Annual Report 2015

THANK YOU. Mobility binds us together. It allows us to discover new things, meet friends, go to work, run errands. And it makes growth and prosperity possible for all of us.

Our mobility today would be inconceivable without the invention of the automobile almost 130 years ago. And with ten patent applications a day in this land of ideas, it is reinvented every day. The result is increasingly safe, environment- and climate-friendly, and comfortable mobility for all of us.

We owe this to the more than 785,000 people who have made Germany the most successful automotive nation in the world. We are presenting some of them here. And we extend our thanks to all of them.

www.vda.de www.unsere-autos.de

Annual Report 2015

7

Foreword

Despite a geopolitically tense environment, the global automotive industry continued to grow once again in 2014. The global car market increased with the three largest markets of China, the USA and Western Europe recording positive development. China managed to build on its lead as the largest single market in the world. The light vehicle market in the USA recorded its best results for eight years. In Western Europe, too, positive figures were at last recorded again after five years of negative growth, with new registrations rising by 5 percent to 12.1 million cars. Because they are set up to serve the global market, German manufacturers have benefited from this global growth. One in five cars sold in 2014 bore a German company logo.

The German automotive manufacturers produced almost 15 million cars last year, over 9 million of which were manufactured at sites outside Germany. Our member companies also increased their production in Germany, however – to 5.6 million units. One of the main reasons behind this success is the high rate of innovation within the German automotive industry.

Our suppliers had a successful year overall in 2014. Once again in 2015 they will be faced with increased challenges due to globalization, fiercer competition and more pressure on costs. The automotive supply industry, and in particular medium- sized family-run enterprises, will only be able to stand up to these challenges with innovations and flexibility. And the industry will continue to work on strengthening its German sites since domestic locations provide an essential base for exploiting global opportunities.

Last year was both good and bad for commercial vehicle manufacturers. While the US market underwent significant growth, demand for heavy commercials in most markets around the world fell. In Germany, the truck market remained almost flat at the same level as the previous year, completely against the trend in the rest of Western Europe. Production of light commercials, however, grew drastically with over 300,000 vans rolling off the production belts in Germany in 2014, with three- quarters of them going for export. The trailer and body industry also managed to record good growth overall. The companies in this industry strengthened their strong competition position in Europe by significantly increasing exports and growing in the domestic market as well. These medium-sized and often highly specialized companies set standards in terms of flexibility and product innovation. Bus manufacturers con- tinued to benefit from the stimulus provided by the rapidly growing coach market.

FOREWORD 8

Every year, our manufacturers invest more than 30 billion euros in research and develop- ment around the world. And the majority of this is spent in Germany. The German automotive industry therefore accounts for one-third of all industrial research invest- ments in Germany. The results of all these efforts are palpable, with our cars needing

less and less fuel and with CO2 emissions falling at a similar rate. Over the last five years, new cars from German manufacturers registered in Germany have reduced their

average emissions of CO2 by over 15 percent to 133 grams and they now need around one-quarter less fuel than was the case in 2006. Average fuel consumption has fallen since then, from 7.1 liters per 100 km to just 5.4 liters per 100 km. The German auto- motive industry is therefore a pioneer in climate protection in this sector. However, this progress has mainly been achieved by improved internal combustion engines.

The future, even more ambitious, CO2 requirements imposed by the EU can only be satisfied, however, if a large proportion of newly registered cars have alternative power units, for example an electric motor.

Germany has attained its objective of becoming the leading supplier of electromobility. In 2014, 17 standard models were launched while this year a further 12 electric cars will be added to the available range. But Germany is still far from being the lead market. Although sales in 2014 rose by around 70 percent, the absolute figures are still low. Germany will have to accelerate massively to achieve its declared target of one million vehicles by the end of the decade. The German Bundestag has passed the Electromobility Law. We welcome the fact that electric cars will now be given priority by being awarded privileges in terms of parking and being able to use bus lanes. However, one thing that is still missing in an additional effective incentive, a purchasing incentive from both companies and from the public purse. Another possible major lever in this respect could be the special depreciation of commercially used electric vehicles proposed by the National Electromobility Platform.

