The German government has proven its deep understanding of the importance of the auto industry to the economy, especially as it is the single largest export segment and offers employment to thousands.
So, when the government sits down with industry to solve the after effects of the ‘dieselgate’ scandal in the US, it does not follow the path of the US government and levy back breaking fines. Instead, it chooses to use that money to a better end.
The diesel summit between the lawmakers and auto makers brought about a call to action that is markedly different than the punitive approach taken by the US Government. While most existing customers of newer diesel powered cars will be offered a software upgrade to clean up the NOx outputs in real life conditions, there is an acknowledgement that the bulk of older engines can not be addressed by such a fix. However, the public perception against diesel usage, especially in urban centres now necessitates a quick fix solution, especially when various cities are planning to implement driving bans.
Barbara Hendricks, environment minister, said after the Berlin meeting that the government “expects a new culture of responsibility” from the carmakers. “People have a right to clean air.” The summit brought together government ministers, regional leaders and the chief executives of the VW, BMW and Daimler, parent of Mercedes-Benz.
Various automotive companies have announced schemes to partner the government’s need to clean up the road fleet. Volkswagen and Audi have announced a price incentive of up to 10,000 Euro if the buyer can show that his or her car (Euro 1 to Euro 4 rated) is being scrapped at the same time. At the base of the offer is a discount of 2,000 Euro.
“Volkswagen is convinced that clean, efficient diesel engines with highly advanced exhaust gas treatment systems are an indispensable powertrain technology for reaching carbon dioxide emission targets,” said Jürgen Stackmann, Member of the Board of Management of the Volkswagen brand responsible for sales and marketing. “At the same time, we want to forge ahead with the changeover to e-mobility.”
The company plans to offer free software upgrades of its Euro 5 and 6 cars – reducing levels by 25 to 30%. At the same time it will be promoting its e-mobility solutions, trying to switch customers to modern electric or hybrid solutions.
Audi’s approach covers an incentive between 3 to 10,000 Euro for cars up to Euro 4, but is also linked to the powertrain of the car they are buying. The aim is to incentivise customers move to a plug-in hybrid or a g-tron compressed natural gas unit. This is linked to meeting the government’s conditions for an ‘environmental bonus’.
While observers have commented on the government’s lax approach to the industry, in many ways this scheme mirrors the previous trade in scheme offered in the heydays of the financial crisis, which helped the German automotive industry weather the economic downturn.
The scale of Porsche’s offering is limited to 5,000 Euro, while BMW has again linked their offer of 2,000 Euro to buying a BMW i3, a plug-in hybrid or a Euro 6-standard vehicle with CO2 emissions of up to 130 grams per kilometre.
Mercedes-Benz will also be offering a reflash of the engine control unit for Euro 5 and 6 cars, which they estimate to cover a million units. In addition, their trade-in offer for older cars is currently pegged at a ‘four digit figure’ but should be generally inline with the rest of the industry.
All the auto makers will also be investing in the Sustainable Urban Mobility Fund that has been set up to address air quality improvement in inner cities.
However, the concerted moves should not be seen as the death knell of diesel. BMW AG Management Board Chairman Harald Krüger said, “For almost two years now, diesel technology which is cutting-edge, highly efficient and popular with customers has been deliberately and publicly discredited. This has caused tremendous uncertainty among millions of drivers and it’s not going to get us anywhere. The German automotive industry will remain strong in innovation: we will provide tomorrow’s mobility solutions.” He is also defensive about the allegations of non-compliance. “Investigations by authorities at home and abroad confirm that vehicles by the BMW Group are not rigged for testing purposes,” Krüger explained.
This is a sentiment echoed by the boss of Daimler AG. “We focus on improving the diesel instead of banning it. In the medium term optimizing the diesel engine is one of the most effective levers for achieving climate goals through less CO2 in road traffic,” said Dr. Dieter Zetsche, Chairman of the Board of Management of Daimler AG and Head of Mercedes-Benz Cars.
“That’s why we have once again expanded our package of measures. We want to improve air quality quickly and effectively – without adversely affecting our customers through driving bans.”
The thrust of the German auto industry now seems to be on promoting their electric autos while trying to stretch out the importance and acceptance of new age diesel engines. The BMW group expects 2017 the first year when sales of its electrified vehicles to exceed 100,000 units, with the all-electric BMW i3, BMW i8, BMW iPerformance plug-in hybrids and the plug-in hybrid MINI Countryman all contributing to the figures.