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Auto Makers Could Face Big Fines Under New European Rules

The European Union is expanding its powers to police and fine auto makers, seeking to prevent a repeat of the diesel-emissions scandal. It is introducing spot-checks on new vehicles and penalties of up to $35,394 per non-compliant car.
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Emre Peker

BRUSSELS—European Union officials agreed Thursday to expand the bloc’s powers to police and fine auto makers, seeking to prevent a repeat of the diesel-emissions scandal that exposed abuses by many local manufacturers.

Negotiators for EU governments and the European Parliament clinched a deal after almost two years of talks, agreeing to allow the bloc’s executive body—the European Commission—to audit national regulators. The move follows failure by EU members to enforce rules for the auto industry, as Volkswagen AG cheated on emissions tests and other manufacturers produced cars that didn’t comply with standards.

The deal introduces spot checks on new vehicles hitting European roads and empowers the commission to issue EU-wide recalls and fine auto makers as much as €30,000 ($35,394) per noncompliant car. That could cost European manufacturers hundreds of billions of euros in penalties if they violate EU rules on the same scale as the diesel-emission breaches.

The revamp by Brussels is part of a broader push to restore the credibility of European auto makers and regulators after U.S. authorities uncovered a long-running scheme to trick emissions tests in order to sell diesel cars that failed to meet environmental standards. Last month, the EU mandated a 30% cut in carbon-dioxide emissions from cars and vans in the decade through 2030. The move aims to force a transition by European motor companies into electric and hybrid vehicles, a market Chinese and U.S. competitors dominate.

“Dieselgate has revealed the weaknesses of our regulatory and market-surveillance system,” said Elżbieta Bieńkowska, the EU’s internal market and industry commissioner. “We know that some car manufacturers were cheating and many others were exploiting loopholes. To put an end to this, we are overhauling the whole system.”

Robots weld parts for the Volkswagen Golf 7 model at a car factory in Wolfsburg, central Germany.Photo: RONNY HARTMANN/AGENCE FRANCE-PRESSE/GETTY IMAGES

Under the new regime, the commission every five years will assess national regulators that are tasked with approving new car models. The EU executive and the bloc’s members will also regularly audit technical services that run the tests on prototype vehicles.

However, member countries, led by Germany, resisted a proposal to empower the commission to suspend services with poor performance records.

“They thought this would be an overreaction that would create additional burdens and would not necessarily improve the system,” an EU official said.

Each year, EU members will have to run various tests on one in every 40,000 new vehicles sold in their country and check the emissions performance of at least 20% of those autos. Countries with very low new-vehicle registrations will have to run checkups on at least five autos.

The compromise on monitoring new vehicles fell well short of the European Parliament’s initial proposal, as well as calls by environmentalist and consumer groups. Still, policy makers and advocacy groups said more robust surveillance would help reverse years of national-level inaction throughout the EU.

“But the proof of the pudding is in the eating,” said Julia Poliscanova, who oversees the clean-vehicles initiative at Transport & Environment in Brussels. “If the European Commission doesn’t keep a tight grip on national car regulators and check their work robustly and regularly, Dieselgate will happen again.”

The changes to approve and monitor new vehicles will help harmonize the EU-wide system, said the European Automobile Manufacturers’ Association, or ACEA. The lobbying group welcomed the revisions as balanced and said the updated regulatory framework would improve the quality of vehicle testing.

“This more robust approval and surveillance system will enable the automobile industry to regain consumer trust,” ACEA Secretary General Erik Jonnaert said in a statement.

The deal is expected to be approved by EU governments and the European Parliament.

“This new framework will help restore the credibility of the car sector,” said Kadri Simson, the Estonian economy and infrastructure minister overseeing the negotiations under the EU’s rotating presidency. “I think [it] is a balanced deal which delivers the necessary reforms.”

Related Articles

  • Volkswagen Manager Gets Prison Sentence in Emissions Case
  • Volkswagen Takes New $2.9 Billion Hit From Diesel Scandal (Sep. 29)
  • European Cities Say ‘No’ to Scandal-Tinged Diesel Vehicles (June 27)
  • More Auto and Transportation News

Write to Emre Peker at emre.peker@wsj.com

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