That’s going to hurt: Impending hardware refit of diesel cars will cost billions

Picture courtesy Manager Magazin

Germany’s and Europe’s carmakers are casting timid glances in the direction of Germany’s capital Berlin, where a possibly extremely costly decision is imminent. This Sunday, the German government is expected to decide what to do with the millions of NOX-emitting diesel cars on the country’s roads. According to Der Spiegel, Germany’s Chancellor Angela Merkel wants a hardware solution, and that could cost many billions.

Ever since the dieselgate scandal became public, European automakers tried everything to avoid a solution that makes older diesel cars come clean. The reasons are money, and the monstrous amounts of diesel cars in Europe. Approximately half of Europe’s cars used to be diesel-powered before the scandal lowered the appetite for driving on oil. The atrocious problem is the huge amount of vehicles already on the road in Europe, and there are around 250 million of them.

Germany is the center of Europe’s automotive universe, and there, automakers and politicians have so far handed out placebos in form of tweaks of the on-board computer, or silly little plastic pieces to be put into the air intake. As expected, they did not work. Environmental pressure groups such as Germany’s Deutsche Umwelt Hilfe soon gave up on lobbying governments, and went to the courts instead to compel cities to enact the dreaded “Fahrverbote,” driving bans for dirty diesels. It did not take much to convince the judges. According to long existing laws, the driving bans should have been decreed long ago, but the laws were ignored by regional governments. Local politicians even ignored the decisions of courts until tardy politicos had to be threatened with jailtime.

The impending driving bans are politically explosive. Imagine your government telling you that you can’t drive your car to work, or that the fruit stand down the road needs to buy a new truck to get the bananas. The German government, and many others in the EU, is in power thanks to a very thin majority, and a fragile coalition. The diesel issue can bring down governments.

So now, Berlin will likely compel its automakers to the “Hardware Lösung,” as it is called in alleged German, and to fit old diesel cars with SCR catalytic converters. This creates two huge problems, namely space and money. Many smaller cars are so compact that there simply isn’t the space to retrofit the complicated chemical factory an SCR converter is.

Then, money. There are more than 20 million diesel cars on Germany’s roads alone. According to Germany’s regulator KBA, only 20% of cars on the road (allegedly) comply with the modern Euro 6 norm. According to Der Spiegel, the “Hardware Lösung” will apply to Euro 5 diesel cars, of which some 6 million are on Germany’s roads. (Nobody is talking about what will happen to the 6.5 million Euro 4 cars. Fahrverbote most likely.) Estimates of costs per car differ between EUR 3,000 and 5,000 ($3,500-$5,900), or something in the range of $30 billion for Germany alone.

And then, the floodgates open. Everybody in Europe will want a Hardware Lösung.