Annual Report 2016 The automotive industry in facts and figures

Annual Report 2016 The automotive industry in facts and figures

Thank you.

Mobility connects us. Lets us discover new things, meet our friends, get to work and run errands. It provides all of us with growth and prosperity.

Today’s mobility is unthinkable were it not for the invention of the motor car over 125 years ago. And mobility is constantly being reinvented. Resulting in an increasingly safe, environmentally and climate-friendly mobility for the future.

This is due to the 800,000 people who have made Germany the world’s leading automotive nation. Some of whom we present here.

And to all of whom we say: Thank you.

www.vda.de/en www.mobilitaet-von-morgen.de 6 Foreword Foreword

the German automotive industry can look 50 percent of new trucks in Western and credibility, legitimately so to some back on one and a half years of economic Europe bear a German company logo. extent. Manufacturers and suppliers success. Last year, German automobile German trailer and body manufacturers want to do their utmost to restore trust manufacturers increased their global were also making successful progress: in the industry. Because – even if these passenger car production to a new record their revenues increased by 6 percent debates frequently created a different of 15.1 million units. Within this total, in 2015 to 10.4 billion euros. impression – the automotive industry domestic production has – for the first has its gaze firmly fixed on the future. time in 10 years – grown more strongly German suppliers continued apace with than foreign production, namely by their internationalization. Worldwide Firms will, in future, set greater store 2 percent to 5.7 million units. Our locations last year numbered 3,000 – by a company culture, defined by important big markets of China, Western growth of around 700 locations since openness, values and the ability to raise Europe and North America have continued 2010. The 100 biggest suppliers in objections. One should not however fail to grow in the first half of 2016 as well. particular are as international as to recognize that the large majority of Employment in our industry topped the manufacturers. To ensure their manufacturers has always tested new 800,000 employees in the core workforces economic success, small and medium- models by the rules, in accordance with in Germany. The automotive industry sized suppliers also have to expand legal requirements. These requirements remains a critical job factor in Germany. into new markets. The VDA supports should therefore also be reformed. them vigorously in this endeavor New, more realistic test procedures, German commercial vehicle manufacturers and is committed more than ever to such as the WLTP and “on-road test,” benefited from a buoyant Western improving collaboration within the value can help to restore customers’ faith in European market in 2015. Heavy goods chain. But recent months were also fuel consumption and exhaust emission vehicle sales rose 14 percent to 295,000 characterized by debates on diesel, data. The automotive industry is itself units. Growth in the first half of 2016 test procedures and pollutant limits. interested in such real-world emissions even reached 16 percent. Around This raised issues of corporate culture and fuel consumption figures. Foreword 7

The automotive industry has always Companies are also pushing ahead Hannover. This is a venue for familiar stressed to what extent employment with a second development that and new companies alike to showcase and production in Germany depend on will completely reconfigure the car their solutions for tomorrow’s mobility. export success. For example, 77 percent world: we are talking about the digital of German car production last year transformation of an entire industry The German automotive industry faces was exported. Free trade and the through networked and automated enormous challenges. But success in European internal market are therefore motoring. We are not just talking here the here and now is no reason to rest fundamental pillars of this success. about a new technology in which on one’s laurels. Manufacturers and The British Brexit decision is therefore we are already leading innovators. suppliers are rising to these challenges anything but encouraging. It is important Manufacturers and suppliers have in unison and working as partners. now to find ways for the EU and the UK instead embarked on a new, digital They affirm this not least through their to remain closely linked, both politically and networked world of mobility – with involvement within their shared trade and economically. new competitors, new services and association. The VDA’s tasks and those new business models. Automobile of its member companies are diverse. The public debate on the Transatlantic Free manufacturers are becoming mobility This annual report provides you with an Trade Agreement TTIP has also run off service providers with a comprehensive overview of the broad spectrum of topics the rails. The opportunities for prosperity offering extending far beyond the car. occupying the automotive industry. and employment afforded by a common In this new competition as well, our economic area of a total of 800 million companies have what it takes to keep people are being ignored. Instead, as with one step ahead of the game. the Brexit referendum, fears are deliberately being stoked. The German automotive Our intention with the “tomorrow’s industry and VDA have repeatedly, clearly mobility” initiative is to demonstrate and explicitly, championed the TTIP. what is already possible, and the Germany needs to respond to political exciting innovations on which Matthias Wissmann, President and economic future issues frankly and we are working. How will we get Association of the German Automotive confidently, and continue to back free trade. around in future? And with what Industry (VDA) technologies? These are questions Notwithstanding all today’s turbulence, our that merit discussion, and not just in companies have their gaze firmly fixed on a controversial way. For the first time, tomorrow. They are working on the future we also want to share a platform to of mobility made in Germany, and on showcase concrete projects being many fronts at the same time, what’s more. developed by German manufacturers According to the experts, Germany ranks and suppliers, invite their experts to among the three leading supplier countries speak and take a look behind the for electric mobility. Up to and including scenes. But the transformation of 2016, German manufacturers have already mobility and digitization also require put 30 production models with electric new collaborative ventures. The drive on the roads. We are anticipating automotive industry and the VDA are many more models in the immediate cooperating ever more frequently with future, some of them with significantly startups. The automotive industry greater electric-powered range. Important wishes to harness the opportunities of political decisions have been made for this collaborative ventures such as these to market launch: the environmental bonus, ensure that mobility technology made for example, half the cost of which is being in Germany remains at the forefront. borne by the manufacturers. If e-mobility is We are also successfully demonstrating to gain even greater momentum, massive this at the New Mobility World, which expansion of the charging infrastructure is we have established as a permanent required as well. new IAA fixture, in both Frankfurt and 8 Content Content

Foreword 6

Automotive industry and its markets 10

Current automotive market in the first half of 2016 12 Automotive year 2015: Key figures and data 14 International markets 16 European market 19 German passenger car market 21 Production and exports 23 Markets for the supplier industry 26 Markets for commercial vehicles and buses 27 Markets for trailers and bodies 30 Suppliers and medium-sized businesses 31 Aftermarket 34 Classic cars 36 Auto banks 39

Economic policy and infrastructure 40

Economic policy for Germany as a business location 42 EU policies 44 Trade and investment 48 Energy policies 52 Infrastructure 56 Passenger traffic 59 Freight traffic 62 Taxes and customs 66 Legal policies 70

Environment and climate 72

Road traffic and CO2 emissions 74

CO2 regulation for passenger cars and light commercial vehicles 76 Passenger car label 82 Air-conditioning and refrigerants 84

CO2 emissions of heavy commercial vehicles 85 Reduction of exhaust emissions 88 International comparison of air pollution control and air quality 90 Automobile production and sustainability 96 European Chemicals Regulation REACH 98 Content 9

Innovation and technology 100

A comparison of combustion technologies 102 Fuel consumption and emissions measurement in cars 105 Exhaust technology for reducing nitrogen oxides 110 Type approval 113 Electric mobility 115 Other alternative drivetrains 120 Networked and automated driving 122 Research Association for Automotive Technology (FAT) 126 Logistics 130

Safety and standards 132

Traffic accidents in Germany 134 Vehicle safety: New Euro NCAP requirements 135 Standardization 138

International auto show and events 144

Mobility connects: The 66th IAA Cars 2015 146 Retrospection on IAA Commercial Vehicles 2016 151 Events 154

Index 162

List of Figures and Tables 164 Index 166 10 Automotive industry and its markets

Automotive industry and its markets

The German automotive industry is as varied as it is large: big corporations and SMEs, manufacturers of cars, trucks, trailers and buses along with their suppliers employ around 800,000 people. Last year they once again raised output and turnover, both at home and abroad. Automotive industry and its markets 11

Christopher Pragassa, industrial mechanic device and fine mechanics, quality management, ebm-papst St. Georgen GmbH & CO. KG 12 Automotive industry and its markets Current automotive market in the first half of 2016

Global car sales continued to develop in the first half of 2016. The picture in Russia is quite different: The Russian market The three largest automotive markets, Western Europe, the could not slow its decline in the first half of 2016. Prices fell United States and China, which altogether account for two- significantly at the beginning of the year again, and the EU thirds of the world market, stay the course. By contrast, demand sanctions remain in force. The country is also in recession remains extremely weak in Russia and Brazil. Japan also remains this year. The bad economic situation is also reflected in the stalled. Overall, however, the global passenger car market in automotive markets: Cumulatively, new car sales are well below 2016 is still likely to exceed the 80 million mark for the first time. the level of the previous year. From January to June 2016, the sales volume decreased by 14 percent to 672,140 units, its The trend in detail: Demand in the world’s largest car market, lowest level since mid-2003. Even sadder is the situation in Brazil – China, has increased in the first six months by 12 percent both at the macroeconomic level and in the automotive sector. to 10.6 million units. This growth is supported by the SUV In the first half-year, new registrations fell by a quarter. This is segment. In addition, small-engined vehicles benefitted this the lowest value since the year 2006. In 2013, more than two and year from tax benefits. A shift between the segments can also a half times this figure was sold than in the first half-year. The be observed in the United States. While light truck sales rose political crisis continues, with economic recovery still seeming in the first half by 9 percent to 5.1 million units, passenger a long way off. car sales declined by 8 percent to 3.6 million units. Overall, after six months and 8.6 million units sold, the market for It is gratifying to see the trend in the most important market light vehicles is more than 1 percent in the positive. After the for the German automotive industry: Western Europe. The record level in 2015, another sales record is expected this year. economic recovery and resulting pent-up demand accumulated Economic conditions continue to provide stimulus. The growth in the years of the financial crisis are at play. In the first six in employment continues, the price of oil is comparatively low months, new vehicle sales increased by 9 percent to 7.5 million and financing conditions remain favorable. vehicles. Of the five largest markets, the Italian car market Aotut mo ive industry and its markets 13

again increased the most to: 1.0 million new registrations, in Western Europe are in positive territory. The backlog that had corresponding to a strong increase of 19 percent. The Spanish accumulated during the years of the financial crisis will now be car market grew by 12 percent. At the end of June, the expiring realized. The new EU countries are enjoying particularly good scrapping premium lured private customers, in particular, into progress: In the first five months there was a strong increase the car dealerships. In the first six months, France accounted of 29 percent. In Russia and Brazil, the commercial vehicle for 1.1 million new registrations (gain of 8 percent). The British business is still considerably weaker than the passenger car market exceeded the previous year by 3 percent – a new record. sector. The German market for heavy commercial vehicles (over The coming months will show the extent to which the exit of 6 tons) in the first half-year, with an increase of 8 percent, was the United Kingdom from the European Union will affect the characterized by a fast pace and reached a volume of 44,350. market. In the new EU countries, demand was also very lively The trend for vans is equally pleasing: In the first six months, it (+17 percent) up to May. Since the market share of German grew domestically by 11 percent to 129,500 units. brands in Western Europe and in the new EU countries is, in each case, about 50 percent, the ongoing recovery has a positive effect on the German automotive industry. So far this year, the German passenger car market has shown a vitality that many did not expect, but that fits, however, with the overall economic development. In the first half year, new car registrations rose by 7 percent to 1.73 million units.

The past results for commercial vehicle markets were also positive. In the first five months, the Western European market for heavy trucks (over 6 tons) grew by 16 percent. All markets 14 Automotive industry and its markets Automotive year 2015: Key figures and data

Highlights

In global passenger car markets there were a few surprises in 2015. The Chinese market had a rise and fall in the past year. The double-digit growth rates of past years are gone. In the United States, the light vehicle market reached an all-time high. Russia and Brazil, in contrast, truly collapsed – but this was hardly surprising, given the overall economic situation in these countries. The real surprise came from Western Europe. At 9 percent, the passenger car market had its highest growth of the last 25 years. The German automotive industry also grew strongly in 2015. Both sales and employment expanded. Production and exports of passenger cars also reached new record levels.

Research and development

The German automotive industry again increased expenditure for research and development (R&D). In 2014, they raised worldwide expenditure to 34.3 billion euros – an increase of 8 percent over the previous year. A good third of worldwide R&D investment in the automotive industry was made by German companies. In addition, the three largest R&D investors in the European Union were companies in the German automotive industry. On the global competitive battlefield, the companies use these efforts to create a foundation for competitiveness and technological leadership.

The R&D location of Germany has special significance as an idea factory. Domestic R&D expenditures rose particularly sharply in 2014, by a good 14 percent, to 19.7 billion euros. About two-thirds were by vehicle manufacturers and one-third by suppliers. For 2015, it is expected that the auto industry will increase domestic investment in R&D by another 5 percent, to 20.6 billion euros. In contrast to vehicle production, of which over 60 percent is now done at foreign locations, the German automotive industry spent the majority of its worldwide R&D funds domestically, at 57 percent. The efforts of the automotive industry are also extraordinarily significant to Germany as a technology location. It is the largest R&D investor by far and had a 40 percent share of total industrial R&D investment in Germany. Aotut mo ive industry and its markets 15

Employment

The auto industry again played a critical part last year in the All three manufacturing groups recorded employment growth positive trend of the German labor market, increasing the in the last year. At vehicle manufacturers, employment rose by permanent employees at its factories in Germany. In comparison almost 3 percent, or 11,600 employees, to a total of 458,800. with 2014, the number at mid-year had risen by a good The German supplier companies had a total of 300,900 people 2 percent, or 17,600 employees, to 792,500. This means that in their permanent employee base. In comparison with 2014, employment has risen for the fifth year in a row. In comparison this corresponds to 2 percent growth, or 5,500 employees. with 2010, companies created more than 90,000 additional jobs. Manufacturers of trailers and bodies also saw growth of For the first time since 2004, the number of employees grew to 2 percent. The number of employees grew by 500 to 32,800. over 800,000 in the period from August to November.

Employees in the German automotive industry Change in percent

4

+3.3 % +3.1 % 3 +2.8 % +2.6 % +2.5 % +2.3 %

+1.9 % +1.9 % 2 +1.8 % +1.5 % +1.5 %

1

0

-0.3 %

-1 2013 2014 2015

Manufacturer Bodies Components Automotive Industry Source: Federal Statistical Office 16 Automotive industry and its markets International markets

Economic performance

The overall economic recovery in the euro area in 2015 was somewhat stronger in fact than had been expected at the start of the year. However, the upswing was not actually all that strong. The United States, in turn, grew somewhat slower than first expected, but was still solid. It only made sense, then, that the US Federal Reserve signaled the end of the zero-interest phase with an initial interest rate increase. The performance of the Chinese gross domestic product, in contrast, is becoming less dynamic. India grew faster than China. Whether the Indian economy will soon really get going, however, is questionable. Russia and Brazil experienced deep recessions.

China

The Chinese passenger car market again defended its leading position as the largest single market in the world. A total of 20 million basic cars, MPVs and SUVs were sold in the People’s Republic in 2015. However, the much-cited new normality in the Middle Kingdom has now finally reached the automobile business as well. With a gain of a 9 percent, China was not able to continue the double-digit growth rates of recent years. Economic weakness and increasingly restrictive policies on new registrations had actually caused the Chinese passenger car market to run into negative growth numbers in the summer months. At the end of the year, however, sales jumped – thanks to the value-added tax being cut in half starting in October for vehicles with up to 1.6 liter displacement. The market for electric vehicles boomed in 2015. During the year, around 206,800 electrically powered vehicles were sold in China. This equates to 300 percent growth over the previous year.

Sales of motor vehicles in China in millions

25

20

15

10

5

0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Source: CAAM, Fourin Aotut mo ive industry and its markets 17

USA

Sales of light vehicle in the USA – including passenger cars and light trucks – performed very nicely in 2015. Sales added 6 percent and exceeded the previous record level from 2000 with a volume of nearly 17.4 million vehicles. The market Electric cars continued its recovery course and grew for the sixth year in a row. However, market With 114,300 registrations, USA is only the second largest market after China growth is not equally distributed. While the overall market grew in the past year, passenger car sales fell by 2 percent. A total of 7.5 million passenger cars were sold. As a result, there was a further shift to light trucks, sales of which rose by nearly 13 percent to 9.9 million units. The light truck share of the overall light vehicle market thus increased to nearly 57 percent, compared with 53 percent in the previous year.

The USA lost its position as the world’s largest market for electric cars last year and was overtaken by China. The electric market in the US shrank by a good 5 percent to 114,300 units. Sales of purely electric light vehicles (BEV) grew by 8 percent to 70,800 units, while turnover of plug-in hybrids (PHEV) dropped by 22 percent to 43,500 vehicles. German manufacturers were able to more than double their sales in the shrinking market, thereby substantially increasing their market share. They sold 23,200 electric vehicles (up 103 percent) and reached a market share of 20 percent (previous year: 9 percent).

Long-term performance of LV sales in the USA in millions

20 20

15 15

10 10

5 5

0 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Passenger cars Light trucks Total light vehicle sales Source: Ward´s 18 Automotive industry and its markets

South America India

The extremely weak overall economic situation put pressure on The Indian passenger car market found its way back to stability automobile markets in two of the most important economies in 2015. Around 2.8 million vehicles were sold in India in the in Latin America. In 2015, light vehicle sales in the Mercosur past year – against a backdrop of easing inflation pressure, countries Argentina and Brazil reached a total volume of low crude oil prices, and low interest rates, passenger car 3 million – a drop of nearly 22 percent. The Brazilian light vehicle turnover rose by nearly 8 percent. The Indian automotive market market reeled under a bitter setback in 2015 overall. With a drop remained well below its potential again in the past year, however. of nearly 26 percent, the market dropped to about 2.5 million A low ownership rate of 22 cars per 1,000 inhabitants, a young units, the lowest volume since 2007. In Argentina, inflationary population and growing middle class with rising income should pressure, currency devaluation and falling investment did not be driving growth. All of this means that higher growth rates hit the light vehicle market quite as hard as in the neighboring should be expected for the emergent economy of India – but no country of Brazil. After new car turnover faced a strong trace of this is evident as of yet. headwind in the first half of 2015, so that light vehicle sales dropped by a good 6 percent, increasing real wages and measures to promote consumer demand pulled the Argentinian market back into positive numbers in the second half of the year. Aotut mo ive industry and its markets 19 European market

Western Europe

The passenger car market in Western Europe continued its recovery at a faster pace in the last year. With a gain of 9 percent, the market achieved its highest growth of the Pleasant surprise: Western Europe grows last 25 years. New registrations of passenger cars had exceeded the previous year after more than it has in 25 years just 11 months, and reached a total volume of 13.2 million units with a strong spurt at the end of the year. Despite the strong increase, however, Western Europe is still quite a way from the registration numbers of the years prior to the crisis.

In the United Kingdom, the passenger car market grew at 6 percent for the fourth time in a row, reaching a new record level of 2.6 million units. The passenger car market in France also grew substantially, to a total of 1.9 million newly registered passenger cars (a 7 percent gain). The French market thus grew for the second year in a row. Italy also recovered further: In the entire year, the Italian passenger car market grew by 16 percent and reached a volume of 1.6 million newly registered cars. In Spain, the PIVE subsidy program, along with overall economic recovery, led to a strong increase of 21 percent in new passenger car registrations, to over one million units.

New passenger car registrations in Western Europe Change 2015/2014

United Kingdom +6.3 %

Spain +20.9 %

Switzerland +7.2 %

Sweden +13.5 %

Portugal +25.0 %

Austria +1.7 %

Norway +4.5 %

Netherlands +16.0 %

Luxemburg -6.7 %

Italy +15.8 %

Ireland +29.7 %

Greece +6.4 %

France +6.8 %

Finland +2.4 %

Germany +5.6 %

Denmark +9.9 %

Belgium +3.8 %

New passenger 0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 car registrations 2015 2014 Source: ACEA, VDA 20 Automotive industry and its markets

Eastern Europe Russia

New passenger car registrations in Eastern Europe (new EU The Russian light vehicle market continued its strong downward countries plus Cyprus) rose by 12 percent in the last year, trend in 2015. Currency devaluation, falling oil prices, inflationary reaching the 1 million mark again for the first time in six years. pressure and the ongoing conflict in Ukraine – Russia’s Among the large Eastern European markets, the Czech Republic economy was in a deep recession. Sales of new vehicles fell had the strongest growth, gaining 20 percent for a new record by 36 percent to 1.6 million passenger cars and light trucks. In level of 230,900 new passenger car registrations. As the largest the fourth quarter, sales dropped by nearly half. The state aid individual passenger car market in the new EU countries, Poland package for the Russian automotive market showed absolutely had its highest level of the past 15 years with 355,000 units (an no sign of being effective. Due to stagnating real incomes and 8 percent gain). The Slovakian market also set a new record severe loss of purchasing power, private consumption has with 78,000 new passenger car registrations (+8 percent). collapsed as a pillar of the economy. Other Eastern European markets, in contrast, are still clearly characterized by the global economic crisis. The Hungarian passenger car market, despite 14 percent growth to 77,200 new passenger car registrations, is still 95,000 units short of its 2007 level. In comparison with Western Europe, the new EU countries remained at a low level. The passenger car markets thus reflected the still enormous overall economic gap. The gross domestic product of Western European countries exceeded that of the new EU countries by more than a factor of ten in 2014 (approximately 11.8 trillion euros). Per capita, this is a difference of about 31,000 euros.

Passenger car sales in Russia Change relative to previous year’s quarter in percent

1,000,000

+10.6 % 800,000 +13.1 % +2.2 % -2.3 % -10.7 % -7.7 % -2.7 %

-12.2 % +20 % +0.2 % -2.2 % 600,000 -23.1 %

-36.5 % -25.3 % -42.6 % 400,000 -36.3 %

200,000

0 2012 2013 2014 2015

Quarter 1 Quarter 2 Quarter 3 Quarter 4 Source: AEB Aotut mo ive industry and its markets 21

German passenger car market

German passenger car market gains in 2015

The year 2015 was a happy one for the passenger car market in Germany. Growth was recorded in eleven of the twelve months – sometimes at double-digit rates. This continues a trend from the recent past, as demand by consumers continues to fall. This drop was more than compensated for by the strong fleet sales. Altogether, 3.2 million new passenger cars were registered in Germany. This is an increase of nearly 6 percent over the previous year. The year started off very promisingly. In the first quarter, sales grew by more than 6 percent. After six months, the gain dropped slightly to 5 percent. A strong spurt at the end of the year – a 9 percent gain in November, 8 percent in December – helped the German passenger car market to reach the highest volume since 2009, when the environmental bonus led to high new registration rates.

As in previous years, the result is primarily due to demand from commercial customers. Consumer customers purchased about 1.1 million new vehicles. Private demand thus stagnated at the level of the previous year. The proportion of consumer buyers dropped by 34 percent. New commercial registrations, in contrast, rose by nearly 9 percent for the entire year. Their share is currently at the highest level ever, at almost 66 percent. More than half the commercial registrations are for company cars. This makes it clear that a shift in demand has taken place. The increasing popularity of company cars has contributed to a corresponding drop in consumer demand for new cars in recent years.

New passenger car registrations Annual basis

in millions 5

4

3

2

1

0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Source: Federal Motor Transport Authority 22 Automotive industry and its markets

The stronger demand from fleet customers is also responsible for the higher sales of vehicles with diesel powertrains. They rose by 6 percent in 2015, somewhat more than demand for vehicles with gasoline engines (a 5 percent gain). This put the diesel proportion of all new passenger car registrations at 48 percent (previous year: 47.8 percent). The share of gasoline engines among new registrations, in 2015 dropped slightly to 50.3 percent (previous year: 50.5 percent).

Despite low fuel prices, sales of electric cars increased greatly again in 2015. New registrations of electrically powered passenger cars rose by 79 percent over the previous year, to 23,500 units. Sales of plug-in hybrids (PHEV) were particularly dynamic. Demand for these vehicles increased by 142 percent to 11,100 units. The share of plug-in hybrids among total electric registrations thus rose to 47 percent (2014: 35 percent). New registrations of purely battery-powered electric passenger cars (BEV) increased by 45 percent to 12,400 units. Despite strong growth, the share of electric vehicles among all new passenger car registrations in Germany was very small, at 0.7 percent. From 2008 to 2015, over 50,000 electric passenger cars have now been registered in Germany. More than 63 percent of these were purely electrically powered.

Cumulative new registrations from January 2008 to January 2016

in thousands 60

50

40

30

20

10

0 2009 2010 2011 2012 2013 2014 2015 2016

Cumulative PC new registrations (BEV) Cumulative PC new registrations (PHEV) Source: Federal Motor Transport Authority Aotut mo ive industry and its markets 23

Production and exports

Domestic production

German automobile manufacturers increased global passenger car production in the past year by a solid 1 percent, to a new record of 15.1 million units. The expansion Passenger car production in Germany was mostly attributable to domestic production, which rose 2 percent to 5.7 million increases more than in other countries units. For the first time in ten years, it grew faster than foreign production. The most important segment within passenger car production was once again the compact class in 2015, whose production rose by an above-average 5 percent to 1.7 million units. In third place, behind the medium class, were sport-utility vehicles, with growth of 15 percent to 957,000 units.

Foreign production

The global market share of German passenger car manufacturers, including their corporate brands, was about one-fifth in 2015. Of a worldwide total of 15 million passenger cars, 9.4 million units were produced in the foreign plants of German manufacturers. This put the share of foreign production at 62 percent. The most important foreign location by far was China. After a powerful spurt at the end of the year, production there maintained the previous year’s level at 4 million passenger cars. Foreign production by German manufacturers received a boost primarily in the European Union, with growth of 4 percent to 3.3 million units. Foreign production in EU countries has now grown by 54 percent over the last six years. Production in North America, including Mexico (NAFTA space), also saw positive growth, growing by 7 percent to 1.3 million units. The lion’s share of this was in the USA, with 812,000 units (a 14 percent gain). The Mercosur region saw a substantial drop in production by 29 percent to 372,000 units. In 2010 production was still at 849,000 units. Another driver was South Africa, which gained 27 percent to 294,000 passenger cars. 24 Automotive industry and its markets

PC production by German manufacturers in foreign countries by manufacturer and country of production, 2015

France 93,357

Belgium 116,250

Netherlands 57,019

Italy 3,707

205,054 United Kingdom 10,558

Portugal 102,158

59,554 Spain 137,178 641,265

Finland 79,619

83,783 Austria 17,062

169,330 Poland 114,978

Czech Republic 673,435

82,422 Slovakia 233,921

183,046 Hungary 160,206

Slovenia 41,504

1,934 Russia 134,292

102,225 South Africa 71,353 120,002

303,525 USA 421,256 87,156

139 Mexico 457,517

1,423 Brazil 347,316

841 Argentina 22,021

India 130,504

260,665 287,755 China 490,260 2,929,678*

Passenger cars 0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000

Volkswagen Audi BMW Daimler Opel *Reduced display Source: VDA Aotut mo ive industry and its markets 25

Exports

The international success of the German automotive industry was evident last year again with another rise in the export rate, which reached a new record level at 77 percent. This means that over three out of four cars manufactured in Germany are exported. This result underscores the sustained high level of attractiveness around the world for cars manufactured in Germany. The rising trend of recent years continued in 2015 as well, and exports rose by over 2 percent to 4.4 million passenger cars.

Europe remained the most important destination continent for passenger cars from Germany, with 2.8 million cars. Growth here of 5 percent was also above average. The countries in the eurozone, which are experiencing an economic recovery, demanded 1.3 million passenger cars (a gain of 9 percent). Exports to peripheral countries in particular, such as Italy (up 14 percent), Spain (up 12 percent) and Portugal (up 19 percent) increased significantly.

The most important destination country for exports from Germany, however, was outside of the euro area. The United Kingdom received 809,900 passenger cars. The second- largest recipient country was the USA, with 618,800 cars (up 1 percent). Growing by 5 percent, 701,300 units were shipped to Asia. While exports to China dropped by one-quarter to 204,500 units, shipments to South Korea increased by 30 percent to 154,300 vehicles. Exports to Japan were not able to be maintained at the level of the previous year, falling by 12 percent to 124,700 units. The Japanese passenger car market, however, did drop off overall in 2015. Exports to Australia and Oceania took a substantial jump, climbing by 16 percent to 90,700 units.

Exports of passenger cars in 2015 by destination country

USA Asia Eastern Europe Rest of the World 2015 United Kingdom Italy Exports of passenger cars France Benelux Spain Rest of Western Europe

Source: VDA 26 Automotive industry and its markets Markets for the supplier industry

German suppliers can look back on a successful year 2015. The companies increased German suppliers increased sales for the sales for the third year in a row. At 75.8 billion euros, their revenues exceed the third year in a row previous year’s level by a good 3 percent. With domestic customers, manufacturers of components and accessories for motor vehicles turned over 46.9 billion euros (up 2 percent). Foreign sales increased by a solid 5 percent to 28.9 billion euros. Export sales thereby rose faster than domestic turnover in three successive years. The export rate for the year just concluded was 38 percent (2010: 34 percent).

German suppliers employed 300,900 workers as permanent staff in the past year. In comparison with 2014, this means growth of 2 percent, or 5,500 employees.

