DIESEL SUMMIT

Band-Aid Fix for Germany's Emissions Problem

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The diesel industry is running on fumes. Picture source: Reuters

A summit meeting of German car manufacturers and government officials is being held in Berlin Wednesday to adopt a rapid solution to the problem of pollution from diesel cars, with both sides already agreed on an emollient message that the 15 million diesels on Germany’s roads will be quietly and efficiently brought up to standard, retaining their value and ability to drive everywhere.

But the conference being held at the German Transport Ministry might be faulted for addressing the wrong problem, in the view of analysts. A better question might be: Why have German carmakers and politicians squandered the country’s technological know-how on outdated diesel technology and failed to adequately promote non-polluting battery powered electric vehicles?

Early indications from government ministries was that a kind of Band-Aid solution will be adopted at the meeting, which will be attended by Germany’s major carmakers – VW, BMW, Daimler, Ford, Opel and officials from the states where the manufacturers are located and the states where pollution is the worst, as well as federal transport and environment ministers.

“The pace that the world has shifted into electric vehicles has been much greater than the German industry wanted and hadn’t anticipated”

Peter Wells, Analyst, Automotive Industry Research Center, University of Cardiff

According to government sources interviewed by Handelsblatt, ministers are prepared to accept a quick fix involving adoption of software changes in vehicle pollution control systems that will reduce exhaust emissions by about 25 percent. The software change, which will be paid for entirely by the industry, is believed enough so that cities like Stuttgart can reduce nitrogen oxide emissions sufficiently to avoid being fined by the European Union for allowing air pollution to exceed legal limits.

Stuttgart has been considering imposing a driving ban for diesel cars and trucks beginning January 1, a prospect that both carmakers and politicians in Berlin view with horror because nearly half the cars in Germany are diesel and their owners are preparing to vote in eight weeks in national parliamentary elections.

If the driving ban is allowed to go into effect, carmakers fear that sales of diesel cars will plummet. Politicians meanwhile are hearing from angry constituents that they fear their diesels, which the government subsidizes, will now lose their resale value, leaving them less well off, or they won’t be able to drive to work.

The government has drawn up a press statement, which has been seen by Handelsblatt, that seeks to reassure diesel owners that they don’t need to worry about driving bans or the value of their cars. Carmakers will commit themselves to cleaner air by the end of 2018, the sources said.

Taken off the table was a proposal that the government force carmakers to install new exhaust control devices. According to the sources, the companies are still developing the next generation equipment and it isn’t ready to be installed.

It was unclear what fate awaited a proposed €500 million  ($590 million) fund to pay for non-polluting vehicles like trollies and electric garbage trucks in the cities. The fund, which was supposed to be funded by the federal government and carmakers equally, has met last minute resistance from the manufacturers.

“In the past, there was a lot of self-regulation in the industry and a lot of trust because these were big, powerful companies...”

Peter Wells, Analyst, Automotive Industry Research Center, University of Cardiff

While the focus at the Berlin summit is on corrective measures for the diesels, auto industry analysts have been shocked about how quickly the industry, which accounts for more than 10 percent of German GDP, has fallen behind in innovation.

“The Germany industry and government were relatively slow to embrace battery electric technology,” said Peter Wells, a professor at the Center for Automotive Research at Cardiff University in Wales. “They were late with incentives and government-supported research and development not only in electric vehicles but also hybrids.”

In contrast, he noted, Britain declared last week that gas and diesel powered cars will not be allowed after 2040, trying to push the industry into developing cleaner cars.

“The pace that the world has shifted into electric vehicles has been much greater than the German industry wanted and hadn’t anticipated,” Mr. Wells said. “They have already been left behind to some extent and they are working hard to catch up.”

Germany’s headache now is that if it moves away from diesel cars too quickly, the country will not be able to meet restrictions on carbon dioxide emissions, which diesels emit much less of than gasoline powered cars.

Another issue is whether car companies can afford to make the necessary investments in the latest technology. Mr. Wells noted that VW had been fined $16 billion for installing cheating software on its pollution control devices in diesel cars sold in the United States and was forced to make cost cuts as a result. A looming antitrust investigation threatens them and other German carmakers with even more fines.

Mr. Wells said the crisis at VW has rippled throughout the German industry and even abroad to Fiat and Renault where diesel cars have come under suspicion. He noted that Mercedes had recently been forced to recall three million diesel cars for a problem that had existed for years quite unnoticed by anyone.

“In the past, there was a lot of self-regulation in the industry and a lot of trust because these were big, powerful companies and officials felt ‘they knew what they are doing and we can rely on them to be honest and reliable,’” Mr. Wells said.  “The regulators and the politicians are no longer quite so trusting and are going to force a lot more of these actions in the future.”

 

Daniel Delhaes reports on politics, transport and airlines from Handelsblatt’s Berlin office. Charles Wallace is a reporter for Handelsblatt Global based in New York City. To contact the authors: delhaes@handelsblatt.com

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