From cheater to innovator

In the short period from 2015 to 2020, Dieselgate supplied a powerful and unanticipated boost to the global PEV industry. China and California remained in the lead but, in terms of policy development and industrial commitment, Europe became another booster of the global PEV industry. It is useful to reflect on the multiple ways that Dieselgate boosted the commercial future of PEVs: - the VW Group, the world’s largest automaker, flip-flopped from diesels to PEVs; - BMW and Daimler, caught by the ripple effects of Dieselgate, moved to expand PEV offerings, though in a more nuanced way that provided their loyal consumers a choice of propulsion systems; - the Merkel government completely shifted Germany’s position from a pro-diesel stance to a pro-PEV stance, while readying German cities for the rollout of numerous PEVs by German automakers; - the European Union, no longer forced to protect diesel technology, seized the opportunity to set much stricter post-2021 CO2 standards that will induce the deployment of millions of PEVs by 2030; and - during the public furor over Dieselgate, politicians uttered the unthinkable: a possible ban on the internal combustion engine. My argument is not that the VW scandal was the only factor that caused European-focused automakers to make PEV commitments. Prior to the scandal, most European automakers made limited PEV offerings. The German automakers, each with significant business interests in China, would have made big investments in PEVs for sale in China, through their Chinese partners, even if the VW scandal had never occurred. However, the Chinese and European markets for new vehicles are each large enough to justify financially their own vehicle designs. Would concerns about global climate change have forced the European auto industry to embrace PEVs without any VW scandal? Not necessarily. Prior to the scandal, the German government and industry were winning the argument in Europe that a pro-diesel strategy was best for the continent in the short run while FCVs might prove to be the best solution in the long-run. If Dieselgate had not tarnished the credibility of the German industry and government, it is doubtful that the EU would have adopted such stringent CO2 standards in the face of opposition from the Merkel government, Germany’s allies in eastern and central Europe, the industry and affiliated labor unions. Renault CEO Thierry Bollore argues that the CO2 crackdown was partly an effort by EU regulators to “regain credibility†after Dieselgate. If Dieselgate had not occurred, Bollore believes that the EU’s shift to PEVs would not have had nearly the urgency that the new CO2 standards display. Some EU officials, such as Commission Vice President Maros Sefcovic, argue that the stricter CO2 standards arose partly from a desire to prevent the European auto industry from falling behind China in PEV development. Thus, there may also have been some industrial-policy motivation behind Europe’s CO2 standards. Would the future bans on ICEs have ultimately forced the European automakers to shift to PEVs? Yes, assuming that those planned bans, which are currently soft policy, become legally enforceable mandates. History shows, though, that the political momentum behind the bans originated with the NOx-related urban bans on diesel vehicles triggered by the VW scandal. Once diesel bans were on the table, it was not a huge leap - given climate-change concerns - to broaden the bans to include gasoline vehicles. Had the VW scandal not occurred and VW not flip-flopped in favor of PEVs, it is questionable whether Europe’s path toward bans on ICEs would have occurred at all or would have occurred so quickly. Is there any chance that diesels, now much cleaner due to new EU standards and enforcement, could make a comeback in Europe? Possibly, but only in niche markets where PEVs and FCVs are not economical or practical.