German supplier industry turnover performance in millions of euros

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Domestic sales Foreign sales Source: Federal Statistical Office Aotut mo ive industry and its markets 27 Markets for commercial vehicles and buses

Heavy commercial vehicles

The largest markets for heavy commercial vehicles developed the infrastructure that has been reinvigorated by the Modi completely differently in 2015. In the USA, sales of medium government bore its first fruits. Sales volume was 280,400 heavy and heavy commercial vehicles (MHCV) increased even more commercial vehicles. than the light vehicle market. With 449,500 new registrations of commercial vehicles over 6 tons, the market rose by almost After the distorting effect of the introduction of Euro VI in 2013 11 percent. In China, sales of heavy commercial vehicles were and 2014, the Western European market for heavy commercial again deep in the red. With a drop of 24 percent, demand fell vehicles over 6 tons returned to normal channels in 2015. New to just 751,000 units. The Indian commercial vehicle business registrations leapt by 14 percent to a solid 259,000 units, thus shifted up a gear in 2015. The market for heavy commercial reaching the highest level since 2008. vehicles grew by a hefty 30 percent. Here, the expansion of

New registrations of heavy commercial vehicles in selected Western European countries in excess of 6 tons

in thousands 100

80

60

40

20

0 2008 2009 2010 2011 2012 2013 2014 2015

Germany France United Kingdom Italy Spain Source: VDA 28 Automotive industry and its markets

After turnover of heavy commercial vehicles over 6 tons being stable in Germany in German market for heavy commercial 2014, new registrations grew significantly in comparison in 2015. The 83,400 newly vehicles grows to 83,400 in 2015 registered heavy commercial vehicles exceeded the previous year’s level by 5 percent. Demand grew stronger as the year progressed. Near the end of the first half of the year, new registrations were still down by almost 1 percent. This was primarily due to the fact that Euro V vehicles produced in 2013 were still allowed to be registered in 2014, and the pre-sale effect lasted well into 2014. This then faded out substantially in the second half of 2014. This meant that in the second half of 2015, a base effect with strong growth occurred – up 6 percent in the third quarter and 16 percent in the fourth.

Transportation

The transporter market in Western Europe grew by double digits in 2015. New registrations of commercial vehicles up to 6 tons rose by 11 percent to 1.7 million units. Especially in southern Europe, fleets continued to be updated. In Spain, new registrations had particularly strong growth of 36 percent to 155,300 vehicles, with an additional boost from the PIMA Aire subsidy program. In France, the largest transport market in Western Europe, turnover grew by 2 percent to 380,300 units. At 15 percent, the United Kingdom booked strong growth and reached a new record level with 375,400 new transporter registrations.

Turnover of light commercial vehicles in Germany in 2015 grew by 4 percent to 244,200 units, reaching a new turnover record. The market was driven in particular by strong growth in online business. This had already grown the year before to a share of around 10 percent of total German retail sales. This drives an increase in demand for CEP (courier, express and package) services , and therefore demand for transporters as well.

Buses

The Western European market for buses over 3.5 tons picked up speed significantly compared with the previous year, with double-digit growth (up 14 percent). In Germany, 6,137 new buses were registered (up 9 percent). Over 80 percent of registrations (5,139 units) were for buses over 8 tons. That equates to an increase of more than 8 percent. The liberalization of the long-distance bus market primarily gave a boost to demand in Germany. Growth in the still young industry continues and service routes are being expanded further. In Germany, buses carry over 5 billion passengers annually, covering about half of the volume of local public transport. Rising quality requirements for local public transport, as well as higher emissions and environmental standards, require the fleet to be updated on a continuous basis. This was evident last year in the new registrations in Western European countries as well. Markets for buses over 3.5 tons in the United Kingdom, Italy, Spain and France all saw double-digit-growth as well. Aotut mo ive industry and its markets 29 30 Automotive industry and its markets Markets for trailers and bodies

German trailer and body manufacturers were also able to profit export revenues rose 10 percent to just under 5.3 billion from the economic recovery in the EU and strong growth in euros, exceeding domestic sales. This reflects the increasing commercial vehicle markets in the past year. Rising incoming internationalization and international competitiveness of orders especially affected production in the second half of 2015. German manufacturers of trailers and bodies, who often have Losses in Russia were compensated for by demand from the EU. niche specialties. With a gain of 20 percent to about 2.9 billion euros, sales in the eurozone had particularly strong growth. Domestic Group II manufacturers increased turnover by Revenues from other countries just reached the level of the a good 3 percent. In the German trailer market, a total of previous year, at 2.4 billion euros. 280,000 new trailers were registered in 2015. With 4 percent growth, to 31,600 units, new registrations of semi-trailers This enjoyable business performance by manufacturers of grew slightly faster. trailers and bodies also had a positive effect on the permanent employees of factories in German locations. Annual average Measured by sales, German trailer manufacturers can employee count in 2015 was 32,800. This puts employment up also look back at a successful year. For the first time since 2 percent, or 500 employees, compared with the previous year. 2008, revenues exceeded the 10 billion euro mark again. In comparison with 2014, a solid 6 percent growth was booked, to 10.4 billion euros. This is a new record for these companies. Domestic sales grew by 3 percent to 5.2 billion euros, while

New trailer registrations in Germany

in thousands 500 50

400 40

300 30

200 20

100 10

0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Semi-trailer (RS) Total trailers (LS) Source: Federal Motor Transport Authority Aotut mo ive industry and its markets 31

Suppliers and medium- sized businesses

The German automotive supplier industry, with 300,000 VDA promotes globalization employees, represents the spirit of innovation, global presence and high performance more than any other field. The industry Local production locations in transitioning countries are often is anything but homogenous. It includes family businesses the most important prerequisite to establishing a foothold. and global corporations, chip makers and steel processors, The early entrants are often manufacturers, followed by companies with dozens of locations worldwide and small suppliers who want to participate in the growth in sales. For specialists that are tweaking the future of mobility with Tier 1 suppliers, a comprehensive international production 100 employees. Just as each company has its own unique network has long been part and parcel of the business strategy. character, the questions of the future must be answered by each Small and medium-sized suppliers, however, hesitate to invest individual company. Nevertheless, there are some similarities. in foreign markets and establish new production locations. The risk of a failed investment bears much greater weight for This is especially true of Germany. It is and will remain the them. In order to help small and medium-sized companies to home of supplier companies and a center of production and nevertheless make the leap to developing and transitioning development. Nevertheless, there is no longer an automatic markets, the VDA has discussed the requirements and answer to the question of location. The majority of parts that suggested solutions for long-term financing. Ultimately, two are assembled by vehicle manufacturers in German factories financing models were created in conjunction with the DEG are already imported from other countries today. Astute and the IKB. economic policy must therefore address the fact that medium-sized companies are the actual backbone of the In addition to financing, a reliable information base is needed German automotive industry. when taking the step into new markets. Besides conventional market data, the experiences of other companies are especially On the other hand, internationalization is essential for both valuable. The VDA has set up “round tables” in the key automakers and suppliers. A recent study from the Center for markets of China and Mexico. Local CEOs of German suppliers Automotive Management and Prof. Stefan Bratzel demonstrated and automakers’ representatives exchange information and this. German manufacturers are seeing more and more experiences and discuss the potential for cooperation. international suppliers, especially at their foreign locations. This means that cooperation between German automakers Due to the enormous significance of China as a sales and and German suppliers is less inevitable than ever. Meanwhile, production location, the VDA has also set up on office for its globally positioned suppliers can do business with new members in Beijing. The team has initially staked out a set of customers in Asia and the Americas. issues to be addressed regarding norms and standards, logistics and the aftermarket. The latest VDA location survey indicates that, with over 3,000 locations around the world, the supplier industry is as Another focal point is entry into the Russian market. This is internationalized as the automobile manufacturers. Compared made all the more difficult by the deep recession in which with the previous survey in 2010, this is a substantial increase of Russia finds itself. Regardless, the Russian government has been about 700 locations. VDA member companies have production attempting to establish local production structures by means in nearly 80 countries. This picture is dominated, however, by of protectionist measures. The VDA therefore started a supplier the 100 largest companies. Measured against the total number cluster for Russia back in 2013, in which 18 companies are of suppliers participating in the VDA, this is just the tip of the currently participating. The companies joint efforts are focused iceberg. In order to secure economic success and Germany as on establishing a stable supplier network in Russia. The initiative a production location, it is therefore necessary for small and remains open to new participants. medium-sized companies to expand into new markets. 32 Automotive industry and its markets

Innovation collaborations

Innovations are the most critical key to survival for automotive companies. Because these innovations were produced by suppliers in international competition. Working together with working together with suppliers, the cooperative relationships the Center of Automotive Management (CAM) of Prof. Stefan between global OEMs and global automotive suppliers were Bratzel, the VDA has investigated the innovative strength of the analyzed in more detail. The results show that the majority of automotive industry and the innovation relationships between innovations from manufacturers in Germany, the USA and Japan suppliers and manufacturers for the first time. The innovative were indeed developed with suppliers from their own countries. power of automobile manufacturers was analyzed in an In the most recent years studied, from 2011 to 2014, the pattern internal comparison on the basis of empirical innovation data. of cooperation became increasingly international, however, both The starting point was over 7,000 innovations between 2005 among OEMs and among suppliers. Manufacturers are working and 2014 that were evaluated according to quantitative and significantly less on innovations with domestic suppliers. qualitative criteria. From 2007 to 2010, German automakers still produced more than two-thirds of their innovations with German suppliers. In The study shows that the innovative power of German recent years, this share has dropped to 47 percent. In the other manufacturers has grown in comparison with their competitors direction, German suppliers implemented over 80 percent of across all technological fields in the last ten years. This was their innovations with German manufacturers between 2007 demonstrated by the analysis of 7,032 vehicle engineering and 2010. In recent years this share fell to 57 percent. German innovations from 18 global automobile manufacturing suppliers are working more with US manufacturers in particular.

Trends in Innovation collaboration between German suppliers and OEMs over time

7 13 6

5 12 Germany Collaboration Collaboration North America 2007–2010 2011–2014 Japan 3 Europe except Germany Share in % Share in % 57 Rest of the world

15 81

Source: Materials on the Automotive Industry No. 50, Innovative Power of German Automobile Manufacturers and Suppliers Aotut mo ive industry and its markets 33

Development service providers Automotive industry and startups

Development service providers perform development work The digitalization of all of its aspects has had a substantial for manufacturers, contributing significantly to increases in influence on the automotive industry on the customer side, with innovation and improvements in efficiency along the entire new mobility services, networked or automated driving, and in supply chain. As a rule, they are focused on developing production. The automotive industry is adapting to new players components, modules and systems for a vehicle, and cover in the automotive supply chain. These especially include young, the entire development cycle from early development to start creative software and digital startups. The auto industry wants to of series production. The VDA provides a forum for these collaborate intensely with these companies in order to make use companies in the interest group for development service of their innovations for “Made in Germany” mobility technology. providers, with discussion of opportunities, challenges The VDA has therefore pushed for cooperation between the and problems with collaboration. Over twenty well-known automotive industry and the national and international startup development service providers participate. scenes with dedicated efforts over the last two years. The association has used various projects and initiatives to establish The service provider industry is currently undergoing upheaval. a new platform for significantly intensifying the exchange The regulation of contracts for services and temporary between companies in the auto industry and startups. employment, as well as rising liability risks with respect to manufacturers, have created a need for change. Even before VDA member companies and startups should have regular the law was changed, manufacturers and development service opportunities for making contact. To this end, a Digital Learning providers adapted or revamped their processes. The VDA Journey has already been established, where medium-sized performed a thorough analysis of the challenges in a joint automotive companies can get to know many mobility startups. study with the Berylls consulting company. The study, titled In the New Mobility World at the IAA, a “Startup Zone” has “Automotive Development Service – Germany as a Future also been set up. The VDA is also working intensively with the Location,” is available free of charge on the VDA website. German Startups Association, producing a joint position paper on traffic and innovation policy. In order for companies and startups to make more intensive contact, a cooperative effort State dialog with the German Tech Entrepreneurship Center (GTEC) has also been agreed on. The German automotive supplier industry has strong regional roots. Regional cluster initiatives have therefore been formed in the federal states, offering various types of support to small Medium-sized commercial vehicle industry and medium-sized suppliers. The VDA is in close contact with supplier clusters in the German federal states, and cooperates The commercial vehicle industry itself is – with the exception of with them on joint events or as part of the IAA. In the VDA State a few large manufacturers – full of medium-sized companies, Dialog, the automotive cluster initiatives from the federal states and is a significant overall factor in the German economy. come together once a year with the economic ministers to The entire commercial vehicle industry has about 190,000 exchange information. The VDA provides another service with employees. Demographic changes, rising internationalization the supplier database auto-world.org, in which VDA member and increasing digitalization present new challenges for companies and companies from various cluster initiatives are medium-sized German companies in the commercial vehicle integrated. The focus here is on regional searches. The supplier business. The family companies, most of which have been led database is a supplement to the VDA manufacturer verification. for several generations, are second to none in meeting the ongoing development needs of their products with respect to ecological and technical demands. No other country has such a high level of technological and quality thinking, as well as innovative ideas that flow quickly into manufacturing and innovative products in the trailer and superstructure industry. 34 Automotive industry and its markets Aftermarket

Aftermarket increases further in significance

The automotive aftermarket is a broad and significant business segment. It includes maintenance and repair of vehicles, as well as sales of spare parts and services. Coping with developments, such as globalization, the increasing complexity of technology, parts variety or logistical requirements, will remain a challenge in the future as well. Increasing networking means a new dimension of complexity, but also new changes – the importance of the automotive aftermarket is going to increase even more.

Product and brand protection

Product piracy is a serious problem for the automotive industry. Around the world, V DA develops security feature to make unauthorized copies and brand violations are a regular occurrence that can ultimately products counterfeit-resistant endanger the safety of consumers. The Aftermarket department of the VDA has long provided a platform for the exchange of experience among experts from vehicle manufacturers and suppliers. This includes regulatory agencies such as the Central Office for the Protection of Industrial Property of German Customs.

In order to facilitate and optimize cooperation with customs officials around the world for all participants, a VDA recommendation on counterfeit protection has been prepared. The Aftermarket department agreed on components of a unique code as a security feature. The main purpose of this security feature is to provide a way to verify product identification. Implementation of such a security feature is an important strategic decision for the companies. It has great utility but also requires that processes be modified. It must therefore be introduced over the long term. In the target state, the training effort for customs should be reduced, and communication between officials and brand owners can be automated, and therefore be done more quickly, making the work more efficient and enabling higher success rates.

Protection of industrial property

In the last two years, the VDA has lobbied intensively in China for greater emphasis to Chinese officials confiscate thousands of be placed on the protection of industrial property, especially brand protection. Officials counterfeit vehicle parts in the southwestern Chinese provinces of Chongqing and Szechuan took a look at the local vehicle parts business with the support of some VDA member companies. In several actions, officials confiscated thousands of counterfeit products. The Chinese public was given a clear signal that the German automotive industry cherishes its industrial rights, even in other countries. Numerous discussions on industrial property protection and the rights of brand owners were also held with Alibaba.com, the largest Chinese online commercial platform. More than 100 employees from the field of intellectual property rights received training on how to better detect counterfeit vehicle products. Aotut mo ive industry and its markets 35

Remanufacturing Electronic components for classic cars

Remanufacturing is the industrial reprocessing of auto About 15 years after the end of series production of a car, it can components that are no longer functional, also known as used already be difficult to buy electronic components, as suppliers parts. Remanufacturing extends the product life cycle, making have already stopped production. This will be even more difficult a valuable contribution to resource protection. In order for a in the future for classic cars that are 30 years old or older. product to be processed, basic technical requirements must be The VDA is therefore developing a recommendation for how provided back in the development phase. A recommendation to manufacturers and suppliers can ensure that service solutions this end has been developed in the VDA, giving developers and will be available in the future as well, even after the suppliers’ designers in particular the necessary information, instructions obligation to continue production has expired. A prerequisite and decision aids. This makes it possible to have product that must be met is the long-term preservation of knowledge development with a remanufacturing orientation. about software and electronics. 36 Automotive industry and its markets Classic cars

For many years, companies in the automotive industry have put great effort into Classic cars and their owners are keeping their brand story alive. Many member companies of the VDA cannot imagine brand ambassadors giving up their distinct working traditions. German automobile manufacturers, in particular, foster their history in order to strengthen their own brand in the present as well. Classic cars and their owners are therefore brand ambassadors as well.

For many years, the VDA has worked to support the interests of this ever-growing movement of classic car fans and drivers. The main focus is on maintaining or creating conditions for historical vehicles to be able to drive on public roads in the future without a problem. Classic cars are particularly affected by new environmental laws or safety regulations. Often they cannot be converted or upgraded to comply with the new requirements. Classic cars should also not have to be adapted to modern standards, but instead be able to remain in their original condition. In the course of current lawmaking, it is more and more frequently necessary to provide exceptions for older vehicles.

The legal definition of a classic car is a vehicle that is at least 30 years old and is in original and technically sound condition. They can be identified by the H designation that allows driving in environmental zones.

The German Classic Car Index 2016 Index trend since 1999 The number of classic cars continues to rise: 388,000 vehicles with H tags 2,500

The German Classic Car Index 2,000 Classic cars gain value moderately, but are no good for speculation

1,500

1,000 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Source: classic-analytics Aotut mo ive industry and its markets 37

At the European level, the VDA is working with the European Members of the German Bundestag are working with classic car Parliament Historic Vehicle Group. A recommendation by the experts and representatives of the movement in the Automotive commission for regulating environmental zones is currently Cultural Heritage parliamentary committee. In 2015, the being prepared in Brussels. The objective is uniform design of Automotive Cultural Heritage Initiative (IAK) was produced by bans and exceptions, so that internal European travel is possible this committee. The initiative aims to declare automotive cultural without needing to know the exact local regulations. This heritage, that is, the entirety of all classic cars, as UNESCO recommendation should apply the German exceptional rules for intangible world cultural heritage. An application to this end classic cars in environmental zones at the European level. is to be submitted to the German UNESCO commission. The UNESCO Convention for the Safeguarding of the intangible In addition, a regulation is being debated in Brussels for cultural heritage was adopted in 2003. The designation simplifying the shipment of motor vehicles within the internal as intangible cultural heritage is to be awarded to human market. Currently, every member state has its own regulations cultural practices, such as theatre, customs or handicrafts. The about whether and how motor vehicles can be re-registered. automobile is currently undergoing a technological change that Re-registering a vehicle in a different member country can will completely redefine it. Recognition as a cultural heritage therefore be very bureaucratic and complicated. Additional should ensure that the contributions to the development exceptions are needed here for classic cars. The documentation of human society that the automobile has made since the required for importing vehicles often no longer exists or has 19th century will continue to be valued. The VDA therefore been lost for classic cars. intensively supports the Automotive Cultural Heritage Initiative.

Classic cars should become intangible UNESCO world cultural heritage 38 Automotive industry and its markets

Changes to vehicle registration regulations in Germany in The German Classic Car Index, published annually, also 2015 greatly affected classic car owners. Regulations on primarily serves to indicate that classic cars are not good issuing temporary tags were revised and tightened. Since then, objects of speculation or monetary investments. Particularly temporary tags have been considerably limited, particularly as rare vehicles consistently fetch very high prices at auction, the tags can be used only for vehicles with valid inspections. which attracts attention. The prices of these vehicles, which This means that fans of historical vehicles can no longer use are often unique items, are disconnected from the normal temporary tags for test drives or relocation trips. An exception classic car market. For this reason, the VDA publishes should therefore be found for historical vehicles. the annual German Classic Car Index, which reflects the performance of the broad classic car market. The index consists The number of German classic cars on German roads has grown of 88 representative classic car models, with assessments or continuously in recent years. The VDA (German Association of selling prices taken into consideration. The index does not, the Automotive Industry) assesses the number of vehicles with however, provide information about the prices of individual H tags every year on the basis of statistics from the German vehicles, but rather highlights the trend of the overall market. Federal Motor Transport Authority (KBA). As of January 1, 2016, In 2015 the index rose by 5.6 percent to 2,413 points. Annual 388,000 vehicles with H tags were registered in Germany. This growth has typically been in the mid-single-digit percentage number grew by 11 percent compared with the previous year. range in recent years as well. This moderate rise in value is Apart from the 344,000 cars, there are also motorcycles and typically consumed by the costs of operation, maintenance utility vehicles. Diesel engines are not popular with drivers of and repairs for most vehicles. vintage cars. Only 8 percent of all cars older than 30 years have a diesel engine. The average annual usage of a classic car is about 1,800 kilometers. The list of vehicles most commonly registered with H tags shows that most classic cars are not sports or luxury cars, but earlier everyday vehicles.

Number of vehicles with H tags Development from 2006 till 2015

350,000

300,000

250,000

200,000

150,000

100,000

50,000

0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Source: Federal Motor Transport Authority Aotut mo ive industry and its markets 39

Auto banks

The auto banks have proven themselves again in 2015 as a strong Growth was also seen in the recent-model used car market. sales engine for the German automotive sector. New business In this area, auto banks were able to achieve growth valued grew by 6 percent to a record level of 38.8 billion euros. The total at about 9.4 billion euros in 2015, thereby adding 7 percent. volume of all leasing and financing contracts under management Recent-model used cars are in growing demand, even beyond grew by 5 percent and was at the historically high level of the classic off-lease vehicles, employee vehicles or single-day 104.0 billion euros at the end of the year. registrations. Auto banks still see further growth potential here.

Strong commercial business and solid consumer demand: Another growth segment for auto banks is mobility services. A significant growth driver for auto banks in the past year They include vehicle-related services beyond financing and was business with companies and commercial customers. leasing, such as auto insurance, warranty and repair insurance, Manufacturers’ in-house financial service providers closed and maintenance services. In 2015, a total of 2.58 million commercial leasing and financing contracts worth a total additional service contracts were closed – 3 percent more than of 21.8 billion euros, for a growth rate of 7 percent. In the the previous year. Since the introduction of the first mobility and consumer market, automobile manufacturers’ banks also service packages around ten years ago, the segment has gained achieved solid growth in 2015. With private financing and in significance. Already more than one of every two customers leasing contracts valued at 15.5 billion euros, the auto banks of manufacturers’ banks elects this type of package solution. recorded a satisfactory gain of 4 percent. 40 Economic policy and infrastructure

Economic policy and infrastructure

As one of Europe’s key industries, the automotive sector needs to operate in conditions fit for the future. Crucial here are economic policies favorable to innovation, a commitment to free trade and a strong infrastructure. Economic policy and infrastructure 41

Katharina Bröker, business administrator/bachelor of arts (FH), executive assistant, Cargobull Trailer Store GmbH, Altenberge 42c E onomic policy and infrastructure Economic policy for Germany as a business location

Germany is one of the most significant of the German automotive industry is Germany is the world champion in production locations in the global decisively dependent on its innovation auto exports, with 190 billion euros in automotive industry. With export volume leadership. This is underscored by a export volume of over 190 billion euros of vehicles, nearly 80 percent global market share trailers and motor vehicle parts, Germany for premium automobiles. Companies is by far the automotive world champion must be able to maintain this advantage of exports. Around 800,000 direct in order to remain in a position to pay employees of the automotive industry production wages that are relatively high generate sales of over 400 billion euros in international comparison. annually. The number of employees has remained largely constant over the last 20 With energy supply, German industry years, and even grown continuously since has a veritable cost problem. The 2010. In order for Germany to remain energy transition has led to significant attractive as a production location over increases in the cost of electricity, the long term, however, its economic and making the price of electrical power political conditions should be critically one of the highest in Europe. Policy- reviewed on a regular basis. This reveals makers must therefore ensure that this that action is needed in a few areas. energy transition is implemented as cost-effectively as possible. In a European comparison, the actual tax burden on companies in Germany The labor market in Germany is heavily remains in the top third. This means that regulated. Companies do, however, double taxation risks for internationally need a minimum amount of flexibility. active German companies and additional Temporary work and contract labor tax increases absolutely must be avoided. provide them with the latitude to This should also be considered when react to large variations in demand. reforming estate taxes. This affects the These effective instruments must automotive industry to a particularly remain available to industry and small great degree, with its many medium- businesses. Policies should therefore stay sized family companies, especially in away from overregulation of temporary the supplier sector. The conditions work and contract labor. Labor costs are for research and development also also of vital importance to the location. need improvement, for example with In recent years they have grown faster tax advantages for research and in Germany than the EU average, while development expenses, or by introducing productivity did not increase by the same a patent box to follow the example of amount. These higher labor costs hinder other EU countries. Good conditions Germany’s competitiveness. Parties to for research and development are labor contracts and policy-makers must important precisely because the success remain vigilant here. Economic policy and infrastructure 43

Top-level talk as part of the automotive industry dialog (December 2015) State Secretary Matthias Machnig (center), Matthias Wissmann, President of the VDA (2nd from right), Jörg Hofmann, Chairman of IG Metall (2nd from left), and representatives of companies and workers’ councils in the automotive industry, photo: BMWi/Susanne Eriksson

An export-oriented industry country Maintaining and securing Germany like Germany, with its particularly strong as an automotive location is a matter emphasis on exports from the automotive for employers, employees and policy- industry, needs unhindered access to makers alike. The VDA began an foreign markets. Tariffs, import fees industry dialog in the summer of 2015 and non-tariff trade barriers distort and with IG Metall and the Federal Ministry limit international competition. This of Economics for this reason, in order is detrimental not only to consumers to work together to identify the actions in the export destination countries. It needed to secure the production also forces German industry to shift location. The result of this process was production capacity to these countries in a joint declaration for a modern and order to avoid trade barriers. Therefore sustainable industrial policy in Germany, every effort should be made to work which was adopted in December of toward open markets and fair market 2015 and is to be implemented by the access around the world. The German German government. automotive industry therefore supports TTIP, the planned transatlantic trade and investment partnership. Trade policy should have a much greater priority overall than has previously been the case in Germany.

A sensible European CO2 regulation is not the least influential factor for market success of automobile production in Germany. The regulation must not be abused as an instrument for shifting competitive opportunities between individual automotive nations. In concrete terms, this means that premium manufacturers must not be disadvantaged relative to others – because European manufacturers are especially strong in the premium sector. This must be kept in view in the upcoming design of CO2 regulations for the period after 2020. 44c E onomic policy and infrastructure EU policies

The European Union has still not returned to calm waters after the heavy storm of the Despite economic recovery, unemployment in global financial and economic crisis. On the contrary: in addition to the smoldering most EU countries is still higher than in 2008 euro crisis, other tough tests of endurance have arisen for the EU in the form of the immense influx of refugees and the British vote to exit the EU. At the same time, the economic conditions in many EU countries remain difficult: despite economic recovery, the effects of the crisis are still pervasive in many regions. The unemployment rate in nearly all EU countries is above the comparable value from 2008, and in Greece and Spain it even exceeds 20 percent. Especially in southern European countries, additional painful consolidation steps are needed – toward flexible labor markets, leaner government agencies and sound social insurance systems.

Initial successes of reforms were already measurable, especially in Portugal and Spain. However, just as in Greece, the governments that stood for reforms were voted out here. In their place, left-populist parties that advocate ending reforms and raising state expenditures gained traction. This means that standstill or even setbacks are threatened for consolidation, especially in countries whose problems are structural in nature. Most EU countries, however, do not have the money for state economic stimulus programs: 16 of 28 EU states had sovereign debts in 2015 in excess of the Maastricht limit of 60 percent of GDP.

Fragile political conditions, paired with inflexible basic conditions, are an enormous stumbling block for private investment. As a result, virtually no progress is evident toward the goal of increasing the industrial proportion of added value in Europe to 20 percent.

Increases in European competitiveness should therefore be at the top of the agenda in Brussels. In the face of political trouble spots, however, Europe’s unsolved economic problems have moved into the background. Instead the wave of immigrants is becoming a tough trial for the European Community. On one hand, Germany and a few other countries cannot bear the load alone. The ability of the economy and industry to integrate is also limited. On the other hand, numerous states feel that their national security is being threatened and react with restrictive asylum and immigration policies. This due in no little part to increasing Islamist terror attacks. In eastern and southern European countries, Russia’s aggression against the Ukraine is also perceived as a new threat. In this situation, right-wing populist parties are gaining support in a majority of EU member states, further reducing the ability of their governments to take action. Ecoic on m policy and infrastructure 45 46c E onomic policy and infrastructure

The voices in the United Kingdom that are critical of the EU Growth and jobs without new debt – this remains the stated are louder than ever. The decision of the majority of voters theme of the EU Commission. The core project is the European in favor of Brexit is critically important. The departure of the investment plan with the European Fund for Strategic United Kingdom from the EU will have serious consequences, Investments (EFSI), which plans to push a total investment including for the German automotive industry. Around one-fifth volume of 315 billion euros in upcoming years. Based on initial of all passenger car exports from Germany go to the United experience, however, the windfall gains are high. To date it is not Kingdom. In 2015, there were 810,000 vehicles. Measured by evident that any truly new projects have actually been initiated export value, the United Kingdom is Germany’s second most using fund financing. important trading partner after the USA. It is important now to find ways for the EU and the UK to remain closely linked, both The EU Commission also expects important growth stimulation politically and economically. from further consolidation of the domestic market – for goods, services, energy, capital and digitalization. Uniform European As a whole, the centrifugal forces acting on the EU have rules are expected to reduce costs. Of particular importance increased significantly. The large number of hot spots has to the German automotive industry is the creation of a digital bound up the capacity of European institutions. Tight finances domestic market. It is absolutely necessary that modern legal and diverging national viewpoints significantly reduce latitude frameworks and standards be developed in order to advance for action. As a result, sustained development toward a the potential of automated and networked driving in Europe. If political union has stalled and economic policy is receiving Europe tackles this challenge decisively, it can capture the title insufficient attention. of innovation leadership.

