European manufacturers with cheaper electric cars?

European automakers are raising prices for gasoline cars and offering discounts for electric vehicles as they brace for another challenge - tougher emissions regulations that could further squeeze profits in an industry already struggling.

The European Union will drastically lower the cap on carbon dioxide emissions from cars on January 1st, meaning that most car companies will have to base at least a fifth of their sales on electric vehicles to avoid hefty fines.

However, so far this year, only 13% of all vehicles sold in the region have been electric, according to data from lobby group the European Automobile Manufacturers Association (ACEA).

“The difference is really big,” said Marc Mortureux, director of the French automotive lobby PFA.

The stricter rules are being adopted at a time when the sector is already struggling with excess car inventory due to poor sales and increasing Chinese competition, which is being pointed out by all the largest manufacturers (Volkswagen, Stellantis, etc.), which are recording decreasing profits.

Now companies will have to sell more electric vehicles, which are more expensive to produce than traditional vehicles, at a time when political and economic uncertainty and dwindling subsidies for electric vehicles are reducing consumption, Mortureux said.

In a sign of growing concerns about the rules, Stellantis CEO Carlos Tavares abruptly resigned this month, in part due to disagreements with the board over how to handle the issue.

European politicians are urging Brussels to rethink the targets with little time left until the start of the year. But carmakers have already started working hard, mainly to avoid fines that could reach 15 billion euros based on current sales, said ACEA President Luca de Meo.

VW, Stellantis and Renault have raised the prices of petrol-engined models by several hundred euros in the past two months, aiming to curb demand for cars with higher emissions and increase the appeal of more expensive electric models, analysts say.

Last month, Stellantis' Peugeot in France raised the prices of all its models by as much as €500, except for the fully electric ones. The Renault group has raised the prices of some pure petrol models, for example, adding €300 to the Clio SCE 65 or the 1.6 %, but the prices of the hybrid versions have remained unchanged.

However, raising prices may not deliver the desired effect. While higher prices for petrol and diesel cars will narrow the gap compared to electric cars, experts warn that this is not necessarily a successful recipe for a significant increase in electric car sales.