German Diesel Makers Get Reprieve as Home States Reject Bans

(Bloomberg) -- Diesel engines received a reprieve in Germany after the home states of BMW AG, Daimler AG and Audi signaled they’d allow upgrades of older motors instead of supporting driving bans that some cities are pushing to cut air pollution.

The state government of Bavaria -- where BMW and Audi are based -- said on Tuesday that it agreed to a voluntary recall with carmakers in an effort to avoid bans of diesel-powered vehicles in its cities, of which Munich is the biggest. Baden-Wuerttemberg, home to Mercedes-Benz parent Daimler, indicated it would be open to a similar solution. 

Auto manufacturers have been lobbying against the prohibitions and offered to pay for the fixes, which could affect as many as 13 million vehicles. Weighing in with their own views are state and federal authorities, as well as German courts.

Germany is wrestling over the future of diesel autos, with possible driving bans in some localities clashing with an industry that employs tens of thousands to produce vehicles that use the technology. While states appear willing to strike deals that allow carmakers to upgrade older models, city governments and courts are likely to continue pushing back and seek bans.

Efforts by Munich, where BMW is based, and Daimler’s hometown of Stuttgart come as some urban areas fail European Union air-quality standards and local governments worry about the impact of cancer-causing nitrogen oxide -- of which diesel cars are a major source -- on the health of their residents. The technology has been under fire especially since Volkswagen AG’s emissions cheating became public almost two years ago, a scandal that’s also enmeshed its Audi luxury-auto brand.

Of several municipalities that have deliberated on introducing restrictions, the northern German city of Hamburg is the only one that has succeeded in prohibiting older diesel cars from certain streets.

In France, the government has gone a step farther, outlining plans two weeks ago to end the sale of gasoline- and diesel-powered vehicles by 2040 in a bid to become a carbon-neutral nation.

Diesel bans threaten to upend an industry already challenged by the costs of developing electric vehicles. BMW Chief Executive Officer Harald Krueger contends the shift to cleaner cars isn’t possible without keeping the fuel, which burns more efficiently than gasoline, as part of an interim step before combustion motors are eliminated.

In particular, diesel technology plays a major role in Germany, where the models accounted for about 46 percent of sales last year. It also supports thousands of jobs. At Robert Bosch GmbH, the world’s biggest car-parts supplier, about 50,000 positions are linked to diesel, with many more employed at Volkswagen and other auto producers.

With a federal election just over two months away, German Transport Minister Alexander Dobrindt has come out against vehicle bans, saying they’re an ineffective tool for reducing pollution. Dobrindt has organized a gathering of government and industry executives on Aug. 2 to consider options for updating older diesels.

Political Solutions

“Driving bans can only be a means of last resort because they limit the mobility of people,” Hubertus Heil -- general secretary of the Social Democrats, Chancellor Angela Merkel’s junior coalition partner -- said on Monday in Berlin. “The solution must be to organize mobility in Germany in another way. So it is good that all parties involved sit down together and develop a concept for the future."

Even as politicians get behind car fixes, there’s the risk of judicially-ordered restrictions. On Wednesday, Stuttgart’s administrative court will hold a public hearing on a complaint seeking to ban all diesel cars from driving into the city, which is Baden-Wuerttemberg’s capital. Stuttgart, built in a valley, has for many years failed air pollution tests. In Munich, a court compelled the city in March to prepare diesel bans to bring down levels of nitrogen oxide.

Last year, the federal Transport Ministry prodded manufacturers including VW, Audi and Mercedes-Benz to recall 630,000 cars that pushed the limits of emissions regulations. Industry leaders contend that the 13 million-car estimate for new fixes is too high.

How that would work and who will pay for it will be discussed at the task force meeting on Aug. 2. BMW and Audi said last month more than 50 percent of their diesel cars that meet Euro-5 emissions standards could be upgraded, and on Tuesday, Bavaria said the carmakers had agreed to bear the cost of the recalls.


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