Changes in the unemployment rate Since 2005

in percent

30

25

20

15

10

5

0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Germany France Italy Spain United Kingdom Source: Eurostat Ecoic on m policy and infrastructure 47

The German automotive industry is taking an active part in Europe should also continue to earn its role as an international this voting process. The round table that the EU Commissioner example. The EU must not, however, distance itself further for Digital Economy and Society, Günther Oettinger, initiated from the other countries by going it alone. Successful climate is already bearing its first fruits, such as focused cooperation protection policy must also preserve industry’s power of with the European telecommunications industry. One thing is innovation and investment. The EU Commission is currently clear: the internal market is a central component of European working on CO2 regulations for the period after 2020. integration. Given the serious debate on political integration, Coordination by the vice president of the EU Commission a new project – such as the digital internal market – could be will hopefully help to bring climate protection and economic a great opportunity for generating momentum and a positive progress into better balance. mood in the EU. One important initiative for the automotive industry comes from At the Paris climate conference in December 2015, in an EU Internal Market Commissioner Elżbieta Bieńkowska. As a ambitious, global climate protection accord, 195 countries follow-up project to the “CARS 2020” initiative, she has created agreed to the goal of limiting the warming of the Earth to much the new high-level group “GEAR 2030,” which is intended to less than 2 degrees Celsius. So far, however, Europe is the only strengthen the competitiveness of the European automotive continent where CO2 emissions are falling. These successes in industry. Core topics for the committee are adapting value Europe are cancelled out by rising emissions in other regions. chains to global challenges, a roadmap for automated and Effective climate protection can therefore succeed only if all networked driving, and international harmonization. countries pursue ambitious goals. Above all, the large emitters in Asia and America must increase their efforts decisively in order to achieve tangible progress.

Passenger car production in Europe 1980, 1990, 2000, 2010, 2015

in millions 6

5

4

3

2

1

0 1980 1990 2000 2010 2015

Germany France Italy United Kingdom Spain Sources: ANFIA, ANFAC, VDA, SMMT, CCFA 48c E onomic policy and infrastructure Trade and investment

The German automotive industry and its employees are dependent on international trade. Passenger cars produced in Germany are exported at a rate of over 77 percent. In order to secure and reinforce Germany and Europe as production locations, the EU should make efforts to pursue global free trade and eliminate trade barriers.

When globalization and free trade are designed fairly, all participants can expect to gain prosperity. Impermissible price dumping as well as protectionist measures should therefore be tracked and eliminated by supranational organizations such as the World Trade Organization (WTO). As the guardian of free trade, the WTO has an important function, in that it monitors compliance with the rules and resolves trade conflicts with mediation procedures.

Even though the Doha round has not yet obtained the desired results, it has provided important revitalization and will be developed further. This is because multilateral elimination of trade barriers would still be the ideal solution. As long as this is not possible, bilateral agreements will take center stage. In recent years, numerous agreements have been signed, and more are in negotiations. They also need to follow the rules of the WTO and meet minimum requirements for the scope of liberalization.

Protectionism

Many countries have difficulties eliminating trade barriers and attempt to protect their domestic economies by penalizing foreign providers. The automotive industry is especially hard hit by this around the world. Countries use high tariffs, for example, to force investment in local production. Often there are also non-tariff barriers to trade. These often take the form of technical regulations that importers can fulfill only with difficulty, if at all. Another instrument for protectionism is minimum requirements for local value added (local content).

The WTO counted exactly 2,127 trade-limiting measures in place in G20 countries in the middle of 2016. Compared with the previous year, 154 new limitations were added. Although individual regulations were lifted, the number of protectionist measures in G20 countries rose by 11 percent. But protectionism cannot really succeed over the long term, because inefficient economic structures typically need to be set up or defended.

Countries such as Mexico demonstrate that open markets and free trade, as opposed to protectionism, are the better basis for building a strong automotive industry. Eastern Europe, by joining the EU and opening its markets, has also shown that this creates jobs. Other countries, in contrast, use forcible measures. South America, in particular, as well as Russia, were noticed regarding that in the past. India, too, imposes import duties of as much as 100 percent. Ecoic on m policy and infrastructure 49

TTIP

For the German automotive industry, the planned transatlantic trade and investment partnership (TTIP) therefore offers a unique opportunity. Never before has a free trade TTIP would save the German automotive agreement brought together a larger economic area than the United States and the industry more than one billion euros in tariffs European Union. The transatlantic economic zone represents 40 percent of the global automotive market and around 50 percent of total global economic performance. Meanwhile the USA and EU have only about 12 percent of the world’s population. Simply by removing tariffs from transatlantic trade, TTIP would save the German automotive industry more than one billion euros that could be invested sensibly. This has the power of an economic stimulus program. Companies, employees and consumers would all benefit similarly from the elimination of tariffs and increased regulatory cooperation.

Opportunities and risks with TTIP are the subject of controversial public discussion. But no one can really explain why vehicles in the EU and the USA need to have different turn signal indicators. In areas where the level of regulation is demonstrably similar, mutual recognition can only be advantageous. Regulatory cooperation in the automotive industry does not mean lowering safety standards. The rights of legislatures are also not limited. TTIP will also pave the way for additional cooperative measures within the United Nations, in order to create worldwide standards like those in the USA and EU. 50c E onomic policy and infrastructure

Free trade agreement with South Korea, India and Canada

After the premature failure of a The EU began negotiations with India multilateral free trade policy, the EU has in 2007 on a free trade agreement. The struck bilateral agreements and started talks stalled, however, and negotiations new negotiations in recent years. were put on hold. An agreement would be desirable, especially from the The free trade agreement with South viewpoint of the automotive industry, South Korea holds onto market entry barriers Korea has been in force since 2011. In because India has enormous potential despite free trade agreement the negotiations, elimination of tariff as a future production location and barriers and some of the numerous sales market. India has not yet been non-tariff barriers to imports was prepared to open its automobile market, agreed to. Since then, the market however, and to significantly lower its share of importers of passenger cars high barriers with an agreement. India in South Korea has indeed risen to has nothing to fear from liberalization, 16 percent, but this is still relatively low however, especially in the automotive by international comparison. In addition, sector. Open markets could draw new numerous market entry barriers for investment and increase exports. After European suppliers and manufacturers all, India already has a trade surplus with are still in place. This includes a very Germany in the automobile market. difficult certification process for motor vehicle parts for the Korean market Regardless of slow negotiations, the (“Korean marking”). The VDA thus VDA and the Indian automotive industry supports the German government and associations ACMA and SIAM maintain the European Commission in their efforts a close partnership. As part of the to continue to eliminate the barriers still German-Indian Automotive Industry in place in South Korea. Working Group since 2008, under the aegis of the Indian Industry Ministry and the German government, the current question of German-Indian cooperation is being addressed.

India India: Trade surplus in passenger cars Compared to Germany, India has surplus, which increased in millions of euros last in 2015 300

This surplus shows the competitiveness of Indian 200 manufacturers

100

0

-100

-200 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

German imports German exports Trade balance Source: Federal Statistical Office, VDA Ecoic on m policy and infrastructure 51

A comprehensive economic and trade agreement (CETA) was Other important agreements from the viewpoint of the negotiated with Canada, but is not to take effect before 2017. automotive industry are free trade agreements with ASEAN This agreement should eliminate tariffs on industrial goods. countries, Mercosur and Mexico. The EU is also currently For European exporters, this means savings of around negotiating an agreement with Japan. Additional concessions 470 million euros annually. Reformed investment protection was by Japan to remove non-tariff trade barriers are indispensible also successfully embedded in the agreement. A standing court here. Negotiations with China about an investment agreement and transparent processes with an appeals court are have been ongoing since 2013. The focus of interest there is on to be established. market access and protection of intellectual property.

Foreign trade promotion and development cooperation

The internationalization strategy of the German automotive and the Middle East. This is intended to create local jobs and industry leads to increased activities in developing and future opportunities. In cooperation with German associations, emerging countries. In order to facilitate market entry for the training centers are currently planned in various countries. They German automotive industry in these countries, the VDA is will train people in technical occupations. This helps both with working with the Federal Ministry for Economic Cooperation the qualification of native technical personnel, and to attract and Development (BMZ). The BMZ can use its experts international investors to the location. on-site to obtain access to wide-ranging local networks for companies. In addition, it provides various subsidies for entry Another area of attention is creating additional sustainability into difficult markets. in the supply chain. Here, the main focus is on compliance with environmental, energy and social standards. In an For economic cooperation the BMZ is regionally focused on example project, the BMZ has been supporting a large Africa, but is also strongly established in Asia, the Middle East German automotive supplier in Mexico since the end of 2015 and Latin America. In addition to the regional focus, there are with the establishment of sustainable supplier management. two topical focal points: fighting the causes of refugee flight, As part of this project, local suppliers are to be trained in order and sustainability of the supply chain. to optimize their environmental and energy management. The BMZ is bearing over 40 percent of the project costs. The In order to help fight the causes of flight, the BMZ, together with projects help companies to meet sustainability goals while German companies and associations, supports career training simultaneously promoting economic activity in developing and and new entrepreneurial development in countries in Africa emerging countries. 52c E onomic policy and infrastructure Energy policies

Electricity prices

Electricity prices in the EU rose further last year. In Germany, electricity is among the most expensive in Europe. High electricity prices are a competitive disadvantage for German industry. The price of industrial electricity for companies in the automotive industry in Germany in 2015 was around 15 cents per kilowatt-hour, making it about twice as high as in France, for example. This disadvantage not only affects companies’ ongoing costs, but also decisions on locations and investments. High energy costs therefore present a long-term threat to production and jobs in Germany.

Over half of the price of electricity is taxes and fees – and the trend is clearly rising. In 2016, the EEG (German Renewable Energy Sources Act) has already reached nearly

Industrial electricity prices in European comparison First half-year 2015, group IF: 70 GWh < consumption < 150 GWh

ct/kWh

Bosnia and Herzegovina Sweden Norway Finland Greece Bulgaria Macedonia Croatia Turkey Romania Slovenia France Poland Belgium Austria Netherlands Estonia Spain Czech Republic Denmark Lithuania Portugal Hungary Latvia Ireland Slovakia Germany Italy Malta Cyprus United Kingdom

0 3 6 9 12 15

Source: Eurostat, VIK Ecoic on m policy and infrastructure 53

the same level as the costs to energy providers for procurement, grids and sales. The companies in the automotive industry – with just a few exceptions – are not excepted from EEG allocations. They pay the full rate. It must be assumed that this allocation will continue to rise, imposing a further burden. It is all the more important that energy policy does not allow the price differences in Europe to become too great.

The clear price differences for electricity in different countries, and the differences in changes in price, show how nonuniform the European energy market still is. Tax and fee burdens sometimes vary widely. German electricity customers have seen little benefit from the recent global drop in energy prices.

Industrial gas prices in European comparison First half-year 2015, group I5: 280 GWh < consumption < 1,120 GWh

ct/kWh

Belgium

Rumania

United Kingdom

Czech Republic

Poland

France

Bulgaria

Netherlands

Turkey

Italy

Denmark

Germany

Slovakia

Spain

Hungary

Latvia

Estonia

Portugal

Austria

Sweden

Finland

Bosnia and Herzegovina

0 1 2 3 4 5 6

Source: Eurostat, VIK 54c E onomic policy and infrastructure

In-house power production in the automotive industry

The automotive industry has long produced a large proportion then plant shutdowns are threatened – with all of the negative of its electricity in its own power plants. This decentralized consequences for the industrial energy supply and for the in-house production protects resources and supports energy energy transition. For operators in certain sectors, such burdens transition. For one thing, resource-saving district heating is used would mean a threat to their existence. predominantly. For another, the public grids are relieved, as electricity is produced where it is consumed. This means there In 2017, the EU Commission will likely rule on the existing is no need for additional grid capacity, which has been greatly regulations for in-house power production in Germany. It has burdened by the energy transition in any case. approved protection for existing facilities, but demands that the regulation be adapted by the end of 2017. The EU Commission Lawmakers have nevertheless greatly increased the cost liability thereby expressed disapproval of the exemption of in-house of in-house power production in recent years. As of 2014, the power from the EEG allocation. German industry demands Renewable Energy Sources Act (EEG) provides that proportional that the burdens for industrial in-house power production EEG allocations must be paid for new power plants for in-house not be further increased. The Federal Economics Ministry production. Following the amendment of the district heating also determined in a study that burdens on in-house power law, industry has in fact received no more subsidies since production could drastically reduce Germany’s competitiveness. the start of 2016. Even if this setback has only affected new A detrimental change would also be legally questionable, as plants so far, investments in expanding in-house production investments that have already been made in in-house power are already being questioned. If electricity from existing plants plants should enjoy protection as existing facilities. should have the EEG allocation applied as well in the future,

Price of electricity for industry Average price of electricity for industry

in ct/kWh 16

12

8

4

0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Production, transport, sale Concession charge Act on the Sale of Electricity to the Grid (StrEG) and the Renewable Energy Sources Act (EEG) Heat-Power Cogeneration Act (KWK) §19 Levy Offshore levy Levy for interruptible loads Electricity tax Source: VEA, BDEW Ecoic on m policy and infrastructure 55 56c E onomic policy and infrastructure Infrastructure

Infrastructure investments User financing

Too little has been invested in infrastructure in Germany for The higher investments, however, are largely financed by decades. This has caused a backlog of investment to get bigger new burdens on road users. The truck road charge has been and bigger. For proper financing of federal highways, the Federal significantly expanded. In July 2015 the fee was extended Ministry of Transport estimates around 7 billion euros annually. to an additional 1,100 kilometers of federal roadways. Three The Cologne Institute for Economic Research places the need months later, commercial vehicles above 7.5 tons total even higher, at 8.3 billion euros. Despite increasing government permissible weight also became subject to the charges. revenues, actual investment in the past 15 years averaged only The previous limit for the fee was 12 tons. The tax authorities 5.2 billion euros. expect additional revenues of 380 million euros per year from the two measures. In a further step, the truck road charge Because expansion has long been neglected, traffic backups will be extended to all federal roadways by mid-2018, which are becoming longer and longer. In 2015, they added up to a should bring another 2 billion euros per year into federal length of 1.1 million kilometers on freeways alone. At the same coffers. This demonstrates that the additional investment is time, the condition of existing roads deteriorated. In the last largely paid for by road freight transport. extensive quality measurement in 2009/2010, according to the Federal Ministry of Transport, 17 percent of freeway kilometers The expansion of truck road charges to include federal were found to have exceeded warning levels. This means that roadways in particular does cause problems, however: federal the roadway surface is in a condition at which planning for roadways have a regional economic function that is different preservation measures must be started. For federal roadways, from that of freeways. They serve as transport routes for local this number is almost 35 percent of total road kilometers. small businesses for short or medium distances, supplying Almost half of bridges (47 percent) exceed the warning value. the surrounding region. A universal federal roadway charge This is a serious safety problem. Bridge closing also often would not only affect the small-business economy, but also put causes backups, lost time and emissions. structurally weak regions far from freeways at a disadvantage.

The need for action can no longer be denied. The German In addition, the CDU, CSU and SPD agreed to introduce a federal government has therefore decided to significantly passenger-car road charge in their coalition agreement of 2013. increase the level of investment. It will not actually reach the This charge, according to the text of the contract, should include necessary 8.3 billion euros per year. Nevertheless, investments of foreign passenger cars in the financing of infrastructure, without 6.15 to 6.63 billion euros are planned for the years 2016 through increasing the burden on domestic vehicle owners. The coalition 2018. This will give a substantial boost to the modernization agreement does stipulate, however, that passenger car road of federal highways. This level should be further increased in charges must conform to European law when instituted. Draft subsequent years. legislation to this effect from the Federal Transport Ministry, however, has been criticized by the EU Commission. It alleges discrimination against foreign vehicle owners, and has therefore initiated breach of contract proceedings that could lead to a ruling by the European Court of Justice. Ecoic on m policy and infrastructure 57

In response, the German government put the legislative petroleum taxes, value-added tax on the petroleum tax, motor process on hold in June 2015. The German automotive vehicle registration taxes and truck road charges added up to industry fundamentally rejects any further burdens on road over 54 billion euros. Construction and maintenance of federal, transportation, and therefore rejects the passenger car road state and municipal roads received just 19.6 billion euros. The charge as well. majority of tax revenues are used for other purposes that have nothing to do with transportation. This means that the money for Higher feeds for road transport are also unjustified because proper investment is there. road users pay nearly three times as much in taxes and fees as the state pays out for roads. In 2015 alone, payments for

Federal highway investment in billions of euros

8

6

4

2

0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

From truck road charges From taxes Planning Source: BMVI, Pro Mobilität e. V. 58c E onomic policy and infrastructure

Reform of contract management

Because infrastructure investment remains well below need, efficient use of resources is all the more important. The system for contract management, above all, needs reform. Today, the federal government determines the need for expansion and new construction and provides financing to the federal states.T he states, in turn, are tasked with planning the individual construction project with their own personnel. For example, they set priorities for projects based on the interests of their own state. The effect of this is that federal objectives for the federal highway system are not always implemented, or additional costs can occur. Reform of contract management is overdue.

The German government is therefore pursuing a reorganization of responsibilities. It plans to establish an infrastructure organization at the federal level. This would take over financing, planning, construction, maintenance and operations, at least for the freeway system. The organization would also receive the road charges for freeways in order to be able to plan and finance projects over several years. The income from these charges would also need to be supplemented by resources from the general budget, for example by dedicating part of the income from petroleum taxes.

Use of transportation-specific fees in billions of euros

60

50

40

30

20

10

0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Expenditure on roads Surplus = expenditures for other purposes than transportation Source: DIW, BMF Ecoic on m policy and infrastructure 59

Passenger traffic

In Germany the car represents over 80 percent of passenger traffic, making it the number one means of transport. In upcoming years the car will retain this dominant position in passenger traffic. But passenger traffic in Germany will see only slight growth. By 2030, the German government expects passenger car traffic to increase around 10 percent in comparison with 2010. Such moderate growth is typical of industrial societies whose population is aging and numerically stagnant. Against this backdrop, the increase in passenger car traffic in 2015 of 2.1 percent, to 958 billion person kilometers, is quite high.

Passenger transport in Germany in billion person kilometers

in billions 1,400

1,050

700

350

0 1970 1980 1990 1995 2000 2005 2010 2015 2030

Air transport Rail Public road transport Car Source: DIW, TCI, BMVI 60c E onomic policy and infrastructure

One of the great challenges for passenger car traffic in The wide rang of possibilities, however, indicates that mobility upcoming years will be urbanization. The growth of cities and providers must cooperate across sectors much more intensively congested areas is a worldwide trend, especially affecting than before. This affects many different individual tasks that developing and emerging countries. But the trend is evident must be mastered for new urban mobility. For emissions-free even in Germany, though less dynamic. Experts assume that the electric mobility, for example, a dense charging infrastructure is population of the five largest German cities will increase by 10 needed. Building it is a communal task, where the auto industry, to 30 percent by 2030. This means that traffic in cities will also energy providers, municipalities, private parking garage operators, grow faster. This trend is further reinforced by e-commerce. retailers and the residence market must cooperate. In order The strong growth in online retail sales leads to above-average for car sharing offers and local public transportation to mesh increases in delivery transport in cities. better, even more data exchange is required. Multimodal route recommendations are conceivable, where the user first takes a At the same time, a transition in mobility can be observed in subway, for example, then switches to a car sharing vehicle or a cities: city residents have become more flexible in their choice rental bike. However, this requires continuous exchange of traffic of means of transport and combine them more frequently. data in real time between individual and public means of transport. They move multimodally – even when they own their own cars. This style of mobility has only just become possible For this reason, the automotive industry wants to further intensify due to smartphones. They make transport information easily its exchanges with cities and transportation agencies. Sustainable and comprehensively accessible. The smartphone provides solutions for the urban mobility of the future are to be developed information at any time about which means of transport is the and discussed. In addition, the auto industry has begun a close fastest, cheapest or more comfortable for any imminent trip from dialog with the startup sector. Many companies in this field are A to B. This may be a personal car or bicycle, or the subway or developing innovative mobility services. They can make a valuable light rail, a rental bike, car sharing or a combination. contribution to the digitalization of mobility for the auto industry.

Long-distance bus levels of value added

Communities Transport companies Commerce Central/regional government

Visitors Revenues from fares Revenues Tax revenues (indirect)

Tax revenues (indirect) Passengers/jobs Customers/jobs

· Hotels · Pubs & restaurants · Retail · Cultural institutions · Leisure facilities · Others

Source: “New coach stopping points and approval practice – opportunities for communities,” study commissioned by MeinFernbus, ADAC Postbus and VDA, kcw 2014 Ecoic on m policy and infrastructure 61

Long-distance buses

Long-distance buses have quickly established themselves already led to a strong consolidation of the market. At the same as a new pillar of long-distance passenger traffic, along with time, further growth within Germany and in cross-border travel cars, trains and airplanes, since the market was liberalized in can be expected. For bus companies, interest in the long- 2013. The number of passengers has risen steeply. In 2015, distance bus market appears unabated. Especially small and around 20 million passengers were carried. Long-distance bus medium businesses are using the commercial potential in a operations have apparently struck a nerve with their service. new, growing market. This means that small and medium bus According to data from the Federal Office for Goods Transport companies, in addition to large, well-known brands and mobility (BAG), in August 2015 around 300 lines were on offer for companies, are also able to profit from this new demand. national scheduled long-distance transport, with a weekly volume of about 9,500 trips. This volume thus increased around The increased density of the network, however, produces 35 percent over the previous year. The strong growth enabled challenges for infrastructure, especially in cities and long-distances buses to substantially increase their share of municipalities. Mostly this means long-distance bus stops, the overall scheduled transport market for buses and trains which still do not meet the requirements for modernity and in Germany. According to numbers from the BAG, the market capacity at many locations. In order for the market to continue share of long-distance buses rose from 5.9 percent (2013) to to grow so dynamically, additional investments in infrastructure 11 percent (2014). This probably does not put the dominance are needed. Long-distance bus providers can contribute to this of rail for scheduled transport in any doubt, even over the long with usage fees. For municipalities, however, the focus should be term. But long-distance buses do provide notable competition on the opportunities that long-distance buses bring. that also benefits train customers. The railroad now has significantly more inexpensive tickets on offer.

In the third year after liberalization, the supply of long-distance bus travel has become predominantly concentrated in a few large operating companies. The high competitive pressure has

Long-distance bus Passenger numbers in Germany

in millions 25

20

15

10

5

0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: Statista 62c E onomic policy and infrastructure Freight traffic

The truck continues to be the backbone This results in a division of tasks between With a 73 percent share of transportation of freight transportation in Germany. transport carriers: the truck is ideal for services, the truck is the backbone of Its volume in 2015 was 472 billion ton shipments of low volume and over short freight carriage kilometers. This was over 73 percent of distances. Rail and inland waterways total volume in the country, including on are more competitive for high-volume roads, rails and waterways. With this share, shipments and over great distances. Germany is about average for Europe. In A good example is the transport of a comparison with the previous year, traffic factory-new automobile. the German volume on roads has risen by 1.7 percent. automotive industry uses rail as the main The most recent transportation forecast part of over 50 percent of its shipments. from the Federal Transport Ministry Freight carriers therefore compete less assumes that by 2030, road transport will with each other than is often thought, due grow about another 29 percent over 2010 to their system-based advantages and levels, to 607 billion ton kilometers. This disadvantages. Rather, they complement will keep the current market share of the each other. truck approximately stable.

The significance of the truck is largely due to its flexibility. Only the truck can reach every destination, from the loading dock to the household doorstep. It also has the economic and ecological advantage for transporting small loads and over short distances. Railroads reach their cost-effectiveness threshold for freight transport at payloads of over 300 tons. Combined transport using road and rail also makes sense only for distances of well over 300 kilometers. Nearly 80 percent of freight volume on roadways, however, is on routes of 150 kilometers. Ecoic on m policy and infrastructure 63

Freight transport in Germany in billions of ton kilometers

1,000

800

600

400

200

0 1990 1995 2000 2005 2010 2015 2030

Truck Rail Inland water vessel Source: DIW, TCI, BMVI 64c E onomic policy and infrastructure

Long trucks

Long trucks can play an essential part in sustainable and climate-friendly freight Long trucks achieve up to 25 percent transportation. In Germany, a field test with long trucks is running through the end fuel savings of 2016. With scientific support from the Federal Highway Research Institute (BASt), its goal is to determine how the use of long trucks will affect the environment, infrastructure and transportation systems. Initial results have already been published in an intermediate report from the BASt in September 2014. They confirmed the positive expectations with evidence that long trucks are safe, environmentally friendly and economical for use on roadways. The field test also demonstrated that long trucks can save up to 25 percent on fuel per ton transported. The long truck could therefore

considerably reduce CO2 emissions from freight transport in widespread use.

The provision for the field test defines the requirements for long trucks.T he total weight of a long truck may not exceed 40 tons, or 44 tons in combined transport. This means that the same weight limits apply as for conventional trucks. The total length of a long truck is up to 25.25 meters. Tractors and trailers must also be equipped with additional safety systems. During the field test, the long trucks travel on a defined road network that has been specially approved for them. It consists mainly of freeways, on- and off-ramps and some federal highways.

Long truck Data and facts

Lengths up to 25.25 m

Volumes 149 m3 Lane departure lights Lane departure warning system Payload 18.5 t Electronic stability control Braking assistant Adaptive cruise control

6–8 axles

Weight 40 t

Source: VDA Ecoic on m policy and infrastructure 65

Long trucks also do not pose a threat to rail transport. On the contrary, the two carriers complement each other. The long truck, with its volume orientation, is targeted exclusively at increasing the efficiency of transporting lighter, high-value goods and parcel freight. This market segment, however, with its typical requirements for flexibility and speed, does not meet the system-based service profile of railroads. A shift of goods from rail to road would thus not be economical with long trucks, so no negative effects on rail freight transport are expected from the use of long trucks.

After the field test is complete, long trucks should see regular operation. Clear boundary conditions will apply. For one thing, long trucks must be able to be operated safely within the existing infrastructure without causing damage. It should therefore continue to be used primarily on freeways and federal highways, in order to make road transport even more efficient there. Long trucks are not used for inner-city deliveries. In addition, route segments and roads should be defined in a future positive network for trucks. It will encompass the federal freeways and all suitable federal highways. Portions of the remaining network will also be approved upon request and after careful review using uniform criteria. The experiences of other European countries will also be taken into consideration.

Long truck: From three into two Two long trucks transporting as much cargo as three standard trucks

Cargo volume

Standard truck 1 Standard truck 2 Standard truck 3

Long truck 1 +50 % Long truck 2 +50 %

Standard truck 1 Standard truck 2 Standard truck 3

Long truck 1 Long truck 2

Source: VDA 66c E onomic policy and infrastructure Taxes and customs

A competitive tax environment is an The requirements for information VDA supports tax policy to promote growth essential prerequisite for maintaining the submission and documentation attractiveness of Germany as a production lead to high administrative costs for location for the automotive industry. The the companies. Also, the national VDA therefore supports an internationally implementation of the suggestions oriented tax policy that promotes must be done in a coordinated, uniform growth. The main points are to prevent manner between the states. Premature, tax increases and the risk of double unilateral implementation in Germany taxation, to improve the tax environment increases the risk of double taxation for research and development, and to and endangers German tax receipts simplify taxes and increase planning and as a whole. legal security. Inheritance tax Avoiding The German Constitutional Court rejected cross-border profit the privileging of corporate assets under transfers the inheritance tax as unconstitutional in December 2014, and required new In 2015, the OECD and G20 countries regulations by the middle of 2016. The took numerous measures to fight German parliament met this requirement cross-board profit shifting of company by amending the inheritance tax law in groups and provide fair tax competition. June of 2016. With its numerous medium- The basis for this is the so-called sized family companies – especially “BEPS project” (base erosion and profit among automotive suppliers – is shifting) by OECD and G20 states, which particularly affected by this inheritance targets cross-border shifting of profits. tax reform. It therefore is necessary The measures range from new minimum to keep the protection of corporate standards for country-specific reporting assets from inheritance taxes intact. by companies to clarification procedures This means that entrepreneurial for resolving international disputes. This and family-run companies, and their is also intended to curtail damaging numerous jobs, can continue to be tax competition. The view of the VDA, protected. However, practical rules on however, is that this international the forbearance of inheritance tax have program against tax avoidance can not yet been provided in the case of lead to a competitive disadvantage for corporate succession. New requirements German companies. for inheritance tax protection were also placed on large companies. Economic policy and infrastructure 67 68c E onomic policy and infrastructure

Research and development costs

More and more often in corporate audits in the automotive industry, tax authorities are questioning the reporting of development costs on income statements. Automotive suppliers, especially, are seeing a considerable impact. Research and development costs are fundamentally tax-deductible. In practice, however, audit requirements are becoming ever stricter. For years the VDA has called for development costs to be applied to net income, so that they can reduce taxes. Especially for companies that do intensive research in the supplier industry, any change for the worse in the supply of immediate deduction of research and development costs would place the location at a clear disadvantage. In order for Germany to remain successful as a location for innovation, the framework must be much more friendly to research.

