Volkswagen Group expects to be fined by the European Union this for failing to achieve its 2020 mandated target for reducing CO2 emissions from its new-car fleet -- despite the automaker's "pooling" deal with Chinese-owned UK brand MG Motor.
"We cannot provide a clear commitment at this point that we will achieve compliance. It will be a difficult race," VW Group sales chief Christian Dahlheim said during the automaker's third-quarter earnings call on Oct. 29.
VW had hoped its new ID3 full-electric compact hatchback would help ensure carbon compliance, but software issues plagued its September launch. Orders for the ID3so far were slightly over 40,000 cars, according to Dahlheim.
VW's finance chief, Frank Witter, told financial analysts that the automaker has set aside funds to cover the likely costs of the fine.
"We have (booked) a couple hundred million in provisions to be on the safe side," he said.
Witter said the fine would only represent a “snapshot” in time because the automaker was “quite comfortable” about compliance next year and longer term for the European market.
Through 2029, Volkswagen will have launched 75 different full-electric models across the group's brands which include Porsche, Audi, Bentley, Skoda and Seat, and sold a cumulative 26 million battery-electric vehicles, mainly built on its MEB architecture.
"Certainly it would be great to already be compliant in 2020, but we are talking a ten-year horizon at the end of the day," Witter said. "If there was a small miss, it would not be great, but it would not be the end of the world."
Since VW already provisioned for the eventuality — an accounting measure only allowed when a cost is deemed likely — earnings in the fourth quarter would not be affected. "There is no negative EBIT effect to be expected. Any risk which potentially could occur has been taken care for," Witter told analysts.