Another very important driver of innovation is networked, automated driving. This presents a major political, economic and social challenge to make road traffic safe and efficient in the future. The German automotive industry is developing solutions for a very wide range of driver assistance systems, some of which are already in use. These systems will help manage some of the driving duties, taking the strain off the driver. To make progress with networked, automated cars, however, the auto- motive industry has to be able to rely on a legal framework both in Europe and in a global context. On the one hand, the infrastructure has to be adjusted and expanded for networking.

On the other, the requirements must be met for ensuring that vehicles can take on duties that currently have to be carried out by the driver himself. As networking and automation becomes more widespread, the requirements for data protection in vehicles are also on the increase. In view of their responsibility in this respect, the German automotive industry will also have to implement a definite security culture in networked vehicles as well. The member companies of the VDA have defined joint data protection principles for networked vehicles. These comprise the three core points of transparency, self-determination and data security.

9

Markets are growing and Germany is a strong exporter, particularly its automotive industry. This is currently something we can be proud of. However, despite the good economic situation at the moment we must not rest on our laurels. Companies face challenges in the form of pension packages, minimum wages and the planned reform of inheritance tax.

The three groups of manufacturers within the VDA are reliant on secure energy supplies at competitive prices, while the expansion of traffic infrastructure and a new start towards deregulation in Germany and the rest of Europe appears to be more urgent than ever. We need sustainable stimuli to support companies’ innovations and invest- ments. That is the only way that the German automotive industry will be able to continue its success.

Our association represents manufacturers and suppliers, all of whom are campaigning for more trade barriers to be removed. A comprehensive free trade convention between Europe and the USA will provide Germany and Europe with some great opportunities. The Transatlantic Trade and Investment Partnership TTIP is an historic opportunity. Europe and the USA can set joint standards, which will have a major effect on our world over the next few decades. If we jointly acknowledge transatlantic rules and regulations and assimilate them, TTIP can become a real engine for Europe as an economic power. And that is why we say “Yes to TTIP!”

The range of duties that this key industry has to cover is as extensive as the current model range offered by the German automotive industry. This annual report provides an overview of the main topics that have marked the year 2014 and will continue to occupy us in 2015. But one thing is abundantly clear – it will still be exciting. But read for yourselves.

With best regards,

Matthias Wissmann President, German Association of the Automotive Industry CONTENT 10

Content

Dates, Facts and Figures 15

Figures and information 16 The situation in the automotive industry 20 The situation for commercial vehicles, trailers, bodies and buses 33 The situation in the supplier industry 37

International Trade and Investment 39

Trade and investment policy 40 Foreign trade promotion and development cooperation 44 International supply of raw materials 44

Economic Policy in Europe and Germany 47

Germany as an industrial location and its competitiveness 48 EU policy for an efficient automotive industry 50

Suppliers and Small and Medium-sized Enterprises 55

Globalization and localization: Small and medium-sized enterprises face a challenge 56 The VDA supports the globalization course 57 Collaboration in the regions: The VDA dialog with the federal states 58 Collaboration in Europe: CLEPA 58 Company financing: Model for the small and medium-sized enterprise sector 59 Pension management and retaining skilled employees 59 Success factor: Collaboration within the value chain 60 Development service providers with growth potential 60 Small and medium-sized enterprises in the commercial vehicle industry, trailers, bodies and buses arena 61

Energy Policy 63

Implementing the Energiewende (energy transition) 64 Renewable Energies Act (EEG) 2014 65 Next steps for the Energiewende 65 Development and composition of the price of electricity for German industry 66 Pan-European comparison of industrial electricity prices 67 Developments in the emissions trading scheme 68 European energy and climate policy 2030 69

11

Climate and Environmental Protection Policy 71

CO2 development in Germany 72

CO2 regulation of passenger cars and light commercial vehicles in Europe 73 Climate protection policy for heavy commercial vehicles 80 Simulation platform for trailer and body manufacturers 82 Air-conditioning systems and refrigerants 83 Biofuels and sustainability debate 84 Labeling 85 Particulates, environmental zones and air quality 88 Tire pressure monitoring systems 90 Occupational safety 91 Sustainable motor manufacturing – acting responsibly in Germany and along the supply chain 92 Reducing classic pollutants 95 End-of-life vehicle recycling 97 REACH: Revision and impact on the automotive industry 98