Company car duty

Recurring political discussions have ignited in Germany around taxes on company cars. There are suggestions again and again that taxes on the private use of company and staff cars should be based on ecological criteria. The auto industry, in contrast, is holding on to the current form of taxation on the monetary benefit of staff or company cars. The so-called 1-percent rule or the total-cost method with a trip log are systematically correct and been proven effective in practice. Aligning company car taxes to any other criteria leads to incompatible distortions in tax law. There are already

extensive and challenging regulations in the EU for further reducing CO2 emissions. Income tax law should not be used for this purpose.

Newly registered company cars by segments 1st term of 2016

SUV Large van Subcompact Compact Mini Mini-Van 2016 Mid-size Share in % Upper mid-size Luxury Other Sports cars Utility motor Home

Source: KBA (Federal Motor Transport Authority), new car registration statistics Ecoic on m policy and infrastructure 69

Energy taxation

The VDA expressly welcomes simplification of electricity taxes that relate to dispensing electricity for charging electric vehicles at commercial charging stations. Up to now, it has been unclear whether companies that pass along electricity from its own charging stations to third parties, such as employees or customers, need to pay electricity taxes. The German Federal Ministry of Finance has now issued a regulation clarifying that companies that operate charging stations are not considered electricity providers and thus do not have to pay electricity taxes on the electricity that they dispense. This also relieves the companies of bureaucratic effort, as it is not necessary to capture and verify the amount of electricity for tax purposes.

Iran

The Vienna agreement in the summer of 2015 ended the nuclear dispute with Iran that had lasted over a decade. After Iran dismantled its nuclear program as agreed, the EU lifted its economic and financial sanctions in January 2016. German auto companies have taken the first steps for resuming trade relationships with Iran. Even after the loosening of sanctions, however, not all exports and transactions are permitted. Approval requirements for individual products continue to cause problems in practice, extra time and effort, and longer delivery times. Remaining limitations on payment transactions are another hurdle that companies face.

Preferential rules of origin in transatlantic free trade agreement

In the negotiations on the transatlantic free trade agreement, regulations on determining which goods get preferential customs treatment are highly significant. In order to improve market access by taking advantage of preferential tariffs, the so- called preferential rules of origin will be simplified. The implementation of these rules costs companies extra time and effort. The EU applies the value-added method, while the USA uses the manufacturing cost method. The VDA supports allowing companies to choose between the two methods of calculation. This choice makes it possible for companies to decide on their own and to continue applying their familiar calculation methods. Internationally active companies could also harmonize their calculation systems in the USA and EU in order to leverage synergies. 70c E onomic policy and infrastructure

Legal policies

Public procurement law reform

With the law on the modernization of Up to now, the economy was able to Starting no later than 2018, all contract procurement law (Public Procurement have an involvement in the procurement awarding procedures should be performed Law Modernization Act) as well as committees, so that the procurement electronically the regulation for the modernization procedures could be designed, of procurement law, Germany has economical and with a practical implemented the EU procurement orientation, among the private and public directions for procurements in the market participant. True structural reform upper threshold area. Among other of procurement law would have had to things, the regulations provide that address eliminating the multitude of state contract awarding procedures should procurement laws, with their different be completely electronic in the future. regulations, and replacing them with a To do so, the necessary parameters uniform federal procurement law. must be defined and systems created for a nationwide, uniform, One improvement, however, is the digital procurement system. By the new uniform European declaration restructuring of the previous structure of suitability, which should simplify of procurement law, the introduction of the procurement process. It makes it an electronic procurement system and fundamentally easier for companies to the consideration of so-called strategic participate in contract awards. Applicants aspects, the reform on procurement no longer need to provide all the evidence law for public procurement brings of their suitability right at the start of significant change in theE uropean as the process. Rather, a standardized well as in the national context. What declaration of suitability is sufficient for effects the reform will have on the participating in a call for proposals. The automotive industry, for which public company that is awarded the contract authorities are an important customer, must then submit all the documentation remains to be seen. as evidence. The lower administrative overhead provides an opportunity for The aims for the standardization of small and medium-sized businesses to the procurement process within the take part in more calls for proposals. European Union, pursued by the reform on procurement law, the more The VDA considers the stipulation efficient, simpler and more flexible of so-called strategic aspects to be design of procurement processes, critical, however. Social, ecological and the promotion of the participation of innovative aspects are to be considered small and medium-sized companies in future awards. This can make public in public procurement procedures, contract awards more complicated the improvement of sustainable and and less transparent. Specification of innovative procurement, as well as strategic goals will also make efficient the simplification of the suitability and economical procurement more test, are welcomed in principle by the difficult. Lawmakers are demanding VDA, which has therefore pressed that companies must also pass along for the balancing out of the deficits the new requirements to their suppliers of the EU Directive in the national and monitor them. This would required legislative procedure. The restructuring worldwide monitoring and certification of public procurement law that passed, systems in some cases, which are nearly however, is insufficient.T he automotive impossible to implement in practice. industry particularly criticizes the fact Larger companies will presumably find that the previously proven cascade it easier to meet the new requirements. system for public contract awards This jeopardizes the goal of lawmakers of was eliminated. The cascade system improving the participation of small and established a hierarchy of legal sources medium-sized businesses in the public that were crucial to contract awards. procurement process. Ecoic on m policy and infrastructure 71

Uniform EU patent

The automotive industry is one of the leading European patent applicants. Stronger patent protection is important for companies in order to protect their innovations. The VDA has long supported a lean-structured and cost-effective EU patent system. This way, with the decision on the cost structure of a uniform patent, Europe has come very close to reach this goal. With the Brexit referendum in the United Kingdom, the introduction of the uniform patent will be delayed again or even jeopardized.

The Administrative Council of the European Patent Office has made a long-awaited decision on the cost structure of a uniform patent. According to the decision, annual The VDA advocates a swift introduction of the fees for a patent that is valid in the 25 participating EU countries will match the sum uniform EU patent with Britain’s participation total of annual fees in Germany, France, the United Kingdom and the Netherlands (True Top 4). European patents are currently validated most often in these four countries.

At present, European patents must be validated individually in each EU country where the protection is to apply. In practice, however, patents for the automotive industry are typically validated in only three or four EU member countries. It was critical for the automotive industry that the new system not cause substantially higher patent costs than before. Therefore the VDA welcomes the decision on the fee system (True Top 4).

Disputes about patents in Europe are currently decided by national courts and agencies. With the agreement on a uniform patent court, the creation of an independent patent court was enacted. This court is to be solely responsible for disputes about European patents and uniform patents. The agreement was signed by 25 EU member states in 2013. It must be ratified by at least 13 states in order to take effect. This must include the three states with the most valid European patents: Germany, France, and the United Kingdom. The Brexit referendum therefore has fundamental impacts on the introduction of the uniform EU patent. It is now a matter of finding and utilizing ways to ensure a swift introduction of the uniform EU patent with Britain’s participation. 72 Environment and climate

Environment and climate

Climate and environmental protection are central issues for the automotive industry. Manufacturers and suppliers alike contribute to reaching the ambitious CO2 targets set in Europe, investing heavily in modern emissions technology and sustainable production. Environment and climate 73

Frank Bez, industrial mechanic and manufactoring systems technician, production technician in diffusion, Robert Bosch GmbH, Reutlingen 74 Environment and climate Road traffic and CO2 emissions

The German automotive industry has number has tripled in the last two years.

German manufacturers reduce CO2 emissions further reduced CO2 emissions and fuel German companies even had 126 models by 3.4 percent to an average of 126.8 g/km consumption of new passenger cars again below 95 g of CO2/km.

in 2015. The average CO2 emitted by a new car from a German manufacturer The overall emissions from road traffic

fell 3.4 percent to 126.8 grams of CO2 in Germany also show a positive trend. per kilometer (g/km). This corresponds After the iron curtain fell in 1990, to fuel consumption of around 5.2 liters passenger and freight transportation

per 100 kilometers. German corporate increased greatly, as did CO2 emissions. brands offered over 1,000 models at the After the rise in the 1990s, according

end of 2015 with CO2 emissions of less to figures published in the national than 120 g/km. In addition, 241 available Inventory Report of the German

models emit less than 100 g/km of CO2 – Environmental Agency, CO2 emissions which corresponds to fuel consumption of produced by road traffic in Germany less than 4 liters per 100 kilometers. This from 1999 to 2010 dropped by about

Energy efficiency Trend of specific energy consumption in passenger and freight traffic

MJ/100 passenger-km* 60

40

20

0 1990 2000 2005 2010 2014

* 1 tonne-kilometer is equivalent to 10 passenger-kilometers. Source: AG Energiebilanzen e. V. E nvIRonment and climate 75

30 million tons. Today, the total emissions reasons: the number of passenger cars are at the lower level of 1990, while increases every year – by 1.6 percent in transportation volume is much higher. 2015. Because the kilometers travelled per vehicle rose slightly in 2015, the total The dominant decisive factor was kilometers travelled by all passenger the reduction of specific energy cars rose by 2 percent. Replacement consumption per vehicle. Today, around of stock, however, saw only 7 percent 34 megajoules of energy are required of all passenger cars on German roads per 100 passenger kilometers. In 1990, replaced with more efficient new cars. a comparable performance needed In order to make up for additional CO2 more than 55 megajoules – about half emissions due to the increase in traffic as much more. The fact that overall volume, the reduction in consumption emissions from road traffic have not also for new cars in 2015 would have had to fallen significantly, despite this reduction be over 25 percent. at the individual vehicle level, has its

Models below 120 grams

120 g CO2 equivalent to 5.2 l petrol or 4.6 l diesel

g/km CO2 1,200

1,000

800

600

400

200

0 1st Q. 2011 1st Q. 2012 1st Q. 2013 1st Q. 2014 1st Q. 2015 1st Q. 2016

German companies Importers Source: Federal Motor Transport Authority, VDA 76 Environment and climate

CO2 regulation for passenger cars and light commercial vehicles

Regulation through 2020

Since 2009, passenger cars and light a single value for all of Europe; rather, commercial vehicles have been subject it takes the different corporate product

to CO2 regulation in the EU. The average ranges into consideration. Each individual emissions of all newly registered vehicles manufacturer, therefore, does not need to from a manufacturer in one year must not meet the overall fleet value forE urope of exceed a statutorily defined limit in grams 95 g/km for passenger cars or

of CO2 per kilometer. For passenger 147 g/km for light commercial vehicles. cars, the target for 2015 is 130 g/km. Rather, a specific limit is calculated This number will drop to 95 g/km by for each manufacturer on the basis

2021. The average CO2 emitted by light of the average vehicle weight of the commercial vehicles had to be reduced manufacturer’s fleet. This ensures to 175 g/km by 2014, and the binding statistically that the average of all

limit in 2020 will be 147 g/km. The CO2 manufacturers will meet the European regulations follow the same principle for fleet value. passenger cars and light commercial vehicles. The regulation does not set

CO2 target values: High requirements on the automotive industry 2006–2015 Average values of the vehicle fleet in kg In the 9 years from 2006 to 2015, a

reduction of the average emissions in g/km CO2 of new vehicles by 30 g/km CO2 200 was requested – from 160 g/km CO2

to 130 g/km CO2

170 2015–2021 160

Increased pace: In the 6 years from 2015 to 2021, they must be Hyundai Honda Daimler reduced by 35 g/km CO2 – from 140 130 g/km CO2 to 95 g/km CO2 130 VW Fiat 9 years BMW Toyota GM Renault Ford 110

6 years 95

80 1,100 1,200 1,300 1,400 1,500 1,600 1,700

EU: Fleet 2006 EU: Target curve 2015 EU: Target curve 2021 Source: EU, EEA E nvIRonment and climate 77

Elements of CO2 regulation for passenger cars and light commercial vehicles

Passenger cars Light commercial vehicles

Definition 2015 target 2021 target 2014 target 2020 target

Weight-based approach 130 g/km CO2 95 g/km CO2 175 g/km CO2 147 g/km CO2 (Regulation EU 433/2009) 95 g/km CO2 (EU 433/2009 (EU 510/2011) (EU 510/2011 adjusted 2014) Individual manufacturer adjusted 2014) CO2 limit is based on Calculation formula: vehicle weight and Calculation formula: Calculation formula: Calculation formula: CO2 = 147 + a (M - M0) calculated individually CO2 = 130 + a (M - M0) CO2 = 95 + a (M - M0) CO2 = 175 + a (M - M0) a = 0.096

a = 0.0457 Flattening of the line a = 0.093 M = weight of the road- gradient to a = 0.03333 M = weight of the road- ready passenger car in kg ready passenger car in kg M0 = 1.372 kg (Ø weight) M0 = 1.706 kg (Ø weight) Alignment of the Ø weight Alignment of the Ø weight w.e.f. 2016 with three-year w.e.f. 2018 with three-year moving average moving average

Financial penalties Target exceeded: for € 95 per gram by which As for passenger cars As for passenger cars - 1st gram CO2: € 5 the target is missed per If a manufacturer fails to - 2nd gram CO2: € 15 vehicle reach the scheduled CO2 - 3rd gram CO2: € 25 targets, it is obliged to pay - 4th gram CO2: € 95 a penalty staggered by the per vehicle amount of target excess

Phasing-in New vehicle fleet New vehicle fleet New vehicle fleet No phasing-in percentage that must percentage that must percentage that must Staggered introduction: comply with the limit: comply with the limit: comply with the limit: increasing proportion of - 2012 65 % - 2020 95 % - 2014 70 % vehicles required to meet - 2013 75 % - 2021 100 % - 2015 75 % the new requirements - 2014 80 % - 2016 80 % (by 2015 or as from 2020) - 2015 100 % - 2017 100 %

Supercredits Vehicles with less than Vehicles with less than Vehicles with less than No supercredits 50 g/km CO2 are offset 50 g/km CO2 are offset 50 g/km CO2 are offset Promotion of highly - 3.5-fold in 2012/2013 - 2-fold in 2020 - 3.5-fold in 2014/2015 efficient vehicles by - 2.5-fold in 2014 - 1.67-fold in 2021 - 2.5-fold in 2016 multiple offsetting in the - 1.5-fold in 2015 - 1.33-fold in 2022 - 1.5-fold in 2017 CO2 balance - from 2016 onwards at par, - from 2023 onwards at par, - from 2018 onwards at par, without limitation with a 7.5 g cap over the without limitation period 2020–2023

Eco innovations Can be offset against the fleet average up to a Can be offset against the fleet average up to a maximum of 7 g of CO2 (examples include solar roofs, maximum of 7 g of CO2 (examples include solar roofs, Technologies that cannot waste heat recovery, etc.) waste heat recovery, etc.) be measured in the official test method (NEDC), but which have clear CO2 savings potential

Exception rules Manufacturers with registrations below 1,000 units are Manufacturers with registrations below 1,000 units are ignored altogether. Manufacturers with registrations ignored. Manufacturers with registrations between 1,000 Exception rules safeguard between 1,000 and 10,000 units are set a target that is and 22,000 units are set a target that is individually agreed the economic existence of individually agreed with the EU Commission with the EU Commission small fleet manufacturers

Manufacturers with Manufacturers with 10,000–300,000 registered 10,000–300,000 registered passenger cars in the EU: passenger cars in the EU: reduction target of 25 % reduction target of 45 % relative to emissions in 2007 relative to emissions in 2007

Pooling Possible Possible

Amalgamation of different vehicle manufacturers within the same group

Source: VDA 78 Environment and climate

CO2 regulations beyond 2020

The reduction of fuel consumption for new cars has made great progress in recent

CO2 regulations for the period after 2020 years. Fuel consumption and therefore CO2 emissions for new cars have fallen must be fundamentally re-examined continuously. The successes of recent years, however, cannot be readily continued into the future beyond 2020. Technologies that have contributed to consumption reductions so far will become more and more difficult as their optimization level increases. For the future, an exponential increase in the development costs for these technologies can be

expected. In order to maintain the pace of CO2 reduction, the European CO2 regulation must therefore be fundamentally re-examined for the period after 2020. The EU already has the most ambitious fleet targets in the world. The USA requires just 121 g/km by 2020, China 117 g/km and Japan 105 g/km.

The existing regulation is aligned solely to the technical efficiency of new cars. CO2 values on the street, however, are influenced by many different factors. These include vehicle efficiency, kilometers traveled and lifespan of a car, driving style, the existing

vehicle fleet and the CO2 content of energy carriers. A convincing and comprehensive political strategy must consider all factors and exploit the full potential for reducing

CO2. Total transportation emissions are primarily driven by the existing vehicle fleet.

The EU’s CO2 target is the strictest in the world

in g/km 150

5.2 l 5.0 l

4.5 l 100 3.8 l

50

0 USA China Japan Europe

Source: Cologne Institute for Economic Research, VDA E nvIRonment and climate 79

In Western Europe, about 12 to 14 million new cars are registered each year. The current regulation applies only to these new cars. The fleet of about 250 million vehicles, in contrast, is not captured by this regulation. Therefore, a comprehensive regulatory approach must drive rapid fleet replacement above all. If new passenger cars must be equipped with more and more complex technologies to meet excessive future CO2 targets, the risk could arise that drivers will hold onto their old cars for financial reasons. Long-term reduction of CO2 is only possible, however, if as many new, efficient passenger cars as possible are sold.

In addition to the lack of consideration for the passenger car fleet, the current CO2 regulation also gives too little credit to technological trends. Even the 95 gram target for 2020 cannot be met with conventional technology alone. However, the required transition to alternative drivetrains, particularly electric mobility, is not currently proceeding quickly enough. The questions of market stimulation and filling or charging infrastructure for vehicles with alternative drivetrains have been answered only hesitantly by policy-makers to date. A purely product-based limit policy from the EU that does not address technology trends, on one hand, and customer demand, on the other, would be one-sided and unbalanced. There are also substantial economic weaknesses and risks.

Climate policy weaknesses and economic policy risks of current CO2 regulation

No linear extrapolation of the regulation because...

Climate policy weaknesses Economic risks

· Exclusive focus on technical efficiency · Success and cost of alternative drivetrains? of new vehicles · Combustion engine financing transition · Absolute traffic emissions (mileage, fleet, etc.) to alternative drivetrains not addressed · Economic efficiency? · Overly ambitious limits hamper fleet renewal · Value-adding structure of volume production and premium cars

Source: Cologne Institute for Economic Research, VDA 80 Environment and climate

If the current CO2 regulation is simply continued, this could lead growth of alternative drivetrains. It is important that the to a politically driven, premature end to the combustion engine. conversion of the CO2 testing method from the current NEDC This would take away the financial basis for investment in new test cycle to the future WLTP cycle does not cause indirect drivetrain technologies by one of the most important industrial tightening of targets. Eco-innovations and other flexible sectors in Europe. Such a policy would not be technology- instruments that reduce CO2 emissions should continue to be neutral and would massively limit the diverse portfolio of addressed in the future. This also includes combustion engines manufacturers. The EU would also thwart its higher-level goal with regenerative fuels. In addition, the next regulatory period – of increasing the share of industry to 20 percent of GDP with similarly to other climate and energy policy targets – should be an overregulated climate policy. In terms of industrial policy, aligned to 2030 rather than 2025. the successful value-creating structure of high-volume and premium cars in Germany and Europe should be secured for the On the other hand, the previous purely supply-side regulatory long term. The 20 percent industrial target must therefore be methodology must be supplemented with an overall strategy given the same consideration as the 20 percent climate target. on the demand side. The idea is to reduce CO2 emissions of all road transportation, not just those from new cars. The other

influencing factors on CO2 emissions from road transportation Suggestions for effective climate protection must be addressed. This is particularly true of the kilometers driven or lifespan of cars, and of the CO2 content of energy The ideal path for regulation after 2020 must still be identified. carriers, that is, fuels or electricity. For example, fuels could be Nevertheless, basic principles that should be applied in the included in emissions trading (ETS) – as a supplement to fleet future can be derived from past experience. Effective reduction regulations. Intelligent, digital technologies for traffic direction of absolute CO2 emissions must be approached not only from or backup avoidance, for example, should also be included, as the supply side with new cars, but also on a much more broad they offer enormous efficiency potential, now more than ever. basis. Therefore the VDA suggests a two-pronged strategy. The same applies to CO2 savings from intelligent driving habits. In order to secure the market growth of electric vehicles, an On the one hand, the automotive industry must further improve active, demand-based policy by EU member states to support the efficiency of their new vehicles. Statutory reduction the new technology is also needed. mandates are helpful – as long as they address the market

Future CO2 strategy on two pillars

CO2 beyond 2020

· Consideration of the entire reduction potential · Harmonization of the regulation with the EU climate protection goals for 2030 · CO2 targets must correspond with the uptake of alternative drive systems & infrastructure · Technology neutrality – reasonable combination of alternative drive systems & internal combustion engines with regenerative fuels

CO2 reduction potential within the automotive industry CO2 reduction potential outside the automotive industry

· Reduction standard for new cars: · Promotion of climate neutral fuels / inclusion of fuels into · Optimization of conventional technology the emission trading · Run-up of alternative drive systems · Inclusion and renewal of existing fleet · Extended measures for the promotion of alternative · Accounting of complementary measures that are drive systems & infrastructure proven to reduce emissions · Promotion of eco-driving · Extension of digital infrastructure for connected and automated driving

General principle: More climate protection by a more comprehensive and better regulation

Source: VDA E nvIRonment and climate 81

Influencing factors on absolute transportation emissions

Comprehensive approach

Look at all contributing factors to CO2 emission

New car technology (fuel CO2 content of energy Driving style and mileage Vehicle fleet Infrastructure consumption in g/km CO2) source (fuels/electricity)

Source: VDA

Regulation ignores existing vehicles in millions

New passenger car registrations = 14 million Passenger car existing fleet = 253 million

Source: VDA

CO2 emissions of newly registered passenger cars in the EU Average CO2 emissions of passenger cars in the EU

in g/km CO2 200

2006–2015

150 -25 %

100

50

0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Source: VDA 82 Environment and climate Passenger car label

The passenger car label is intended to help consumers shopping for cars to better estimate the energy efficiency and climate-friendliness of a new car. To this end, it

indicates the CO2 emissions, fuel consumption and CO2 efficiency of a new car. The basis for the passenger car label is EU Directive 1999/94/EC. It requires that consumers

be informed of the fuel consumption and CO2 emissions of a new car in a standardized manner in advertising and at the dealership. Exactly how this information is to be presented will however be left to individual states. In Germany, manufacturers and dealers have been required since 2004 to display an energy consumption label. At the end of 2011 this label was improved significantly. The core of the new label is a color scale showing the car buyer the energy efficiency of a new car.

The passenger car label is based on the established efficiency label for electrical appliances, whose color scale from green to red is familiar to consumers. Vehicles

exhibiting significantly better OC 2 values than the average are assigned to green categories. Average vehicles are classified amber and vehicles that are worse than the

average are labeled in red. If in future there is an improvement in the CO2 values of passenger vehicles offered on the market, the system will be tightened up. The color scale is supplemented by information about average fuel costs and the annual amount

of the CO2-based motor vehicle tax so that the consumer can include these vehicle running costs in their purchase decision.

The label is intended primarily to give an orientation to private or commercial buyers and interested parties, but also to help car dealers use energy efficiency as a sales tactic. The color scale immediately shows the customer whether a new car is fuel- efficient relative to the weight of the vehicle. This primarily makes it possible to make comparisons within a vehicle class, such as a compact car with other compact cars, or a family van with other family vans. For car buyers, the assistance of a passenger car label is increasingly important. According to a survey by dena in 2015, 73 percent of those questioned who are familiar with the passenger car label consider it “very important” or “rather important” to their purchase decision. Since the label was introduced in 2011, this level has risen by 15 percent. E nvIRonment and climate 83

German passenger car label

Information regarding fuel consumption, CO2 emissions and current consumption in the meaning of Pkw-EnVKV (Car Energy Consumption Identification Ordinance)

Brand: Fuel:

Vehicle- Model: Other energy carriers: specific data Capacity: Weight of vehicle:

Fuel consumption combined: /100 km Information inner city: /100 km regarding official outside: /100 km consumption combined: g/km and CO2 values CO2 emissions Current consumption combined: kWh/100 km

The values indicated were determined in accordance with specified measurement procedures (Art. 2, Nos. 5, 6, 6a Pkw-EnVKV, in the version

currently in force). CO2 emissions incurred by the production and provision of the fuel or other energy carriers are not taken into account in

the determination of the CO2 emissions in accordance with Directive 1999/94/EC. The data does not relate to an individual vehicle and does not form a constituent part of the bid, but serves solely for comparison purposes between the different types of vehicles.

Note with regard to Directive 1998/94/EC:

The fuel consumption and CO2 emissions of a vehicle depend not only on the efficient utilization of the fuel by the vehicle, but are also

influenced by driving behavior and other non-technical factors. CO2 is the greenhouse gas mainly responsible for global warming. A

guideline to the fuel consumption and CO2 emissions of all private car models offered for sale in Germany can be obtained free of charge at any point of sale in Germany at which new models of private cars are on display or offered for sale.

On the basis of the CO2 emissions measured and determined CO2 efficiency by taking the weight of the vehicle into account

A+ A B B Classification of the specific Color bars for C vehicle into the visualization of D efficiency class the CO2 efficiency scale E F G

Annual tax for this vehicle Euro Energy costs with a run performance of 20,000 km: Fuel costs and Fuel costs (______) at a fuel price of ____ euro/payment unit Euro Current costs at a current price of ____ euro/payment unit Euro motor vehicle Prepared on: tax per year

Source: EC 84 Environment and climate Air-conditioning and refrigerants

Climate protection is a priority for coolant in use at the time. Since then, two New cars will need to be charged with the German automotive industry. refrigerants have become established as climate-friendly refrigerant in the future This applies not only to increasingly alternatives. R1234yf is already used in efficient engines, but also to improving many new vehicle models. As with the vehicle air-conditioning systems. By previously used refrigerant R134a, it can 2017, new requirements will apply in also be used in the car at the previous Europe. As of the beginning of 2014, all typical pressure level of around 30 bar. new type-tested vehicle models must R1234yf is also largely compatible with be charged with a climate-friendly the existing technology in existing air- refrigerant. Starting in January 2017, this conditioning systems. Starting in January requirement will apply to all new cars. In 2017, the majority of new vehicles in the order to be considered climate-friendly, EU will be equipped with this refrigerant. a refrigerant must have a greenhouse

factor of less than 150. This greenhouse CO2 can also be used as a refrigerant, and factor (GWP, global warming potential) in this context it is referred to as R777.

is a measure of the climate harmfulness CO2 technology has now been developed of a refrigerant in relation to the climate for series production. This took a lot of

effect of CO2. A GWP of 150 means effort because the refrigerant‘s peculiar that one kilogram of the refrigerant characteristics, such as high system that escapes into the atmosphere has pressures, necessitated a complete 150 times the climate effect as one redevelopment of all the refrigeration

kilogram of CO2. However, the refrigerant circuit components. The VDA, together R134a, which has been used since the with the standards committee Automotive, late 1990s, has a GWP of 1,430, so it has developed an extensive system of

greatly exceeds the limit. Therefore this standards for components of CO2 air- refrigerant must be replaced. conditioners. This ensures a uniform global standard that makes mass As far back as the beginning of the production of such components possible 1990s, the automotive industry began by applying standardization. to look at possible alternatives to the

Refrigerants for air-conditioning systems in comparison

Ozone depletion potential Refrigerant Climate potential (GWP) (ODP)

R 12 10,890 Yes

R 134a 1,430 No

R 1234yf 1–4 No

R 744 CO2 1 No

Source: IPCC, VDA E nvIRonment and climate 85

CO2 emissions of heavy commercial vehicles

Heavy commercial vehicles play an indispensible role in freight and passenger transport in Germany and Europe. With over 460 billion tonne-kilometers, they carry about 71 percent of freight transported in Germany. At the same time, heavy commercial vehicles are responsible for about 5 percent of total CO2 emissions in Europe. the commercial vehicles industry has been able to apply numerous technological innovations to massively reduce the CO2 emissions of their vehicles in recent years. The fuel consumption of heavy commercial vehicles, according to investigations by technical publications, has fallen by around 60 percent per tonne-kilometer since the mid-1960s. At the same time, the introduction of Euro standards have permanently reduced pollutant emissions, especially nitrogen oxides and particulates.

CO2 emissions by heavy commercial vehicles should continue to drop in upcoming years. Statutory regulations following the pattern of CO2 regulations for passenger A CO2 regulation for commercial vehicles that cars, however, do not make sense for heavy commercial vehicles. This is because, follows the pattern of passenger cars would not make sense in contrast to passenger cars, commercial vehicles have a completely different initial position. Heavy commercial vehicles are used exclusively under commercial considerations. With a share of around 30 percent, fuel costs are generally the largest single item among all operating costs. For this reason alone, operators of heavy commercial vehicles have a massive interest in new vehicles with ever-lower fuel consumption. They thereby place substantial market pressure on manufacturers to continue to reduce vehicle fuel consumption and thus CO2 emissions.

