Berlin gets the better of Brussels in Dieselgate row

When Germany's minister for transport and digital infrastructure, Alexander Dobrindt, appeared before the press last week, his handlers insisted he could stay only 15 minutes and was there to talk exclusively about the government's new digital agenda.

The journalists present had other ideas. They asked Mr Dobrindt why Berlin is blocking EU efforts to push through tougher car-exhaust tests. Almost two years after Volkswagen’s Dieselgate scandal broke, revealing mass manipulation of diesel engines to pass environmental tests, was Germany still more committed to its car industry than European citizens’ health?

Mr Dobrindt, a bespectacled Bavarian with a skittish smile and a slippery air, insisted all was well. German car companies’ “voluntary” recall of more than two million vehicles for modification was well under way, he insisted.

In Brussels, they tell a different story. By this month the European Commission had hoped to strike a deal with EU member states to overhaul the car auto exhaust tests, which, at present, are based on lab results rather than on-the-road tests.

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That allowed Volkswagen – and, environmental groups say, most other car makers – to game the system: making cars that cut emissions to legal limits only when they detected they were in a testing lab. The rest of the time the engines switched off clean modes, polluting cities with illegal and health-damaging levels of noxious nitrogen oxide.

Instead of using Dieselgate as an opportunity to move beyond diesel, and overhaul the testing regime, EU officials say German car companies are clinging to the status quo, with the help of Berlin, which is blocking efforts to overhaul European car-emissions testing.

The commission wants additional competences from member states: to oversee the work of national car-testing agencies and to carry out spot checks. Their hope: to end a a long-running practice of national governments and agencies turning a blind eye to illegal practices in their national car industries.

A further EU proposal would end the practice, already the case in Germany, of testing agencies’ work being financed by car manufacturers. To avoid potential conflicts of interest, Brussels wants this work financed jointly by a fee and public funds.

But Berlin has dismissed these proposals in a letter to the Maltese presidency of the European Council, and the relevant passages have been watered down in draft EU documents.

European streets

It’s not just on exhaust tests that Berlin has its foot on the brake, critics say. Brussels had hoped to introduce a €30,000 fine for individual cars of a polluting model, and for new powers to take offending models off European streets. Almost a year after that proposal was made, EU sources say Germany has yet to state its position and is thus holding up hopes of agreement by the end of May.

Germany is not alone in dragging its feet, according to environmental agencies, who name fellow car-producing countries Spain, Italy and the Czech Republic as delaying agreement.

A German government spokesman, asked about the claims, said that Berlin’s ruling grand coalition “still had no unified position on the European Commission’s plans. The talks are ongoing.”

While Berlin blocks new car-exhaust arrangements at EU level, new test results from Germany’s state environmental agency show that most diesel engines are far dirtier than claimed by manufacturers.

The UBA agency's test, leaked to German news agency DPA, showed that nitrogen oxide emissions from some diesel engines amounted to 767mg per kilometre, far above average values of 575mg per kilometre.

Even diesel engines with the supposedly stringent Euro 6 norm, applicable to all new cars since September 2015, pollute more than permitted in on-the-road tests: 507mg per kilometre instead of 80mg per kilometre in on-the-road tests. The UBA tests, confirming results of previous environmental groups, showed that nitrogen oxide emissions levels rose even higher on colder days.

In the last days the leaked test results, and Brussels complaints of Berlin procrastination, have ramped up tensions inside Germany’s grand coalition.

Federal environment minister Barbara Hendricks, of the junior Social Democratic Party, has called on Mr Dobrindt, a conservative ally of chancellor Angela Merkel, to "do more to get manufacturers to meet their obligations", including manufacturer-independent exhaust tests by year-end and a halving of noxious exhaust fumes by 2020.

But German environmental agencies have dismissed Ms Hendricks’s demands as ineffectual political “whingeing” that shows little interest in changing the status quo or reducing car companies’ choke hold on German politics.

"These cars have to disappear from the streets. Hendricks has to say we will push through to end this fraud and to make cars clear," said Jürgen Resch, head of Germany's Environment Aid organisation. "She won't go to the chancellor and say: 'Either we do this or I resign.'"