Networked and Automated Driving 101

From the driver assistance system to automated driving 102 Creating a legal and political framework 104 Data protection in the vehicle 104 Coordination Center for Networked and Automated Driving 105

Transport and Infrastructure Policies 107

The road is the number 1 means of transport 108 Infrastructure – increasing efficiency potential 110 The new truck toll – change of system in charging external costs 113 Car toll with unanswered questions 114 Traffic safety policy 115 The long truck: Successful in field trials in Germany 116 Coaches in Germany – new coach stopping points 118

Taxes and Customs 121

Taxes 122 Customs and purchase taxes 126

Drive Engineering 131

Exhaust emissions legislation in Europe 132 Electric mobility in Germany 135 Transporting batteries 137 CNG, LNG, fuel cell 138 AdBlue® 140 Type approval at ECE level 142

CONTENT 12

Vehicle Safety 145

Road traffic accident statistics in Germany 146 Plastic windshields in motor vehicles 147 Action to improve pedestrian safety 148 Theft protection 150 The 48 V vehicle electrical system is gaining support 151

Standards and Technical Specifications 153

Fuel consumption in NEDC 154 WLTP – Worldwide Harmonized Light Vehicles Test Procedure 155 VDA projects in the joint electric mobility research project – implementation of the standardization roadmap 157 Standardization of driving dynamics and driver assistance systems 158

Preparation of a DIN specification series for CO2 air-conditioning systems 159 Standardized video interface for in-car applications 160 Product Life Cycle Management and the Digital Factory 162

Law, Sales and After-sales 171

Current development in sales and service 172 Current challenges for after-sales 174 Challenges to digitization 175 VDA statement on data protection in networked vehicles 176 Establishment of an EU patent system 177 Automotive banks’ new business volume increases 178 Public procurement system: Implementation of the EU Procurement Directive 180 The importance of contracts for services in the automotive added value chain 182 Non-tariff barriers to trade: a position paper for the aftermarket 183 The Open Telematics Platform in the aftermarket: positioning paper 184 “Quality is added value” initiative 184

Quality Management 187

Quality Management in the VDA 188 Status of global ISO/TS-16 040 system certification activities 189 QMC basic and advanced training 190 Assurance of automotive software development processes using Automotive SPICE 191 Development in assessor numbers 192 QMC offices in China and Russia 193 University initiative by the QMA – focus on a foundation department 193

13

Classic Cars 195

The Classic Cars Committee 196 Political committee work 198 Political topics 199 Dates, Facts and Figures 200 FIVA study 201

Trade Fairs and Events 203

65th IAA Commercial Vehicles 2014 – drive the future 204 International Commercial Vehicles Press Workshop in Frankfurt am Main 207 Global Truck Study 208 VDA Medium-sized Business Day 209 Technical Congress 210 The 11th QMC Quality Summit in Berlin 211 VDA Logistics Department Events: Automotive Logistics Forum and VDA Logistics Award 2015 212 E-Fleet 2014 213 Trade shows abroad and cooperative events 214 “On the Move” – contemporary photography exhibited by the VDA 215

Index 217

List of Figures and Tables 218 Index 222 Cover: Dieter Flecks – business economist, director logistics, VOSS Automotive GmbH, Wipperfürth, 2013 Dates, Facts and Figures

Javier Nestor – french-teacher, upholsterer, Faurecia Autositze GmbH, Neuburg/Donau, 2013 DATES, FACTS AND FIGURES 16

Figures and information

2014 turnover: Record year despite adverse circumstances

Overall, the automotive industry in Germany can look back on a successful 2014. The German automotive industry Notwithstanding a difficult economic and political environment, it managed to increased turnover again in 2014 increase its turnover to 367.9 billion euros, reaching a new record level in the process. This equates to growth of 2 percent. Almost two thirds of the turnover, 236.8 billion euros, was derived from export revenues. Domestic turnover totaled 131.2 billion euros. These developments illustrate that the German automotive industry has successfully maintained and built on its competitive position notwith- standing adverse circumstances.

