Das Kartell, and why we can’t go on regulating the car industry like this

Germany is in the grips of what may well be the largest cartel case in its industrial history. According to Der Spiegel, a German weekly, Volkswagen and Daimler have turned themselves in to the German and EU competition authorities. The alleged cartel included themselves BMW, Audi and Porsche, and dates back all the way to the 1990s. The news comes roughly a year after the European Commission fined EU truckmakers a record €2.9 billion for price fixing and collusion on emissions technology.

The evidence obtained by Der Spiegel explains in a great detail how senior representatives from Volkswagen, Audi, Daimler, BMW and Porsche met regularly to agree joint approaches to the development of cars as well as costs, suppliers and markets. Some 60 working groups discussed technologies ranging from convertibles to diesel after-treatment systems.

The cartel case is particularly explosive because of its link to dieselgate. The starkest and most incriminating allegation is related to AdBlue, which is used in selective catalytic reduction (SCR) systems to reduce NOx from diesel engines. Volkswagens & co discussed what size of AdBlue tank would be appropriate. They agreed they’d need at least 19 litres to enable the SCR to function properly but then proceeded to agree that none of the partners would fit tanks bigger than 8 litres. That would save space and money. They knew that this meant emission limits could not be met in real-world conditions, but with lax emissions tests and approval systems in Europe they were confident they would get away with it.

If this is confirmed, then Dieselgate would not simply be a case of unclear rules and carmakers exploring (and transgressing) what was legally possible – but rather a conspiracy by some of the world’s largest carmakers.

The cartel allegations are shocking but not surprising. Carmakers oppose virtually every new regulation. They work through their EU and German umbrellas, ACEA and VDA, to delay, weaken and undermine regulations at every step of the regulatory process. At national level they collude with the government bodies they are supposed to be regulated by. In a way, illegal collusion is merely the logical next steps in carmakers’ eternal quest to cut corners and circumvent regulation.

The biggest scandal is perhaps that carmakers continue to get cover from governments. Take Dieselgate: no fines have been levied in Europe; only after proposed city bans did some carmakers agree to upgrade software; but, still, no customers have been compensated.

The hard truth is that most of the action so far has come from independent NGOs, journalists, prosecutors, judges and competition authorities. It’s a sign that our system works to some extent but, at the same time, a painful reminder of how impotent and unwilling our democratically elected politicians are.

But now the game is up. The way we regulate and control the car industry in Europe is leading both industry and the environment to ruin. It cannot continue. So what needs to change?

First, our politicians and especially those in Germany need to stop slavishly taking orders from carmakers. Not just because it is wrong, but also because it is counterproductive. Indeed, had politicians done their jobs the German car industry wouldn’t be in the shambles that it currently is: reliant on a dirty, expensive technology that the rest of the world won’t buy. The Commission has now appointed Vice President Jyrki Katainen to oversee efforts to clean up the automotive sector. He needs to enforce a culture change in the industry, including tobacco-style lobbying restrictions, until the sector cleans up its act. He should also take steps to ensure fines are used to mitigate the crime, as in the US, which required VW to install electric recharging points as part of its penalty.

Secondly, we need to strengthen the entire system of auto regulation. To its credit, the Commission has made decent proposals to improve tests and enforcement that the European Parliament has effectively strengthened. These proposals need to be adopted without first being weakened by car manufacturing member states. We need full transparency on automaker test results; independent third-party testing of cars and trucks; independent representatives on the body overseeing vehicle approvals; plus a boost for the powers and resources of the EU’s competition authorities (for example, the newly proposed single market information tool).

Third, we need a comprehensive strategy on diesel. The starting point needs to be that we accept that there’s no future for diesel unless it is genuinely clean. That means diesel cars need to respect the same standards as petrol cars. So, instead of briefing against cities that want to ban dirty diesels, the Commission should start work on a Euro 7 standard for new vehicles and take action to clean up and fix the 35 million dirty diesels that remain on Europe’s roads. Last but not least, we need to accept – as France and the UK have – that combustion cars will need to disappear. In November the Commission will propose new car CO2 standards and, possibly, a sales target for zero emission vehicles. This will be an excellent opportunity for politicians to show all their tough talking means something.

Comments

Dan Aris's picture

Comment: 

Grand theft market failure ...
The OEMs have not yet realised that it is far more cost effective to focus on electrifying the urban cycle (slow, congested, polluting traffic) and limiting the engine's operation to higher speeds and longer distances. The global average daily driving distance is only 30km! A 7kWh battery will deliver this (including charging margins). Overall the average car could drive 50% electric and 50% ICE - we call this strategy "Town & Country Hybrid" See Libralato web site for details.

MJAB's picture

Comment: 

1) gasoline engines can legally have higher PM emissions than diesel ones. Why?
Look at direct injection gasoline PM emissions.
2) German politicians covered german automotive industry so to became dominant.
3) hybrid real drive emission, with actual certification standard, are much much higher that real drive ones.
4) the diesel emission rules ,that are effective, are also in European Union, the Euro VI for the trucks.
It is Germany that backed Euro 5, Euro 6 with a lot of gray zones. Mow we know why.
5) Daimler confessed to be part of the cartel in 2014. Why it took so long to act?

JKP's picture

Comment: 

...and gives cleaner exhaust also w low temperatures, cold engines etc., still the industry is using addblue, which does not give any meaning.
Btw...many diesel exhausts are clean to the metal inside the end of exhaust, but most gasoline is not....

Rohit's picture

Comment: 

Including the folks at T+E, the world is not waking up to the potential of DME and bioDME as ultra low-emission fuels. It's not all about EVs, but for trucks and larger vehicles we need to follow the decade of work done by Volvo to realise that a better alternative exists.

Florence's picture

Comment: 

It's no longer a question of should we ban diesel from our cities, it's a question of when will cities rid themselves of the internal combustion engine altogether, period.

Michael's picture

Comment: 

To me the allegation of an "agreement" on limiting AdBlue tanks to 8 litres does not sound plausible. After all, there's hardly any vehicles on the market whose tank is actually this small. The majority are between 10 and 20 litres, and there is no evidence that the members of this "cartel" are making them smaller than anyone else.

Moreover, smaller tanks do not mean that emission control systems have to be less efficient. They just need to be refilled more often (which, contrary to popular belief, is no more complicated than topping up washer fluid). To me this makes much more sense than needlessly hauling around enough AdBlue to make it from one oil change to the next.

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William Todts's picture

Executive Director

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