UNPOPULAR DIESEL Diesel Crisis Intensifies

Threats of bans on diesel vehicles have pressured carmakers to find a technical fix. But the real threat could be financial, as demand plummets.

Stuttgart is ground zero for Germany’s growing diesel crisis, which saw sales of diesel-powered cars plummet 19.3 percent in April. The south-western city has the worst air pollution in the country, and is also home to two of Germany’s most prestigious automakers, Porsche and Daimler, the maker of Mercedes. In addition, Stuttgart is the capital of the federal state of Baden-Württemburg, governed by a coalition led by the popular local Green party.

The state’s Green transport minister, Winfried Hermann, has put himself at the forefront of the fight against air pollution. No fan of the internal combustion engine, he has in the past spoken out passionately for a “world without stinking cars,” and a “decarbonization” of Germany’s cities. Now he is a key supporter of the city’s proposed partial ban, beginning 2018, on diesel-powered vehicles, which would prevent many cars from driving on pollution-heavy days. If that hastens the end of diesel fuel, then so be it: “The air pollution plan is not a plan to save diesel,” says Mr. Hermann.

Winfried Kretschmann, Baden-Württemburg’s state premier, is more conciliatory. In the coming weeks, he will begin consultations with the leaders of Germany’s top automakers. He will press them to accelerate the search for a technical fix – a filter system is one proposal – which could be a temporary solution until combustion engines are displaced by electric motors.

Cities will do everything they can to avoid vehicle bans. They don’t want to paralyze urban traffic. Helmut Dedy, managing director, German Association of Cities

The problem goes far beyond Stuttgart. In 40 urban areas, air pollution levels regularly exceed allowable levels, particularly emissions of soot and nitrogen dioxide, with diesel-engine cars widely seen as a major cause. Across the country, more than 240 local authorities have implemented air pollution control plans, the German Association of Cities has confirmed. Frequently, these are responses to court rulings, which insist on action to ensure statutory health standards.

Bans are an unwanted last resort, but may be unavoidable. “Cities will do everything they can to avoid vehicle bans. They don’t want to paralyze urban traffic,” said Helmut Dedy, managing director of the German Association of Cities. “But if nitrogen dioxide levels continue, we fear some kind of limited bans,” he added.

German cities began to take serious measures against air pollution over a decade ago. But diverting trucks, building bike paths, and planting trees had limited success. In 2007, Berlin became the first city to introduce “environmental zones,” which ban cars that fail minimum environmental standards. Since then, soot levels are down 60 percent and nitrogen dioxide has fallen by 20 percent. Now the city is a major backer of a plan by which the federal government would introduce a “blue badge” to identify non-polluting cars, allowing the easier introduction of much wider environmental zones.

The problem came sharply into focus with the so-called “Dieselgate” scandal in 2015. This revealed that Volkswagen and a number of other manufacturers manipulated emissions testing data in order to make diesel vehicles falsely appear compliant with environmental standards. In fact, it turned out that diesel-powered cars were – and often still are – emitting no less than seven times the permitted level of nitrogen dioxide.

The legality of diesel bans is currently awaiting a judgment from the Federal Administrative Court, due by the end of this year. The judges must decide on the balance to be struck between health standards and the unequal restrictions on free movement that diesel bans could impose.

A Handelsblatt survey of Germany’s twenty largest cities has revealed that diesel bans are high on the agenda in most, but are seen as an undesirable weapon of last resort. One Stuttgart official said: “Driving bans impact the freedom of citizens. It would be better to avoid them.” But given health concerns, a solution was needed: “The ball is in the car manufacturers’ court,” he added. The northern port city of Hamburg is under pressure from a local court decision which ordered the city to cut its dangerous pollution levels. A new action plan has been prepared, which will include possible diesel bans on two major roads.

Very few cities – the north-western city of Wuppertal is one – completely rule out bans. Many, like the former capital Bonn, are holding off on diesel bans until the legal situation is clarified. Others, including Bremen, Leipzig, Munich and Nuremburg, support the nationwide introduction of the blue badge, as a basis for local schemes to limit diesel-powered vehicles. In the post-industrial Ruhr areas, cities including Bochum, Duisburg and Essen are keen to jointly impose expanded environmental zones, on the Berlin model, which would cover whole regions.

The car industry, widely condemned for its shady practices on data manipulation, is now under severe pressure to come up with solutions. But there are no less than 15 million diesel-powered vehicles on German roads, and any technical solution will be enormously expensive. The Association of German Chambers of Industry and Commerce, or DIHK, points out that more than two thirds of all commercial vehicles are diesel-powered. Bans could cost industry more than €5 billion, they claim. The federal environment ministry has pledged funds to help any transition, but its plans are on hold, with a general election is just three months away.

Diesel-powered cars have dropped from 50 percent of all cars sold in November 2015, to just 41.3 percent today

The car industry highlights another problem. Technical fixes, like filters, might reduce some pollutants, like nitrogen dioxide, but could also sharply decrease fuel efficiency, increasing carbon dioxide emissions. Diesel emits between 15 and 25 percent less carbon dioxide than petrol-driven engines, say manufacturers. So a wholesale shift away from diesel could harm efforts to slow climate change.

Although diesel-powered car sales held up well in the wake of Dieselgate, April’s sharp drop in sales indicates increasing wariness among consumers. As well as the prospect of bans, buyers also have serious reservations about the resale value of new diesel-engine cars. In terms of market share, diesel-powered cars have dropped from 50 percent of all cars sold in November 2015 to just 41.3 percent today. The trend is now widespread across Europe: in the UK, sales also plummeted in April, down 27.3 percent.

The financial question is becoming a genuine anxiety for the car industry. In recent years, an increasing proportion of new cars have been leased to customers by manufacturers or have loan financing provided by their banking arms. In other words, in financial terms, many cars on the road are assets on their books. A collapse in the resale value of millions of diesel-engine cars could do grave damage to their balance sheets.

 

Daniel Delhaes reports on politics, transport and airlines from Handelsblatt's Berlin office. Markus Fasse specializes in aviation and automobile industry news and works from Handelsblatt's Munich office. Silke Kersting reports for Handelsblatt from Berlin, focusing on consumer protection, construction, environmental policy and climate change. To contact the authors: [email protected], [email protected], [email protected]