German motor manufacturers: Continued demand for “Made in Germany”

Within the automotive industry pride of place went to Manufacturer Group I, German motor manufacturers namely the motor vehicle and engine manufacturers. With turnover of 284.8 billion alone generated turnover of more euros, the companies in Manufacturer Group I accounted for 77 percent of the than 280 billion euros in 2014 automotive industry total. On the domestic market, the manufacturers turned over 80.2 billion euros. Turnover from abroad was 204.5 billion euros. This underlines the German motor manufacturers' high level of export orientation and certainly also the outstanding global reputation of vehicles “Made in Germany.”

German automotive industry turnover performance in million of euro

400,000

350,000

300,000

250,000

200,000

150,000

100,000

50,000

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

Domestic turnover Turnover from abroad *Break in the time series

Source: Federal Statistical Office 17

Suppliers: Through the 70 billion euro turnover mark for the first time

The year 2014 also had a gratifying conclusion for the German supplier industry. It increased its turnover by 5 percent to 73.3 billion euros, thus breaking through the Supplies increased their turnover by 70 billion euro mark for the first time. Contrary to the motor manufacturers, German 5 percent suppliers generate the bulk of their turnover domestically, as their customers primarily operate in Germany. Export revenues in the past year however enjoyed a significantly more dynamic trajectory, posting an 8 percent increase to 27.4 billion euros. Domestic turnover grew by 3 percent to reach 45.9 billion euros. DATES, FACTS AND FIGURES 18

Research and development: German automotive industry leads the world

In 2014 the automotive industry was once again Germany’s most research-intensive In 2014 the automotive industry sector. In-house research and development (R&D) spending amounted to 17.6 billion was again Germany’s most research- euros. Compared with 2013, the German automotive industry boosted its R&D expen- intensive sector diture by 6 percent, contributing almost one third (31 percent) to the economy’s total R&D expenditure. In addition to boosting the efficiency of the conventional

combustion engine, reducing CO2 emissions and optimizing (production) processes, R&D efforts focus on alternative drive systems, e-mobility, increased vehicle safety, vehicle networking, automated driving and/or the development of assistance systems.

A total of almost 93,000 R&D employees are beavering away in Germany on automotive innovations. That means that the automotive industry employs one quarter of the economy’s total R&D personnel. R&D also enjoys a high priority within the automotive industry’s core workforces in Germany – almost one in eight employees is engaged in this area. The automotive industry’s position as far and away the biggest investor and employer in the R&D arena underscores its importance to Germany as a technology center. This is the breeding ground of the innovations and technological know-how that underpin the industry’s international competitiveness.

In-house spending is supplemented by contracted-out R&D work, such as to R&D service providers (e.g., engineering service providers) or universities, but within the industry as well. This external R&D expenditure totaled 8.2 billion euros in 2013. In addition to their own efforts, therefore, German automotive industry companies also made heavy demands on R&D beyond their own corporate confines. This illus- trates the major importance of the sector’s strong R&D networking, both within the industry and beyond.

German manufacturers and suppliers are also increasingly ramping up their foreign German manufacturers and R&D capabilities, reflecting the automotive industry's increasing globalization. The suppliers ramping up their foreign German automotive industry's global expenditure in 2013 totaled 29.6 billion euros. R&D capabilities That was 7 percent up on 2012. The automotive industry spent 13 billion euros of this abroad. Whereas only a good third, 5.6 million units, of the global output of German marques (14.7 million units) was produced domestically, the bulk of R&D (56 percent) still takes place in Germany. That means that especially in the strategi- cally important R&D arena, companies still rate Germany highly. A critical contribution to this comes last but not least from Germany's excellent R&D infrastructure, with a cluster of companies involved in research throughout the entire automotive value chain, together with universities, research institutes and highly qualified staff.

According to EU Commission data, the German automotive industry accounts for a good third (34 percent) of the industry’s total worldwide R&D expenditure – as such, it occupies pole position not only on the national stage, but in the interna- tional arena as well. 19

Employment situation: Sustained growth in employment

The automotive industry once again demonstrated its importance to the German labor market in 2014, further increasing employment in its German-based companies. German automotive industry Midway through the year, core workforces numbered 774,900 employees. That was increased employment numbers almost 3 percent higher, or 18,900 employees, than 2013. Employment peaked in in Germany in 2014 November at 785,200 personnel.

