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Automakers Blame EU Regulations for Rising Car Costs, Especially for Smaller Models
Top executives at two leading car manufacturers have criticized the European Union, asserting that EU regulations have significantly driven up the price of new vehicles in recent years. They argue that these regulations, especially concerning safety features and cleaner engine technology, have made it difficult to produce affordable city cars and superminis, contributing to the discontinuation of models like the Ford Fiesta.
Call for Regulatory Relaxation on Small Vehicles
Stellantis chairman John Elkann and Renault CEO Luca de Meo recently joined forces to urge the EU to ease its regulatory constraints on smaller vehicles. They contend that failure to do so will impede Europe’s progress toward achieving its environmental targets, as consumers will continue using older, more polluting vehicles due to the high cost of newer, smaller models.
Impact on Car Prices
- De Meo noted that EU regulations have increased the price of models like the Renault Clio by approximately 40% over the past 15 years.
- In the UK, the Renault Clio starts at £18,995 for a petrol engine and £21,895 for a hybrid powertrain.
“If we have less regulations, we can make sure that we build cars that are less expensive and so they’ll be more affordable,” Elkann stated at the FT Future of the Car Summit in London.
Stellantis’ Perspective
Elkann emphasized that the inflationary effects of EU regulations have also inflated the prices of smaller Citroen, Fiat, Peugeot, and Vauxhall models, all brands under the Stellantis umbrella.
Reducing Vehicle Emissions
Elkann suggested that relaxing regulations on small cars would provide an “incredible opportunity” to decrease passenger vehicle emissions. Rather than mandating expensive electric vehicles, regulators should focus on enabling consumers to replace older, polluting cars with cleaner, more affordable options.
Transition to Cleaner Vehicles
Encouraging drivers to switch to economical petrol or hybrid-powered small cars could significantly reduce pollution from the 250 million vehicles currently in use within the EU.
Older Cars on the Road
- The average age of cars in Europe now exceeds 10 years, with some countries like Greece having an average vehicle age of 17 years.
- In the UK, the average car is 9.5 years old as of 2024, compared to 8 years in 2019 and 7 years in 2000.
This trend indicates that drivers, facing cost-of-living pressures, are retaining older, more polluting vehicles for longer periods.
Unprofitability of Small Cars
De Meo and Elkann argue that current regulations have rendered the production of superminis in Europe unprofitable, contributing to the decline of models like the Ford Fiesta. The Ford Fiesta ceased production in Germany in the summer of 2023.
Renault’s Position
De Meo stated that Renault already “doesn’t make money” on certain small cars. He added that regulations between 2015 and 2030 would increase the cost of a medium-sized Renault car by 20% and small cars by 40%.
“Small cars still have a purpose and they could actually reboost the automotive market in Europe,” de Meo added.
Shift Towards Electrification
Manufacturers have been discontinuing internal combustion engine (ICE) models in favor of electric vehicles (EVs), aiming for a zero-emissions future. Smaller, less expensive cars are often the first to be phased out as brands prepare for the ban on new petrol and diesel vehicles in the UK from 2030 and in the EU from 2035.
The number of ICE options in the ‘A-segment’ (city cars) has decreased to just three choices.
Affordable EVs on the Horizon
Despite the decline of petrol models, automakers are introducing more affordable EVs.
- Renault plans to launch its new Twingo EV in the UK, with a target price below €20,000 (approximately £17,000).
- The Dacia Spring is currently the least expensive EV, starting at £14,995.
- The Dacia Sandero petrol model is available from £14,715.
Only four other ICE cars are available in the UK for under £17,000. These include the Kia Picanto (from £16,065), MG3 (£16,425), Hyundai i10 (from £16,600) and Toyota Aygo X (from £16,845).
Recent Regulatory Changes
De Meo and Elkann’s joint statement follows the European Parliament’s vote to expedite softer EU CO2 emissions targets for cars and vans, granting automakers more time to comply and reduce potential penalties.
The UK has also eased its Zero Emission Vehicle (ZEV) mandate rules due to trade pressures.