1. How Can the Regulatory Framework Help to Improve the Competitiveness of the European Automotive Industry? Ivan Hodac Secretary General of ACEA FEBIAC General Assembly Brussels, 16 June 2005

2. ACEA: An Overview ACEA represents the whole European automotive industry 13 companies, CEOs members of the Board 24 National Associations as associate members 17 million vehicles produced per year 1.9 million direct jobs 19 billion in R&D investment 33.5 billion of net trade contribution 340 billion of tax revenues

3. Average car Production per 1.000 inhabitants 2005

4. ACEA Challenges ACEA represents an industry and a product that is constantly under the spot in many areas: Environment (emissions, CO2, ELV, noise…) Safety (e-safety, pedestrian, EuroNCAP…) Mobility Intellectual Property (design protection…) Tax, etc. This means we are constantly under pressure and in the public arena

5. ACEA Achievements The European Industry has made significant achievements towards sustainable mobility and is fulfilling its societal responsibilities: Reductions in emissions / CO 2 Reductions in noise (by 90% since 1970) Recyclability of cars (almost 95%) Active and passive safety (belts, ABS, ESP, airbags, …) e-Safety Mobility (navigation systems, RTTI) We should speak up about all these achievements!

6. The competitive development of the European automotive industry depends on a strong and profitable home market, requesting high market acceptance of its products! A strong home market is crucial for the industry to: Enhance Europe as a high volume and profitable automobile production location; Safeguard jobs at stake; Enhance Europes potential in the field of R&D and technological innovation. Economic Situation of the MV Industry Profitable Home Market Market acceptance Growth on third markets

7. Economic Situation of the MV Industry Today, the European market constitutes the most competitive and at the same time the least profitable market in the world! Source: Deutsche BankSource: Eurostat HICP: Harmonised Index of Consumer Prices

8. Economic Situation of the MV Industry ACEA members have lost market shares in their home market to the benefit of Japanese and Korean makers Source: ACEA 19901995200020032004 ACEA JAPAN KOREA 88,1% 11,8% 0,1% 87,8% 10,7% 1,5% 85,2% 11,4% 3,4% 84,0% 12,7% 3,3% 83,2% 13,1% 3,3%

9. The Issue of Competitiveness The EU Commission has officially recognized in its European Competitiveness Report of 2004 that it exists a link between the Regulatory Framework and Competitiveness: Clearly, the competitiveness of the automotive industry depends on a coherent and cost-effective regulatory framework […] Progress is still to be made in reducing regulatory complexity and in designing regulations so as to meet their goals while taking into account possible conflicts between regulations, their cumulative impact and their external aspects

10. EU has a higher number of automotive regulations EU has not a completed internal market EU has higher regulatory stringency and demands for the automotive industry EU has shorter lead times than the US EU has higher bureaucracy and red tape EU has a lower economic growth EU automotive market is less profitable The Regulatory Burden: A comparison with the US 10 Factors affecting the Competitiveness of the Industry

11. The regulatory burden Incoherency of EU legal requirements: Ex.1 : Fuel efficiency versus NOx emissions Ex.2: Safety requirements versus CO 2 emissions Ex.3: Pedestrian safety versus industrial design protection and CO2 reductions Consequences: - Regulatory density increases the costs of doing business in Europe! - Budget is devoted to meet new regulatory requirements (and updates) rather than to more competitiveness-orientated investments (R&D,…) - Cumulative cost resulting from legislative pressure Industry performance suffers from numerous and often un-coordinated and unbalanced EU regulations, that are interpreted and implemented differently in the various Member States!