The year 2014 saw growth in all three Manufacturer Groups. The motor manufacturers accounted for the bulk, with 447,200 employees. That was growth of 13,600 employees (a good 3 percent) in their companies’ core workforces. The supplier companies posted growth of almost 2 percent, or 4,500, to reach a total of 295,400 employees. In addition, trailer and body manufacturers employed 32,300 people last year. That was growth of almost 900 employees, or 3 percent, in the core workforces of the companies in this Manufacturer Group.

Growth in production volume in Germany, the factories’ high capacity utilization and the good export performance, especially to the EU and China, contributed to the positive employment growth in the German automotive industry. Globalization of production is an additional contributing factor as it is creating jobs in management functions or in research and development, for example. The automotive industry is therefore a good example of increasing local manufacturing in foreign locations creating and safeguarding domestic jobs as well.

German automotive industry employee numbers Change in %

6

5.0 5

4 3.5 3.5 3.3 3.1 3.1 3 2.7 2.8 2.6 2.5 2.3 1.9 2 1.8 1.8 1.5

1

0

-0.3

-1 2011 2012 2013 2014

Manufacturer Bodies Parts Automotive industry

Source: Federal Statistical Office DATES, FACTS AND FIGURES 20

The situation in the automotive industry

Global motor industry: China and USA set the tone

For the German automotive industry, 2014 was a year of mixed sentiments. Optimism The crisis in Russia and Ukraine is prevailed at the beginning of the year – for macroeconomic growth and the motor unsettling European consumers industry alike. The German market was on the starting blocks after a weak 2013 and the auguries also seemed favorable for Western Europe after years of decline. But it was also clear that the emerging countries – with the exception of China – would have to cope with a difficult year. The positive outlook for the USA and China, on the other hand, continued unabated. However, optimism gave way to disenchantment midway through the year – especially in Europe. The emerging countries’ economies were in the doldrums, the political crisis in Russia and Ukraine was causing economic and consumer uncertainty throughout Europe. If therefore the first half of this year was characterized by positive exaggeration, the mood went into reverse for the rest of the year and gave way to a similarly exaggerated and unjustified economic pessi- mism. The forward-looking indicators of sentiment slackened, research institutes’, and international organizations’, forecasts were capped.

The actual figures again showed a more realistic picture: the Western European passenger car market achieved its forecast level for 2014. Admittedly this was primarily because of the strong British market and not because of the hoped-for but absent recovery in France and Italy.

New registrations of passenger cars worldwide by region New registrations of commercial vehicles worldwide by region (Units in 1,000s) (Units in 1,000s)

Region 2013 2014 Change in % Region 2013 2014 Change in %

Europe 15,992 16,181 1.2 Europe 2,300 2,349 2.1 Western Europe 11,555 12,113 4.8 Western Europe 1,638 1,758 7.3 New EU countries 782 894 14.3 New EU countries 155 166 7.4 Eastern Europe 3,656 3,175 -13.2 Eastern Europe 507 425 -16.2 America 22,838 23,338 2.2 America 1 657 672 2.4 NAFTA 18,334 19,415 5.9 NAFTA 430 483 12.4 thereof USA 15,532 16,435 5.8 thereof USA 352 407 15.6 Mercosur 4,504 3,922 -12.9 Mercosur 227 189 -16.6 thereof Brazil 3,580 3,333 -6.9 thereof Brazil 187 165 -12.2 Asia 27,121 29,285 8.0 Asia 8,942 8,202 -8.3 Japan 4,562 4,700 3.0 Japan 813 863 6.2 China 16,303 18,369 12.7 China 5,682 5,123 -9.8 India 2,554 2,571 0.7 India 687 606 -11.8 South Korea 1,292 1,410 9.1 South Korea 246 250 1.5 ASEAN 2,077 1,872 -9.9 ASEAN 1,446 1,290 -10.8 other 333 363 9.1 other 68 70 3.0 Other countries 7,126 7,262 1.9 Other countries 632 634 0.3 Total 73,076 76,066 4.1 Total 12,530 11,858 -5.4

1 In America medium/heavy trucks and busses. Source: VDA 21

China: Consolidation of pole position for passenger cars

The Chinese motor industry continued to motor along nicely in 2014: almost 18.4 million new cars were sold last year in the People’s Republic – China’s passenger car market In 2014 China maintained its position thereby defied the flagging dynamism of the domestic market, confidently asserting as the world’s largest single market its position as the world’s largest single market. Against the backdrop of increasing urbanization and the concomitant increasing demand in the so-called tier 3 and tier 4 cities, passenger car sales in the year as a whole grew by almost 13 percent.