Development of fuel consumption in percent for heavy-duty commercial vehicles per tonne-kilometer in Europe

in % 0

-20

since 1965

-40 -60 %

EU I EU II EU III EU IV EU V EU VI

-60 1965 1975 1985 1995 2005 2014

Source: Lastauto Omnibus (1967–2010), Daimler AG (2011, 2014) 86 Environment and climate

Commercial vehicles are also operated under an extraordinarily consumption and CO2 emissions of commercial vehicles will be diverse range of variants – from long-distance routes to able to be determined realistically and certified in the future. regional and urban distribution, to travel and city buses VECTO thereby makes it possible to consider both individual or construction vehicles. Depending on their application, vehicles and combinations of vehicles with trailers and bodies. there are substantial, functionally driven differences in The influence of various components on fuel consumption can fuel consumption. In addition, hardly any new vehicles are also be analyzed. VECTO thus provides transparency on the completely finished when they roll off the manufacturer’s fuel consumption of commercial vehicles while simultaneously assembly line. Rather, trailer and body manufacturers complete increasing competitive pressure among vehicle manufacturers the vehicles, without the vehicle manufacturers even knowing to offer ever more efficient vehicles. about it in individual cases. At the same time, bodies and trailers have a substantial effect on weight, aerodynamics and To sustainably reduce CO2 emissions from road freight transport, other factors that significantly influence fuel consumption. additional steps beyond this are needed. Within the integrated

Finally, in contrast to passenger cars, no generally applicable approach, all potential sources of CO2 reduction must be test cycle exists for heavy commercial vehicles, so that enhanced, from vehicle technology measures to renewable fuels previously no generally recognized information has been to optimized vehicle operation. European commercial vehicle available about fuel consumption and CO2 emissions. manufacturers, their suppliers and many other participants have come out with such an integrated approach. European The EU Commission decided several years ago to first provide commercial vehicle manufacturers have made it clear since transparency on fuel consumption and CO2 emissions of 2014 at the IAA (International Motor Show) that annual CO2 heavy commercial vehicles. Using the VECTO (Vehicle Energy savings in road transportation could be doubled by applying an Consumption Calculation Tool) simulation program, fuel integrated approach.

CO2-saving potential of the existing truck fleet through different measures (Long haul and regional delivery average numbers)

Vehicle-related measures for fleet Fuel Operations

Vehicle Trailer Tires Alternative fuels 6 % Fleet CO2 Operation Infrastructure renewal emission 2.5 % Engine Weights and Low rolling efficiency dimensions: resistance tires Biofuels 2nd EMS and other generation 13 % Aerodynamics efficient Air-pressure solutions control Synthetic fuel Predictive Driver training Better +5% add. fleet driving Aerodynamics Super single -20 % Natural gas infrastructure renewal (Euro 0, or tires Consolidation of I, II) Auxiliaries Light weight freight Telematics -3.5 % annual Ongoing fleet Driver training/ Weights and Improved traffic reduction replacement assistance dimensions: flow systems EMS and other efficient solutions

2014 2020

Source: ACEA and TML, 2015 E nvIRonment and climate 87

New design potential for trucks and buses

In 2015, the European Union created possibilities for extensive protection, at the same time. In addition, new technologies technical changes to commercial vehicles and omnibuses. for reducing consumption are to be added to the vehicles. According to them, future commercial vehicles and combinations Various approaches are currently being taken to the redesign of vehicles can become longer overall if they meet certain of cabs. Product cycles for commercial vehicles are generally prerequisites. The requirements of EU Directive 2015/719 make much longer than for passenger cars. Commercial vehicle it possible to redesign the vehicles without any loss of loading manufacturers can therefore first improve existing models area. In order to be able to implement the directive in practice, with moderate aerodynamic changes. These changes can be the European type approval rules will also be adapted by the implemented quickly up to market readiness, without have to end of 2016. The new rules are intended to improve commercial expand the existing type approval process in comparison with vehicles in many ways. Their focus is on aerodynamics, current commercial vehicles. A more ambitious approach plans protecting pedestrians, cyclists and other vehicles in case a complete redesign of the cab and drivetrain. As a prerequisite of collision, and driver comfort. For omnibuses, maximum for this, however, a large number of adaptations to existing permissible weights were raised. This gives additional room for regulations must be made. alternative drivetrains and technical measures such as barrier- free design of travel coaches, such as lift systems. For trailers, aerodynamic body parts known as rear flaps can be mounted on the rear in a short time. These aerodynamic In order for truck cabs to become more aerodynamic, they must rear flaps can be mounted with no additional review of the type become longer. This changes both the location of the driver approval if they are no longer than 50 centimeters. For longer and the external shape of the truck. The redesign must follow aerodynamic body parts, however, a great deal of evidence of numerous legal requirements, such as for lighting and underride safe operation is required. 88 Environment and climate

Reduction of exhaust emissions

The automotive industry has achieved great success in air quality According to TREMOD, emissions of individual exhaust gases preservation over the past decades. Despite increasing road from road transportation will each fall by at least 90 percent by traffic, since the end of the 1980s classical pollutants have 2030, in comparison with 1990 levels. been lowered by means of comprehensive application of technology and improved fuels, while CO2 emissions have also ·· Emissions of volatile hydrocarbons (HC) will drop by been reduced. Critical technical improvements included the 94 percent. introduction of the catalytic converter, reduction of tank-filling emissions, particle filters on diesel passenger cars, SCR systems ·P· articulate matter emissions (PM) will also fall by 94 percent. for heavy commercial vehicles and in general the ongoing optimization of engine technology. Although the greatest ·· Carbon monoxide (CO) emissions will be reduced by reduction in emissions was achieved in the 1990s, exhaust 92 percent. gas pollution will continue to drop in the future as well. The introduction of Euro 6 vehicles that will need to fulfill the real ·· Nitrogen oxide fumes shrink by around 90 percent. driving emissions (RDE) regulation in the future will further drastically reduce emissions from diesel passenger cars – Differentiation must be made for nitrogen oxides (NOx) in particularly emissions of nitrogen oxides (NOx). particular. NOx consists of non-hazardous nitrogen monoxide

(NO) and the irritant gas nitrogen dioxide (NO2). According

On the basis of the TREMOD calculation model developed by to the Federal Environment Ministry, NO2 emissions have the Heidelberg ifeu institute under a joint commission from the improved only slightly over the years. From 2003 to 2013, the VDA and the German Federal Environment Ministry, the falling levels at traffic measurement stations dropped from around trend in pollutant emissions can be quantified. This makes it 48 micrograms per cubic meter of air to 42 µg/m3. The low clear that emissions from road transportation will continue to drop in NO2 is due in part to the fact that the parameter that is drop in upcoming years. relevant for type testing is not NO2 but overall nitrogen oxides

(NOx). Manufacturers and suppliers will still substantially accelerate their efforts to reduce NO.

Great success in reducing emissions from road traffic in road traffic: HC emissions

in kilotons bn km

1,200 750

600 800 Emissions of volatile hydrocarbons 450

-94 % 300 400

150

0 0 1990 1995 2000 2005 2010 2015 2020 2025 2030

Passenger transport Transport of goods Mileage Source: ifeu, DIW E nvIRonment and climate 89

Great success in reducing emissions from road traffic in road traffic: Particle emissions

in kilotons bn km

1,200 750

600 800 Fine dust and/or particle emissions 450

-94 % 300 400

150

0 0 1990 1995 2000 2005 2010 2015 2020 2025 2030

Passenger transport Transport of goods Mileage Source: ifeu, DIW

Great success in reducing emissions from road traffic in road traffic: CO emissions

in kilotons bn km

8,000 750

600 6,000 Carbon monoxide emissions 450 4,000 -92 % 300

2,000 150

0 0 1990 1995 2000 2005 2010 2015 2020 2025 2030

Passenger transport Transport of goods Mileage Source: ifeu, DIW

Great success in reducing emissions from road traffic

in road traffic: NOx emissions

in kilotons bn km 1,200 750

600

800 Nitrogen oxide fumes 450

-90 % 300 400

150

0 0 1990 1995 2000 2005 2010 2015 2020 2025 2030

Passenger transport Transport of goods Mileage Source: ifeu, DIW 90 Environment and climate

International comparison of air pollution control and air quality

In order to improve air quality throughout Europe, the EU has The annual average limit for particulate matter is currently defined air quality limits that have been incorporated into met at every station in Germany. In 2015 once again it was German law. These levels are very challenging. Especially for seen that daily limits are exceeded almost exclusively in the particulate matter, the limits are being met much better today winter. The meteorological conditions in winter months are the than they were ten years ago. For nitrogen oxide emissions, primary reason for this. Particularly when winter high-pressure however, there are still greater challenges. zones cover a large area, with low moisture and strong sunlight, the daily limits can be exceeded. In the summer, in contrast, overruns of daily limits are seldom recorded. Levels Particulate matter above the limit are also often observed across large areas. For example, of the 48 stations that had twenty or more days There are two different limits for particulate matter (PM10) – over the limit in the first half of 2014, three-quarters were in one for the annual average and one for the daily average. the new federal states, which are rather sparsely populated. The annual average must not exceed 40 micrograms per This indicates that particulate matter levels typically have cubic meter (µg/m³). The daily average must be no greater meteorological causes for the most part. than 50 µg/m³, but this value can be exceeded 35 times in a calendar year. These limits for particulate matter (PM10) are The example of the particulate matter alarm in Stuttgart at the largely met in Germany, even at measurement stations next beginning of 2016 shows that road traffic can hardly be made to high-traffic roads. In 2015, only two measurement stations responsible for levels above the limit anymore. Although fewer still exceeded the limits. One of these is at the Neckartor in vehicles were traveling on the road, particulate matter levels Stuttgart. Even there, success in improving air quality is clearly rose significantly on the days when the particulate matter evident. From 187 overruns in 2005, the frequency of overruns alarm was in effect. was reduced to around 70 within ten years.

Particulate alarm Stuttgart 2016

Preliminary daily average particulate PM10

in µg/m3 150

100

50

0 01/15/16 01/16/16 01/17/16 01/18/16 01/19/16 01/20/16 01/21/16 01/22/16 01/23/16 01/24/16

With particulate alarm Without particulate alarm Limit value Source: LUBW, temporary values Environment and climate 91 92 Environment and climate

The automotive industry has done its part to minimize particulate matter. In modern In Beijing, particulate matter has reached passenger cars, particulate matter emissions are essentially irrelevant. According to levels never measured in Germany official data, even in Berlin automobile exhaust contributed only about 7 percent to particulate matter levels. Construction machines, in contrast, had over a 12 percent share. The Federal Environment Ministry has determined that exhaust gases from heating systems and open fireplaces are now responsible for a larger proportion of total particulate matter emissions than motor vehicle engines. An example makes this especially clear: The engine of a fully loaded 40-ton tractor trailer emits the same amount of particulate matter on a trip from Berlin to Hamburg as a smoker who smokes one pack of cigarettes.

In an international comparison, German cities are in an extremely good situation. The particulate matter emissions in the Chinese capital of Beijing are significantly above the levels observed in Germany and reach heights that have never been measured in this country. But attempts to control the levels with driving bans have also failed there. Despite cutting traffic volume in half with driving bans, no significant change in particulate matter levels was achieved. Instead, the influence of weather is also clear in Beijing. The lack of wind is the primary factor for high pollutant levels. Particulate matter levels drop noticeably whenever stronger wind movements are recorded.

In Milan another factor is clear, namely the inversion weather pattern. The temperature curve there tracks the particulate matter curve very closely, and limited driving bans in Milan also could not bring about any change. E nvIRonment and climate 93

Particulate matter Beijing 2015 Wind driving particulate matter

in µg/m3 km/h 800 40

700 35

600 30

500 25

400 20

300 15

200 10

100 5

0 0 11/29 12/02 12/05 12/08 12/11 12/14 12/17 12/20 12/23

Beijing PM10 Average wind Source: American Embassy in Beijing, DWD

Particulate matter Milan December 2015

PM10 and temperature curves largely similar

in µg/m3 km / h

110 Travel restriction 11 100 Mon.–Wed. 10 10 a.m.–4 p.m. New Year’s fireworks 90 9

80 8

70 7

60 6

50 5

40 4

30 3

20 2

10 1

0 0 12/01 12/04 12/07 12/10 12/13 12/16 12/19 12/22 12/25 12/28 12/31 01/03 01/06

Milano-Verziere PM10 Temperature Source: ARPA Lombardia, DWD 94 Environment and climate

Nitrogen oxides

Meeting the limits for nitrogen dioxide emissions (NO2) on main The introduction of a blue sticker can also be helpful – but only traffic routes in cities is still a challenge. This is due not least if the following principles are observed: to the fact that although stricter air-quality limits have been in place in the EU since 2010, the more strict Euro 6 exhaust gas ··Clear and uniform rules and implementation across Germany. standard for all newly registered diesel passenger cars has only needed to be met since September 2015. As market penetration ··Classification of vehicles according to typical European of these modern drivetrains advances, however, the air quality limit categories. will become significantly better in upcoming years with respect to nitrogen oxide emissions. ··Equal treatment of vehicles with diesel and gasoline engines. If differentiation is planned anyway, the blue sticker should In order to reduce nitrogen oxide emissions at the affected include diesel vehicles that meet Euro 5. Electric and fuel-cell measurement stations in the short term, there are many vehicles should be classified for the blue sticker. suitable approaches. Avoiding traffic backups in inner cities with intelligent traffic light controls – known as the ··A blue sticker should be introduced only if it takes effect green wave – has great potential. Better traffic flow reduces for a period beyond 2020, in order to avoid a sudden drop in nitrogen oxide emissions by up to one-third, as shown by vehicle levels. measurements from the Technical University in Munich and the ADAC. In addition, buses and taxis in inner-city traffic ··An upgrade to the blue sticker should be possible with have a substantial impact on NOx emissions, because they are adequate retrofit concepts for the same level of exhaust used in inner cities at particularly high levels. Replacement of gas quality. these fleets with modern, low-pollution buses and cars would appreciably lower NOx emissions in the short term. Environmental zones and blue stickers will only be successful,

however, if the other NOx emitters make comparable efforts to those of the automotive industry.

Reducing pollutant emissions with network controls Reduction of emissions

in percent 40

33 %

30 28 % 27 %

24 %

20

15 % 13 %

10

0

NOx emissions NO2 emissions Particulate emissions Particle count Fuel consumption HC emissions

and CO2 emissions Source: ADAC E nvIRonment and climate 95

Violations of the immission limit value of 200 µg/m³ (1-hour average value) for nitrogen dioxide at selected spot measuring points since 2003

in µg/m3 1,000

800

600

400

200

0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Stuttgart Am Neckartor Stuttgart Arnulf-Klett-Platz Stuttgart Hohenheimer Straße Stuttgart-Bad Cannstatt Source: LUBW 96 Environment and climate

Automobile production and sustainability

The automotive industry works on aligning its production more emissions of solvents from painting vehicles in series production closely to the principles of sustainability. Emphasis is placed on have fallen by 65 percent. Today, they are at the lowest level anchoring economic, ecological and social objectives vertically, in international comparison. The responsibility for people and that is, across all value-adding levels. The responsibility for the environment no longer ends at the factory door; rather, it sustainable economies should be borne jointly by companies, must be anchored throughout the entire supply chain. One government and society. The German automotive industry is important instrument here is the questionnaire for surveying doing its part. Manufacturers and suppliers actively embrace suppliers uniformly with respect to aspects of sustainability. their responsibility along the entire cycle of production and The questionnaire was developed by an international network use: from the selection of materials to production in Germany, of automobile manufacturers and is currently being introduced from fuel-saving operation to closing the material cycle at at suppliers and sub-suppliers. In addition, companies are the end of the product life cycle. Over the past two decades, holding local training sessions to bring sustainability into German automakers have achieved great success in protecting practice in everyday life. resources in manufacturing. Drinking water consumption, for example, dropped by 60 percent. Over 80 percent of production waste is now recycled. German automakers have also made great improvement in air-quality preservation: Since 1990,

Share of vehicle coating on total NMVOC emissions in the EU 2012

NMVOC emission in Gg

539 total 9,817 44 Gg or total 0.45 % 539 Gg or Share of automotive 5.8 % OEM coating Share of industrial coating

Anthropogenic emissions Industrial coating

Source: ACEA, 2015

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Lorem Ipsum Lorem Ipsum Dolor Anteil in % Lorem Ipsum Lorem Ipsum Dolor

Quelle: Lorem Ipsum E nvIRonment and climate 97

Back in 2014, preparations began for the European process of reviewing and adapting so-called best available technologies (BVT) for painting vehicles in series production. The focus is on strengthening climate protection by reducing emissions of highly volatile hydrocarbons (VOC, volatile organic compounds). Currently, not even 1 percent of total VOC emissions in Europe come from vehicle painting in series production. Nevertheless, the process is still significant to the automotive industry, because emissions limits are to be derived from the best available technology. The German automotive industry leads in an international comparison of environmentally friendly vehicle painting. For this reason, the emissions limits determined and defined at the EU level should not be further tightened when implemented in German law.

In the European Union, formaldehyde has been classified as a carcinogen since the beginning of 2016. Formaldehyde is a substance that occurs naturally in the environment. Among the characteristics of formaldehyde is that it breaks down quickly in soil, in the air and in water. The additional pollution in the outside air due to process-related emissions breaks down within a few hours, making it irrelevant in terms of pollution control. Nevertheless, as a result of the reclassification of formaldehyde at the European level, German laws and regulations also need to be amended, particularly the Technical Instructions on Air Quality Control (TA Luft) and the 31st implementation regulation on the Federal Pollution Control Act (BImSchG). Within the automotive industry, this affects vehicle painting systems for series production, power plants and engine test stands. The VDA therefore supports realistic, workable emission limits for formaldehyde in Germany. Competitive disadvantages for the German automotive industry due to tightening of emissions limits relative to European requirements should be avoided. This also applies in full to the TA Luft regulation, which the Federal Environment Ministry plans to update. German industry considers a fundamental revision of the regulatory structure to be unnecessary. Instead, adaptations to technical advances will be sufficient.

In addition, regulations on the storage of hazardous materials have been revised in Europe. The Seveso III directive on controlling risks of major accidents with hazardous materials must now be implemented in German law. The German automotive industry is affected by the regulations, because things like refrigerants, fuels, solvents and paints are stored at many locations. Requirements on minimum distances between operational facilities and protected areas, especially residential areas, are particularly relevant. The Seveso III directive and drafting for implementation in German law currently leave various points unclarified. The German automotive industry advocates for a practical one-to-one implementation of the European requirements in German law as well as a grandfather clause. 98 Environment and climate European Chemicals Regulation REACH

European Chemicals Regulation REACH affects vehicle production

REACH is a regulation of the European only in the factory chromium plating Union, which governs the Registration, process. However, here the protection Evaluation, Authorization and Restriction of workers is consistently regulated at a of Chemicals (REACH). The regulation high level by EU directives and national has been in effect for almost ten years. regulations. Long periods should be The authorization or approval procedure granted for the use of chromium (VI) for substances of very high concern compounds, in order to allow alternatives (SVHC) was established by REACH. This to be developed in Europe. Otherwise, procedure provides that substances that businesses and jobs in the EU would are included in the regulation require be jeopardized. At the same time, it authorization for a transitional period. is expected that production would If such approval is not obtained for an migrate to regions with lower labor and affected material, its use is banned environmental standards. Since the within the EU after the end of the affected components can be produced period. Experience with REACH has without any restrictions outside Europe shown that the regulation also has great and then imported. influence on vehicle production, because substances previously used have had to In addition, REACH also increasingly be substituted. endangers the production and availability of spare parts. The EU However, a use ban applies only Vehicle End-of-Life (ELV) Directive does within the EU, and only for the allow that replacement parts with the substances themselves. Products that same materials as the original parts are manufactured outside the EU may be produced (repair-as-produced with substances that are no longer principle), so that older vehicles approved may continue to be imported could still be repaired. However, the into the EU. This compromise is made REACH regulation does not provide clearly manifest by the authorization for similar treatment. Replacements procedure for chromium (VI) compounds. parts should therefore be exempted Chromium (VI) compounds, which are from the prohibited substances and be used in the production of chromium- guaranteed over the entire period of use plated components – in the car, as of a vehicle. Such an exemption should be well as in the sanitary sector – were part of the REACH regulation. Otherwise, added to the REACH Regulation Annex, older vehicles could not be repaired in and require approval as of September a few years. The previously discussed 2017. In finished, chrome components, approaches are not sufficient from the only harmless, elemental chromium viewpoint of the automotive industry. is included. A potential risk arises Environment and climate 99 100 Innovation and technology

Innovation and technology

E-mobility and networked, automated driving will result in a fundamental change to mobility. Combustion engines are becoming even more efficient. The German automotive industry is reinventing the car. Innovation and technology 101

Sonja Sterba, cutting machine operator, assembly fitter on the main assembly line, MAN Truck & Bus AG, Munich 102 Innovation and technology A comparison of combustion technologies

Gasoline and diesel

The diesel engine has always outscored its gasoline counterpart with its lower Diesel and gasoline engines each have fuel consumption. In its combustion process, energy stored in the fuel is far better their respective strengths in different utilized. Admittedly, diesel combustion generates more pollutants, necessitating classes of vehicles additional elaborate exhaust gas treatment measures. The dynamic tension between fuel consumption, emissions, driving performance and vehicle costs sees diesel- and gasoline-powered vehicles pitting their respective strengths against each other in different vehicle classes: A modern gasoline engine makes compact cars with moderate annual mileage affordable, whereas an advanced diesel with a tendency for higher mileage delivers lower fuel consumption. The ability to choose between gasoline and diesel helps to accommodate customers’ individual needs – especially in terms of cost. It is no coincidence that the diesel engine business fleets, including those of the skilled trades. Innoa v tion and technology 103

Diesel scores in terms of fuel consumption

A diesel engine’s fuel consumption advantage relative to a comparable gasoline engine is around 20 percent. CO2 emissions are a function of fuel consumption. Because CO2 is given off when a fossil fuel such as diesel or gasoline is burned. Despite a higher carbon content, diesel persists because of its efficient combustion with an ultimate

CO2 advantage of up to 15 percent.

Their lower CO2 emissions make diesel vehicles an indispensable building block in implementing European climate protection targets. This is illustrated by an example: in 2015, 48 percent of all newly registered cars in Germany featured a diesel engine.

Based on this distribution, average emissions per car were 128 g/km CO2. If all diesel cars were now replaced by corresponding gasoline cars, then significantly higher emissions of about 135 g/km CO2 would result. Conversely, the emissions would be approximately 121 g/km CO2 if all gasoline cars were replaced by diesel cars. This is where the advantage of the diesel becomes apparent: With an average mileage of over 15,000 kilometers and a volume of 3.2 million new car registrations, this represents a savings of over 630,000 tons of CO2 per year. That is the same as a small town of 70,000 inhabitants emits each year.

Gasoline and diesel engine CO2 trends Relative CO2 emissions per new vehicle Absolute CO2 emissions per new vehicle per year

g/km CO2 1,000 t CO2 ∆ = emissions 70,000-inhabitant city 180 7,000

6.000 170 2008–2015

5,000 160 -20 % CO2 emissions

4,000

150

3,000

140 ∆ = 13.2 2,000

130 1,000

120 2008 2009 2010 2011 2012 2013 2014 2015 2015 2015 2015 2015* 2015*

Real values: gasoline + diesel Scenario: only gasoline Scenario: only diesel * 15,000 km annual output, new registrations 3.2 million Source: Federal Motor Transport Authority, VDA 104 Innovation and technology

Hydrocarbon (HC), carbon monoxide (CO), nitrogen oxides (NOx) and particulate

High NOx emissions are a challenge matter (PM) pollutants are generated from fuel combustion. In particular, the relatively when it comes to diesel engines high NOx emissions are a challenge for the diesel engine. They result, alongside low fuel consumption, from the specific combustion process of diesel. Light and dark are close bedfellows here. The better the combustion, the higher the temperature and the

more NOx is produced. This gives rise to conflicting interests: measures to reduce

CO2 often result in higher nitrous oxide formation, whereas combustion optimized for

less nitrous oxide means higher CO2 emissions. In Euro 6 vehicles, this trade-off is

achieved by active DeNOx exhaust gas treatment (also see “Exhaust technology for reducing nitrogen oxides”).

The German automotive industry is the leader in diesel

Because of its technical advantages, the economic importance of the diesel engine In 2015, 2.0 million diesel cars were exported to the German automotive industry has also steadily increased. In 2015 alone, at from Germany 2.7 million vehicles, 48 percent of all cars produced in Germany had diesel motors. Of this, 2 million vehicles were exported, of which almost 1.5 million went to EU member states. Due to the leading position of the German automotive industry in diesel technology, a significant share of the currently approximately 800,000 jobs in the automotive industry in Germany depend directly and indirectly upon the diesel engine. This applies to manufacturers, but also, and above all, to the German automotive suppliers. Currently, approximately every other newly registered car, both in Germany and Western Europe, is a diesel. And every other diesel car sold in Western Europe bears a German brand name. For medium and heavy commercial vehicles, the diesel engine has traditionally had a strong position because of its cost effectiveness. In production, and of course also in exports, its share is nearly 100 percent. Innoa v tion and technology 105

Fuel consumption and emissions measurement in cars

Current legal framework: NEDC (New European Driving Cycle)

Legal limit values for measuring pollutants are specified across Neither the test vehicle nor the measurement procedures may Europe. The first uniform emissions standards for passenger cars be modified.T his is because the boundary conditions are clearly in the European Community took effect in 1970. The common defined: for example, the car’s daytime running lights must label “Euro-norm” was introduced in 1992 with emissions level be on, a specific engine oil must be used, and there are clear Euro 1. The currently applicable standard is Euro 6. Over the specifications for the type and size of the tires. course of progression from Euro 1 to Euro 6, lawmakers lowered the passenger-car limits for nitrogen oxides by 97 percent and for particles by 98 percent. The EU standard values for fuel consumption and emissions are determined using a legally mandated method, the New European Driving Cycle (NEDC), on a test bench.

Difference between lab and street

As the NEDC was introduced back in 1996, it is now obsolete. The different load and dynamic requirements and selection of The city driving proportion is too high and accelerations are exhaust gas treatment systems play a critical role in exhaust too low. It also does not take into account varying landscape emissions as well. topography and faster expressway driving. The maximum speed of 120 km/h is driven for only ten seconds. The average speed In addition, many technologies developed in recent years to of the NEDC is unrealistically low at 34 km/h. Features that are reduce CO2 have a greater effect on the test bench than on the now taken for granted, such as air-conditioning, radio and seat roads. Start-stop technology, now in widespread use, is one heaters, are not covered, as they depend greatly on different example of this. In the NEDC, it reduces fuel consumption by user profiles. The goal of this legal requirement was essentially about 10 percent. In reality, this consumption advantage exists to provide a basis for comparison between various vehicle only in heavy traffic with a lot of stop-and-go driving. manufacturers. It soon became clear, however, that there is a difference between the test bench results and the values on the Because vehicles are becoming more and more efficient, the roads. There are many reasons for this. value measured in the test cycle is also dropping. If the additional consumption due to features such as air-conditioning and the Usage behavior, above all, has a substantial effect on fuel navigation system remain constant, then the percentage consumption and emissions: drivers who travel in the mountains deviation that they cause will rise, although the absolute level of a lot, drive faster on the expressway more often or use a lot consumption is lower. of comfort functions that consume more fuel than others. There is not just one vehicle consumption level on the roads. 106 Innovation and technology

WLTP will replace NEFZ

Not only consumers, but also the manufacturers themselves have an interest in obtaining realistic consumption numbers with a new test cycle. Representatives of the UNECE (United Nations Economic Commission for Europe) have therefore developed a new procedure with the support of the automotive industry, including the VDA. In 2017, the obsolete NEDC is to be replaced by the modern standard WLTP (Worldwide Harmonized Light Vehicles Test Procedures). With higher average speeds of up to 131 km/h, greater variations in speed and more strict test procedures, it provides a better overall picture of fuel consumption under real driving conditions. Like the NEDC, the WLTP cycle is also measured on a test bench. It specifies standardized, reproducible and comparable test conditions for national and international vehicle manufacturers. It provides customers with a better measuring stick for the consumption and emissions values of different car models. It provides manufacturers with a legally reliable basis for certifying new vehicles.

Speed profile in the future WLTP “world cycle”

in km/h Low Middle High Extra-high 150

120

90

60

30

in s 200 400 600 800 1,000 1,200 1,400 1,600 1,800

WLTP NEFZ Source: UNECE Innoa v tion and technology 107

The VDA supports the introduction of this new measurement the target value must also be adjusted accordingly. On average, method, as it gives automobile manufacturers the ability to the automotive industry expects a nominal increase in fuel communicate more realistic consumption values. Nevertheless, consumption values of about 15–20 percent when using the the WLTP standard will also not reflect fuel consumption on WLTP to determine fuel consumption. A method has been the roads or real emissions in all cases, because consumption developed for introducing the WLTP into CO2 legislation, which and emissions are also dependent on driving style and provides for converting WLTP measurements back to NEDC environmental conditions. values at first.T he intent of the EU Commission is that this will ensure that the launch of the WLTP does not bring about an

Conversion from NEDC to WLTP affects not only consumption intensification of CO2 legislation. measurements, but also CO2 fleet monitoring and the challenging CO2 laws in Europe. The 95 g fleet target value was established on the basis of the NEDC. If the measurement method for determining CO2 emissions is to be changed, then

New WLTP cycle

WLTP NEDC (New European Driving Cycle)

Starting temperature Cold Cold

Cycle time 30 min. 20 min.

