German government announces diesel deal details

The German coalition government has presented details of the measures it has agreed aimed at dealing with the uncertainty over the future of older diesel vehicles in the country.

At a press conference on Tuesday, German Minister for the Environment Svenja Schulze from the center-left SPD said that a combination of trade-in incentive schemes and still unspecified retrofit options would be introduced for drivers of older diesels in and around the 14 German cities with the highest level of nitrogen dioxide (NO2) pollution.

Those cities are Munich, Stuttgart, Cologne, Reutlingen, Düren, Hamburg, Limburg an der Lahn, Dusseldorf, Kiel, Heilbronn, Backnang, Darmstadt, Bochum and Ludwigsburg. Schulze said she hoped the deal would avoid diesel bans in various German cities. "I believe we've got a big deal on the way here," she told reporters.

According to a coalition document, seen by the news agency DPA, drivers in the affected areas will have the choice of opting for a trade-in or a retrofit scheme. However, details on the retrofit schemes remain sketchy, with Germany's big carmakers Volkswagen (VW), Daimler and BMW unusually reticent in their early reaction to the news.

Read more: German diesel pumps still flowing despite retrofit talks

Transport Minister Andreas Scheuer from the Bavarian CSU said that the trade-in schemes — whereby drivers of older diesels could trade them in for new models at generous discounts — would be available to drivers immediately. Retrofit schemes, which would see car manufacturers install new hardware in older diesel engines aimed at reducing emissions levels, would take longer to agree fully on with car manufacturers.

He said that Germany's biggest automobile manufacturer, VW, had agreed to assist with retrofits but had yet to agree on the full details of precisely how they would be implemented. Premium carmaker Daimler, said Scheuer, had said it "will think about retrofits" but would focus at this time on trade-in incentive schemes of up to €5,000 ($5,758).

While there are new spending commitments and rule changes in the package, there is no legal mandate on drivers or manufacturers to organise retrofits. 

However, the government has committed to funding 80 percent of the potential retrofit costs on some heavy vehicles, for example rubbish trucks, that operate in the most polluted areas. In addition, it will fund 80 percent of the retrofit costs for trademen's vehicles, delivery vans and trucks and some other commercial vehicles operating in those same areas.

Scheuer said the coalition's compromise centered on four maxims — that driving bans would be avoided, that mobility would not be restricted, that diesel drivers should not incur extra costs and that the automotive industry should ultimately take responsibilty for the crisis.

"Carmakers need to understand the signal we are sending," he said.

A complicated background

In the early hours of Tuesday morning, the leaders of the country's coalition government parties confirmed that they had reached agreement on how to tackle diesel-related air pollution in German cities, without resorting to wholesale diesel bans. This followed six hours of talks between the three parties and German Chancellor Angela Merkel, which had followed over from earlier talks on Friday.

They remained tight-lipped on the details of the plan at that stage, saying only that the agreement was "highly complex" — hinting at its mix of partial, regionally-based retrofits and upgrade schemes for motorists, as well as the uncertain outline as to who exactly would foot the bill.

The backdrop to this long-awaited agreement is twofold. Three years ago, it was revealed that Volkswagen had installed cheating devices in 11 million of its vehicles worldwide, allowing it to dishonestly beat emissions checks and spew out far more hazardous nitrogen oxides (NOx) than it was legally allowed to.

That scandal, known as Dieselgate, set in train a politically-charged debate about the use of diesel in Germany. However, the urgency to find some kind of satisfactory solution has been turbo-charged by the growing issue of air pollution in scores of German cities. More than 60 German cities exceeded EU limits for NOx in 2017, including several of the country's primary urban centers.

With a partial driving ban already in place in Hamburg, and with similar bans expected to follow in Stuttgart, Frankfurt and Düsseldorf, among others, the need to end uncertainty over the future of diesel cars in Germany. Sales of diesels in the country have fallen sharply since their peak before the Dieselgate scandal three years ago.

Euro 6 good, Euro 5 not so good

Perhaps the most eagerly-anticipated component of Tuesday's press conference related to the question of hardware retrofits. With car manufacturers having been strongly resistant to this costly and time-consuming option, car industry observers were looking to see firm commitments in the area from government and manufacturers alike.

However, while ministers Scheuer and Schulze were bullish on the merits of the deal that had been agreed, information on future retrofit schemes was scant. Extensive hardware retrofits, if agreed to by a majority of car manufacturers, could potentially cost the industry billions.

Newer diesels from the so-called 'Euro 6' range (from September 2014 on) spew out much lower levels of NOx, so retrofits would primarily apply to the older 'Euro 5' and 'Euro 4' cars. There are 5.5 million 'Euro 5' diesel vehicles on German roads at present and around 3.1 million 'Euro 4' vehicles.

According to a Volkswagen insider, quoted by the news agency Reuters, the car manufacturer still believes that retrofits are the wrong solution for avoiding diesel bans in German cities. The insider also said that Volkswagen had not agreed to fully cover the cost of potential retrofits.

In a telling public comment on the matter, Volkswagen works council boss Bernd Osterloh said the government's announcement was good news for jobs in the the industry as the commitment to blanket retrofits was "off the table."

Read more: Will taxpayers foot the bill for Dieselgate?

As hard as it has proven for the German coalition to convince the country's car manufacturers to agree to foot the bill for retrofits, it has proven harder still for them to convince foreign manufacturers to play along.

Opel, a German brand now owned by the French company Peugeot SA, said on Tuesday it rejected the concept of hardware retrofits as the technology was not yet fully developed and because it was not economically sensible.

"In addition, it would take too long to implement them," the company said in a statement.

aos/uhe (dpa, AP, Reuters)