Admittedly the market in 2014 is likely to have been driven not least by preemptive effects: owing to the severe air pollution caused primarily by high traffic volumes, a restrictive new registration policy is now in force in China’s major conurbations. Last year, Shanghai, Beijing, Guangzhou and Hangzhou were among the cities significantly clamping down on the number of passenger cars on their roads. Other major cities and provincial capitals followed suit and announced restrictions on new registrations, which clearly resulted in new vehicle purchases being brought forward.

Motor manufacturers will probably increasingly target China’s growing middle class – coupled with what is still a low level of motorization (there were just 61 passenger cars per thousand inhabitants in China at the beginning of 2015), this should ensure continued expansion of the Chinese passenger car market.

Breakneck growth rates, as for example in the record year 2013 (+23 percent), are likely however to be a thing of the past.

Motor vehicle sales in China 23,491,687 21,984,000 19,303,901 18,505,144 18,061,936 13,644,794 9,336,326 8,791,523 7,215,525 5,322,089 2,363,217 3,248,511 4,391,642 4,574,429

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

Sources: CAAM, Fourin DATES, FACTS AND FIGURES 22

US market: Locomotive in the global market

The US market, along with China, was again among the growth locomotives driv- The US market almost completed its ing the global motor industry in 2014: light-vehicle sales grew by around 6 percent, catching-up process in 2014 or 16.4 million units, thereby almost attaining the pre-crisis level of 2006. In the process, the market almost completed its catching-up process in 2014. This positive performance was sustained by the emphatic development of the economic environ- ment. Admittedly, the first quarter did suffer from extreme winter weather, causing an annualized 2.1 percent dip in GDP. However, GDP growth in the rest of the year (Q2: +4.6 percent, Q3: +5.0 percent, Q4: +2.2 percent) more than made up for the downturn. Employment increased significantly over the year. The unemployment rate fell by one percentage point to 5.6 percent. Consumer confidence improved accord- ingly as did the asset situation, which was additionally boosted by a further recovery of the real estate market. The sharp fall in the price of gasoline operated as an addi- tional “turbo,” especially in the last two months of 2014. At US$2.54 per gallon at the end of the year it was significantly below the 3 dollar mark.

Not least because of the lower fuel prices, new car purchasers’ motto in 2014 was again “bigger is better.” Whereas passenger car sales only rose by a good 1 percent to 7.7 million new vehicles, the market volume in the light truck segment increased by 10 percent to 8.7 million units. This boosted the share of the total market account- ed for by light trucks from 51.2 percent to 53.2 percent.

In 2014, German manufacturers doubled their sales volumes compared with 2010. With sales of just under 1.4 million new vehicles, they posted a new record, even if overall they were unable to take full advantage of the upward trend in the US market.

On the other hand, German manufacturers made significant gains in the sale of electric In 2014 the electric vehicle market vehicles (purely battery-powered and plug-in hybrids). With sales of 11,300 units, they broke through the 100,000 mark increased their sales volume tenfold, achieving a market share of around 10 percent. In 2014, the total electric vehicle market broke through the 100,000 mark for the first time. With growth of almost 23 percent, electric vehicle sales increased to 119,100 units. The proportion of pure battery electric vehicles (BEV) accounted for fully 53 percent of this. A total of 0.7 percent of light vehicles featured an electric motor (1.5 percent of all passenger cars). The continued electric advance negatively impacted hybrid vehicles (without plug-in). The increased demand for plug-in hybrids resulted in a fall in conventional hybrid market share to 2.8 percent (year before: 3.1 percent). Notwithstanding the significantly higher price of diesel fuel, however, compression ignition vehicles gained market share. In 2014, around 3.1 percent of light vehicles were diesel-driven. Total sales increased by almost 17 percent.

