BMW and VW Fined $1 Billion by EU for Emissions Cartel

Automakers Fined for Emissions Cartel

During the 1990s, as concerns about the environment grew, several German automotive manufacturers reportedly engaged in clandestine meetings. The purpose of these gatherings was to ensure their vehicles continued to generate substantial greenhouse gas emissions. Investigations by the European Union revealed that Volkswagen, Audi, Porsche, BMW, and Daimler – the parent company of Mercedes-Benz – were involved in illegal collusion.

EU Investigation and Findings

The EU determined that these automakers actively restricted competition in the development and implementation of emission cleaning technologies for new diesel passenger cars. Essentially, they deliberately delayed the introduction of more effective emissions control systems. On Thursday, the EU imposed substantial fines totaling $1 billion (€875 million) on Volkswagen and BMW for their participation in this emissions cartel.

Margrethe Vestager, Executive Vice President of the EU Commission, stated that the five manufacturers – Daimler, BMW, Volkswagen, Audi, and Porsche – possessed the capability to reduce harmful emissions to levels exceeding legal requirements. However, they consciously avoided competing to fully utilize this technology for improved emissions performance.

Vestager emphasized that the decision highlights the failure of legitimate technical cooperation and underscored the EU’s intolerance of anti-competitive practices. She affirmed that competition and innovation in pollution management are vital for Europe to achieve its ambitious Green Deal objectives, and the EU will take decisive action against any cartel behavior that jeopardizes these goals.

Settlements and Fines

All involved parties have acknowledged their participation and agreed to settle the charges. Volkswagen, encompassing Audi and Porsche, will pay approximately $595 million. BMW’s share of the fine amounts to $442 million.

Daimler faced a potential fine of around $861 million, but avoided payment by acting as the whistleblower in the case. This effectively means Daimler escaped financial penalties.

Financial Impact and Past Infractions

Considering BMW’s net profit of $4.62 billion last year and Volkswagen’s earnings of approximately $12.2 billion (and nearly $23 billion in 2019), the fines are perceived by some as a relatively minor penalty. It is important to note that this is not the first instance of Volkswagen facing scrutiny over emissions practices.

In 2015, the U.S. Environmental Protection Agency issued a notice of violation to VW under the Clean Air Act. The agency discovered that VW had intentionally installed software in its diesel engines to falsely indicate compliance with emissions controls. In reality, these vehicles were emitting pollutants at levels significantly exceeding legal limits.

Focus on AdBlue Tank Sizes

The EU’s investigation specifically focused on an agreement among the companies regarding the standardized sizes of tanks used for AdBlue. This solution is mixed with diesel exhaust to neutralize harmful pollutants. The automakers agreed to refrain from competing on improving emissions control, despite having the technological means to do so.

Greenwashing Efforts and Charging Networks

The existence of the cartel was initially reported by Der Spiegel in 2017, prompting the companies to initiate efforts to improve their public image. In the same year, these manufacturers, along with Ford Motor Company, collaborated to establish Ionity, a high-power charging network for electric vehicles (EVs) across Europe.

The initial plan was to deploy around 400 charging stations by 2020, but Ionity ultimately installed approximately 300. Furthermore, the company significantly increased charging prices by 500% last year.

Recent Investments in Heavy-Duty Charging

More recently, VW’s Traton Group, Daimler Truck, and Volvo Group have jointly invested nearly $593 million in a network of public charging stations. This infrastructure is intended to support electric heavy-duty long-haul trucks and buses throughout Europe.