Daimler Is Trying To Avoid The ‘Fate’ Of Volkswagen By Updating Three Million Mercedes Cars With Reduced Emission Features

DAI: DAIMLER AG logo
DAI
DAIMLER AG

German automaker, Daimler, has announced the decision to update 3 million Mercedes cars in Europe in order to reduce their diesel emissions. Though it refuses to define this move as a ‘recall,’ this decision comes in the wake of widespread investigation and criticisms it received for allegedly evading rules regarding the control of vehicle pollutants. The company has been under fire since last week after media reports suggested that the scale of its emission problem was greater than previously known. After Volkswagen’s emission related scandal, it seems that Daimler, too, is following in tow, and the move to update the Mercedes cars might be its way to avoid paying billions of dollars in fine like Volkswagen did. The software update will also be available in the U.S. if the ongoing investigations conducted by the United States Department of Justice, the Environmental Protection Agency, and the California Air Resources Board suggest that it is required.

The Cost Benefit Analysis

The step to improve emissions of over 3 million Mercedes-Benz cars will cost Daimler around $252 million. The software update will help the pollution equipment to function under a wider range of conditions as opposed to the narrow temperature range within which it operates at present. Daimler might have taken this step to prevent the possibility of paying a significantly higher amount in civil and criminal penalties. Volkswagen paid over $22 billion in civil and criminal penalties because they tried covering up their tracks when investigations for its own emission related malpractices began in early 2014. However, it is noteworthy to mention that the scale of accusations against Daimler is much smaller as compared to that which was raised against Volkswagen.

Why Are Most European Cars Facing This High Emission Problem?

In order to follow the regulations related to Climate change, a lot of European manufacturers make diesel cars. Though the diesel engines of an automobile emits lower levels of carbon dioxide and generates better fuel efficiency compared to the ones running on gasoline, the problem with the former is that they emit nitrogen oxides, which is carcinogenic in nature and might also trigger asthma. However, car makers are increasingly facing the problem of keeping the price of diesel cars competitive as the cost of the equipment that needs to be installed to neutralize the diesel fumes has been increasing.

Many European automotive manufacturers, including Daimler, have been denigrated by environmental groups and government bodies for taking advantage of the loophole that allow car companies to dial back emission control in order to protect the engine. Studies by the German, French, and British governments revealed that many of these cars shut down the pollution controls when the external temperature falls below 20 degrees Celsius or 68 degrees Fahrenheit.

Other than Volkswagen paying billions in settlements in the U.S., Fiat Chrysler Automobiles has also been mired in controversy. The company is in talks with  the Justice Department and has recently announced the modification of 100,000 vehicles in order to placate the U.S. officials.

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Daimler AG
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