Long-term development of light vehicles in the USA Numbers in 1,000s

20,000

15,000

10,000

5,000

0

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

Passenger cars Light trucks Light vehicle sales total

Source: Ward’s 23

Mercosur: Disappointing year – in all areas

Light vehicle sales in two of Latin America’s most important economies were hard hit in 2014: the Mercosur member states Argentina and Brazil only managed to sell New vehicle sales in Argentina a total of not quite 4 million new vehicles – a fall of almost 13 percent. Currency and Brazil in 2014 not even quite depreciation, inflation and falling real incomes hit Argentina especially hard: last year 4 million units the Argentinean market for passenger cars and light trucks slumped by more than 36 percent. The luxury tax on premium vehicles introduced by the Argentinean govern- ment, and which came into force in January 2014, will probably have played no small part in the falling sales figures. The Argentinean consumers’ willingness to purchase also fell against the backdrop of a constantly deteriorating economic environment. Even the “Pro.Cre.Auto” incentive program, offering preferential interest rates for the purchase of locally manufactured vehicle models to the end of the year, was unable to slow the downturn – with light vehicle sales of around 589,000, 2014 handed Argentina the weakest market since the crisis year 2009.

The Brazilian light vehicle market was also a disappointment in 2014: a macroeconomic environment troubled by inflationary pressure, the weak Real and a restrictive mone- tary policy offered passenger car and light truck sales almost no scope for recovery. With sales of 3.3 million units, the market shrank by almost 7 percent for the year as a whole – raising the industrial product tax IPI at the beginning of the year proved to be not the only obstacle here; there was also the hike in new vehicle prices as a result of the obligatory fitting of airbags and ABS.

In the long term, however, Brazil remains a growth market – following the re-election of President Dilma Roussef last October, the country is waiting for the necessary impetus to reform to get one of the world’s great economies back on track. If the economic engine should start firing again and consumer confidence improve, then light vehicle sales will probably benefit as well.

India: Turnaround by midyear?

After the disappointment of the year before, the engine of India’s motor industry started firing again in 2014 – Indian passenger car sales last year were around 2.6 million. India’s motor industry grew in 2014 If the first quarter (-6 percent) had initially clearly suffered from a combination of weak economic growth, high interest rates and strong inflationary pressure, starting in May the Indian passenger car market managed to turn things around. Not least because of the outcome of the parliamentary elections held in the early summer – Indian consumer sentiment has brightened notably since Premier Narendra Modi took office – new vehicle sales finished with a plus in each of both the second as well as the third and fourth quarters of 2014.

To boost domestic vehicle sales, the government also lowered excise duty on passen- ger cars and commercial vehicles as early as February. Against the backdrop of falling fuel prices, this offered – especially in the second half of the year – further scope for recovery: India’s passenger car market managed growth of almost 1 percent for the year as a whole. DATES, FACTS AND FIGURES 24

As anticipated, modest growth in Western Europe

In 2014, following four successive years of decline, the West European passenger car The West European passenger car market returned to growth. The level of new registrations rose by almost 5 percent market posted growth in 2014 to 12.1 million passenger cars. The positive trend, which began in the second half of 2013, continued unbroken throughout 2014. December was the 16th successive month of growth in the passenger car market.

But with around 1.8 million new vehicles, new passenger car registrations in France only reached the previous year’s level. Whereas in the first three quarters the market was still growing, passenger car demand in the fourth quarter of 2014 fell by almost 5 percent. Admittedly, there was a special effect at work here: the significant tightening up of the bonus-malus system with effect from 1 January 2014 triggered a significant preemption effect in December 2013. The adjustment to the bonus-malus system with effect from 1 January 2015, on the other hand, was significantly more benign. The passenger car market reflects the situation of the French economy as a whole. GDP increased by 0.4 percent in 2014. The unemployment rate remained at a record level.

For 2014 as a whole, the Italian market, after four years of significant falls, achieved an increase of more than 4 percent (1.4 million passenger cars). Admittedly, 2014’s market volume was still a good 1.1 million units below the 2007 level. There was a particularly large increase in new registrations of rental cars, up by around 14 percent compared with the year before. Private and other commercial new registrations were also up (+2 and +3 percent, respectively). The private share in Italy achieved a good 62 percent in 2014. However, the Italian economy continued to decline. In 2014, the national economy shrank further (GDP 2014: -0.4 percent). Only this year is mini- mal growth anticipated (+0.4 percent).

