Why Nissan is moving from the internal combustion engine in Europe

The chief operating officer of Nissan on Tuesday explained that his company has decided to move away from the development of new internal combustion engines in Europe once a tougher set of emissions standards, known as Euro 7, come into force.

During an interview with CNBC’s “Squawk Box Europe,” Ashwani Gupta laid out some of the reasons behind the planned shift, a subject he has addressed a number of times in the past.

A key reason behind the decision, Gupta said, related to how competitive ICE cars would be following the introduction of Euro 7, given that new technology would have to be used for these vehicles to comply with regulations. Another factor to consider was whether customers would be willing to pay for the cost of such tech.

According to Brussels-headquartered campaign group Transport & Environment, it’s expected that Euro 7 standards will be implemented in 2025. From Gupta’s comments, it would appear Nissan has made its mind up on how the market will develop and European consumers will behave going forward.

“If the total cost of ownership of battery electric cars at Euro 7 is less than the total cost of ownership for the ICE cars,” he said, “[then] definitely, customers will go for battery cars. So that’s why we’ve decided not to develop ICE engines, starting [from] Euro 7, for Europe.”

Gupta was also keen to stress that the decision related to the development of new ICE engines, rather than those already in the market.

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The above remarks echo comments from Gupta during a question and answer session earlier in the day.

Nissan, he explained, believed customers would have to pay “much more” for an ICE car than an electrified one at the time of Euro 7’s introduction. “It’s not us who is deciding, it’s customers who will say that the electric car has more value than [an] … ICE car.”

Away from Europe, Gupta said the Japanese automotive giant would “continue to do ICE engines as far as it makes sense for the customer and for the business.”

Last November, Nissan said it would invest 2 trillion Japanese yen ($17.3 billion) over the next five years to speed up the electrification of its product line.

The company said it would aim to roll out 23 new electrified models by 2030, 15 of which will be fully electric. It is targeting a 50% electrification mix for its Nissan and Infiniti brands by the end of the decade.

Nissan is one of several well-known companies pursuing an electrification strategy. In March 2021, Volvo Cars said it planned to become a “fully electric car company” by the year 2030. Elsewhere, BMW Group has said it wants fully electric vehicles to represent at least 50% of its deliveries by 2030.

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These moves come at a time when major economies around the world are attempting to reduce the environmental footprint of transportation.

The U.K., for example, wants to stop the sale of new diesel and gasoline cars and vans by 2030. It will require, from 2035, all new cars and vans to have zero tailpipe emissions.

Elsewhere, the European Commission, the EU’s executive arm, is targeting a 100% reduction in CO2 emissions from cars and vans by 2035.

Tuesday also saw Nissan report an operating profit of 191.3 billion yen, or roughly $1.65 billion, for the period between April and December 2021. Net income hit 201.3 billion yen in the first nine months of the fiscal year.

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