Exposed cartel exacerbates situation in the German automobile industry


It is now certain that the diesel emissions scandal does not only represent the failure of one single manufacturer. The affair resulted from years of agreements between German automobile manufacturers Audi, BMW, Daimler, Volkswagen and Porsche. 

It is now certain that the diesel emissions scandal does not only represent the failure of one single manufacturer. The affair resulted from years of agreements between German automobile manufacturers Audi, BMW, Daimler, Volkswagen and Porsche. Since the 1990s, agreements have been made on cars, suppliers, markets and expenses. According to the German news magazine Der Spiegel (30/2017), more than a thousand meetings are said to have been held in the most diverse kinds of working groups. Thematically, those meetings revolved around topics like brake control systems, seating systems, air suspension, clutches – but also around gasoline and diesel engines. Correspondingly, the enterprises in question hardly compete against each other in those and other areas anymore which leads to extensive debilitation of both market economy and competition.

As a matter of course, customers are aggrieved by such cartel-type structures as they are deprived of being offered market-driven prices. Additionally, they are being detained from technological innovations. Particularly affected are owners of cars with gasoline engines. Furthermore, it has been proven that the arrangements between manufacturers led to an insufficient use of the possibilities of emission control. This became evident from countless meetings which revolved around the topic of AdBlue. AdBlue is an additive composed of urea that splits off oxides of nitrogen into the harmless components of nitrogen and water during the combustion process. Concretely, the question of the appropriate size for an AdBlue tank was discussed repeatedly. For financial reasons, Daimler, BMW, Audi and Volkswagen all agreed on small plastic tanks. While solutions holding up to 35 liter were up to debate at first, later a tank with a volume of eight liter was decided on. However, this small amount of AdBlue only suffices for 6.000 kilometers of complete emission control. To prevent customers from having to refuel urea this frequently, the injected amount was reduced.

The tightening of environmental standards followed. To solely meet the European emission standard 6, the amount of AdBlue admixed would have needed an increase of 50 percent. The manufacturers were well aware of this, but failed to upgrade to larger tanks. In fact, quite the opposite happened: In May 2014, Audi warned of one-sided actions and a possible “arms race of tank sizes”. Most likely, the actions of one single manufacturer would have aroused mistrust from regulatory authorities. Possibly, the question would have been as to why one manufacturer’s vehicles require a significantly higher amount of AdBlue than those of other car companies. However, the test stand showed nothing unusual each time. Software was programmed to make sure that a sufficient amount of urea was being injected during test mode. The ending of the story is publicly known: In 2015, the fraud was uncovered by US authorities.

Altogether, those agreements on diesel engines were supposedly one of the most spectacular cartel cases in the history of German industry. The manufacturers face penalties amounting to billions – money that they would actually need to invest in the development of electric cars. Daimler, BMW, Audi and Volkswagen could fall behind even further in the market competition against Asia and the US.

However, another factor is alarming. Seemingly, by their illegitimate arrangements, the German automobile industry slowed down the progression and development of e-mobility. Not only did it damage its own reputation and existence, but, as the most important German industrial branch, failed to assume its high social responsibility. By the abuse of market power and the circumvention of innovations, it put over a hundred thousand jobs at stake – in their very own enterprises, as well as in the suppliers’ companies.

Sped up transformation as logical consequence

In the German automobile industry, many future-oriented decisions related to electronic mobility and autonomous driving have accumulated. Up to now, car companies struggled to initiate a radical transformation since the traditional business still continued to flourish. The emission scandal, lawsuits for emissions being too high and now – to cap it all off – public reports on an alleged cartelization: When will German car companies finally realign themselves if not now?

Increasingly, the general public and even the world of politics expect the OEMs to change in this country. This inevitably leads to a speed-up of the imminent transformation of the industry that will happen regardless. Manufacturers no longer have the upper hand which allowed them to act at their whim. In fact, they feel increasingly pressured to finally make future-oriented technologies and solutions ready for the market.

Suppliers need to develop new business models immediately

The specified situation might result in difficulties that threaten the existence of suppliers in the traditional segment. It is now high time to grow independent from the classic automobile business and develop sustainable business segments that are tailored to current and future customer needs. Those may include physical as well as digital products and services. An example for this can be seen in the development of eBike systems by Bosch; with this, the long-established company seeks to position itself as “the driving force for the mobility of the future”. In 2016, ZF founded the subsidiary company Zukunft Ventures GmbH which is intended to push the strategic transformation within the enterprise forward, allow immediate access to key technologies and realize a connection to knowledge and future competences. In other words, Zukunft Ventures is engaged in the mobility of tomorrow. Topics include scarcity of resources, safety, autonomous driving, and more.

Furthermore, several start-ups show how future-oriented business fields in mobility can look like. For instance, Park Here from Munich offer a system, independent of energy, that seeks to improve the parking lot usage in large cities in the easiest way possible. Beyond that, approaches to car sharing like getaround and bike sharing concepts like Mobike or ofo from China are emerging. All these young businesses have recognized the upcoming, fundamental change of private transport. Based on future customer needs, they developed innovative business models – a process that now must be adapted by automobile suppliers.

Experts like GRANTIRO provide advice to automobile suppliers affected by these issues and make a significant impact on the sustainability of traditional middle-sized businesses by helping them pave the way for a safe future in times of transformation and change.


Spiegel printed edition 30/2017



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