While Berlin fiddles, German consumers are adapting fast.

New car sales figures, released last week, showed that diesel sales continue to fall: down 10 per cent in February alone, with total market share now down 4 per cent year on year. Consumers are returning to traditional petrol cars: almost 54 per cent of new car registrations in February. Rising sharply in the same figures: sales of electric cars (up 100 per cent) and electro-hybrid cars (44 per cent).

That is part of a wider European trend since the September 2015 VW scandal broke. Diesel cars and SUVs had almost 66 per cent market share in western Europe six years ago, but that has now dipped to about 50 per cent. This share could plunge further to about 30 per cent by 2020, according to a forecast earlier this month by JPMorgan Chase, cutting German carmaker earnings by at least 5 per cent as they are forced to push less profitable alternatives.

Existential question

The looming death of diesel is not just a blip for the big German brands, it is an existential question. For many, diesels represent a huge proportion of their sales in western Europe, from 65 per cent to 100 per cent.

Running scared, the German car companies are lobbying hard in Berlin for more time to adapt to the new reality. They argue that, despite the recent emissions scandals, diesel motors still use about a fifth less fuel than gasoline engines. Without diesel, they say, there is no chance of meeting EU emissions targets set for 2021.

But the reality is changing faster than the car makers themselves. Germany’s auto analysts say the consumer shift away from diesel is not motivated by a feeling of being duped in the past over diesel, but uncertainty over the diesel engine’s future, particularly in urban areas.

Last week a Bavarian court gave Munich until the end of the year to meet air-quality standards, after years of falling short. If no solution is found to the ongoing problem of dirty air, the court said, a complete ban of diesel vehicles from the city must be implemented at the start of next year. A similar diesel ban is also looming in Stuttgart.

Banning diesel engines from two car towns – Stuttgart is home to Daimler, BMW is pure Munich – would send worrying signals for the entire German car industry.

Berlin and other major cities are following Munich and Stuttgart in tightening further already existing limits on the cars that are permitted in the city centre in a bid to improve air quality.

Authorities in the German capital have launched a major transport rethink, prioritising mobility over cars, with a massive spend on cycle lanes and public transport.

And while some German courts tighten the screws on city air quality, other judges have intervened to correct a discrepancy whereby European diesel drivers are not entitled to the same levels of compensation as their US counterparts.

A court in the western city of Hildesheim ordered Volkswagen to refund a customer the full €23,499.99 purchase price of their Skoda Yeti, likening the VW group's cars with manipulated diesel emissions to "horsemeat in lasagne".

While VW has appealed, similar rulings in higher instances could increase the squeeze on German car companies in their own backyard.

Skoda

Volkswagen’s Skoda subsidiary is also feeling the squeeze in the UK, where its Octavia model’s permit originates. British authorities threatened to block the permit, forcing a complete recall, unless Skoda compensated duped consumers. VW fended off that expensive demand, but London’s fall-back position is equally unpalatable for Skoda: a lifetime guarantee on engines modified to meet emissions targets. That has left the VW subsidiary in a difficult position: refusal to go along means the Octavia has no permission to be on the roads; go along and they are opening the floodgates to similar guarantee demands from elsewhere in Europe. Considering that VW/Skoda engineers don’t know the long-term effects of their engine modifications, the Dieselgate aftershocks could be very expensive indeed.

Back in Germany, VW chief Matthias Müller is not ready to give up on diesel without a fight. In trade journal Automobilwoche on Tuesday he said the modern diesel engine was "in our view part of the solution not the problem".

Mr Müller, who took the top job after Dieselgate broke, said VW is planning a pro-diesel campaign to ensure its advantages “feature more strongly in [public] awareness”.

As customers look elsewhere, cities tighten the screws and the EU cries foul over Berlin blockades to testing reforms, the opposition Green Party have spotted an opportunity to make Dieselgate an election issue in next September’s federal poll.

They say it is time to end “anachronistic” tax subsidies for the fuel at the filling station pump.

"Diesel has not delivered what it promised," said Anton Hofreiter, Green parliamentary party co-leader in the Bundestag. "Air pollution comes at a cost: to conned consumers, the health of city-dwellers and the environment."