The German transport ministry is urging automakers to agree to expensive engine refits of older diesel cars so that they can avert looming driving bans in cities.
Vehicles sold before the EU’s Euro 6 standard on toxic emissions was introduced in September 2014 could be barred from major cities such as Stuttgart and Düsseldorf under a possible landmark ruling by Germany’s top administrative court, which will conduct a hearing on the matter on Thursday.
“We need refits so that the six million owners of Euro 5 vehicles have a chance to keep on using their vehicles after the decision by the Federal Administrative Court,” said a source in the Transport Ministry.
Experts agree that refits would work. In a study conducted for a ministerial working group, Georg Wachtmeister, professor of engine technology at Munich’s Technical University, concluded that installing exhaust cleaning systems in older engines would be a “very efficient measure.”
Refitting older diesel cars could cost €7.6 billion — or as much as €14.5 billion, an analyst estimates.
Car recalls are a horror scenario for Mercedes-maker Daimler, BMW and VW, including its subsidiaries Audi and Porsche. The General German Automobile Club (ADAC), the equivalent of the American Automobile Association, estimate repair costs at €1,500 to €3.300 ($1,850 to $4,070) per vehicle.
Arndt Ellinghorst, a car expert at research firm Evercore ISI, calculated minimum costs of €7.6 billion for the whole industry, which includes foreign diesel cars such as Ford, Peugeot and Toyota. But if costs end up at the upper end of estimates, the figure would almost double to €14.5 billion.
Big German cities such as Stuttgart, Munich and Cologne regularly exceed EU pollution limits. Emissions of nitrogen oxide from diesel cars are causing particular concern because doctors say they’re to blame for thousands of heart attacks each year. Faced with lawsuits by environmental group Umwelthilfe, the cities are forced to make the air cleaner. The Federal Administrative Court is expected to rule on Thursday or shortly thereafter, whether German municipalities can ban older diesel cars from urban areas to improve air quality.
Refitting older diesel cars could prevent such a blockade. Even drivers’ lobby ADAC said on Tuesday that refits would be “highly effective” and could cut toxic emissions by 70 percent in cities. The statement is remarkable, because the drivers’ lobby ADAC is usually a close ally of the German auto industry.
The figure contradicts claims from the automakers, which have been steadfastly resisting hardware refits because of the financial burden. The CEO of VW’s luxury auto unit Audi, Rupert Stadler, told Handelsblatt that repairs wouldn't be much more effective than a simple update of the engine software, which would cut toxic emissions by up to 30 percent. At a meeting with government officials last August, Daimler, BMW and Volkswagen agreed to voluntary measures including software updates and purchase premiums to encourage drivers to upgrade to new and cleaner vehicles.
Chancellor Angela Merkel’s government is starting to panic at the prospect of the chaos that may ensue from a driving ban. Retailers are warning that their business would suffer because people would stay out of inner cities, although such fears are partially overblown.
To alleviate concerns, however, the Transport Ministry has set up a number of working groups made up of representatives from the auto industry, environmental groups and scientists. One measure includes the refitting of buses run by municipal transportation authorities, which should cut their nitrogen oxide emissions by more than 90 percent.
The touchy topic of passenger vehicle repairs remains unresolved so far, and the Transport Ministry might leave it to Ms. Merkel and auto industry bosses, which plan to hold another diesel summit, possibly next month.
Car owners can’t be expected to cover the costs of refits, but manufacturers can’t legally be forced to either. Solutions suggested include setting up a fund for the purpose, with manufacturers and the government paying into it 50/50, and tax incentives for purchases of new cars in cases where refits aren’t economically viable or technically possible.
All the solutions point in one direction: Carmakers will at least have to cough up some money. The big question is how much exactly.
Markus Fasse specializes in aviation and automobile industry news and works from Handelsblatt's Munich office. Martin Murphy covers the steel, car and defense industries. Daniel Delhaes reports on politics, transport and airlines from Handelsblatt's Berlin office. Martin-Werner Buchenau reports from Stuttgart as Handelsblatt's Baden-Württemberg correspondent. To contact the authors: [email protected], [email protected], [email protected], [email protected]