FRANKFURT -- Volkswagen Group and its brands including VW and Audi could decide as early as this week whether to extend a diesel trade-in incentive program in Germany into the second quarter.
The incentives to replace diesels up to and including Euro 4 diesels, offered by a wide range of automakers, have proven popular. Propped up by rebates, the overall German market gained 9.5 percent to nearly 531,200 vehicles in the first two months. Not since 1999 have so many cars been sold over this period, according to Germany's auto industry association VDA.
"There is a meeting at the group level later this week, maybe we might know more on Thursday," said a source familiar with the discussions.
While incentive schemes and rebates usually are issues decided by individual VW Group brands, executives say the diesel incentive program is more political in nature, a corporate social responsibility measure that emerged from a diesel summit last August between industry and German government to discuss measures to reduce high NOx emissions in cities so a joint approach across all brands is being taken.
An extension would mean sacrificing some of the profits at a time when high investments are required to develop new digital technologies and cleaner powertrains. Yet this could be one of the quickest, easiest methods to renew the 6.4 million diesels in Germany that are Euro 4 and worse, dating back in most cases to 2010 or earlier.
VW brand CEO Herbert Diess dismissed mounting pressure to equip cars with new emission after-treatment systems. Speaking to reporters on the sidelines of the Geneva auto show last week, he said retrofitting millions of older diesel models would take at least another three years in order to develop, validate and homologate a new system and its components. This would be even longer than the time VW needed to first receive regulatory authorization for the rollout of software updates and then implement them.
Nor would it make any sense, Diess said. In 2021, nitrogen dioxide levels in almost all cities in Germany will have fallen below the critical EU limits on their own as the country’s 15.2 million diesels are continuously renewed.
“What we absolutely have to achieve - by any means necessary - is the prevention of city driving bans, because that leads to a decline in [Euro 5] residual values that is dramatic for our customers,” Diess said.
Audi is under greater competitive pressure to extend its incentive program, since rivals Mercedes-Benz and BMW have already said they will continue with the until the end of the first half.
VW brand has less to fear because Ford and Opel for the moment have not indicated whether they plan to continue offering incentives past this month. Renault has an incentive plan running through April at its namesake brand.
While VW’s sales people are more in favor of an extension to avoid market share losses, Diess appeared neutral at best to the idea given his strong focus on profitability.
“For the moment we’ve agreed to offer it through March, certainly one can consider expanding it,” he said. “Whatever quickly addresses the problem. What’s crucial is the timing - we can’t wait until 2021 when the problem solves itself, we have to act now to prevent the court’s decision [from resulting in bans],” he said.
Nevertheless, Diess expressed his very clear preference for solutions that don't involve VW spending money. This could include helping cities finance the renewal of their heavily-polluting bus fleet, on average 13 years old, through a general “Mobility Fund" that so far is substantially dependent on taxpayer revenue. Diess also is in favor of new electric vehicle lanes in urban problem spots that could encourage more demand for battery-powered vehicles.
Opel for its part did not rule out an extension, merely saying “we will inform the public of our plans at the appropriate time.” Ford could not be reached for a comment.