Bullish German car lobby dismisses Dieselgate as bump in the road

Matthias Wissmann glides into the Berlin conference room with a choirboy smile, owlish eyes behind round glasses and chestnut brown hair that belies his 68 years.

An old-school operator from the Bonn era, Dr Wissmann can look back on half a century in the Christian Democratic Union (CDU), three decades as a Bundestag MP and a term as federal minister for research and then transport in the last Helmut Kohl cabinet.

A decade ago he became head of the VDA, the German auto industry's lobby group, a high-profile position requiring guile, brass neck and an enviable contacts book. The VDA chief has needed all three to weather what can only be described as Germany's carmageddon.

Two years ago, Volkswagen was revealed by US authorities to have installed software in millions of its diesel vehicles that manipulated emissions, making them appear cleaner only when on a test ramp. On the road, they belched out levels of noxious nitrogen dioxide (NOx) well above legal limits.

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The scandal sucked in other German manufacturers including, in recent days, BMW, and on Wednesday, a Detroit court sentenced a former VW executive to seven years in jail for conspiring to mislead US regulators and violate clean-air laws.

There’s an ongoing Brussels cartel investigation into illegal collusion among the big German brands, uncertainty over post-Brexit sales and a big question over e-mobility challenge. Add all that up and the road ahead looks bumpy for the German car industry, one-fifth contributor to the national economy and employer of one in seven Germans.

And yet, while recent scandals have hit diesel sales across the continent, the VDA released figures this week predicting 3.5 million car registrations in Germany alone for 2017, a near record high and up 3 per cent year on year.

The German industry has a 20 per cent global market share, according to the VDA, including one-fifth of the crucial Chinese market. In Europe, every second new registered car is German, it says. The lobby group’s members claim to control 70 per cent of the premium segment.

So has the emissions scandal proved to be diesel off the auto industry’s back?

“Software manipulation cannot be justified and it caused grave damage for the firms involved,” said Wissmann. “But I travel a lot, particularly in Asia, and my impression is that the image of German brands remains high.”

The industry’s image is soiled forever in Berlin’s chancellery, where Angela Merkel was made look like a fool when the dieselgate scandal broke: a slap in the face for her defence of the industry against EU incursions.

“Don’t think this situation is pleasant for me… I don’t like at all the serious mistakes that have been made,” Wissmann said, insisting the manipulation took him by surprise, too.

Mistakes happened

“I think the chancellor knows that those firms in which mistakes happened will do everything to correct their mistakes,” he said.

Millions of European customers of Volkswagen would beg to differ. Contrite in the United States, where VW paid $22 billion (€18.6 billion) in civil and criminal penalties and consumer settlements, the company continues to battle in Europe against legal claims, including those brought by Mayo solicitor Evan O’Dwyer on behalf of his clients with VW group vehicles.

As the German industry struggles with its fraudulent past, it is battling to retain its crown in the future.

Leading German car executives are scathing about young pretenders like Tesla and its chief executive Elon Musk, suggesting he is better at peddling dreams to eager investors than building quality vehicles.

The VDA chief, for his part, insists the German industry isn’t sitting on its hands. Between now and 2020, Wissmann says, his members will spend €40 billion on alternative engine technology. In three years’ time, he says, some 100 German e-autos will be on the roads.

Six out of every 11 self-driving car patents are owned by German companies, he says, and they are investing heavily in digitalisation, networking, infotainment and navigation.

“Pure motor performance will,” he says, “play a lesser role in the future.”

German car companies insist the future of mobility is far from clear, says Wissmann, with electric cars just one option alongside engines powered by nitrogen, liquid gas or even synthetic fuels. The last are carbon neutral and already a reality, he says, but the fuel costs four times the price of traditional petrol.

“It could be that, from 2030, the combustion engine can be climate neutral. It would be a serious mistake to bet on one technology and see later that it was the wrong decision,” he said.

Long before then, next year to be precise, German carmakers will learn whether they were wise to bank so heavily on the “clean” diesel engine that, in many cases, was anything but.

Germany’s federal administrative court in February may order city authorities in Düsseldorf and Stuttgart to impose diesel bans to reduce levels of noxious nitrogen oxide below legal limits. It will be a landmark ruling, with a knock-on effect on 28 German cities with air dirtier than legal limits.

Wissmann is bullish on the bans, presenting VDA claims that noxious nitrogen dioxide levels in German cities are 70 per cent lower today than 20 years ago.

Three so-called “diesel summits” in Berlin have seen car companies pay €160 million of a promised €250 million fund for cities (they insist foreign car manufacturers close the funding gap). German makers have have also announced discounts for newer, cleaner models and have agreed to update software in 5.1 million vehicles.

Absurd

But they refuse to consider hardware retrofits, seen by auto analysts as a more efficient – if costly – way to get cleaner emissions.

The VDA chief says this is a pragmatic step, nothing to do with the bottom line, and dismisses Germany’s nitrogen dioxide fears as “absurd”.

When he rhapsodies about how clean the newest Euro6D engines are, however, industry watchers laugh at his brazenness. Six months ago, Wissmann was gushing about how the previous, Euro6 standard engines, had “solved” the NOx problem as even the ADAC – Germany’s AA – warned the engines were waste of money because 90 per cent breached NOx standards.

Wissmann's bravado evaporates further when questions turn to the ongoing cartel investigation into his members. Last week in Der Spiegel, European competition commissioner Margrethe Vestager promised a thorough investigation – the ninth – into her "loyal customers" in the German automobile industry.

After fining members of a lorry cartel – including VW and Daimler – €2.93 billion last year, Vestager's office is now examining claims that German car companies colluded on new technology, including equipment that would stymie clean emissions efforts.

Wissmann grows visibly nervous, his lips thin and he starts to scratch his nose, insisting that no cartel meeting took place under the auspices of his VDA. As always, Germany’s chief car lobbyist is, for the good news, a self-styled industry insider and, when confronted with industry fraud claims, a shocked – shocked – outsider.

“There have been voluntary disclosures from companies,” he said of the cartel investigation, “but I am not sure if that means the behaviour of the companies was correct or not.”