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<p>Road transportation is responsible for a significant part of the EU’s total CO2 emissions. Therefore, the automotive sector is subject to continuously strengthening environmental regulation. Regulation (EU) 2019/631 of the European Parliament and of the Council of 17th April 2019 sets, for the period from 2020 to 2024, an EU fleet-wide target of 147 g CO2/km for the average emissions of new light commercial vehicles and an EU fleet-wide target of 95 g CO2/km for the average emissions of new passenger cars, phasing in for 95% of vehicles in 2020 with 100% compliance in 2021. If a manufacturer does not meet given CO2 standards, the excess emissions premium (penalty) is to be charged. Value creation in the automotive sector across the supply chain is necessarily undergoing a process of change. Manufacturers of passenger cars and light commercial vehicles are forced either to face a massive penalty or to invest in the development of low-emission technology and in the change of the production portfolio towards zero- and low-emission vehicles with lower profit margins and a relatively unformed customer base. The aim of this paper is to identify how the excess emissions premium affects the value creation in the automotive industry. Our methodology utilizes the income-based valuation approach. First, we conduct an analysis of the key financial value drivers of automotive companies in the period from 2016 to 2019. Subsequently, we make a prognosis of value drivers for the future period affected by the above-mentioned regulation.</p>
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Road transportation is responsible for a significant part of the EU’s total CO2 emissions. Therefore, the automotive sector is subject to continuously strengthening environmental regulation. Regulation (EU) 2019/631 of the European Parliament and of the Council of 17th April 2019 sets, for the period from 2020 to 2024, an EU fleet-wide target of 147 g CO2/km for the average emissions of new light commercial vehicles and an EU fleet-wide target of 95 g CO2/km for the average emissions of new passenger cars, phasing in for 95% of vehicles in 2020 with 100% compliance in 2021. If a manufacturer does not meet given CO2 standards, the excess emissions premium (penalty) is to be charged. Value creation in the automotive sector across the supply chain is necessarily undergoing a process of change. Manufacturers of passenger cars and light commercial vehicles are forced either to face a massive penalty or to invest in the development of low-emission technology and in the change of the production portfolio towards zero- and low-emission vehicles with lower profit margins and a relatively unformed customer base. The aim of this paper is to identify how the excess emissions premium affects the value creation in the automotive industry. Our methodology utilizes the income-based valuation approach. First, we conduct an analysis of the key financial value drivers of automotive companies in the period from 2016 to 2019. Subsequently, we make a prognosis of value drivers for the future period affected by the above-mentioned regulation.

Selected Impacts of Regulation (EU) 2019/631 On Value Creation in the Automative Industry

Financial Internet Quarterly

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Road transportation is responsible for a significant part of the EU’s total CO2 emissions. Therefore, the automotive sector is subject to continuously...

Selected Impacts of Regulation (EU) 2019/631 On Value Creation in the Automative Industry

Published Online: Oct 11, 2021

Page range: 76 - 87

Received: Aug 26, 2021

Accepted: Sep 20, 2021

DOI: https://doi.org/10.2478/fiqf-2021-0022

Keywords
CO2 emissions, excess emissions premium, value drivers, company value

© 2021 Romana Čižinská et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Selected Impacts of Regulation (EU) 2019/631 On Value Creation in the Automative Industry

Published Online: Oct 11, 2021

Page range: 76 - 87

Received: Aug 26, 2021

Accepted: Sep 20, 2021

DOI: https://doi.org/10.2478/fiqf-2021-0022

KeywordsCO2 emissions, excess emissions premium, value drivers, company value

© 2021 Romana Čižinská et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Keywords
CO2 emissions, excess emissions premium, value drivers, company value