November 20, 2018
How the German diesel scandal is driving voters away from the grand coalition
The financial crisis was the big economic story of the last decade. Here in Europe, the decline of the car industry is the big story of this decade, and possibly the next. It is not only a story of shifting technologies and consumer preferences, but also a political one. We would, for example, attribute the extreme decline in the popularity of the grand coalition in large part to the decision to shift the costs of the diesel scandal to the consumer. This would explain the flow of voters from both CDU and SPD towards the Greens.
To outside observers, it seems improbable that what is primarily an industrial development could have such big political implications. The reason is that Germany remains the country with the lowest rate of home ownership in Europe. As a result, the car constitutes the main asset of the median household. As successive governments have been subsidising diesel technology, diesel car ownership is widespread. A combination of scandals, emissions tests, future emissions ceilings and court decisions to allow diesel bans have reduced the residual values of diesel cars. As a result, the median German household has taken a significant financial hit.
Germans will this morning be reminded once again of the government’s handling of the crisis when an expert commission of the ministry of transport produces its report. As Tagesschau noted, the report has already been overtaken by events. The government short-circuited the process by accepting the car industry’s demand to provide only minimal compensation for diesel owners.
The Commission favours a forced upgrade to make old diesel cars compliant with the requirements of the current Euro 6 norm. This would have cost some €3000-5000 per car, but the industry has rejected that categorically. Instead, the government and the industry have already agreed on a scheme that would give diesel car owners a small premium to buy new cars - but only in areas affected by a ban. But, since nobody in their right mind buys a diesel car in the current circumstances, these premiums have turned out to be only a theoretical subsidy. In reality, nothing much is happening.
The number of cities imposing bans is growing fast. For the first time, the ban is now affecting a motorway - in the densely populated Ruhr area. And German newspapers are reporting that the cities are getting more efficient at policing the ban, with cameras that manage to detect non-compliant cars.