EMISSIONS: Mercedes Urges EC to Address EV Demand Shortfall, Emission Fines
Mercedes-Benz CEO Ola Kaellenius has called on the EC to address falling EV demand, warning that automakers risk billions in fines under stringent CO2 emission rules unless policies shift to support green investments and industry competitiveness, according to the automaker cited by Reuters.
- Automakers in the EU face potential fines of up to €15bn by 2025 if fleet emissions fail to meet CO2 limits.
- The CO2 targets were based on expectations of a significant rise in EV demand, which has not materialised. EV sales dropped 5.9% in 2024, reducing market share to 13.6%, far below the 20% needed to meet emission goals.
- Kaellenius argued that subdued EV sales were due to weak demand, not supply issues, and called for the scrapping of fines that could hinder investments in EV technology.
- EU carmakers are struggling to compete with Chinese EV manufacturers and are bracing for potential U.S. tariffs under the new administration.
- Additionally, Kallenius is advocating for a "grand bargain" with the U.S. to prevent a trade war and enhance free trade benefits.
- The EU plans a strategic dialogue involving automakers, suppliers, and trade unions to address industry competitiveness and potential job cuts.
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STIR: 118bps of ECB Cuts Priced Through '25; Lane at MNI Event Tomorrow
Euribor futures have moved away from lows alongside broader core FI this afternoon, now -2.5 to +0.5 ticks through the blues. ECB dated OIS continue to price 118bps of easing through the end of next year, implying a deposit rate of just over 1.8%.
- This level is likely below most policymaker’s best guess of the neutral rate. Although President Lagarde said the Governing council did not discuss neutral at the December meeting, several policymakers have expressed views on the concept in the days following the decision. We will send a document summarising post-decision ECB-speak tomorrow.
- Tomorrow’s regional calendar is headlined by ECB Chief Economist Lane’s webcast with MNI at 0900GMT/1000CET. Clients can register for the event here.
- Final November CPI is also due tomorrow, which is accompanied by the ECB’s underlying inflation metrics.
- On Monday, President Lagarde suggested recent progress in underlying inflation was a contributing factor in the decision to drop the ECB’s pledge to keep policy “sufficiently restrictive” in the December policy statement.
| Meeting Date | ESTR ECB-Dated OIS (%) | Difference Vs. Current Cut-adjusted Effective ESTR Rate (bp) |
| Jan-25 | 2.642 | -27.3 |
| Mar-25 | 2.327 | -58.8 |
| Apr-25 | 2.081 | -83.4 |
| Jun-25 | 1.919 | -99.6 |
| Jul-25 | 1.841 | -107.4 |
| Sep-25 | 1.781 | -113.4 |
| Oct-25 | 1.757 | -115.8 |
| Dec-25 | 1.731 | -118.5 |
| Source: MNI/Bloomberg. | ||
SECURITY: Poland To Press For Ukraine NATO Membership At EU Council Meeting
Reuters carrying comments from Polish Prime Minister Donald Tusk, speaking from Lviv, Ukraine, stating that Poland, “will do everything in our power to make Ukraine’s NATO membership a real possibility.” Tusk's comments could suggest that Poland may advocate for offering Ukraine a pathway to NATO membership for the territory still under Kyiv's control, whilst de facto recognising Russia's partial sovereignty over occupied territory in return for an armistice agreement.
- Tusk added that Warsaw, “will be opening a new border crossing between Poland and Ukraine in the next few days.”
- Ukrainian President Volodymyr Zelenskyy will attend a 19 December European Council meeting in person, with the schedule also set to include, “the EU in the world, the Middle East, resilience and preparedness, migration and foreign policy issues,” per an invitation letter from the President of the European Council, António Costa.
- Costa said: “The December European Council meeting is an important occasion to send a united and unequivocal message of support to Ukraine for a comprehensive, just and lasting peace,”
- The meeting comes as world leaders seek clarity on US President-elect Donald Trump's plans to end the war. At his first presser since the November election, Trump yesterday refused to be drawn on whether he would press Kyiv into territorial concessions and revealed he would hold calls with Zelenskyy and Russian President Vladimir Putin soon. Trump also conceded that a ceasefire in Ukraine would likely be more difficult than resolving conflict in the Middle East.
US TSYS/OVERNIGHT REPO: SOFR Jumps, ON RRP Adjustment Eyed
Secured funding rates rose Monday, led by a 5bp jump in SOFR to a fresh December high of 4.65%. This was not a wholly unexpected development, with a key quarterly tax deadline and Treasury settlements seen applying upward pressure.
- The 7bp SOFR-EFFR spread is unusually high (EFFR printed 4.58% as usual) outside a month-end date, last being this wide on Oct 31.
- As noted yesterday, SOFR and other rates are set to subside later in the week before like being pressured again at month/quarter/year-end, with an additional factor applying downside pressure including a possible/likely 5bp downward adjustment to ON RRP on Thursday post-FOMC.
- Of eight analysts who expressed an opinion, 6 saw the Fed adjusting ON RRP 5bp lower this week, versus two (Citi and Wrightson ICAP) seeing such a tweak as taking place at a future meeting.
REPO REFERENCE RATES (rate, change from prev. day, volume):
* Secured Overnight Financing Rate (SOFR): 4.65%, 0.05%, $2360B
* Broad General Collateral Rate (BGCR): 4.61%, 0.02%, $842B
* Tri-Party General Collateral Rate (TGCR): 4.61%, 0.02%, $818B
New York Fed EFFR for prior session (rate, chg from prev day):
* Daily Effective Fed Funds Rate: 4.58%, no change, volume: $99B
* Daily Overnight Bank Funding Rate: 4.58%, no change, volume: $224B
