Diesel Dilemma

Foreign Carmakers Silent on Emissions

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One in four diesel cars on German streets is foreign made. Source: Reuters/Srdjan Zivulovic

The pledges made by German automakers at last week’s diesel summit in Berlin to cut nitrogen oxide emissions to stave off city bans have put importers of foreign brands in a quandary.

They too now find themselves under pressure from Germans and the federal and regional governments to join in the national effort to clean up diesel and restore the “Made in Germany” brand.

Reinhard Zirpel, the president of the VDIK Association of International Motor Vehicle Manufacturers which represents 35 overseas brands, was sharply criticized for coming to the summit empty-handed.

“Not acceptable,” German Transport Minister Alexander Dobrindt grumbled after the meeting, referring to the VDIK’s alleged refusal to contribute. However, apart from Opel and Ford, no top-level managers from foreign makers were invited.

“We didn’t cause the diesel crisis and now we’re supposed to pay for the consequences? That’s not right.”

Foreign carmaker executive

German manufacturers pledged to adapt software in more than five million cars to reduce emissions and agreed purchase subsidies to encourage people to ditch older diesel cars and go electric or buy cleaner diesel models.

Last weekend, BMW Chief Executive Harald Krüger joined the criticism, saying the importers couldn’t shirk their responsibility given that a large number of diesel cars in Germany were foreign-made and were polluting cities as well. To be sure, some four million foreign brand diesel cars are registered in Germany. That’s around one in four diesels, including brands owned by Volkswagen, such as Seat of Spain and Czech-run Skoda.

Foreign carmakers have also been the subject of investigations over the past two years, though nothing as concrete as VW’s Dieselgate scandal or the latest admission of collusion by Germany’s three biggest carmakers. German business weekly WirtschaftsWoche, a sister publication of Handelsblatt, on Thursday reported that German authorities have been asked by the Transport Ministry to look into Ford’s Mondeo model after tests suggested some irregularities. Fiat-Chrysler and France’s Renault have also been the subject of investigations in the US and France, respectively.

Publicly, the foreign makers don’t want to comment. But they’re frustrated at being pilloried by their German rivals. “We didn’t cause the diesel crisis and now we’re supposed to pay for the consequences? That’s not right,” said one executive who declined to be named.

They’re pondering how to respond to the heated atmosphere in Germany. They know they need to react, not least to defend their market share. Market leader VW, for example, is pledging up to €10,000 ($11,700) to trade in old cars. These so-called “environment premiums” are basically discounts aimed at boosting demand.

“We expect more and more non-German brands to introduce their own purchase subsidies to avoid losing too much market share,” said Arndt Ellinghorst, an analyst at Evercore ISI.

10 p22 New Cars in Germany 2016-01

Ford and Toyota had already launched their purchase incentive programs before the diesel summit. Renault was the first importer to follow after the summit and further companies such as Opel’s new French owner PSA and Hyundai are expected to offer discounts in the coming days. Fiat too has drafted plans for discounts.

Opel is a special case because it produces its cars in Germany but needs the blessing of PSA in Paris to enter the discount battle. Opel announced a voluntary recall at the diesel summit. “We’re among the first manufacturers that initiated voluntary measures that were already started months ago,” said one Opel spokesman.

But PSA sees no need for voluntary recalls. “Our Euro 5 and Euro 6 standard vehicles fulfil the legal requirements,” said a PSA spokesman. PSA, unlike most other manufacturers, already publishes the emissions of its diesel vehicles under real driving conditions rather than in laboratory tests.

Not all foreign brands have performed well in recent street tests, though. Brands including Fiat, Renault, and Jaguar Land Rover have been found to emit significantly higher levels of nitrogen oxide when tested in realistic conditions. But the companies continue to insist that they obeyed the law.

No foreign manufacturer has stated an interest in joining Germany’s planned €500 million mobility fund.

So far, no foreign manufacturer has stated an interest in joining Germany’s planned €500 million ($587 million) mobility fund to promote sustainable transport projects in cities. One executive complained that it was “nebulous” what the fund’s money would be spent on. German manufacturers have voiced similar misgivings. But in the end, some foreign brands may sign up to the fund.

“We’re happy to sit down for talks on defining gaps and closing them,” Ford’s head of German operations, Gunnar Herrmann, recently told Handelsblatt.

Firms may have agreed to sign up to some of the measures if they had been invited to the Berlin summit, executives said. “We’ll cooperate in the working groups to optimize the avoidance of nitrogen oxide,” said the VDIK. The aim is to dispel the impression that they’re leaving the diesel mess for the Germans to sort out.

 

Daniel Delhaes reports on politics, transport and airlines from Handelsblatt’s Berlin office. Lukas Bay is an editor with Handelsblatt’s companies and markets desk. To contact the authors: delhaes@handelsblatt.com and bay@handelsblatt.com 

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