China is not the problem Car industry must electrify - or pay up

The EU recently imposed punitive tariffs on Chinese e-cars. Switzerland is not going along with this. Car importers have bigger challenges than China - such as complying with CO₂ limits.

Switzerland has had a free trade agreement with China for a good ten years and does not participate in the EU's punitive tariffs. However, the statistics from Auto-Schweiz show that the proportion of Chinese e-cars on Swiss roads is very small anyway. Chinese brands such as BYD, Aiways and JAC account for less than one percent of new registrations.

Nevertheless, they are not insignificant for Thomas Rücker, Director of Auto-Schweiz, and could increase significantly in the coming years. "When it comes to battery electric vehicles, Chinese manufacturers are technologically ahead and can produce more cheaply than their European counterparts."

Is the e-euphoria over?

In Switzerland, the electric euphoria seems to have died down for the time being. After years of strong growth, cars that can be supplied with energy via a plug will have lost market share to the other drive classes by 2023.

Rücker puts this into perspective. The growth of cars with alternative drive systems has slowed down. "However, all hybrid systems together grew by 13 percent from January to May, and plug-in hybrids alone also grew by six percent."

However, pure electric drive is the cleanest technology - as long as the electricity comes from non-fossil sources. "Battery electric vehicles must grow faster if we want to meet the federal government's climate targets," emphasizes Rücker.

Importers must pay for too much CO₂

By the targets, he means the average CO₂ emissions of imported vehicles in Switzerland. If an importer exceeds the limit value with the average value of the cars it imports, it must pay a penalty, known as a "sanction", in accordance with the Ordinance to the CO₂ Act.

This value is currently 118 grams of CO₂ per kilometer. All importers together reached an average of 112.7 grams for cars in 2023. Higher limits apply for commercial vehicles. The Federal Office published the figures for last year at the end of June.

Next year, the limit value will fall to 93.6 grams per kilometer, a further 17 percent less. The industry can only achieve this if it sells enough electric vehicles, explains Rücker. "As part of the e-mobility roadmap, the industry wants to sell 50 percent plug-in vehicles in order to achieve this target," explains Rücker. "We're not far away from that, but we still need to make progress."

The end customer pays in the end

The penalty for exceeding the limit value can be expensive, as the Swiss Federal Office of Energy explained at the request of blue News. The federal government charges the importer 95 francs per car and gram of CO₂. If a company misses the target value by one gram of CO₂ per kilometer and has sold 1000 cars, it must pay a penalty of 95,000 francs.

For the largest importers, which sell several tens of thousands of cars a year, the penalty can run into the millions. Amag, Switzerland's number one, paid over 21 million francs in 2021. In this way, the federal government wants to encourage the industry to offer its customers cars with the lowest possible emissions.

Importers and dealers pass this fee on to their customers. Anyone who buys a car with particularly high CO₂ emissions pays more - provided the respective importer exceeds the limit value in that year. The importer calculates whether or not they will exceed the limit in the billing year and adjusts their vehicle prices accordingly. This means that those who drive heavy combustion engines have to hope that as many others as possible will buy an electric car or a small car.

Rücker sees the industry's options as limited: "Swiss car dealers import what customers want to buy." The demand for cars with alternative drive systems, especially battery electric cars, is the limiting factor. "In the beginning, demand rose quickly thanks to those who were open to the technology. But now we need to reach the masses."

Gaps in the charging infrastructure

The Director of Auto Schweiz sees the charging infrastructure in particular as an obstacle. "Customers are hesitant if they don't have their own parking space or their landlord doesn't want to know about sockets in the parking garage."

Another complication is that the various charging station providers have developed different systems: "You need three different cards and five different apps or more to be able to charge your electric car anywhere. That's not ideal." Rücker hopes that a standardized charging network that is compatible with all common vehicles will be created throughout Switzerland or, even better, throughout Europe in the next few years.

Another problem is opaque tariffs: "With today's charging infrastructure, the differences in energy prices are striking and not transparent enough - this promotes mistrust instead of trust in a new solution."

The price also prevents some people from buying an e-car. They are still more expensive than combustion engines. Chinese brands could make a difference here and expand their position. However, with the EU tariffs, they will have to produce massively cheaper in order to actually be able to offer cheaper vehicles in Europe.

As mentioned, there are no such penalties in Switzerland. Whether the small Swiss market is worth the special efforts of Chinese manufacturers is another question. The EU also has a penalty system like the Swiss one - and it operates with even lower limits.

Industry continues to rely on combustion engines

The EU wants to ensure that no new CO₂-emitting vehicles are put on the market from 2035. European manufacturers are therefore required to expand their fleets with alternative drive systems. However, the e-euphoria also seems to have subsided on the manufacturer side for the time being.

They are presenting new combustion engines and electric vehicles are less present in advertising than they were just a few years ago. Rücker denies that European car manufacturers are turning back to combustion engines. "That would be disastrous in view of the EU's sanctions regime."

The fact that petrol and diesel vehicles are still being developed further is due to the fact that electrification is not progressing as quickly as hoped for the reasons mentioned. "That's why manufacturers must also continue to develop combustion engines."

Rücker is convinced that there is a need for significant battery production in Europe. "The industry must bring more added value to Europe. This is the only way manufacturers can compete with China."

He believes importers and dealers have a duty to win over customers for electric vehicles. To this end, he is hoping for help from the energy industry, which could simplify access to charging infrastructure. And finally, the federal government could help with an incentive system to make it easier for people to switch to electric cars.