherent elements of the integrated approach, namely infrastructure measures, fiscal incentives and eco-driving. An integrated approach involving all stakeholders would lead to larger cost-effective CO2 reductions, delivering more for the environment at lower costs to society. There is no doubt that CO2 will be a major test for the overall value of the CARS 21 process, with implications for the credibility of High-level groups as such.

Similarly unbalanced, and therefore not genuinely holistic, is the approach adopted for road safety, with its focus on vehicle improvements and underestimation of the role infrastructure measures can play. Translating the integrated approach into real-world improvements requires the balanced implementation of vehicle technology, infrastructure measures and education, information and enforcement.

Affordability at risk

Cars need to remain affordable if the desired environmental and safety improvements are to be achieved. The CARS 21 recommendations stressed that affordability of new vehicles and, consequently, fleet renewal are key to achieving environmental and safety improvements. This is because the main environmental and safety challenges arise not from new vehicles, but from the large aging fleet on the road. The annual fleet renewal rate in Europe is already lower than 10% and this fact is not sufficiently taken into account.

Overall, the Commission’s actions should be consistent with the Lisbon strategy: one cannot fight for jobs and growth at the one hand and propose, on the other, solutions that endanger the competitiveness of an industry supporting 12 million jobs in the EU. The industry should not be put in a position in which it could lose strength vis-à-vis its major trading partners. External aspects of regulation must be evaluated and impact assessments are of utmost importance.

Vital tool

It is vital for the international competitiveness of the automotive industry that the recommendations, agreed in 2005 by the High-level Group members of the Council, Commission, European Parliament, automotive industry, environmentalists, trade unions, suppliers, consumers and the oil industry, are implemented by all stakeholders. A mid-term review of the CARS 21 recommendations and of the roadmap should be conducted in 2009.

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