12. Unfavourable market acceptance of EU legislation Customers are not willing to pay for features which are not for their direct interest: environment, recycling, pedestrian safety (ex.: low success of the green models of several B-cars in EU) Introduction of non-technical legislation which has or will reduce the profitability of the industry: Design protection of spare parts, distribution system, warranty New policy of the Commission to promote ratings, labels or transport policies which will add costs to the vehicle or its use (Euro-NCAP, green purchasing, road pricing,…) Factors Affecting the Competitiveness of the Industry The Regulatory Issues

13. CARS 21 In January 2005, the Commission has launched CARS 21, an innovative initiative to address competitiveness of the automotive sector : HLG composed of EU Commissioners, MEPs, National Ministers, Industry (auto, suppliers, oil), NGOs, Trade Unions and Motorists Meetings throughout 2005, leading to a final report with recommendations to improve competitiveness, reduce costs and avoid cumulative effects of regulation, draft a new regulatory framework for the next 10 years Focus on: Competitiveness, better Regulation, Environment, Safety CARS 21 is a recognition by decision-makers that regulatory issues do affect competitiveness

14. Define an efficient and competitive automotive policy process and framework Support the full and rapid completion of the Internal Market Promote an efficient R&D and innovation framework Promote an efficient European Transport Policy Promote a dynamic trade and investment environment in third countries Reinforce the Competitiveness Council so that it can more effectively and coherently fulfil its mandate CARS 21 ACEA Priorities (Horizontal)

15. CARS 21 ACEA Priorities (Vertical) CO2 emission reductions (incl. Integrated approach) Future legislation on emission standards (PCs and CVs) Safety (incl. integrated approach) Design protection for visible spare parts Taxation WVTA Framework Directive for CVs

16. Example: Design Protection The proposal to abolish design protection rights on visible spare parts, adopted by the EU Commission in September 2004, is a good example of « bad regulation »: No proper impact assessment done and little consultation with the industry No respect of review procedures contained in previous legislation Inconsistent with EU overall policy on intellectual property No proven price benefits for consumers Open door to quality and safety issues (compliance with pedestrian protection rules?) A 2,5 billion Euro present for parts producers outside the EU

17. Example: Digital Tachographs The date of entry into service of Digital Tachographs (5 August 2005) has been confirmed, but Member States and suppliers are not ready: National legislation not in place in 12 MS Tachographs Cards not in place in 15 MS Workshop Authorisation not in place in any MS Enforcement Agencies not in place in 17 MS 3 out of 4 digital tachograph producers have still not started deliveries To date the EU Commission has taken no steps to clarify the situation, despite an EP vote calling for a moratorium. Commission must have the means and the will to correct such a situation!

18. Example: CO2 Reductions So far, CO2 reductions have been achieved exclusively through technological measures put in place by manufacturers, while significant and less costly progress could be made through an integrated approach comprising: Vehicle Infrastructure Driver Other Stakeholders Situation is similar for Road Safety !

19. Example: China China is becoming an increasingly important market in the global automotive scene. European manufacturers play a key role in China, but are faced with a number of specific issues: Chinese Compulsory Certification Joint-Ventures Local Content Emissions Intellectual Property Rights This penalizes access to Chinese market. Support from the Commission is needed.

20. Prioritazion and coordination of EU policies Proper IA methodology and processes Proper and timely consultation of the industry Holistic approach to legislation Technology neutrality Split-level approach Art. 95 as legal basis Global harmonisation of technical rules Sufficient lead-time Simplification of EU legislation ACEA Better Regulation Principles

21. ACEA Three Pillars Approach Better Regulation Develop better Regulation principles on which to base effective EU automotive policy (incl. review of regulatory process) Pending Legislation Review, applying better Regulation principles, pending legislation proposals Reduce cost of legislation Future Legislation Apply better Regulation principles & pro-competitive regulatory process to all future legislation Put on hold any legislation proposal not respecting these principles

22. Conclusions CARS 21 is the first test case for a new, holistic approach to sectorial regulation Competitiveness must becomes a guiding principle of EU industrial policy and must be translated into concrete actions ! Cars need to remain affordable ! The EU needs to take into account the global dimension of the automotive market and its future challenges (China, India) Only a competitive and healthy automotive industry can continue to prosper and innovate, and to contribute to European economies and sustainable mobility !