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Up in smoke

EC emissions ruling spells major trouble for the Czech auto industry

By František Bouc
Staff Writer, The Prague Post
February 14th, 2007 issue

Jan Přerovský/The Prague Post
Carmakers will have to design engines to pass stricter emissions tests.
The auto industry was the driving force behind the Czech Republic’s growth last year, accounting for nearly a fifth of the country’s exports. So, when the European Commission pushed through an environmental resolution Feb. 7 that had major manufacturers threatening to pull up stakes, many Czechs took notice.
The EC hopes to impose an emissions limit of 130 grams (4.6 ounces) of CO2 per kilometer (0.6 mile) driven on all new cars starting in 2012. Although the ruling is a compromise from the EC’s original target of 120 g/km, it is still a huge cut. The average car in Europe spits out 161 g/km.

Environmental Minister Martin Bursík told Czech Television Feb. 11 that the government will go along. “I believe we will have no other way but to simply accept it,” he said.

While the emissions limit is still some time off, carmakers will have to begin designing the cleaner engines and initiate the costly factory upgrades almost immediately. For burgeoning companies such as Škoda, this means a major move.
“We would have to consider moving our production eastward to Russia and China,” Škoda Auto board member Martin Jahn warned. “This could bring about a situation in which prices of cars could skyrocket by 2,500 euros [$3,250/70,428 Kč], so our competitiveness would significantly drop.”
That would put the jobs of the nation’s 30,000 auto workers and tens of thousands of subcontractors in jeopardy.
Škoda is the country’s leading exporter, and its departure would have nearly fatal impacts on the economy, Industry and Trade Minister Martin Říman said. But he tried to temper the comments from Škoda officials.
“I don’t think there’s an imminent threat of Škoda leaving,” Říman said.
The measure will face a fierce battle in the European Union, where it must be ratified by all member states. But it has strong supporters in France and Italy.
The Czech economy has been linked to the auto industry in recent years, and that industry is currently booming.
Carmakers in the Czech Republic produced a record 855,912 cars last year, up 41 percent from 2005, with passenger cars making up 99 percent of the total, the Association of Automotive Industries (SAP) reported recently.
Škoda produced a record 556,433 units last year, and the Japanese-French consortium of Toyota, Peugeot and Citroen (TPCA) turned out nearly 300,000.
Partially as a result, Czech foreign trade posted a record 47.3 billion Kč surplus in 2006. Seventeen percent of the overall export volume was attributed to vehicles, and passenger cars on their own had a 9 percent share of the country’s overall exports.
The Škoda concern
Škoda belongs among the more environmentally friendly brands (the average Škoda’s CO2 emissions are 152 g/km).
But the bulk of sales come from its Octavia models, which emit 160200 grams of CO2 per kilometer. Last year, nearly half of the Škodas sold were Octavias.
The other major manufacturer, the Kolín-based consortium TPCA, is not as worried about the EC ruling, plant spokesman Matěj Matolín said. The TPCA plant churns out smaller cars with lower gas consumption and, thus, lower emissions. Its average car already meets the proposed regulations.
Vehicles to be produced in the Hyundai plant currently under construction, but on hold for the time being, in Nošovice, north Moravia, should also meet the EC limits.
More of the same
EC spokesman Johannes Laitenberger said the proposal will fulfill the EU’s obligations to fight global warming and maintain the competitiveness of European carmakers at the same time. But Škoda’s Jahn insisted the mere reduction of CO2 car emissions would bring little relief to the environment unless the EC also implements more complex solutions.
Laitenberger said the EC was also ready to push to raise the mandatory use of biofuels in cars, as well as regulations further limiting the sulfur levels in diesel fuels. New regulations on tires and gear boxes should also help curb emissions, he said.
Industry and Trade Minister Říman said the EC’s fight against CO2 emissions is bordering on hysteria. He said the recent measure against car producers would only make them less competitive worldwide and put a huge number of quality jobs at risk from cheaper labor to the east.
In the wake of the ruling, the government is also concerned about how the EC will respond to a call to increase the amount of emission vouchers for Czech industries. The country is seeking to increase the amount of CO2 it can produce in a year nearly 4 percent to 101.9 million metric tons (112.3 million short tons).
The government submitted the request to Brussels in January and has not yet received a response.

František Bouc can be reached at fbouc@praguepost.com


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