Jaguar Land Rover expects $118M CO2 fine from European regulators

LONDON -- Jaguar Land Rover has set aside 90 million pounds ($118 million) to pay a likely European Union fine for failing to meet its CO2 emissions reduction target.

The automaker expects to miss its goal because of delays in launching new plug-in hybrid vehicles, which emit less CO2 than diesel and gasoline models.

"We are not happy that we will not be compliant in 2020, but a lot of that has been taken out of our hands," JLR Chief Financial Officer Adrian Mardell told investors during the automaker’s quarterly earnings call on Tuesday.

As part of its plans to tackle climate change, the EU requires automakers selling cars in the bloc to cut fleet average emissions of new cars to 95 grams per km this year. Each automaker has an individual target, largely based on the weight of the cars they sell.

JLR’s strategy to reach its target has been to launch more plug-in hybrid versions of its Land Rover, Range Rover and Jaguar SUV models, but the automaker hit a setback when it was forced to halt sales of the plug-in hybrid versions of its two best-selling vehicles, the Range Rover Evoque and the Land Rover Discovery Sport, due to a discrepancy over their emissions figures.

Mardell said JLR has now increased the amount it set aside  to pay potential EU penalties to 90 million pounds in the third quarter from 58 million pounds at the end of the second quarter.

The automaker expects to hit its CO2 reduction target in fourth quarter as it rolls out more plug-in hybrids.

"I believe this will be a compliance quarter and we will be in credit. We are hopeful that 90 million is the worse it gets," Mardell said. "It depends on the release of those vehicles."

Mardell said sales of plug-in hybrids and the full-electric Jaguar I-Pace would account for around 11 percent to 12 percent of JLR sales in the EU and the UK for the final quarter of 2020.

He said JLR would be compliant in 2021, although the company has previously said it could struggle to meet the UK government’s separate 2021 target, which mirrors the EU goal. 

While JLR is already bracing for a fine for 2020, analysts at PA Consulting predict the automaker will miss its target of 135 g/km for 2021, finishing next year a 135 g/km, resulting in a 93 million-euro fine.

JLR this year has opened order books for five plug-in versions of existing models, including the Range Rover Velar, Jaguar F-Pace, Land Rover Defender and the two smaller Land Rover SUVs affected by the sales stop.

A plug-in hybrid version of the Jaguar E-Pace compact SUV will also be launched, Mardell said.

The rollout of the plug-in hybrid Range Rover Evoque and Discovery Sport was halted after the SUVs' stated CO2 emissions figures rose above the original amount promised when they went on sale in April.

"Due to the impact of the COVID-19 pandemic, we are not yet in a position to deliver the previously communicated best-case WLTP combined figures," Land Rover said.

Land Rover previously said the Evoque P300e's CO2 was as low as 32 grams per km and the Discovery Sport P300e was as low as of 36 g/km.

Land Rover now says the lowest emitting model records 44 g/km and has an electric range of 43 km (27 miles), compared to 66 km previously. The automaker declined to say which model reaches those levels.

The company said it aims to improve those figures in future versions.

Mardell said it would only roll out plug-in hybrid models when they were perfect. “We are determined to bring these to market but we will not compromise quality for speed,” he said.

Ford has also said it will not meet its EU CO2 targets for 2020 after stopping sales of its Kuga plug-in hybrid following a recall for a fire risk. Ford has said it will seek to pool with another, unnamed automaker to offset its emissions rather than pay a fine.