European car firms call for €40bn green bailout

The European auto industry has today announced that it is to lobby the EU for a €40bn (£31bn) "green" bailout package designed to stimulate demand for new cars and help fund the development of low carbon vehicles.

Having seen its attempts to delay proposed car emission standards for 2012, rejected last month by the European Parliament's environment committee, the European Automobile Manufacturers' Association (ACEA) is now calling on the EU to help fund its members' efforts to comply with the new rules.

Under the EU's proposals, manufacturers will be required to cut average car CO2 emissions by a fifth to 130 grams per kilometre from 2012 or face hefty fines.

Manufacturers, particularly those in Germany which tend to make larger cars than their French and Italian counterparts, have argued that the length of new car development cycles means they will struggle to comply with the rules from 2012.

Now the industry claims that the best way to ensure the new targets are met is for the EU to provide €40bn in low interest loans to help fund low carbon vehicle research and development programmes.

The ACEA is also calling on Brussels to introduce incentives for drivers to scrap cars that are more than eight years old in an attempt to accelerate the shift towards cleaner vehicles and stimulate consumer demand for cars at a time when the economic slowdown is beginning to affect the market.

The trade group claimed that across the 15 original EU members, cars older than eight years represent 36 per cent of the existing fleet and that their replacement with new cars would save 20 megatonnes of CO2 emissions a year, equivalent to 4.5 per cent of total passenger car emissions.

"Car makers face increasingly hesitant consumers and call on governments to respond, stimulate the economy, relieve the credit crunch and restore consumer confidence," said Christian Streiff, president of the ACEA and chief executive of PSA Peugeot Citroën. "Only then will consumers have the means and the confidence to invest in new vehicles. The proposed loans-package will give an important and welcome signal to consumers and financial markets."

He added that over the past decade, new car CO2 emissions have been cut by 14 per cent, and that while this progress would continue the industry believed " governments can do more to support our already significant investments and growing number of achievements".

The calls for a "green" bailout follow similar plans in the US for a $25bn (£14bn) package of low interest loans designed to help manufacturers accelerate the development of low carbon vehicles.

Legislators are considering the plan which would aim to help major US manufacturers such as Ford, GM and Chrysler meet recently introduced rules requiring them to improve fuel efficiency across their fleet by 40 per cent by 2020.