EU Investigates German Car Manufacturers for Collusion

The European Commission, the executive branch of the European Union, is currently investigating whether German car manufacturers cooperated illegally to slow the development of emissions reduction technology. The investigation follows an October 2017 raid of BMW, Daimler, VW, and Audi offices. The raid, conducted based on suspicions of price fixing, delivered information to the Commission suggesting that the car manufacturers might have colluded in circumvented emissions testing.

Car manufacturers often meet to talk about standards for car components and models, but companies must inform authorities of their cooperation. Failure to notify the authorities of talks on emission standards could violate EU antitrust rules against cartels.

The stakes of the investigation represent the scale and depth of recently-revealed regulation-cheating programs within the German auto industry. The circle of five - BMW, Daimler, Volkswagen, and Volkswagen’s subsidiaries, Porsche and Audi - has faced scrutiny from European and U.S. officials since the 2015 Volkswagen diesel emissions scandal.

In September 2015, Volkswagen admitted that it had attached defeat devices to millions of vehicles (11,000,000 globally; 8,000,000 in the EU; 600,000 in the United States). Defeat devices detect when a car is in an emissions test, apply emissions controls during the test, then revert to non-controlled emissions during normal driving. Effectively, the technology maximizes engine performance while appearing to comply with regulations while continuing to emit illegally high quantities of particulates and nitrogen oxides.

Further revelations could be particularly pertinent in Germany because of the role of the car manufacturing industry in its economy, employing more than 800,000 people and producing a quarter of national GDP, and because of Germany’s leadership role in the EU. Germany has an economic incentive not to hamstring its flagship industry but a political need to satisfy the expectations of the EU.

Emissions scandals allow EU officials, who are now deciding car and truck emission standards for 2030, to justify stricter enforcement of environmental regulations. Pressure for action from the German government has created a policy debate over whether to require software upgrades, which are easier for the industry to implement, or hardware upgrades to improve car emissions, which were endorsed by German Environment Minister Svenja Schulze.

For the manufacturers, the 2015 scandal reduced diesel car sales and increased electric car sales. Market trends away from diesel put manufacturers under pressure to adapt.  Meanwhile, local public health regulations like Hamburg’s ban on diesel cars in high-traffic areas and potential tariffs from the United States require companies to proceed carefully when navigating a nuanced network of sociopolitical factors.

Porsche announced in a press release on September 23 that it will no longer produce diesel engines for its cars. Diesel vehicles never made up a large portion of Porsche’s product; its first diesel car went on the market only a decade ago, and it had not sold diesel vehicles in the United States since 2015. However, Porsche is not merely discontinuing products. The company is expanding towards renewables as well. Earlier this year, Porsche announced that it would double its investment in more sustainable vehicles by 2022, and it will release its electric sports car, the Taycan, in 2019.