Idle time element 13 % 25 %

Cycle length 23.25 km 11 km

Speed Average: 46.5 km/h – Maximum: 131 km/h Average: 34 km/h – Maximum: 120 km/h

Propulsive power Average: 7.5 kW – Maximum: 47 kW Average: 4 kW – Maximum: 34 kW

Special equipment is considered for weight, Influence of special equipment and aerodynamics and onboard electrical Currently not considered air-conditioning system (quiescent current). No AC

Source: VDA 108 Innovation and technology

Real Driving Emissions

Exhaust gas measurements will also be converted to the WLTP introduction of the RDE legislation that has now passed, so in the future. Pollutant limits, however, will not be affected. as to avoid large discrepancies between laboratory and road WLTP laboratory measurements will in future be supplemented values in future. by the so-called RDE test (Real Driving Emissions), which will measure vehicle pollutant emissions directly on the road for With RDE, vehicles have to comply with nitrogen oxide limits not the first time. The regulation was adopted in its final form by only on the test bench, but also under real driving conditions the European Parliament at the beginning of 2016. The VDA and nearly any environmental conditions. The only concessions advocated for and welcomes the road measurements. Unlike by lawmakers are consideration of the measurement tolerance the laboratory investigation, the RDE test does not require of the portable emissions tester and a slightly higher limit for compliance with any fixed driving cycle. In practice, the RDE a transition period of 15 months after the introduction of RDE test will be conducted under any environmental conditions. (conformity factor 2.1 including PEMS measurement tolerance) Acceleration, outside temperature, wind conditions and traffic in order to allow the entire passenger car fleet to be converted situation are random. The intention behind this additional test to these new RDE limits. Compared with Euro 5, the final DER in future is to reduce the differences between test stand and regulation means a reduction in emissions by a factor of five. everyday car use. Manipulations, especially using software that detects the test bench situation, will thus no longer be The VDA expects that the air quality targets in Germany will be possible. For the RDE test, vehicles will be equipped with achieved by Euro 6 in conjunction with RDE. This is primarily the so-called PEMS technology (Portable Emissions Measurement conclusion of a study by the Aachen research institute AVISO, in System) for mobile emissions measurement. PEMS is already cooperation with Graz Technical University and the Heidelberg used as standard for commercial vehicles. environmental institute ifeu. The result of the study is that the violation of air pollutant limits will be solved by the increasing Differences between test bench measurements and road market penetration of Euro 6 and RDE. Natural fleet replacement tests are generally due to technical reasons and depend on alone will reduce nitrogen oxide levels in the air by 17 percent individual usage as well as individual environmental boundary by 2020. This means that measurement points that currently conditions. Extreme values in excess of limits, however, are have an annual average of 48 µg/m³ will meet the limit of inconsistent with the spirit of current emissions regulations. 40 µg/m³ in the future. This means that 33 of 72 measurement That is why the automotive industry is advocating the rapid points that exceed the limit will be brought down to target levels.

Real Driving Emissions regulation (RDE) D eadlines and conformity factor

Conformity factor Date applicable

New models: all models with type approval after the date indicated. All new Measurement tolerance of PEMS devices registrations: all vehicles newly registered after the date indicated. Slightly used (currently 0.5) is already included in the factors vehicles one year later in each case

New models All new registrations

1st step 2.1 September 2017 September 2019

2nd step 1.5 January 2020 January 2021

Source: VDA Innovation and technology 109 110 Innovation and technology Exhaust technology for reducing nitrogen oxides

Reduction in particulates between 150 and 500 °C. The cold start is therefore critical, as the engine has not In order to clean combustion pollutants yet reached the desired temperature. This The first step of exhaust gas treatment out of diesel engine exhaust, additional is in contrast to normal driving, when it is eliminating particulates systems for exhaust gas treatment reaches its maximum efficiency of about are used. The first step is typically the 80 percent at 300 to 400 °C operating oxidation catalytic converter. Here, temperature. The increased consumption

pollutants are converted into harmless of the vehicle for regenerating the NOx exhaust gas components. The diesel storage catalytic converter averages particulate filter cleans soot out of the about 2 percent. exhaust in a second step. The cleaning that the filter requires is done by burning In the SCR catalytic converter (selective

off the embedded particles. The cleaning catalytic reduction), the NOx emissions can only be successful, however, if the are broken down by adding the reducing particle filter temperature is at least agent AdBlue®. AdBlue® is a non-toxic, 350 °C. In city traffic, this is often not odorless urea solution. It is sprayed into the case, so the filter must be actively the exhaust flow as needed and converts

burned off. To do so, the engine control the NOx emissions into the neutral

unit increases the exhaust temperature components of nitrogen (N2), water and

to 600 °C. This is associated with a carbon dioxide (CO2) in the SCR catalytic brief increase in fuel consumption and converter. For the SCR catalytic converter

therefore up to a 9 percent increase in as well, significant NOx rates can be

CO2 emissions. The particle filter in a achieved only above approximately new car has an efficiency of nearly 100 200 °C. When the engine and exhaust percent. This means that the diesel is system are at operating temperature, the nearly free of soot. SCR catalytic converter removes up to 90 percent of nitrogen emissions from the exhaust. Nitrogen oxide reduction Benefits of this system: Its high In order to reduce nitrogen oxide efficiency level makes it possible to

DeNOx technology enables a significant emissions (NOx), two technologies that adjust combustion for low consumption, reduction in NOx can also be combined are used in the and therefore lower CO2 emissions.

third stage: the NOx storage catalytic This means that fuel savings of up to converter and the SCR catalytic converter. 5 percent are possible. The reducing ® The NOx storage catalytic converter agent AdBlue must be integrated in the removes the nitrogen oxides from the vehicle, however, with a separate tank. exhaust and stores them until its holding AdBlue® consumption averages capacity is used up. To regenerate it, the 0.2 l/100 km. As AdBlue® becomes more engine electronics briefly add a little more available and customer acceptance diesel fuel to the combustion mixture, grows, the use of AdBlue® has expanded,

much like what is done for the particle which further reduces NOx emissions.

filter.T he stored NOx is converted into the

neutral components of nitrogen (N2) and

carbon dioxide (CO2). The NOx storage catalytic converter then begins its work anew. The storage catalytic converter can

store NOx only in a temperature range Innoa v tion and technology 111

AdBlue®

The German automotive industry is the leader in the field of SCR technology. All German manufacturers offer models with this technology. Around 2.5 million vehicles from German group brands already use AdBlue® in Europe. Over 30 percent of current diesel passenger car models from our manufacturers are shipped with AdBlue® technology, and the trend is rising. Some manufacturers have already indicated that their diesel passenger car ranges will be successively and completely upgraded to SCR technology. The VDA predicts that by 2020, over 20 million diesel cars from German companies will be equipped with AdBlue®.

SCR level in Europe

in millions 25

20

15

10

5

0 2012 2013 2014 2015 2016 2017 2018 2019 2020

Source: VDA 112 Innovation and technology

AdBlue® technology is often hidden behind model names Therefore, a dense AdBlue® infrastructure is needed at filling such as BlueTEC, BluePerformance, BlueTDI, clean diesel, stations across Europe. Currently, AdBlue® is available at nearly BlueInjection or ECOnetic. The most prominent feature of the all filling stations, but mostly in the form of bottles or other SCR technology is the second tank filler behind the filler door. containers. The owner or driver of a modern diesel car, however, Behind it is a special AdBlue® tank that typically holds between expects filling up to be as easy as usual, regardless of whether 8 and 20 liters. AdBlue® consumption for a passenger car is it is for fuel or AdBlue®. Therefore, the sale of AdBlue® in bottles currently about 1 to 2 percent of diesel fuel consumption. For or cans can only be a transition solution. Rapid expansion of light-duty commercial vehicles, consumption is about twice that an AdBlue® dispensing system network is needed. In Germany, high. In the future, significant increases in AdBlue® consumption construction of an AdBlue® infrastructure has just begun. Up are expected in order to reliably meet EU exhaust regulations. to now, fewer than 100 filling stations have been equipped with This means that in the future drivers will need to fill up not only convenient AdBlue® filling pumps. with diesel, but also with AdBlue®. AdBlue® is anticipated to need to be refilled every 5,000 to 10,000 kilometers. Innoa v tion and technology 113 Type approval

Type approval is a prerequisite for bringing a new vehicle to market

There are clear legal rules not only for emissions, fuel consumption and the measurement methods to be used, but also for what is known as type testing of new vehicle models. Every new vehicle model must go through this process before it goes on the market. In Europe, the automobile manufacturer uses the current test cycle – still the NEDC today, and WLTP starting in 2017 – to measure exhaust gases and consumption on a test vehicle. These data are checked by technical services monitored by the national approval agency – in Germany, the Federal Office for Motor Vehicles.

The type test is thus not only about the exhaust gas and consumption measurements, but, above all, the regulations on vehicle safety. In the entire process, therefore, the A type test checks whether all EU vehicle is checked to makes sure it complies with all applicable EU requirements. requirements for new models have been met The national agency issues an approval only on the basis of this test, that is, the type approval, which is valid throughout the EU. Individual vehicles are then pulled from the assembly line during production and tested for compliance with the requirements. EU law also provides for tests on vehicles that are currently in use. Vehicles in the field must comply with the established limits for a period of 160,000 km or five years.T his is monitored with field testing by the Federal Road Research Institute (performed by TÜV Nord). If the type approval agency determines that a vehicle type no longer meets the requirements, the vehicle manufacturer must develop steps for correcting the defects. A recall action may be required.

A continuous check of the exhaust system also takes place in the vehicle itself. The engine electronics use an onboard diagnostic system (OBD) to continuously monitor functionality – regardless of kilometers traveled or age of the vehicle. If a defect occurs in the exhaust system, then this is detected by the sensor analysis and complex error-detection algorithms. The error is saved, and the vehicle instructs the driver to visit a service station. The OBD is therefore much more powerful than regular exhaust inspections, which are done only every two years and only allow no-load measurements. 114 Innovation and technology

The European Union is now planning an extensive reform of the EU type approval EU plans extensive reform of the European system, which is currently regulated in the EU framework directive for type approvals type approval system (2007/46/EC). The entire process will be reviewed and expanded. After the RDE emissions test is introduced, the results of mobile PEMS measurements will also be incorporated in the type test. In addition, the EU wants to further harmonize the execution of the type test across Europe and strengthen its monitoring of the market. Type approval agencies and technical services will meet stricter requirements and must be subjected to inspections or audits. At the European level, the EU Commission itself wants to establish market monitoring. At the same time, national approval agencies will gain the ability to call for retesting if there is suspicion of false test results from a manufacturer. The type approval for the entire vehicle, and for systems and components, will also be limited to five years. Finally, it is planned that software used in electronic systems be disclosed to the approval agencies and technical services. This is particularly intended to prevent manipulation. Because such software is extremely relevant to competition, however, strictly confidential handling of the data must be ensured. The use of individual approvals, stepwise production of commercial vehicles, and expiring series will be improved greatly. Up to now, national approvals were required, but in the future they will apply Europe-wide.

In addition to planned European reforms, there are also efforts to establish an international type approval system. Work is currently underway on a draft version, known as the International Whole Vehicle Type Approval, IWVTA, by the UN Economic Commission for Europe (UNECE). Experts from Europe, Japan, Russia and South Africa are involved. They are to develop a type approval system that is attractive to all 51 UNECE member states, if possible, in order to reach a large number of users. The UNECE type approval can later supplant the EU type approval. Over the long term, emerging countries such as China or India should also join in the use of the international type approval. Innoa v tion and technology 115

Electric mobility

The consultancy estimates that Germany could produce about Leading market and provider 1 million electric vehicles by the year 2020. The National Platform for Electric Mobility (NPE) has combined However, a prerequisite for this is also a strong development of the key players from industry, science, politics and trade unions the domestic market. In the first half of 2016, new registrations in strategic dialogue for the last six years. Upon the 2014 of electric vehicles in Germany increased by nearly 8 percent progress report, the NPE has ended the market preparation compared with the previous year. Since 2008, about 66,000 phase, which has run since 2010. For the next phase of the electric vehicles have been registered in Germany. By market launch from 2015 to 2017, proposals were submitted for international standards, however, Germany is only at the top as Germany to reach the goal of becoming the leading provider a provider. In relation to the market development, Germany is in and market for electric mobility by 2020. the one of the last places. Currently, most electric vehicles are on US roads. By market volume, in 2016, China clearly moved ahead of the US, and thereby to the top. The largest European Market launch phase electric markets were Norway, in front of the United Kingdom. Comparing these markets, the proportion who have electric Regarding the goal of becoming the leading provider, the vehicles, in terms of total registrations, is particularly revealing: German automotive industry is already successful: up to the end In Germany in the first half of 2015, only 0.6 percent of all new of 2015, German manufacturers had put 29 production models passenger vehicles were electric vehicles. The leader in Western with electric drive on the roads and gradually expand the range Europe is Norway, with a share of 28.4 percent, followed by in the areas. Sweden with 3.1 percent. Even independent experts view Germany as being on the right track. According to the Electric Vehicle Index (EVI) of McKinsey, Germany was among the top three in provider nations.

Electric share of total passenger car market January to June 2016

in percent

30 28.4 %

23

15

8

3.1 % 2.3 % 1.4 % 1.4 % 1.3 % 0.6 % 0.7 % 1.1 % 0.9 % 0 Germany France United Kingdom Norway Sweden Netherlands Western Europe USA (LV)* China Japan**

Electric share 2015 Electric share 2016 YTD * January–July ** January–March Source: Federal Motor Transport Authority, WardsAuto, Fourin, IHS driven by Polk, VDA 116 Innovation and technology

Electric mobility is becoming more and more important Under the direct support, buyers of purely electric vehicles internationally – it is the key to a sustainable mobility system receive a bonus of 4,000 euros. For plug-in hybrids, 3,000 with resource conservation in mind. In the market-preparation euros are granted. German manufacturers participate with a 50 phase, Germany correctly focused on the support of research percent share of the direct support. and development, on standardization, and on training and skills. The Electric Mobility Act has been in force since 2015. Under it, In spring 2016, the federal government also provided an overall communities can locally support electric vehicles – for example, package of direct support, investment in charging infrastructure with free parking or special access rights. This requires uniform and a public procurement initiative with a volume of 1 billion marking. Therefore, since September 2015, there has been a euros set aside for it. This strategic decision has laid down the special e-license plate for electric vehicles. basis for Germany to also become a lead market for electric mobility. Since a starting push is important, as long as electric cars remain more expensive than conventional cars, due to high battery costs. The starting push will be limited to a few years.

E-license plate

D B - MK 24E

Source: VDA

Abrechnung Innoa v tion and technology 117

Charging infrastructure

T o achieve a successful market launch in Germany, the use highway drives. A financial cost of about 193 million euros is of electric cars must be attractive and practical. The charging expected. For normal charging, there should also be 70,000 infrastructure plays a significant role in that. With the recent public charging points available by 2020. This would require approximately 6,250 public charging points for normal an investment of about 346 million euros. Support from the charging and 200 quick charging points (as of June 2016), federal government covers a large part of this requirement and there are still too few public charging facilities. The resolution will stimulate further private investment. In addition, changes to foster the expansion of the charging infrastructure is of in the construction and rent law, tax law, and in the energy and crucial importance for a further expedient development. The calibration regulations are necessary. federal government is setting aside 300 million euros from 2017 to 2020 for this purpose.

Therefore, the VDA has, together with the National Platform for Electric Mobility, determined the need for a charging infrastructure. So, by 2020, roughly 7,100 public quick charging poles are needed, which allow, among other things, lengthy

Charging infrastructures

Private installation location: Publicly accessible installation location: Charge process Currently 85 % Currently 15 % portions Perspective beyond 2020: 60–70 % Perspective beyond 2020: 30–40 %

Typical locations for charging infrastructure

Single/double Parking spaces Company parking Truck stop, Shopping center, Roadside/ garage or parking and/or underground spaces on own highway service car parks, public parking space at privately parking in residential premises station customer parking owned home buildings, multiple spaces dwellings, apartment blocks

Charging technology Combined charging system prescribed as minimum Combined charging system prescribed specifications standard in the Charging Column Directive

Power supply Via existing infrastructure (e.g., Via existing street lighting) or Via existing system connection or separate connection to the service new connection low-voltage or medium-voltage grid connection to the low-voltage or medium-voltage grid

Source: VDA

Abrechnung 118 Innovation and technology

Battery and cell production As early as 2010, the National Platform for Electric Mobility (NPE) submitted the first German Standardisation Roadmap for The traction battery of an electric vehicle currently constitutes Electromobility with recommendations for the standardization about 30 to 40 percent of its value. Much of this is attributable of electric mobility. At the end of 2014, this roadmap was to the battery cell – about 60 to 70 percent. It is therefore a key substantially revised and republished as version 3.0. element in the value chain. At the same time, the battery cell is the central element of the vehicle. They essentially determine To obtain maximum versatility, standardization activities the performance and the cost, making them critical for user should be coordinated and merged with the different sectors acceptance. Traction battery modules and traction battery of the industry. The norms and standards in the areas of systems have been successfully developed and manufactured electrical or power engineering and automotive engineering in Germany. The production of the cells in large numbers is have been developed separately up to 2010, on the basis of still missing in the value chain. Automobile manufacturers are historically grown structures. The Standardisation Roadmap for currently focused on the further development and expansion of Electromobility, in contrast, establishes the essential overarching the production of battery packs. vision and a systemic approach for electric mobility. Version 3.0 describes the work progress since 2010 and complements the Currently, there is significant battery cell production capacity work plan with new tasks and projects that have resulted from worldwide, wherein mainly Japanese and Korean manufacturers the progress made. The VDA will continue to be responsible for dominate the market. With the growing market success of bringing forward the concerns of the automotive industry. The electric vehicles, the demand for battery cells is only expected final version 4.0 is planned for 2017. to rise significantly; thus, a further expansion of global cell production is necessary. In this case, the construction and operation of cell production, with favorable local conditions Tax incentives and labor and energy costs could be sustainably possible in Germany as well. The time window for market entry, from the The federal government has also, in the overall package for the perspective of the NPE, is when the next battery cell generation support of electric mobility, adapted and improved various tax (optimized lithium-ion cells) or following generations are ready regulations for electric vehicles. A tax exemption on noncash for market. For a possible entry into the cell production, a benefits for employees was agreed, whereby they receive free production start was determined upon, in stages from 2021. charging current from their employers. For obtaining charging With the establishment of battery cell production in Germany, current, simplified tax arrangements are also beneficial the expertise of the local companies and research institutions because this way red tape can be avoided for the benefit of should be closely linked. For this, the NPE, together with the the employers, by the recording and documenting of charging VDA have developed a roadmap for cell production. current. The loading device provided by the employer for private use is also tax-free. In addition, employers can impose a tax on noncash benefits, for the free or cheap transfer of ownership of Research funding charging devices, or on subsidies for the acquisition of charging devices, with a flat tax rate of 25 percent income tax plus The federal government promotes research and development for solidarity surcharge and, if appropriate, church tax. electric mobility in many ways. The technology in continuously evolving in the joint projects between companies and research The federal government has also extended the car tax exemption institutes. The focus is on, among other things, the optimization for purely electric vehicles, from five to ten years. The VDA of the drive system, the electric motor and the power has advocated the exemption of electric vehicles with plug-in electronics, battery technology, lightweight construction as well hybrids and range extenders, as well as purely electric cars, from as the interaction of all of the components. The various areas of the motor vehicle tax. support are handled by the four Federal Ministries of Education and Research, Environment and Construction, Transport and The VDA also proposes improving the existing compensation Digital Infrastructure, and Economic Affairs and Energy. The for the disadvantages for electric vehicles on company car central contact for companies and research institutions is the taxation. For the noncash benefit arising from the private use of Federal Government’s Lotsenstelle Elektromobilität. an electric company car, the following relief current applies: The tax applied to the gross list price of the vehicle can be reduced by the cost of the battery (in 2016, a global rate of 350 euros Standardization roadmap per kilowatt-hour battery capacity). This lump sum is reduced in subsequent years, by 50 euros per year until 2023. As the reason Research and development form the basis for the recent for the declining arrangement – the acceleration of the electric successes of German manufacturers. In addition to research vehicle market – has not occurred, the relevant amount should funding, electric mobility requires close cooperation between the not be further reduced in the coming years as currently planned, various industry sectors and the relevant standardization bodies. but it should remain in full. Innoa v tion and technology 119

Up to the end of 2015, German manufacturers have put 29 production models with electric drive on the roads 120 Innovation and technology Other alternative drivetrains

Natural gas

The German auto industry continues to gas drivetrains. Compressed natural gas Germany currently has 80,000 natural gas cars follow a diversification strategy to reduce, (CNG), as it is used for passenger cars, on the road supplement and ultimately completely is available at around 900 filling stations. replace fossil fuels. The primary goal is to Across Europe there are over 3,000 back more than one horse and promote natural gas filling stations. various future-capable technologies for alternative drivetrains. The natural gas mobility initiative of the German Energy Agency (dena) Above all, natural gas is a promising fuel. has formulated a goal, shared by the

It has a CO2 advantage of over 20 percent automotive industry, of achieving a compared with gasoline. Even compared 4 percent share for natural gas in the

with diesel engines, CO2 reductions energy mix on German roads by 2020. of up to 10 percent can be achieved. For the German automotive industry, this However, natural gas vehicles have primarily means developing and offering made up only a small proportion of total additional attractive vehicle models with vehicles to date. In Germany there are natural gas powertrains. about 80,000 passenger cars with natural

Power-to-gas operating principle

Generation Conversion/storage Application Separation

Power Hydrogen Methane Carbon dioxide Biogas

“Green Power” Electrolysis Methanation CNG filling station Biomass

Vegetable Methane waste

Methane storage CNG vehicle Biogas system

Bio-methane

Source: VDA Innoa v tion and technology 121

For heavy-duty commercial vehicles, liquefied natural gas (LNG) is an important alternative to diesel fuel. Above all, liquefied natural gas has the energy density Liquefied natural gas is an important required for long-range travel. This makes LNG particularly well suited for long-haul alternative to diesel for long-haul freight transport freight transport. The VDA therefore welcomes the EU initiative for promoting LNG infrastructure in the EU in order to facilitate a breakthrough in LNG mobility.

A discounted energy tax rate applies to natural gas through 2018. Measured by energy content, natural gas is currently taxed at a rate of 13.90 euros per megawatt-hour. In comparison, the rate for diesel is 47.20 euros/MWh. This difference contributes greatly to making natural gas an interesting alternative fuel for consumers and companies. The VDA has pushed since the start of the legislative session to extend the tax benefits and thus provide investment security. The grand coalition decided in February, 2016, that the tax advantage should remain in place through 2024, and introduced legislation to this effect.

Fuel cell

Hydrogen technology can play a significant role as a particularly sustainable alternative powertrain in the future. The fuel cell, in combination with hydrogen storage, is an excellent source of power and is more rich in energy than a battery. Like pure electric drivetrains, it is completely emission-free. Its cruising range, however, is comparable to current gasoline engines. Refilling is also fast, so a future fuel-cell vehicle could offer the flexibility and comfort of a current vehicle with an internal combustion engine. The possibility of flexible hydrogen production using excess renewable energy opens up additional potential.

The fuel cell is ready for series production – models from German manufacturers have been announced for next year. This means that the construction of a hydrogen filling station infrastructure must now take center stage. The seven public H2 filling stations in Germany are a start. Long-term success would require about 1,000 filling stations across the country. 122 Innovation and technology

Networked and automated driving

Innovation leadership of the German automotive industry

T oday, mobility systems face many challenges: globalization In its strategy for automated and networked driving, the federal and urbanization lead to rapid growth in traffic and may government has also set the goal of ensuring Germany’s bring transport systems to their limits in capacity. By 2050, pioneering role in this technology. Automated and networked 70 percent of all people will live in cities. The number of driving will be brought to the road: from the test runs, through cars is expected to double. Automation and networking, development, to serial production and to regulatory approval. however, offer the chance to meet these global challenges The Federal Ministry of Transport and Digital Infrastructure successfully, because driving would become efficient, safe and has defined the following areas of action in which the environmentally friendly. German manufacturers and suppliers necessary conditions for the new technology will be created: wish to further expand their innovation leadership through Infrastructure law, innovation, networking, as well as IT security automated and networked driving. and data protection.

Legal and political framework

Currently, nonexistent, incomplete or different national legislative However, the Vienna Convention still requires that each vehicle approaches still form a major obstacle on the path to the market must have a driver. Thus, the operation of autonomously driven introduction of automated and especially autonomous vehicles. vehicles without drivers is not possible in the current situation. Therefore, the goal of the legislatures should be the creation However, the working group is already working on road safety of the regulatory framework. The harmonization of the various under the UN Economic Commission for Europe (UNECE), rules is in the best interests of a functioning European internal in a further expansion of the convention, so in the future market. To this end, the federal government has announced its autonomous systems could also be permitted. strategy for automated and networked driving. In addition, other international technical regulations (UN-R- The prevailing road traffic law does not take into account the Regulations) need to be revised. This particularly includes the different levels of automation. However, national legislative UN Regulation on Steering Systems (UN-R 79). This is because changes are not absolutely necessary. The legislature does a core feature of automated driving is that the vehicle drives not distinguish, in principal, between the technical automation on its own to follow the road or to overtake. UN-R 79 currently levels. In fact, two cases should be distinguished: On one hand, provides for automatic steering, but only up to a speed of there are situations where there is a driver, who may partially 10 km/h. This speed limit should be repealed. need to or could potentially take over the driving (automated systems); and on the other hand, there are situations in which An adaptation of the existing liability laws is not needed for the driver is just a passenger, or there is no driver (autonomous automated driving systems. This is because in case of accidents systems). Therefore, changes are needed to the rules in force. due to automated driving systems, a comprehensive liability The existing regulations – particularly the Road Transport Law coverage is provided by the owner liability or the manufacturer’s and the Road Traffic ctA – however, do not specifically prohibit product liability. Insofar as the driver is legally responsible for the use of automated systems. In the case of an accident, driving, they are liable in the case of their fault. The liability however, the use of the systems could be currently considered model described has already proven itself in many automotive a breach of the driver’s duty. This uncertainty should be innovations and is therefore technologically neutral. For cases, resolved quickly. where driver liability should be excluded from the operation of an automated driving system, the statutory maximum amount As a basis for national regulations, the Vienna Convention on of liability could be raised in order to avoid potential liability road transport was adapted in October, 2015. It changed a gaps. Only when a system completely takes over the driving task previous regulation, according to which drivers had to control and the driver is a mere passenger, might it be necessary to their vehicles at all times. The convention now allows automated fundamentally review the rules on liability. systems to influence the driving of a vehicle – but only if they could be overruled or turned off at any time by the driver. A first legal basis has been created by this change in the international convention. The VDA advocates that national legislators must now implement this and allow automated driving. Innoa v tion and technology 123

Automation

The number of driver assistance systems, that can assist the garages, however, speeds are very slow, which make the driver in the driving task, has continued to increase in recent situation controllable despite the high complexity. In both years. There has been a perception that autonomous vehicles cases, a vehicle can detect its surroundings with its own may soon be technically feasible. It is much more likely, however, sensors, and the situations are easily controllable. It is obvious that this development will take place in an evolutionary manner. that further innovations must be tested, such as the extension Automated functions will be developed gradually on the basis of the application of automated functions in the urban of established driver assistance systems and incorporated into environment. The federal government has therefore launched more and more new cars. Drivers will be guided step-by-step initiatives such as the Digital Test Field Highway that will be towards automation. extended by urban test fields.

Automated driving is expected to be initially practically applied on the highway and in garages. Despite the fast speeds on federal highways, traffic is comparably structured. In parking

Introduction of automated driving and parking functions Introduction time frames define the time frame, when driver assistance systems (FAS) will likely be introduced into the market.

