It was nicknamed "Diesel Summit" the emergency meeting between the German government and German manufacturers, held yesterday, to deal with the crisis around diesel emissions and engines.
Since Dieselgate in 2015 – the Volkswagen Group's emissions-handling scandal – there have been constant reports of suspicions, investigations and even confirmations that the problem was broader. More recently, announcements of banning the circulation of Diesel cars by several German cities motivated this meeting between government officials and manufacturers.
German manufacturers will collect more than 5 million cars in Germany
The result of this meeting was the elaboration of a agreement between the German manufacturers – Volkswagen, Daimler and BMW – and the German government. This agreement entails the collection of more than five million Diesel cars - Euro 5 and Euro 6 – for a software update. This reprogramming will make it possible to reduce NOx (nitrogen oxides) emissions by around 20 to 25%, according to the VDA, the German car lobby.Arndt Ellinghorst, Evercore AnalystWhat the agreement does not do is restore consumer confidence in diesel engines.
Deutsche Umwelthilfe wants to ban Diesel
The reduction should make it possible to avoid the traffic ban that some German cities planned. However, the environmental group Deutsche Umwelthilfe (DUH) claims that the agreement will reduce NOx emissions by only 2-3%, which, in the opinion of this organization, is insufficient. The DUH also claims that it will continue to pursue the objective of banning Diesel in 16 German cities through the courts.
Incentives to exchange older cars
At this same “summit” it was agreed that manufacturers will offer incentives to exchange older Diesel cars that cannot be upgraded (prior to Euro 5). BMW had previously announced that it would offer an additional 2000 euros in exchange for newer vehicles. According to the VDA, the cost of these incentives will exceed 500 million euros for the three builders, in addition to the costs of more than 500 million euros for the collection operations.The builders also agreed to invest in more charging stations for electric vehicles, and to contribute to a fund aimed at reducing NOx emissions by local governments.
Dieter Zetsche, CEO of DaimlerI understand that many people think that the German car industry is the problem. Our job is to clarify that we are part of the solution.
Outside this agreement are foreign builders, who have their own association, the VDIK, and who have yet to reach an agreement with the German government.
Increased sales of gasoline vehicles can increase CO2 levels
German industry has come under increasing pressure due to the growing scandals related to the Dieselgate and the manipulation of emission values. German manufacturers – and beyond – need diesel technology as an intermediate step towards meeting future emission standards. They have to buy time not only to introduce their electrical proposals, but also wait for the market to reach a point where electrical can guarantee a more favorable sales mix.
Until then Diesel remains the best bet, however costs are an issue. Due to its greater efficiency, resulting in lower consumption, it means 20-25% less CO2 emissions than gasoline cars. Diesel sales fall in Germany – something that is happening all over Europe – will mean, in the short and medium term, a likely increase in CO2 levels.
Weight of the automotive industry in Germany
Dealing with the diesel crisis in Germany has been a delicate act. The automobile industry represents about 20% of jobs in the country and guarantees more than 50% of the trade surplus. The share of diesel cars in the German market was 46% last year. The share of diesel vehicles in Germany was 40.5% in July this year.
Carsten Brzeski, economist ING-DibaThe importance of the automobile industry is extremely high. Volkswagen is more important to Germany's economy than Greece. The car industry has to find a solution with the government on how to deal with the issues surrounding this structural transformation.
Source: Autonews / Forbes