How the Car Is Changing

Cars are changing. And not only in mature economies, but also in emerging economies like India, China, Russia, or Brazil. The main driver of this change is concern for the environment, starting with emissions reductions. To measure the latter, the indicator is grams of carbon dioxide per kilometer driven emitted by a car. CO2 emissions also express a car's efficiency: the lesser emissions are, the lower gas consumption is. To traditional consumer expectations in terms of active and passive car safety, ecological priorities have now been added.

In Europe, the car industry must pursue the targets set by EU directives: by 2020, newly matriculated cars will have to have to emit, on average, a maximum of 95 gCO2/km. The latest Geneva Motor Show, which ended on March 17, was a further proof of this. Two examples can highlight the new trend. After 10 years of prototypes, Volkswagen presented the XL1 for sale: it can run for a 100 km with just one liter of diesel fuel causing emissions of just 21 gCO2/km. This result was made possible by reduced mass, excellent aerodynamics and the combined use of a small two-cylinder engine coupled with an electrical unit. These are features that, mutatis mutandis, can also be found on the latest Ferrari model, the first hybrid ever made by the Maranello sports car firm. In this case, emissions have been cut by 40% with respect to the Enzo, the leading model a decade ago.

Grams of CO2 released per km are now not only part of marketing, but performance targets for the whole car industry. And such intense commitment has brought results. In Italy, in terms of emissions new cars sold have gone, on average, from 147.3 gCO2/km in 2006 to 126.3 del 2012 (UNRAE data).

If lower emissions means lower gas consumption, the impact can be seen on the demand side. Looking at the January 2002 – December 2010 period, we can see that gasoline consumption dropped from 16Mt per year to a bit less than 10Mt, while consumption of diesel fuel rose from 21.5 to over 25M tons, with a clear substitution effect (Italian Ministry for Economic Development data).

And over the last two years, the trend has gotten stronger: in December 2012 gasoline consumption was at a 8.4Mt low, diesel fuel at 23.4, also because of the crisis and reduced transport flows of goods.

All this has determined an unforeseen, paradoxical, and worrisome effect on government coffers: in December 2012 and in January 2013, tax receipts deriving from the sale of car fuels have contracted, by 7.2% and 5.2% respectively, although fiscal pressure remained constant.