Soaring SUV sales may contribute to climate change

‘Consumer preferences for SUVs could offset the benefits from electric cars’: the International Energy Agency.

US manufacturing - reuters
A worker assembles an X model SUV, which BMW says accounts for 44 percent of the brand's sales [File:Charles Mostoller/Reuters]

Soaring demand for SUVs drove record sales last year for premium automakers including BMW and Mercedes, leaving the industry on a collision course with government efforts to tackle global warming despite big investments in electric vehicles.

BMW said on Friday that deliveries by its main luxury brand rose two percent to a record 2,168,516 vehicles last year, thanks to a 21 percent jump in sales of its “X”-branded sport utility vehicles (SUVs), which now make up 44 percent of the BMW brand’s global sales.

At Mercedes-Benz, the world’s best-selling premium car brand, every third luxury car sold last year was an SUV.

Automakers across the world are investing billions in electric vehicles to try to meet tougher emissions regulations. But the jury is out on how many drivers will buy them.

“Consumer preferences for SUVs could offset the benefits from electric cars,” the International Energy Agency (IEA) warned in its November World Energy Outlook 2019 report.

The IEA said a doubling in market share had seen emissions from SUVs grow by nearly 0.55 gigatons of carbon dioxide (CO2) during the last decade to roughly 0.7 gigatons.

As a result, SUVs were the second-largest contributor to the increase in global CO2 emissions since 2010 after the power sector – ahead of aviation, trucking, and heavy industry including iron and steel, cement and aluminium, the IEA said.

There are now more than 200 million SUVs around the world, up from about 35 million in 2010 and accounting for 60 percent of the increase in the global car fleet since 2010, IEA data shows.

“If the popularity of SUVs continues to rise in line with recent trends, this could add another two million barrels per day to our projection for 2040 oil demand,” noted the IEA report.

The German carmakers say their vehicles are among the most fuel-efficient available, thanks to hybrid and other technologies, adding customers could also choose to buy smaller, more frugal cars instead of SUVs.

Both BMW and Mercedes-owner Daimler say they aim to achieve new sales records in 2020 and are preparing to launch fully electric SUVs: the BMW iX3 and Mercedes-Benz EQC, which they say shows a commitment to a cleaner future.

Efficiency gains

While acknowledging the growing popularity of SUVs, Germany‘s powerful VDA auto industry association said much of the demand was for more efficient models.

“Only just under five percent of SUVs are large luxury class vehicles. The market success of the SUV segment is mainly due to the model offensive in compact and medium-sized SUVs, with correspondingly lower fuel consumption,” VDA said on Thursday.

The newly registered SUVs of German group brands had reduced their CO2 emissions by 35 percent since 2008, it added.

European Union lawmakers agreed in December 2018 that automakers had to cut CO2 emissions from cars by 37.5 percent by 2030 from 2021 levels, in addition to a 40 percent cut between 2007 and 2021, or face fines.

Evercore ISI analysts say the average German auto fleet emission is still too high at around 124 grams per kilometre in Europe, compared with the average limit of 95 grams per kilometre for 2020.

“The current CO2 performance is simply not good enough, and we continue to flag that carmakers run the risk of facing considerable fines if more is not done,” the analysts said in a note.

Electric and hybrid vehicles made up only 3.9 percent of new European sales in the third quarter of 2019.

BMW plans to launch 25 hybrid and electric cars by 2023, with more than 12 models being fully electric versions.

By 2025, half of all its cars are expected to be hybrid or electric vehicles, it said.

Mercedes expects half of its sales to be hybrid or electric by 2030, with Europe reaching the 50 percent mark in 2025.

Peter Fuss, a partner at EY, said German carmakers pushed sales of higher-margin SUVs last year ahead of the introduction of the more stringent European clean air rules in 2020.

In the fourth quarter of 2019, there was an unusually large rise in commercial registrations in Germany, Italy, and the United Kingdom compared with figures for private consumers, in a sign that carmakers were pushing more polluting models into the market.

“We will not see the same growth rates in this segment as we did last year,” Fuss said.

Electric car registrations are expected to take off in mid-2020, he added.

Source: Reuters