Is the future getting cloudy for diesel in Europe?
VW, Daimler, BMW escape deep concessions in rescue pact
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.
Matthias Mueller, left, chair of Volkswagen, Harald Krueger, CEO of BMW, Dieter Zetsche, chair of Daimler in Berlin on Wednesday.