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Auto Industry On Edge Ahead Of Decision On Diesel Bans

Auto Industry On Edge Ahead Of Decision On Diesel Bans.

The European automotive industry in general and Germany’s in particular is nervously awaiting the court decision Thursday which could allow cities to ban diesel cars in the name of saving lives from dirty air, but which in turn could do existential damage to the industry.

The Federal Administrative Court in Leipzig will rule Thursday on an appeal by the states of Baden-Württemberg and North Rhine-Westphalia after lower-level judges ruled they could impose bans on some diesels in their respective capitals Stuttgart and Düsseldorf.

The environmental group Deutsche Umwelthilfe (DUH) sued Stuttgart and Duesseldorf because it wants to allow municipalities to ban diesel cars from city centres and make sure clean air regulations are enforced. The verdict from Germany’s Federal Administrative court would be final and follows various local court decisions across the country. A ruling would affect all vehicles sold before the latest “Euro 6” standards were introduced in September 2015.

If Germany bans diesels from city centers, other big European cities are likely to fall into line.

The legal action by DUH reflects frustration because of years of failure by federal, state and local governments to slash harmful emissions.

Brussels-based lobby Transport and Environment (T&E) summed up the case for action to curb, and ultimately remove diesel engines.

“The court decision on Thursday is an important milestone for German cities to protect citizens from breathing toxic air polluted by illegal dirty diesels. Over 400,000  people die every year in Europe as a result of air pollution and in cities high levels of nitrogen dioxide are predominately caused by poorly controlled diesel exhaust fumes,” said Greg Archer, Clean Vehicles Director at T&E.

400,000 deaths a year
Environmental groups like T&E say E.U. regulations which purport to demand clean diesels are only effective in laboratories and are still deadly out on the road. These groups also use the 400,000 deaths a year as though that represents direct mortality, but University of Cambridge statistical analysis points out that isn’t the case.

“There are 37 million dirty diesel cars on the road today (in Europe), a legacy of dieselgate. These cars must either be cleaned up or be  prevented from driving in cities when pollution levels are high,” Archer said.

But it’s not yet clear exactly what decision will be taken by the Leipzig court. It might decide to insist manufacturers clean up their diesels by imposing expensive hardware and software solutions. It could allow partial bans if the weather makes poisonous pollution more likely, or it could allow full freedom to ban diesels on health grounds. It could kick the decision back to the federal government and insist it, finally, takes some action.

Professor Stefan Bratzel, from the Center of Automotive Management in Bergisch Gladbach, Germany, said the decision is hard to predict.

“Most probably the court will decide that cities can ban diesels, but it might say this case is not for cities to decide but must be taken at the national (federal) level, and that points to the biggest problem. The federal government hasn’t decided what to do about this. It’s decided not to act, and now we’ve got into this big mess concerning diesels and cities,” Bratzel said.

Either way, sooner or later, this points to big trouble for manufacturer’s finances.

“Yes, I think there will be a big price to pay by the manufacturers because with all this publicity diesel sales will go down by even more than they did last month,” Bratzel said.

In Germany, Europe’s biggest market, last month diesel sales dived to 33.3% of the market, from 45.1% in January 2017. Diesel sales are sliding across Europe. In 2011 more than half – 55.7% – of all new cars sold in Europe were diesel. This slid slowly to 50% by the end of 2016, and since then the fall has quickened to 45.7% in 2017, according to IHS Markit, which projects a steady fall to 42.0% this year, 40.0% in 2019, and on down to about 32% in 2025. Other surveys project an even faster fall – to perhaps 15% by 2025.

Big mess
“This is a big mess for the car manufacturers. Without diesel it will be really hard to make the changes needed to make CO2 goals. They will have to spend a lot of money to bring electromobility forward,” Bratzel said.

Car makers face billions of euros in fines if they fail to make 2021 CO2 targets.

Peter Schmidt, editor of respected European newsletter Automotive Industry Data (AID), reckons whatever the court decides won’t make any difference. Diesel’s goose is already cooked.

“The diesel situation in Europe and Germany is a lost cause. The image of diesel has been so badly damaged that almost irrespective of anything from the court it is likely to disappear far quicker than some people could have projected,” Schmidt said.

Professor Ferdinand Dudenhoeffer from the Center for Automotive Research (CAR) the University of Duisberg-Essen believes the court will act to allow cars to be banned from city centers because there currently is no viable plan to clean up diesels.

Dudenhoeffer wants the government to offer all diesel car owners a 2,000 euro ($2,468) voucher which could be used to either to pay for the anti-Nox treatment which would allow them into city centers, or as compensation for scrapping the car. This would be paid for by phasing out the subsidy now paid for diesel at the pump, and bring the cost in line with gasoline. This diesel subsidy amounts to 8 billion euros ($9.9 billion) a year.

Measuring stations
Dudenhoeffer said it would be no surprise the court will act because CAR found that at 47 measuring stations in 35 German cities the safety levels for nitrogen dioxide were being significantly breached by up to 60%.

“The only thing left is either driving bans or hardware conversions. The measurements show that it is impossible to meet the nitrogen dioxide limits in urban centers without hardware modifications (to diesel cars). More than 70% of the Nox pollution from traffic comes from diesel cars. This shows that driving bans cannot be avoided,” Dudenhoeffer said.

“For the judges the case law is very difficult, because it is clear without hardware conversions, the limits are not achievable, unless driving bans are allowed,” he said.   

Investment researcher Evercore ISI has looked at two reports on the cost of diesel retrofitting. One from the Technical University of Munich estimated the cost at 1,300 euros per vehicle, another from Volkswagen suggested at least 2,500 euros.

Evercore ISI analyst Arndt Ellinghorst is getting exasperated by the moves to hit diesel.

“We continue to watch in astonishment as Germany’s press and parts of the political establishment remain transfixed on abandoning diesel, despite scientific assertions that modern diesels are indeed clean. Meanwhile, remedy for old diesels is potentially seen as retrofit of existing vehicles, i.e. continue with diesel; a move which penalizes rather than supports the German auto industry.”

“We follow the global auto industry, and from where we stand, it is very clear that no other country is damaging its auto industry in the same fashion. Furthermore, no other cities in Europe or the U.S. are as aggressively debating legal frameworks for diesel driving bans, yet.”

“To be clear, German (manufacturers) comply with E.U. emission regulations, Germany is subsidizing diesel fuel in a major way and CO2 regulation is designed to support fuel efficiency, i.e. Diesel powertrains.”

While CAR’s Dudenhoeffer called for extensive modifications to diesel engines, carmakers argue they would be too costly and complex. Instead, manufacturers Volkswagen, Daimler and BMW have offered software upgrades to millions of vehicles to reduce polluting emissions or trade-ins for newer, cleaner models.

The previous German government had agreed new regulations with the auto industry which green groups felt weren’t tough enough. It seemed the auto industry had won the argument, but environmentalists reckoned they could bypass this agreement by seeking bans in city centres.


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