Urban driving* Level 4 High Valet parking* (driverless parking) automation

Level 3 Highway driving* Conditional Traffic jam/driving in traffic queues* automation

Key parking Level 2 Highway driving assistant Partial automation Park assist

Lane keeping assistant Level 1 Parking steering assistant Assisted Adaptive cruise control

Blind-spot monitoring Level 0 Driver only Lane departure warning

Year 2000 2005 2010 2015 2020 2025 2030

* Assuming the existence of a legal framework Driving functions Parking functions Source: VDA 124 Innovation and technology

Networking

The networking of vehicles together with the environment and Today, vehicles are equipped with mobile radio – but only the infrastructure creates completely new possibilities that go for communication with the stationary IT centers of the far beyond traditional driving functions. Particularly, the features manufacturers. For fast and reliable data transfer between of automatic driving can only be fully developed through vehicles and the infrastructure, mobile radio is not yet mature networking. Individual vehicles could receive information enough. However, in principle, the future 5G mobile standard that go far beyond the range of vision of the human eye and should be suitable for this. 5G has the potential to quickly and the onboard sensors. This communication may be between reliably transmit information while driving, as is possible with vehicles (vehicle-to-vehicle, V2V), between vehicles and the ITS-5G-Wi-Fi. However, 5G technology is still at the research or infrastructure (vehicle-to-infrastructure, V2I) as well as between advanced development stage. It is not yet clear when 5G Mobile vehicles and IT centers of control centers (vehicle-to-IT-backend, radio for V2X communication will be ready for market. V2B). As a generic term for communication of vehicles with various recipients, the term vehicle-to-X (V2X) is used. Well-known business models in the automotive industry have been greatly transformed through networking and digitization. Communication technologies comprise the basis for networking. The new digital markets are fundamentally different from the In the European CAR 2 CAR Communications Consortium known product markets: the competition for data and the (C2C-CC), automobile manufacturers and suppliers work data interface now more than ever determines market share. together with research institutes on technologies for V2X It is therefore vital that there is fair competition on these communication. They have already developed and tested a digital markets. We need an industrial policy, which limits standard for automobile Wi-Fi – the so-called ITS-5G standard. the dominant actors and ensures competitive opportunities The technology allows direct and instantaneous communication. for European industries. It should be especially noted that Vehicle manufacturers in the consortium have announced a policy decisions regarding access to vehicle data also involve market launch slated for 2019. However, the infrastructure industrial policy issues. should also be fitted out with ITS-5G at the right time. Innoa v tion and technology 125

Data protection

Modern vehicles already need and produce a variety of data. Because of the growing trend of information technology equipment of motor vehicles, their connection to the Internet and the networking of road users to each other, this trend will continue. Digitization and networking bring, in addition to advantages in traffic safety and comfor at the same time, risks for the individual rights of vehicle users, which has been encountered by the automotive industry.

In 2014, the VDA published its Data Protection Principles for Connected Vehicles. Subsequently, the data protection authorities of the federal and state governments, with the VDA, developed a declaration on data protection aspects in the use of networked and non-networked vehicles and published it in January 2016. The following topics were covered in the joint declaration:

··The personal nature of the data accumulated in the vehicle

··Determination of the point in time of data collection

··Determination of the responsible body

··Legal basis for data handling in the motor vehicle

··Data protection right to information against the manufacturer

··Sovereignty over the data processing operations in the vehicle

The data protection authorities and the VDA agree that data arising from the use of a car is personal, if there is a link with the vehicle identification number or the license plate. For the determination of the timing of data collection and the responsible entity, it must be distinguished whether data is received immediately (online) or later (offline). The declaration clearly notes that vehicle owners have a gratuitous right to information and stored personal data against the manufacturer. In addition, the onboard computer of the vehicles will provide information on the main issues for data processing. The VDA will continue the dialogue with the data protection authorities to further questions of data protection in automated and networked vehicles. 126 Innovation and technology

Research Association for Automotive Technology (FAT)

In the Research Association for Automotive Technology (FAT), all German car and commercial vehicle manufacturers and numerous suppliers come together under the umbrella of the VDA, to conduct precompetitive and joint research. Projects by research partners at universities, public research centers or non-university research and development services are carried out on its behalf. Since its founding, the FAT has published around 300 volumes on its research projects.

Reduction of parking search traffic in city centers

Scarce parking space and highly strained infrastructures lead to, in many cities, higher levels of parking search traffic.T his unnecessarily generates waste gases, noise and loss of time. A new study by Prognos AG, on behalf of the Research Association for Automotive Technology (FAT), has recognized this and studied parking search traffic from cars and light trucks in city centers. In addition, the study aims to show how unnecessary parking search traffic can be reduced through better information.

Overall, by the estimate of the authors of the study, 560 million hours are consumed Motorists in Germany spend 560 million hours every year in Germany in parking search traffic. Parking places are sought, especially annually on parking place searches on leisure trips, round trips to the home and service trips. At least onefifth of all travel in business dealings is estimated as being related to parking search traffic. In private transport, it goes up to as much as about every other trip.

The parking spaces and what information was available on their occupancy status were studied. It included parking garages and private parking spaces that are publicly available. This also included public road space, which is managed with parking ticket machines, parking meters or so-called “Handyparken.” The study concluded that in the car garages very good information was usually provided regarded open parking spaces. However, this information is only available in a very rudimentary fashion on the public streets. And this is regardless of the fact that management of this is possibly through parking ticket machine providing information on open parking spaces. Because wherever parking is managed, there is data on the parking tickets sold. However, this information has rarely been used for traffic control. Even in unmanaged public street space, it would be possible to provide information. The local authorities could use statistical methods, which in turn would permit information on its utilization. Innoa v tion and technology 127

If it is possible to greatly improve the information situation, the search for parking and the loss of time in German cities could be significantly reduced.T he Prognos study came to the conclusion that, at best, up to 181 million hours of parking search time could be avoided. Less parking search traffic would also mean that the motor vehicle mileage could be reduced overall. By achieving the optimum possible savings of approximately 2.7 billion vehicle-kilometers, then around 0.5 million tons of CO2 could be prevented. The study shows that better information on the parking space availability could considerably reduce search traffic. To perform this for public parking space, usage forecasts are made and published using statistical and dynamic data from the parking ticket machine. The detection of individual spaces by sensors should be intensified. This data should be provided and publicly made available facility-wide over a data platform.

The study on “Information about available parking spaces in cities” has been published in FAT Series No. 271.

Common passenger car parking space at home Average values

Garage, car port, Public area Various private parking space

Large city (large) >500 kI (n = 6) 58 % 39 % 3 %

Large city (small) 100–500 kI (n = 14) 64 % 34 % 3 %

Medium city (large) 50–100 kI (n = 5) 70 % 27 % 3 %

Medium city (small) 20–50 kI (n = 9) 81 % 17 % 2 %

Small city (large) 10–20 kI (n = 9) 83 % 14 % 3 %

Small city (small) <10 kI (n = 6) 84 % 14 % 2 %

Total 73 % 25 % 2 %

Source: VDA 128 Innovation and technology

Energy-efficient road train

The reduction of CO2 emissions is one of the major economic and technical challenges in road transport. The commercial vehicle industry is working intensively to further improve the energy efficiency of commercial vehicles. In addition to optimizing the powertrain, it is all about the sustainable reduction of aerodynamic drag and rolling resistance, which accounts for roughly 25 percent of the fuel consumption of a truck in long-distance traffic.

To explore how driving resistances in heavy commercial vehicles can be reduced in the future. The Research Association for Automotive Technology (FAT) has launched a cross-manufacturer and precompetitive project on the “Potential analysis of an energy- efficient road train.”T he research should provide input on resource conservation in road transport for more economy in terms of energy efficiency in road traffic. In

addition, the research project also supports the work on the future CO2 legislation on heavy-duty commercial vehicles and the revision of the guidelines on weights and measures (96/53 EC).

FAT flow simulation: Vortex distribution on the semi-trailer

Ux (m/s)

0 10 20

Source: FAT Series No. 237, November 2011 Innoa v tion and technology 129

In it, the aerodynamic potentials of road trains were tested, for example, in extensive computer simulations. This was supplemented by flow tests in wind tunnels with semi-trailer models. The research showed that the greatest potential for aerodynamic optimization existed in the semi-trailer itself. Through side panels, tailgates and a downdraft tailpiece, approximately 5 percent more fuel could be conserved. Other types of semi-trailers can attain significant drag reduction by closing the space between the cab and the trailer.

Using an articulated train, the air resistance can be greatly reduced if the gap between the two structures can be closed off from the penetrating air stream. This could be achieved by externally provided spoilers at the end of each trailer structure. These components are, however, only used to a limited extent, even under the future legal framework. An extension or alteration of the cab would impact with another 1 to 2 percent fuel saving.

The rolling resistance of commercial vehicle tires was first practically tested on roads with specially created measurement vehicles. The research showed that the tread depth of the tires and the ambient temperatures have a strong influence on rolling resistance. Different rough road surfaces seem to be less of an influence on rolling resistance than as the case with passenger car tires. Super single tires on the drive shaft are particularly efficient. They produce 16 to 18 percent less rolling resistance than dual tires.

It also studied how rolling resistance can affect an entire road train. It became clear that, for example, the rolling resistance of a train that is loaded with a strong Optimal loading can reduce rolling deviation from the ideal axial positioning can increase by more than 4 percent. In a resistance by 8 percent fully loaded truck, the rolling resistance can, in turn, be reduced by 8 percent if the trailer is loaded with optimal weight distribution. For this, a payload-dependent load distribution plan was developed.

To capture the full range of the above-described studies in the practical operation of road trains, several road trains – equipped with extensive measurement technology – are being monitored in their daily use. This new research project is funded by the German Federation of Industrial Research Associations. Based on the results that are expected at the end of 2016, simulation tools and analysis methods will be further developed.

Under the FAT research project for energy-efficient road trains, numerous papers have been published: Heavy-duty commercial vehicle configurations under the influence of realistic flow conditions (FAT 281), Sensitivity analysis of factors in rolling resistance in commercial vehicles (FAT 258 and 279), Aerodynamics of commercial vehicle combinations under realistic driving conditions with crosswind influence (FAT 260), Examination of the rolling resistance of tires for commercial vehicles under actual road conditions (FAT 255), Aerodynamics of heavy-duty commercial vehicles (FAT 241), Consumption reduction of commercial vehicle combinations by aerodynamic measures (FAT 237). 130 Innovation and technology

Logistics

The global production network of the German automotive In order to manage and control these networks, accurate, industry depends upon the supply chains being reliable and comprehensive and fast information is crucial. It no longer safely organized. Vendor components must be delivered quickly, simply involves the beginning and end of a process, for example, securely, economically and in an environmentally friendly the date of goods shipping and receiving. Instead, companies fashion, to production plants. Also, finished vehicles must reach want to have the highest possible transparency throughout the their customers in all regions of the world. For this purpose, entire order and delivery process. This is because only this level complex production networks involve the participation of of transparency makes it possible to refine the controls in order numerous partners. Major challenges for automotive logistics to react to disruptions and to coordinate logistics processes are globalization and security, facing terrorism and crime. in finer detail.T o achieve this goal, the physical objects in the supply chain – from the container ships down to the smallest Modern logistics networks must optimally bring together shipping container – must be networked. You will allow their local raw materials and global supply. It must be able to react location and status to be continuously reported. From the flexibly to fluctuating demands as well as to geographical and information details, logisticians can systematically put together political risks. The costs should not get out of hand. Therefore, a picture of the condition of the entire supply chain. the decisive factor is the permanent improvement of the logistics processes. Above all, this entails the optimization of As part of this development, IT systems are opened and diverse the flow of information between manufacturers, suppliers and objects are linked to each other, so that an “Internet of Things” logistics service providers. To put this into practice, the VDA is formed – often described by the phrase Industry 4.0. seeks to further harmonize the interfaces over which data are However, there are certain risks associated with this. To protect transmitted. Another focus of VDA Logistics is to form systems the automotive supply chain against cybercrime, the VDA has with which supply chains can be monitored digitally. Parts and developed secure transmission and encryption protocols. supplies are already equipped with RFID tags (Radio Frequency Identification) and can continuously transmit their location. The Digital systems are no longer relevant only in the control of VDA recommendations on the use of RFID have been completely logistics processes. Even the planning of new factories is largely revised, and now provide the latest knowledge and experience. digitized. For example, 3D visualization and logistics simulations In addition, global recommendations were developed jointly with are used. Thus, production and logistics processes can be international partner organizations. virtually planned today in the “Digital Factory,” and tested and optimized, before a single spade is turned. The horizontal integration of the supply chain and the integration of all partners in the value chain, from raw material suppliers to the automobile manufacturers and from distribution to the supply of spare parts, is currently gaining in importance to automotive logistics. In particular, the number of different partners and the complexity have grown rapidly. The supply chains have grown longer, and the transport volume and value of the transported goods have increased. This is partly due to the wider variety of automobile models, but also due to the rapid expansion of overseas production on all continents. Innoa v tion and technology 131 132 Safety and standards

Safety and standards

The German automotive industry is renowned for its high level of safety and top quality. Manufacturers and suppliers are continuously further developing international standards and norms. Safety and standards 133

Marco Trines, Business Economist, Sales, Kiekert AG Heiligenhaus 134 Safety and standards Traffic accidents in Germany

Measured by distances driven, road transport is safer than ever

The number of fatalities has steadily decreased over the past The number of fatally injured road users on the autobahns in few years, even though the distances driven in Germany are 2014 sharply declined by 12 percent to 375. This historically increasing every year. In 2015, however, an increase in fatalities low level was maintained in 2015. The distances driven on of almost 3 percent, by 3,475, was recorded. This was, according the autobahn also increased from the previous years (plus to the Federal Highway Research Institute, not the least due 2.5 percent). Also, overall the autobahns are by far the safest to the strong increase in the number of fatal motorcyclist roads. For every 1 billion kilometers driven, statistically accident victims. This number grew from the previous year by 1.6 died. On regional, district and local roads, on average 5.3 7 percent. This year, there was not only a mild winter, but, unlike and on federal roads 8.3, died. Even compared to the highways in 2014, there were also dry, warm and above-average sunny of other countries German autobahns are extremely safe. For summer months. This led to a great deal of motorcycle traffic. every 1 billion kilometers, accident statistics show, for example, Nevertheless, the risk of being killed in road traffic is increasing in France 1.7 people, in Belgium 2.0, and in the United States small. This also applies to 2015. For every 1 billion vehicle 3.4 – all more than here. A general speed limit, as there exist in kilometers, statistically 4.5 died. In the mid-nineties, it was three these countries, does not necessarily make the highways safer. times as high. Thus, road transport, measured by distances driven, is safer than ever.

Deaths per 1 billion kilometers driven by road categories

in billion kilometers 70 66.5

60

50

40 35.9

30

20

11.7 10 8.1 5.3 1.6 0 BAB Federal roads Regional, district and local roads

1980 2014 Source: Federal Statistical Office, DIW S afety and standards 135

Vehicle safety: New Euro NCAP requirements

The European New Car Assessment The integration of active and passive Programme (Euro NCAP) is a consumer safety systems in a vehicle will lead to protection-oriented program to evaluate accidents being increasingly avoided the safety of passenger cars. It is or mitigated in the future. An active supported by a consortium of European braking or steering intervention can, for transport ministries, automobile example, reduce the collision speed and associations, insurance associations thus reduce the severity of accidents. and research institutes. Since 1997, Therefore, it is logical that the Euro the Euro NCAP has become the key NCAP more strongly consider these valuation benchmark for vehicle safety technological developments. for manufacturers and consumers. Today, twelve institutions from eight European Moreover, the existing requirements on countries participate in the program. passive safety are continuously revised. Passive safety: Tougher requirements for Almost all new vehicles are tested For adult occupant protection, child occupant protection against frontal impact and evaluated by Euro NCAP for their safety and pedestrian protection, there passive and active safety. The results are have been significant changes to the published and allow car buyers to quickly program since 2015, to react to the and comprehensively obtain information manufacturers and suppliers of new on the vehicle safety of an automobile. technology solutions.

The test requirements to achieve This will lead to the better evaluation of the maximum score were changed the protection of occupants of various progressively in recent years. Since 2014, ages and body sizes in conjunction the vehicle manufacturers have had to with the restraint systems, in a frontal meet significant new requirements in collision. Therefore, a new crash test was multiple areas in order to achieve the introduced in 2015. This test comprises highest rating (5 stars). In particular, the frontal impact of a vehicle against a the four categories were rebalanced. rigid barrier at 50 km/h. Till that point, The adult occupant protection was only the level of protection for an average worth as much as 50 percent of the adult was rated – and using a so-called evaluation. Child safety and pedestrian 50th percentile dummy. In the future, protection were each worth 20 percent. the protection of small, lightweight rear Driver assistance systems was worth passengers will also be assessed (using only 10 percent of the overall evaluation. the so-called 5th percentile dummy). It As of 2014, the active safety systems will also determine how well a smaller, are now twice as heavily considered, lighter occupant is protected in the specifically, 20 percent. The Euro NCAP passenger seat. The new provisions are follows the overall trend, in which the designed primarily as a result of the new systems, the active occupant and improvements in restraint systems for pedestrian protections, are becoming small occupants. increasingly important. 136 Safety and standards

To determine the protective potential of vehicles in side be paid to the protection against excessively stretched ligaments impacts, two different crash tests are currently applied. In it, an and bends at the knee. Manufacturers should consider this impact was recreated with a movable barrier with a deformation especially in the design of the front portion of new vehicles. For element at 50 km/h on the side of the vehicle. A lateral pole the assessment of head impacts, different measuring points on crash at 29 km/h was also tested. Since 2015, both tests have the hood, the A-pillar and windshield are now taken into account. become more demanding. For the movable barrier, a much larger To meet the increased demands, manufacturers use different deformation element is now used, the barrier itself, at 1,300 kg, constructive solutions, such as external airbags, deployable hoods is significantly heavier than previously. For the pole impact, the or more free deformation spaces under the hood. impact angle is only 75 degrees instead of 90 degrees, and the collision speed has now increased to 32 km/h. This thus Previously, the Euro NCAP only evaluated few supporting safety increases the overall requirements for side impact protection. systems, such as seat belt reminders and electronic stability Manufacturers responded with more extensive protective control. Since 2014, automatic emergency braking systems measures, stiffer body components and additional head airbags. (AEBS) have also been examined and evaluated. Emergency braking systems for city driving are tested below 50 km/h, Starting in 2016, new criteria apply for child safety in frontal and enable vehicles facing each other head on to brake and side impacts. The previously used dummies have been automatically. Emergency braking systems for highways are replaced by new ones, where possible risks of injury can be tested in scenarios where a vehicle runs too close to a slower detected more accurately. Moreover, dummies are tested in new or braking vehicle and should brake without driver intervention. sizes. In frontal and side impact, dummies are used in child From 2016, there will be additional testing, such as emergency seats that represent a 1.5-year-old and a 3-year-old child. In the braking reacting to pedestrians. The findings of the so-called future, test bodies will be used to represent children aged six AEB systems for unprotected road users are then assigned to and ten years. This change of dummies leads to a focus on the protect pedestrians. safety of children not only in child safety seats. In addition, the occupant restraint systems of the vehicle itself, especially belts, These active safety systems must always be present in must better meet the needs of children. In addition, it will also the vehicle in the future, in order to continue to earn the evaluate how well child seats can be installed in the vehicle. maximum score of 5 stars in the Euro NCAP test. These very For this, the simplest, customizable solutions are defined as the substantial changes in the overall evaluation system have been target. The background to this new requirement is that children implemented in recent years. By the year 2020, requirements in are too often being secured incorrectly in child safety seats, all areas, frontal impact, side impact, active safety systems, will which are not fully effective in the event of an accident. be further developed.

For the assessment of pedestrian protection, the recent legform impactor more accurately reflects the physical characteristics and vulnerabilities of the human leg. Thus, more attention will S afety and standards 137

Digital radio

Smoothly flowing and safer traffic requires the provision of accurate and up-to-date traffic information. In the future, this will increasingly be done via Vehicle V2X Digital radio is superior in the transmission communications. Simultaneously, the radio will continue to play an important role of traffic information in providing basic information. Digital radio increasingly proves superior in the automobile. In 2015, nearly 15 percent of the new cars from the German brands were already delivered with digital radio.

Nowadays, traffic information is still brought to the car largely by traditional radio. In addition to the radio program, broadcasters, on their frequencies in the non-audible range, send traffic messages that input into the navigation system. The use of the so-called RDS-TMC technology (Traffic Message Channel) for this purpose is no longer sufficient, in terms of its transmission capacity. Information on the hazardous areas cannot be provided with any precision, but only by road sections. Traffic information is limited due to the low capacity on federal roads and autobahns. Information can no longer by transmitted to the downstream network.

Digital radio (DAB, Digital Audio Broadcasting) can help here, because it has a much higher capacity. DAB brings much more extensive coverage and more accurate traffic information, simultaneously to the radio program in the navigation system. Information on the traffic situation or hazard warnings are updated multiple times more so, and is thus more helpful.

Now is the time to fulfill the potential offered by digital radio, and to exploit the technical capacities of the content. For quite some time, this content was no different from that which was disseminated via RDS-TMC over analog radio. Since 2016, the range has become clearly noticeable. Via this process, the German automotive industry communicated with the broadcasters, in intensive dialogue under the framework of the digital radio boards at the Federal Ministry of Transport and Digital Infrastructure.

The digital radio that is coming also shows the level of computerization of cars in Germany with DAB radios. It will grow gradually. In 2015, it was already in 12.8 percent of the new cars and rising. For vehicles from German manufacturers it was, at 14.4 percent, even significantly higher. 138 Safety and standards Standardization

Automotive security engineering

Security, or the protection or the resistance of a system Basically, virtually any of these attack vectors can be blocked or a vehicle, against unauthorized external access has an by suitable protective measures – for example, cryptographic increasingly important role in the automotive industry. In protocols – in the digital components of the vehicle, the particular, the increasing variety of software-controlled functions associated IT systems and its interfaces. A major challenge is in the car and internal and external networking create ever that during the development phase, the technical possibilities of larger targets for manipulation or interference. The automotive what the attackers of the next and the succeeding generation industry responds to it with automotive security engineering, in will be capable of doing are often not predictable. Automotive order to protect the vehicles and systems. security engineering should therefore achieve the highest possible level of security throughout the product life cycle. Academic research projects have already demonstrated, on several occasions, that it may be possible to interfere with In order to create an industry-wide, common understanding of vehicle onboard wireless interfaces, Bluetooth or Wi-Fi and to automotive security engineering, the VDA launched an initiative manipulate them in a dangerous manner. The usual gateways for for the International Organization for Standardization (ISO), in hackers are the insufficiently or incorrectly protected interfaces, the form of a standardization project. The future standard will through which access can be obtained to the communication describe the state of the art and establish uniform security networks of the vehicle (see figure). However, malicious minimum requirements for product development processes in programs may also involve offline access to the vehicle, for the automotive industry. Through clear definitions and terms, example through a malicious audio file. security requirements and thus the product safety will be significantly improved.

Communication channels, which must be protected against external attacks

Bluetooth

Wi-Fi

Third-party Production IT systems

Manufacturer Customer service IT systems

Internet

Car2Car

Source: VDA S afety and standards 139

Extended Vehicle

Since the summer of 2014, the automotive industry, under the The automotive industry is therefore developing web-based framework of the International Organization for Standardization platforms for service provider access. The provider may access (ISO), has worked on a large-scale standardization project and receive data via the manufacturer’s IT centers (back-end entitled the “Extended Vehicle.” The aim is to create a web- server). The web platforms themselves shall be designed by based platform, over which an external service provider can each manufacturer. As part of the ISO, however, the necessary access vehicle data securely and in a standardized manner. standards and norms will be developed, for example, to define Today, the automotive industry is creating the technical the structures, processes and especially security mechanisms. prerequisites, so that future external service providers can offer mobility services to drivers. The Extended Vehicle ISO Project comprises several standards series. ISO 20077 describes methodological requirements Nowadays, data is still often accessed via the onboard for the use of vehicle data via the web interface as well as diagnostic interface (OBD). An example of these applications general terms. The ISO 20078 standard establishes the actual are devices that allow vehicle owners to connect (so-called OBD requirements for the web interface related to access, data dongles) and record driving data for car insurance. Through content, security and access control. ISO 20080 defines an initial them, motion profiles can be created, which could lead to better Extended Vehicle application: the radio-based diagnostic access insurance ratings. Since the OBD port was originally developed for workshop service. for the vehicle diagnosis in the workshop, it is not suitable for access to vehicle data by new service providers.

Extended-Vehicle-Concept

In-vehicle interface Application platform Extended vehicle

OEM, 3rd party Costumer 3rd party or Costumer Costumer server neutral server Standard WWW interface

ExVe Backend server (OEM specific) BT/Wi-Fi GSM or BT/Wi-Fi GSM/VPN

Read Write Read Write Read Write

OBD connector Onboard gateway, protocol and app Telematics unit (OEM specific)

Standardized adapter Standardized gateway Standardized interface

Source: Daimler AG 140 Safety and standards

Internet-based vehicle registration

The registration of motor vehicles in Germany shall run completely In future, a plaque holder will be provided for readmission, to online in the future. The federal government has started the i-car which the registering body will apply a stamp plaque. The owner project, Internet-based vehicle registration. As a first step since receives this at their home, following their application via the 2015, the deregistration of a motor vehicle can be done online. In Internet, which they then apply to the license plates. future, the re-registration may be done on the Internet. The version of DIN 74069 newly developed in the NA In addition to the change in vehicle registration, it will also Automobile regulates the exact verification requirements for extend a valid DIN standard. Even today, the vehicle owner, the new stamp plaques and plaque holder. These include tests if wanting to take the vehicle out of service, can uncover a of irreversible exposure and readability of the code, as well as security code, which is covered by the stamp plaque mounted the mechanical and chemical resistance of the structure and under the license plate. Among other things, they must then bonding in order to prevent tampering. specify this security code in the Internet-based method, to cause the shutdown of the vehicle at the approval authority. S afety and standards 141

Quality management

The quality of its products is a key factor for business success At the highest VDA Quality Board, the Quality Management in the automotive industry. Manufacturers and suppliers have Committee (QMA), the VDA quality standards are defined and further increased the quality of new automobiles in recent developed. In quality management working groups, experts from years – despite higher complexity, shorter development cycles the companies prepare the decisions in detail. and a greater variety of models. In parallel, the warranty and guarantee periods have been extended to offer customers As an agency, the QMC follows up the decisions of the QMB. even more reliability. With the increasing levels of quality, So, the QMC publishes and markets the VDA QMC guidelines, quality management in the automotive industry must also in which standards are published. It also provides VDA QMC constantly evolve. Quality requirements for processes, parts and trainingcourses in their own education and training forums. components must be met over the entire production and supply Here, employees of manufacturers and suppliers are trained chain. The automotive industry has increasingly accepted that in the application of the QMC systems and standards. Besides quality no longer simply means product quality. Quality is rather its own education and training programs, licensed partners a key principle throughout the entire product development also offer QM training. The QMC is both a contracting partner process, from development through to customer use. and supervisory authority of the certification bodies. These companies examine, under specific certification schemes of the QMC, the quality management systems of companies in Quality Management Center of the VDA the automotive industry worldwide and award certificates. Compliance with the QMC processes and standards is usually The VDA coordinates the overall quality management of the a prerequisite to becoming a supplier for a company in the German automotive industry. Thus, new methods and techniques German automotive industry. for quality management are developed in partnership with manufacturers and suppliers at the VDA Quality Management Center (VDA QMC). The VDA QMC publishes all jointly developed definitions, rules and requirements for quality management in the automotive industry.

International branches of the VDA QMC

Germany Russia China Berlin Moscow Beijing 142 Safety and standards

International activities

In 2015, the international activities of the VDA QMC grew further. The number of participants in QMC training rose in 2015 by almost 30 percent compared to last year. In China, an increase of 10 percent was recorded. Only the branch in Russia, due to the difficult economic situation, witnessed a subscriber decline of 11 percent. Worldwide, more than 16,000 participants took part in VDA QMC training.

In mid-2015, a new licensee partner for QMC training was attracted in South Korea. The Korean Foundation for Quality (KFQ) and the South Korean subsidiary of TÜV Süd have since trained the employees of the local automotive industry in the application of German quality standards.

To ensure that the training provided by the licensees corresponds to the requirements of QMC, assessments take place regularly. There are also regular trainingcourses for trainers; and once a year there is a major international licensee meeting, wherein innovations to quality standards are presented and discussed. Only thus can the high level of VDA QMC training be ensured worldwide.

Attendance trends From 2014 to 2015

Participants 18,000

+29 %

12,000

6,000

+10 %

-11 %

0 World China Russia

2014 2015 Source: VDA QMC S afety and standards 143

Automotive Quality Institute (AQI)

In 2015, the VDA established, in cooperation with the Technical University of Berlin, a new company to develop concepts for quality assurance in future technologies and innovations. The Automotive Quality Institute (AQI) can access, through the QMC, the comprehensive network of automotive industry experts and, through cooperation with the Technical University of Berlin, scientific expertise. The AQI discusses the questions of modern quality assurance in the following thematic areas: networked and automated driving, new technology materials, Industry 4.0, and big data.

For networked and automated driving, the AQI will consider whether known methods of quality assurance can be applied to these new technologies or need to be redeveloped. In particular, IT security is gaining new meaning. In addition, quality issues, which result from large-scale production with new materials, such as fiber composites or natural materials, should be managed. Further key subjects in the thematic areas of Industry 4.0 and big data are the use of artificial intelligence for large data volumes and networking of industrial processes. 144 International auto show and events

International auto show and events

In 2015 in Frankfurt and in 2016 in Hannover, the world’s leading trade fair for mobility and transport once again set new benchmarks. Nowhere else is it so easy to experience the fascination that surrounds cars and the innovation within this sector than at the IAA International Motor Show. International auto show and events 145

Sonja Vandenberk, designer, chief designer CMD, Ford Cologne 146 International auto show and events Mobility connects: The 66th IAA Cars 2015

The main theme of the 66th IAA Cars 2015 was the digitization and networking around the automobile. The motto “Mobility connects” accurately reflects this emphasis: networking and digitalization of mobility shaped the IAA 2015 – at the opening ceremony, in the IAA congresses, on almost all tours and in all media. And therein was the special attraction of the IAA: experience today how mobility will link us tomorrow.

