European automotive giants Stellantis and Renault are advocating for adjusted, less stringent regulations on small cars, a move they say could substantially reduce prices and safeguard the future of compact vehicle production in Europe. This push could benefit not only these major players but also popular models like the Skoda Fabia and Volkswagen Polo.

The Regulatory Landscape

Currently, European emission standards apply uniformly to all passenger cars, irrespective of size or level of electrification. This one-size-fits-all approach, covering both pollutant emissions and CO₂ levels, disproportionately impacts smaller, more affordable vehicles. While all new car prices are rising due to these regulations, the effect varies. Larger cars face penalties for exceeding fleet emission limits, while smaller cars require expensive exhaust cleaning technologies to comply.

The Call for Change

Renault Group and Stellantis Group, as reported by the French newspaper Le Figaro, argue that regulations should differentiate between small and large cars.They propose that the European Union should offer regulatory advantages to small cars, as the declining profitability in this segment threatens production and could lead to factory closures.

What we want are different regulations for small cars. Too rules are developed for larger and more expensive cars,which means we can’t build smaller cars with acceptable profitability.
Lucu de Mea, head of the Renault group

Geopolitical Implications

The effort to change these regulations is expected to be spearheaded by Italy, France, and Spain, where small car sales are most prevalent. Renault and Stellantis, holding a combined 30% of the market share, heavily invest in the progress, production, and sale of small cars to European customers. In contrast, German brands often prioritize exports.

Criticism of Current Regulations

The current regulatory framework has faced criticism for favoring larger, export-oriented manufacturers. According to industry leaders, these rules have made European cars more complex, heavier, and expensive, pricing many consumers out of the market.

Europe is vital to them, but their priority is export. Over the past 20 years it has been their logic that dictated regulation. As a result, European rules make our cars more complex, heavier and more expensive, and most people cannot afford them.
de Meo

The Stakes

John Elkann, temporary boss of Stellantis, described European new car sales as being at disastrous levels and emphasized the strategic importance of specific regulations for small cars. He warned of potential unpleasant decisions within the next three years if the current trajectory remains unchanged.

Wider Impact

The Renault Group, which includes Dacia, specializes in producing affordable vehicles. Stellantis also boasts strong brands in this segment, such as Peugeot, Citroën, lancia, and Fiat. reducing the sale price of small cars would benefit not only these brands but also models like the Czech Škoda Fabia and Volkswagen Polo.