Is the fu­ture get­ting cloudy for diesel in Europe?

VW, Daim­ler, BMW es­cape deep con­ces­sions in res­cue pact

The Hamilton Spectator - - BUSINESS - ELIS­A­BETH BEHRMANN AND BIRGIT JENNEN

Volk­swa­gen, Daim­ler and BMW agreed to up­grade more than five mil­lion newer diesel cars in Ger­many and offer trade-in re­bates on older mod­els, avoid­ing more costly reme­dies in a bid to sal­vage diesel tech­nol­ogy and avoid driv­ing bans in cities.

The deal, hashed out at an emer­gency sum­mit in Ber­lin on Wed­nes­day, largely sticks to com­mit­ments that the au­tomak­ers had al­ready made and al­lows them to dodge ex­pen­sive hard­ware re­calls, which would have bal­looned costs. About half the re­calls have al­ready been car­ried out as part of Volk­swa­gen’s re­sponse to its cheat­ing scan­dal. The agree­ment also in­cludes au­tomaker par­tic­i­pa­tion in a fund to pro­mote sus­tain­able trans­port in cities.

“What the agree­ment doesn’t do is re­store con­sumer con­fi­dence in diesel engines,” said Arndt Ellinghorst, a Lon­don-based an­a­lyst with Ever­core ISI. “Two years into the VW diesel scan­dal, hav­ing learned about the short­com­ings of bench emis­sion test­ing and ways to trick the sys­tem, con­sumers rightly de­mand new tech­nolo­gies.”

Top ex­ec­u­tives from the Ger­man auto in­dus­try were sum­moned to face off with min­is­ters and state lead­ers amid a steady drum­beat of neg­a­tive news about diesel pol­lu­tion, di­al­ing up con­cerns over the tech­nol­ogy’s im­pact on ur­ban air qual­ity. The man­u­fac­tur­ers agreed to ab­sorb the costs of the up­grades, which they said wouldn’t di­min­ish per­for­mance, fuel us­age or dura­bil­ity.

The aim of the fixes, which also in­volve ve­hi­cles from PSA Group’s Opel brand, is to cut emis­sions of smog-in­duc­ing ni­tro­gen ox­ides by 25 per cent to 30 per cent on av­er­age, the Ger­man auto in­dus­try lobby VDA said.

“Our goal is to im­prove diesel rather than ban it,” Daim­ler chief ex­ec­u­tive of­fi­cer Di­eter Zetsche said in an emailed state­ment. “As long as e-cars still have a small mar­ket share, op­ti­miz­ing diesel is the most ef­fec­tive lever to reach cli­mate tar­gets in road trans­port.”

There’s a lot at stake for all sides. Ger­man au­tomak­ers need diesel as a stop­gap tech­nol­ogy to buy time to catch up with the elec­tric of­fer­ings of Tesla and Nis­san.

Diesel was once the call­ing card of Ger­man auto-en­gi­neer­ing prow­ess, with the in­dus­try boast­ing about the tech­nol­ogy of­fer­ing more power while emit­ting about 15 per cent less car­bon diox­ide than equiv­a­lent gaso­line engines.

Ger­man politi­cians in turn heav­ily backed diesel for decades with tax in­cen­tives that make the fuel cheaper at the pump. That all started com­ing crash­ing down in Septem­ber 2015 fol­low­ing Volk­swa­gen’s ad­mis­sion that it duped reg­u­la­tors and con­sumers for years with diesels rigged to cheat on emis­sions tests.

“We’re in a very tough spot here, and it’s the car in­dus­try that’s re­spon­si­ble for this. There’s been cheat­ing go­ing on,” Stephan Weil, the prime min­is­ter of Lower Sax­ony and VW su­per­vi­sory board mem­ber, said in an in­ter­view with N24 tele­vi­sion in Ber­lin.

The tur­moil com­pounds an al­ready tense sit­u­a­tion for the in­dus­try which is also strug­gling with the switch to elec­tric cars and adding self-driv­ing fea­tures, while new chal­lengers Tesla, Uber and Ap­ple ready strate­gies to grab a slice of fu­ture prof­its.

ST­EFFI LOOS, GETTY IM­AGES

Matthias Mueller, left, chair of Volk­swa­gen, Har­ald Krueger, CEO of BMW, Di­eter Zetsche, chair of Daim­ler in Ber­lin on Wed­nes­day.

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