With a total of 931,700 visitors, over The IAA is unique because it represents 50,000 more guests came to the world’s the entire automotive value chain. most important mobility fair than two Visitors can not only view the full range years ago, an increase of around 6 of manufacturers, but can also witness percent. This is the best result in eight the entire range of skills of the suppliers. years. Also the number of exhibitors For example, there were 400 suppliers increased: 1,103 companies from on show, presenting 98 of the 219 39 countries presented their products. world premieres – including the latest Thus, the IAA reached the highest number developments in battery technology, of exhibitors since the turn of the century. lightweight components, sensors or driver The exhibitors presented 219 world assistance systems. premieres – 60 world premieres more than two years ago. Over 11,000 journalists from It is particularly pleasing that the IAA 106 countries reported on the IAA. visitors have become younger on average. The average age of visitors was 34 years – The IAA is the international leading trade considerably lower than the average age fair for mobility and the automobile. of the total population. Compared to This can be seen in particular from the the IAA 2013 – at that time the average views of the exhibitors: 40 percent of the age was 37 years – the IAA audience exhibiting companies came from abroad. has become about three years younger. Also, in terms of the visitors, the IAA has This impressively shows the IAA that become even more international: almost the fascination with cars is unbroken, one in five IAA visitors came from abroad. especially among young people. International auto show and events 147 148 International auto show and events

T oday, the IAA is much more than an auto show. The exhibition in 2015 was repositioned: a large, central and international forum for the mega-trend of the digitization and networking of mobility.

So, with “New Mobility World,” a completely new exhibition area was created in which the various industries and companies were represented – from startups to the international telecommunications groups. Overall, over 180 exhibitors featured their contributions to mobility in New Mobility World. The exhibition was also supplemented by a large off-road course in which visitors could experience the new possibilities live: cars parked independently, drove a simulated highway construction site in full autonomous mode, or automatically dodged a sudden obstacle on the road.

Five thematic areas formed the major framework for New Mobility World: Connected Car, Automated Driving, E-Mobility, Urban Mobility and Mobility Services. The full range – from assisted systems as a first step towards automated driving to the broad range of urban mobility solutions – was experienced over a total of 30,000 square meters. In addition, exhibitors could present their offers in seven thematic parks. Among them was the startup zone. Here, startup companies were especially invited to present themselves and their ideas, in the direct vicinity of potential business partners. In addition to several technology companies, service providers also presented their various mobility solutions. A two- and three-wheeled off-road course rounded off the program. A total of 200 events took place at New Mobility World. International auto show and events 149 150 International auto show and events

The success of the new exhibition shows that it was the right strategic decision, in which the IAA realigned with New Mobility World to create a cross-industry platform for future mobility. This platform is unique worldwide and the concept had its glittering premiere at the IAA.

The more than 25 professional events and conferences on various industry topics that were held at the IAA were always very well attended. The IAA is also a huge classroom: The School Campaign was a great success with more than 30,000 participants. Even student groups from Belgium, France, Holland, Austria and Poland participated. The welcoming classes from Frankfurt also welcomed young people from Afghanistan, Eritrea and Syria. The two most visited special activities were the off-road course and the proffered test drives were even more popular and reported strong growth rates in the participating visitors.

This IAA Passenger Cars 2015 reported more visitors, more world premieres and more exhibitors than the IAA two years ago. Therefore, the 66th IAA Passenger Cars has more than met expectations, thus demonstrating its position as the world‘s most important trade fair for mobility.

The 67th IAA Passenger Cars will take place from September 14 to 24, 2017, in Frankfurt am Main; the press days are September 12 and 13, 2017. International auto show and events 151 Retrospection on IAA Commercial Vehicles 2016

The slogan of the 66th IAA Commercial Vehicles 2016 was Urban logistics “driven by ideas.” This was delivered on in spades at this year’s version of the world’s most important trade fair for Digitization offers a quantum leap in the cities: greater safety, transport, logistics and mobility. This IAA was characterized greater efficiency, a better quality of life. The vehicles feature by unprecedented dynamism, its gaze directed on the distant panoramic cameras and sensors, consigning the “blind spot” horizon. In Hannover, the future became visible reality. The and associated hazards to history. Goods are delivered “on entire commercial vehicle sector showcased its capacity for demand,” individually and on time. For cities, still a vision, but innovation, its creativity and pioneering spirit to IAA visitors. for destinations in rural areas or for mountain stations already This was exemplified by the 332 world premieres and more than conceivable today: the transporter is assisted by delivery 100 European premieres. Even more so, the IAA 2016 was the drones, that “swarm out” to the relevant house. This was trade fair for decision makers, and more international than ever. demonstrated to visitors “live” in front of Hall 19 at the IAA.

Three major themes dominated this IAA: electric mobility, These topics were addressed at numerous congresses, on the digitization and urban logistics. LIVE stage in the outdoor exhibition area, during the “guided tours” and in the course of many an electric vehicle test drive in the IAA grounds, all under the New Mobility World logistics Electric mobility banner. The IAA visitors were able to immerse themselves in this new mobility and logistics world and experience it Virtually every manufacturer of city buses and vans has electric firsthand. That too is what explains the fascination of this IAA. and hybrid drive models in its portfolio. Several of them are already on the road, with many more to follow in the near future. Only at the IAA is the entire commercial vehicle value chain to That means that: in future emission-free mobility in our cities be seen. That is what sets the IAA apart from all other motor will be increasingly possible, ultra-quiet buses and transporters shows. Suppliers were very strongly represented: half the 2,013 will ply the streets. In the medium term, the same will hold true exhibitors belonged in this manufacturers’ category. They were for heavy goods vehicles engaged in distribution transport. A even more strongly represented among IAA world premieres: new quality of life for urban spaces is thus emerging. 72 percent (239) of the 332 world premieres were accounted for by supplier companies, especially in the electric mobility and digitization arenas. Digitization Buses were especially strongly represented at this IAA. And This was the biggest and most comprehensive driver of it was no coincidence that four of the five candidates for the innovation. The networking and automation of the commercial prestigious “Bus of the Year” award were electric-propelled vehicle extends far beyond assistance systems as we have buses. The trend is clear: This sector is increasingly dominated known them to date. Platooning is just one example: trucks, by electricity. And that notwithstanding the fact that the bus is electronically networked and digitally coupled on motorways the absolute CO2 champion anyway. and trunk roads, can significantly reduce their fuel consumption and CO2 emissions. At the same time, platooning increases safety, the “moment of terror” is banished, the networked electronics react instantaneously. Networking also bestows on the long distance truck driver the benefit of being able to “digitally reserve” a free parking place. 152 International auto show and events

The IAA 2016 has become even more international. The This IAA was also a major international mobility congress proportion of foreign exhibitors was 61 percent (2014: 59 percent). with an exciting activity program and efficient communication The number of exhibiting countries has risen to 52 (2014: platform, that made many a separate business trip redundant. 45 percent). The top 5 from abroad included China (229), Italy This was further assisted by the 27 trade-related activities and (145), the Netherlands (121), Turkey (92) and France (85). events attracting a total of 4,400 guests. Examples include the CatIT Congress, the two “IAA classics” Hazardous Goods This time, with a significantly greater number of press Day and securing cargo, as well as the New Mobility World conferences, the IAA started one day later. Despite that, more logistics symposia, including Dronemaster Logistics and the people on average attended the IAA each day than two years “Lab16 – Startups meet Industry.“ Lab16 in particular created ago. There were almost 250,000 visitors. A very good result that – a completely new event format whereby startups and industry notwithstanding the trade fair’s shorter duration – exceeded were able to meet and develop smart new ideas. the 2014 level. The IAA was on the money not just with this program and Exhibitors expressed particular satisfaction with the high the high quality speakers but the choice of topics as well. visitor quality and very in-depth discussions with customers. During the numerous VIP tours – including those involving EU The IAA Commercial Vehicles has developed even more into a Commissioner Guenther Oettinger, Federal Minister of Transport professional trade fair for decision-makers. The proportion of Alexander Dobrindt, as well as members of the European trade visitors rose to 87 percent (2014: 84 percent). Eight out of Parliament and German Bundestag – there was very keen every ten trade visitors were decision-makers, and in the case of interest in electric mobility and networking. foreign trade visitors the figure was nine out of ten. International auto show and events 153 154 International auto show and events Events

Commercial Vehicle Symposium

The Commercial Vehicle Symposium of the VDA was held vehicle manufacturers focus their development efforts. Key for the third time in June 2015. Around 120 representatives progress has already been achieved in this, and others will from politics, the media, associations and industry attended follow. It is clear that all modes of transport must continue the event on “Commercial vehicles today and tomorrow – to improve their performance. Therefore, common solutions Service providers for our modern mobility” in Berlin. for the efficient transportation of goods by road and rail were Prominent speakers included board members of the major discussed. Another focus of the debate comprised commercial manufacturers of commercial vehicles, including Dr. Wolfgang traffic in cities. Because especially in metropolitan areas, the Bernhard (Daimler) and Andreas Renschler (Volkswagen). challenges for freight are particularly clear. New technologies Maximum efficiency, low operating costs and optimum and logistics concepts must prove their practicality, especially environmental compatibility are the key requirements that in that area. At another podium, the challenges in the consumers and transportation companies meet today. The fledgling remote bus sector were discussed. further reduction of fuel consumption and thus CO2 emissions is therefore a central objective, on which the commercial International auto show and events 155

Comtrans

Without a booth, but with an impressive presence, the German commercial vehicle industry has showed the flag at the commercial vehicle show Comtrans 2015, in Moscow. Around 20 companies – including suppliers and manufacturers of commercial vehicles, trailers and bodies – were represented as exhibitors. Production at the plants of German commercial vehicle businesses in Russia are running at a partially low level. Nevertheless, it was demonstrated at Comtrans that companies continue to see Russia as a commercial vehicle market with great potential. Despite the difficult political and economic situation, it is desirable that the economic ties that were established in the past continue to remain. The VDA supported the companies with a press conference. 156 International auto show and events

QMC Quality Summit

Joint product responsibility in the automotive supply chain was the central theme of the 12th QMC Quality Summit for the automotive industry which took place at the Porsche plant in Leipzig, in November 2015. It has become clear that good cooperation between vehicle manufacturers and suppliers is the real secret to the success of the German automotive industry. Among others, VDA President Matthias Wissmann, Rainer Bomba, State Secretary at the Federal Ministry of Transport and Digital Infrastructure, and Siegfried Bülow, Chairman of the Board of Porsche Leipzig spoke, at the event. During the two days of the event, around 250 participants discussed the challenges of quality management in the automotive industry. The QMC Quality Summit is the leading forum for quality management in the automotive industry in Europe.

Lars Thomson International auto show and events 157

Automotive Logistics Forum

The comprehensive production network is held together by a logistics system that is becoming increasingly global and complex. Automotive logistics is thus an essential success factor for the automotive industry. This was clear at the Automotive Logistics Forum in Frankfurt, in February 2016. Crises, disasters, strikes and many other upheavals worldwide have not subsided – but have actually increased and pose new challenges for logistics experts. Automobile logistics has mastered these challenges, without which production would come to a halt. It continues to work under high pressure from the further digitization of the supply chain – thus, the motto of Automobile Logistics Forum was also “Supply Chain 4.0.” Keynote speakers included Opel CEO Dr. Karl-Thomas Neumann and VDA President Matthias Wissmann. The event was jointly organized in 2016 for the fourth time by the Association of the Automotive Industry and the German Logistics Association. Around 420 participants spoke, among others things, on data quality in logistics, new means of transport logistics, challenges in the global aftermarket, risks in global purchasing and packaging. 158 International auto show and events

Technical Congress

From March 17 to 18, the 18th Technical Congress of the VDA and Chairman of the Mobility Solutions business unit, Rainer took place in the conference venue in Ludwigsburg, with around Bomba, State Secretary at the BMVI (Federal Ministry of 600 participants from the political arena, government agencies, Transport and Digital Infrastructure), and Dr. Andreas Schamel, the media and the automotive industry. The congress was Director Global Powertrain Research & Advanced, Director opened by VDA President Matthias Wissmann, Jochen Flasbarth, Ford Aachen Research & Innovation Center (RIC). State Secretary to the Federal Minister for the Environment, and Dr. Michael Steiner, Head of Overall Vehicle Development The number of keynote presentations for the congress was and Quality of Porsche AG, which supported the congress in complemented by Prof. Dr. Henning Kagermann, President of 2016 as premium sponsor. The subsequent plenary session acatech, Prof. Dr. Karsten Lemmer, Director of DLR, Dr. Harald was held with Prof. Dr. Thomas Weber, member of the Board Naunheimer, Executive Vice President of ZF Friedrichshafen, of Daimler AG, responsible for Group Research & Mercedes- Ralf Lenninger, Senior Vice President of Continental Automotive Benz Cars Development, Jean-Dominique Senard, CEO and GmbH, and Dr. Helmuth Ludwig, Executive Vice President of Chairman of the Board of Michelin, and Gilles Le Borgne, VP Digital Enterprise, Siemens PLM software. of Research & Development, Peugeot Citroën Automobiles (PCA). The second day of the congress was opened by a panel The 19th Technical Congress will be held in Berlin from April 5 discussion. Involved in the discussion were Gertrud Sahler, to 6, 2017. We would like to thank ZF Friedrichshafen for kindly Head of the BMU (Nature Conservation and Nuclear Safety), agreeing to support the congress as premium sponsor. Dr. Rolf Bulander, Managing Director of Robert Bosch GmbH International auto show and events 159

VDA SME Day

The VDA SME Day traditionally covers member of the Board of Volkswagen topics for small and medium-size AG and CEO of Volkswagen Truck & Bus automotive enterprises class and their GmbH, Dr. Stefan Sommer, Chairman economic and sociopolitical environment. of the Board of ZF Friedrichshafen AG, More than 200 senior business and Dr. Carsten Linnemann, Chairman representatives of the automotive of the SME and Trade Association of industry come together for presentations, the CDU. On the second day, the topic discussions and workshops, and use the was on digitization. In workshops and opportunity to exchange information and during the panel discussion, company to network. The focus of the 2016 SME representatives discussed digitization Day 2016 was on “Small and medium- strategies for the SME industry. sized enterprise innovation – the motor of the German automotive industry.” At The 17th VDA SME will be held from the event, which was opened by Arndt May 11 to 12, 2017, in Frankfurt/ G. Kirchhoff, Managing Partner and CEO Gravenbruch once again. of Kirchhoff GmbH & Co. KG and VDA Vice-President, speaking on the first day, among others, were Andreas Renschler, 160 International auto show and events

International Press Workshop

The International Press Workshop is traditionally held in advance of the IAA Commercial Vehicles Show. From June 22 to 23, 2016, senior national and international representatives of the commercial vehicle industry updated about 150 journalists on new developments in the commercial vehicle sector. The focus was on connected vehicles and intelligent and sustainable mobility solutions. “What is the future of the truck? The answer is clear: networked, automated, digital. Here lies the next great leap in innovation of road transport,” said VDA President Matthias Wissmann, at the beginning of the workshop. “We have a great opportunity with ‘Made in Germany’ mobility and transport technology, to set new standards.” One of the biggest

challenges for the commercial vehicle industry is the reduction of CO2 emissions. Wissmann emphasized: “The commercial vehicle manufacturers and the logistics

industry understands: We can only reduce CO2 emissions together. And it would be too short of a leap to only regulate the vehicles themselves. To reach the climate targets,

we must optimize the entire transport process on CO2 efficiency. Because there are many more variables that can be manipulated in terms of consumption than only the

new engines and vehicles. With an integrated approach, the annual CO2 reductions for trucks could double.” The Future – Made in Germany

Computer scientist Alan Kay once said, “The best way to predict the future is to invent it.” And that is our mission as well.

German automobile manufacturers and suppliers are developing alternative drive systems, networked cars and automated driving features, while also creating intelligent solutions for urban mobility. We are witnessing a development which one might call “The Future – Made in Germany”. In other words, the reinvention of individual mobility through engineering.

How will we get around in future? Using what kind of technologies? We present real projects carried out by German manufacturers and suppliers, speak to experts and take a look behind the scenes – exploring R&D departments, think tanks and test labs.

Won’t you join us on this exciting trip?

Web: mobilitaet-von-morgen.de | Twitter: @mobilmorgen 162 Index

Index Index 163

Martin Dallmayr, motor mechanic, Testing Technician, Webasto, Stockdorf 164 Index List of figures and tables

Automotive industry and its markets

Employees in the German automotive industry 15 Sales of motor vehicles in China 16 Long-term performance of LV sales in the USA 17 New passenger car registrations in Western Europe 19 Passenger car sales in Russia 20 New passenger car registrations 21 Cumulative new registrations 22 PC production by German manufacturers in foreign countries 24 Exports of passenger cars in 2015 25 German supplier industry turnover performance 26 New registrations of heavy commercial vehicles in selected Western European countries 27 New trailer registrations in Germany 30 Trends in Innovation collaboration 32 The German Classic Car Index 36 Number of vehicles with H tags 38

Economic policy and infrastructure

Changes in the unemployment rate 46 Passenger car production in Europe 47 India: Trade surplus in passenger cars 50 Industrial electricity prices in Eurpean comparison 52 Industrial gas prices in European comparison 53 Price of electricity for industry 54 Federal highway investment 57 Use of transportation-specific fees 58 Passenger transport in Germany 59 Long-distance bus levels of value added 60 Long-distance bus: Passenger numbers in Germany 61 Freight transport in Germany 63 Long truck: Data and facts 64 Long truck: From three into two 65 Newly registered company cars by segments 68

Environment and climate

Energy efficiency 74 Models below 120 grams 75

CO2 target values: High requirements on the automotive industry 76

Elements of CO2 regulation for passenger cars and light commercial vehicles 77 Index 165

The EU’s CO2 target is the strictest in the world 78

Climate policy weaknesses and economic policy risks of current CO2 regulation 79

Future CO2 strategy on two pillars 80 Influencing factors on absolute transportation emissions 81 Regulation ignores existing vehicles 81

CO2 emissions of newly registered passenger cars in the EU 81 German passenger car label 83 Refrigerants for air-conditioning systems in comparison 84 Development of fuel consumption 85

CO2-saving potential of the existing truck fleet through diffrent measures 86 Great success in reducing emissions from road traffic: HC emissions 88 Great success in reducing emissions from road traffic: Particle emissions 89 Great success in reducing emissions from road traffic: CO emissions 89

Great success in reducing emissions from road traffic: NOx emissions 89 Particulate alarm Stuttgart 2016 90 Particulate matter Bejing 2015 93 Particulate matter Milan December 2015 93 Reducing pollutant emissions with network controls 94 Violations of the immission limit value of 200 µg/m3 (1-hour average value) 95 Share of vehicle coating on total NMVOC emissions 96

Innovation and technology

Gasoline and diesel engine CO2 trends 103 Speed profile in the future WLTP “world cycle“ 106 New WLTP cycle 107 Real Driving Emissons regulation (RDE) 108 SCR level in Europe 111 Electric share of total passenger car market 115 E-license plate 116 Charging infrastructures 117 Power-to-gas operating principle 120 Introduction of automated driving and parking functions 123 Common passenger car parking space at home 127 FAT flow simulation: Vortex distribution on the semi-trailer 128

Safety and standards

Deaths per 1 billion kilometers driven 134 Communication channels, which must be protected against external attacks 138 Extended-Vehicle-Concept 139 International branches of the VDA QMC 141 Attendance trends 142 166 Index Index

Symbole Charging infrastructure › 117 2-pronged strategy › 80 Charging points › 117 5G › 124 Child safety › 136 China › 16, 23 A Chromium › 98 ACMA › 50 Classical pollutants › 88 AdBlue® › 110, 111 Classic cars › 36 AdBlue® bottles › 112 Climate conference › 47 AdBlue® infrastructure › 112 Climate protection › 47 AdBlue® tank › 112 Cluster initiatives › 33 Aerodynamic optimization › 129 CNG › 120 Air-conditioning › 105 CO2 emissions › 74, 85 Air-conditioning systems › 84 CO2 regulation › 43, 79 Air quality › 90 Combined transport › 62 Air quality targets › 108 Combustion engines › 102 Air resistance › 129 Commercial customers › 21 Alternative drivetrains › 120 Commercial vehicle industry › 33 Approval agencies › 114 Company cars › 21, 68 Argentina › 18 Complexity › 130 Articulated train › 129 Conformity factor › 108 Autobahns › 134 Consumers › 21 Automated and networked driving › 122 Contract award › 70 Automation › 122 Contract management › 58 Automotive Cultural Heritage Initiative › 37 Czech Republic › 20 Automotive supplier industry › 31 Autonomous vehicles › 123 D AVISO › 108 DAB › 137 Data › 125 B Data protection authorities › 125 BASt › 64 Declaration of suitability › 70 Battery cell › 118 dena › 120 Battery cell production › 118 Developing and emerging countries › 51 Beijing › 92 Development service providers › 33 BEV › 22 Diesel › 102 Blue sticker › 94 Diesel engine › 102 BMZ › 51 Diesel particulate filter › 110 Bonus › 116 Diesel proportion › 22 Brand protection › 34 Digital Audio Broadcasting › 137 Brazil › 18 Digital Learning Journey › 33 Brexit › 46 Digital Radio › 137 Bus market in Germany › 28 Disadvantage compensation sum › 118 Bus markets in western Europe › 28 Doha round › 48 Domestic production › 23 C Driver assistance › 135 CAM › 32 Driver Assistance Systems › 123 Car sharing › 60 Car tax exemption › 118 E Causes of flight › 51 Eastern Europe › 20 Center of Automotive Management › 32 E-commerce › 60 CETA › 51 Economic Commission for Europe › 122 Charging current › 118 EEG › 54 Index 167

EEG allocations › 54 G EFSI › 46 Gasoline › 102 Electric car market in China › 16 Gasoline engine › 103 Electric car market in the USA › 17 German Old-timer Index › 38 Electricity prices › 52 Germany › 21 Electric vehicle market in Germany › 22 Globalization › 48, 122 Electric vehicles › 115 Greece › 44 Electronic components › 35 Günther Oettinger › 47 Emissions standards › 105 GWP › 84 Employment › 15 Energy consumption label › 82 H Energy-efficient road train › 128 Heavy commercial vehicle cabs › 87 Energy transition › 42, 54 Heavy commercial vehicle market in China › 27 Environmental zones › 36 Heavy commercial vehicle market in Germany › 28 Estate taxes › 42 Heavy commercial vehicle market in India › 27 EU › 44 Heavy commercial vehicle market in USA › 27 Euro 1 › 105 Heavy commercial vehicle market in western Europe › 27 Euro 6 › 105 Heavy commercial vehicles › 27, 85 Euro area › 16 History › 36 Euro crisis › 44 Horizontal integration › 130 Euro NCAP › 135 Hydrogen › 121 Euro-norm › 105 Hydrogen technology › 121 European Fund for Strategic Investments › 46 European Union › 44 I Euro VI › 27 IAA › 146 EVI › 115 IAA Passenger Vehicles › 146 Exhaust gas treatment › 102, 104, 110 IAK › 37 Exhibitors › 146 ifeu › 108 Export rate › 25 Import duties › 48 India › 18, 50 F Industry 4.0 › 130 Family businesses › 31 Industry dialog › 43 Family companies › 66 Infrastructure › 56 FAT › 126, 128 Inheritance tax › 66 Fatalities › 134 In-house power production › 54 Federal Highway Research Institute › 64 In-house production › 54 Federal Ministry for Economic Cooperation and Development › 51 Innovations › 32 Federal Office for Motor Vehicles › 113 International Whole Vehicle Type Approval › 114 Field test › 64 Internet of Things › 130 Fleet replacement › 79 Iran › 69 Foreign location › 23 Italy › 19 Foreign production › 23 IWVTA › 114 Formaldehyde › 97 France › 19 K Free trade › 48 Korean marking › 50 Free trade agreement › 50 Freight transport › 62 L Freight transportation › 62 Latin America › 18 Fuel cell › 121 Leading provider › 115 Fuel consumption › 103 Leading trade fair › 146 Liability › 122 168 Index

Light truck › 17 Passenger car label › 82 Light vehicle › 17 Passenger car market › 19 Limit › 76 Passenger car road charge › 56, 57 Limits › 90 Passenger traffic › 59 Limit values › 105 Patent box › 42 LNG › 121 Patent court › 71 Local content › 48 Patent protection › 71 Long-distance buses › 61 Pedestrian protection › 135, 136 Long-distance traffic › 128 PEMS › 108 Long trucks › 64 Personal data › 125 Petroleum taxes › 57 M PHEV › 22 Market › 115 Plug-in › 22 Market launch phase › 115 Poland › 20 McKinsey › 115 Pollutant emissions › 108 Mercosur › 18 Portable Emissions Measurement System › 108 Mexico › 48 Portugal › 44 Milan › 92 Preferential rules of origin › 69 Mobile radio › 124 Procurement law › 70 Mobility Fair › 146 Production location › 42 Motorcyclist › 134 Production network › 130 Product piracy › 34 N Prof. Stefan Bratzel › 32 National Platform for Electric Mobility (NPE) › 115, 117, 118 Prognos › 126 Natural gas › 120 Protectionism › 48 Natural gas vehicles › 120 Protection of industrial property › 34 NEDC › 105, 107 Networking › 122, 124 Q New European Driving Cycle › 105 Quality › 141 New Mobility World › 148 Quality standards › 141 Nitrogen dioxide › 94 Quick charging poles › 117 Nitrogen oxide › 90 Nitrogen oxides › 104, 105 R Non-cash benefits › 118 R777 › 84 Norway › 115 R1234yf › 84

NOx emissions › 104 Radio Frequency Identification › 130

NOx storage catalytic converter › 110 R&D › 14 RDE › 108 O RDS-TMC › 137 OBD › 113 REACH › 98 Occupant protection › 135 Real Driving Emissions › 108 On-board diagnostic system › 113 Rear flaps › 87 Online business › 28 Refrigerant › 84 Overall fleet value › 76 Refugees › 44 Oxidation catalytic converter › 110 Remanufacturing › 35 Renewable Energy Law › 54 P Replacements parts › 98 Parking garages › 126 Research and development › 14 Parking place searches › 126 Research and development expenses › 42 Parking search traffic › 126 Research Association for Automotive Technology › 126, 128 Particulate matter › 90, 92 Research funding › 118 Index 169

RFID › 130 U Right to information › 125 UN › 122 Road Traffic ctA › 122 UNECE › 114 122 Road traffic law › 122 , United Kingdom › 19 46 Road transport › 62 128 , , UN-R 79 › 122 Rolling resistance › 129 Urbanization › 60 122 Russia › 20 , Urban Mobility › 59 USA › 17 S Scheduled transport › 61 V School Campaign › 150 V2B › 124 SCR catalytic converter › 110 V2I › 124 Security feature › 34 V2V › 124 Semi-trailer › 30 129 , V2X › 124 Seveso III directive › 97 VDA State Dialog › 33 SIAM › 50 VECTO › 86 Side impacts › 136 Vehicle painting › 97 South America › 18 Vehicle safety › 135 South Korea › 50 Vehicle-to-Infrastructure › 124 Spain › 19 44 , Vehicle-to-IT-Backend › 124 Speed limit › 134 Vehicle-to-Vehicle › 124 Standardization Roadmap for Electro mobility › 118 Vehicle-to-X › 124 Start-stop › 105 Vienna Convention › 122 Startups › 33 Stops › 61 W Suppliers › 26 31 , Waterways › 62 Supply chain › 96 Western Europe › 19 Supporting safety systems › 136 Wind tunnels › 129 SUV › 12 WLTP › 106, 107 World champion of exports › 42 T World Trade Organization › 48 Tailgates › 129 Worldwide Harmonized Light Vehicles Test Procedures › 106 TA Luft › 97 WTO › 48 Technical services › 114 Test › 105 Traction battery › 118 Traffic accidents › 134 Traffic backups › 56 Trailer and body manufacturers › 30 Trailer manufacturers › 30 Transporter › 28 Transporter market in Germany › 28 Transporter market in western Europe › 28 Truck › 56, 62 Truck road charge › 56 True Top 4 › 71 TTIP › 43, 49 Type approval › 113, 114 Type approval system › 114 Type test › 113, 114 Imprint

Author Association of the German Automotive Industry (VDA) Behrenstraße 35, 10117 Berlin www.vda.de

Copyright Association of the German Automotive Industry (VDA)

Editing VDA Press Department VDA Communications Department

Design/Layout dANGEROUS. Werbeagentur GmbH

Print DCM Druck Center Meckenheim GmbH, Meckenheim

ISSN 1869-2915

Status October 2016

Cover Isabelle Seitz, degreed engineer, CFD calculating engineer – validation and development climatization, MAHLE Behr GmbH & Co. KG, Stuttgart

Association of the German Automotive Industry (VDA) Behrenstraße 35, 10117 Berlin www.vda.de Twitter @VDA_online