New passenger car registrations in Western Europe Change 2014/2013 in %

United Kingdom 9.3

Spain 18.4

Switzerland -1.9

Sweden 12.7

Portugal 34.8

Austria -4.9

Norway 1.4

Netherlands -7.1

Luxembourg 6.8

Italy 4.2

Ireland 29.5

Greece 21.3

France 0.3

Finland 2.7

Germany 2.9

Denmark 3.8

Belgium -0.6

-10 -5 0 5 10 15 20 25 30 35 40

Sources: ACEA, VDA 25

In 2014, the British passenger car market grew by all of 9 percent to reach a market volume of almost 2.5 million units, making it the highest level in the past ten years. Overall it was the fourth-best result ever, only from 2002 to 2004 were new registrations higher. Higher employment, low interest rates, attractive financing models and an improvement in consumers’ asset situation had a markedly positive effect on the passen- ger car market. Passenger car demand grew positively across all owner groups (private owners +10 percent, business owners: +9 percent). UK GDP grew by 2.6 percent in 2014, significantly higher than the average of other EU countries. German registra- tions achieved the anticipated result, again breaking through the 3 million barrier.

In addition to a pickup in the Spanish economy, the PIVE and PIMAAire environmental incentives available throughout the period lent the market significant forward impe- tus. For the year as a whole, the Spanish passenger car market achieved a volume of 855,000 units (+18 percent). By way of comparison: in 2007 there were more than 1.6 million new registrations. The seventh round of the PIVE program (1,000-euro government subsidy, 1,000-euro manufacturer's subsidy) started in January 2015. The budget was used up in April 2015. The subsidy boosted private registrations in 2014 by a good 21 percent (share of the total: 57 percent). Company cars, benefit- ing from PIMAAire, increased by almost 14 percent (share of the total: 25 percent). Demand by rental car companies (+16 percent), which have traditionally had a large share in Spain (share of the total: 18 percent) followed a similarly positive path. DATES, FACTS AND FIGURES 26

Eastern Europe defies the Ukraine crisis

The year 2014 saw double-digit growth of fully 14 percent in new passenger car In 2014 the new EU countries’ markets registrations in the new EU countries to reach 895,700 new vehicles. Almost all still bore the stamp of the financial markets, with the exception of Bulgaria, Estonia, Slovakia and Slovenia experienced crisis double-digit growth. This was the first increase the new EU countries had seen since 2007. The markets still clearly bore the stamp of the financial crisis. For example, the Romanian passenger car market was still 242,400 units short of the level eight years ago. The Hungarian passenger car market also lost 104,200 units compared with the size of the 2007 market. Only Poland, the Czech Republic and Slovakia managed to grow for the first time since 2007. Poland remained the biggest single passenger car market in the new EU in 2014, growing by 13 percent, or 327,200 units, attaining the highest market volume since 2003 in the process. The Czech Republic achieved a record year with 190,300 passenger cars.

Passenger car sales in Central and Eastern Europe Change 2014/2013 in %

Romania 21.6

Hungary 20.2

Czech Rep. 16.7

Baltic States 13.1

Poland 12.9

Slovakia 9.5

Bulgaria 5.2

Slovenia 6.3

Russia -10.3

Turkey -11.6

Ukraine -54.5

-60 -50 -40 -30 -20 -10 0 10 20 30

Source: VDA 27

Russia: Not just a political crisis

The Russian light vehicle market suffered a severe setback in 2014 as a whole. A nega- tive economic environment – the low price of crude oil in particular adversely affected The fall in the ruble weakened domestic the strongly commodity-dependent Russian economy – pushed new vehicle sales consumption in Russia significantly below the previous year’s level. Around 2.5 million passenger cars and light trucks were sold in Russia last year – the fall in the ruble and capital flight weakened domestic consumption, thereby accelerating the clear downward trend. The Ukraine conflict as well – and Russia’s consequent confrontation with Europe and the USA – was not without consequences for the light vehicle market. Consumers’ purchasing mood suffered an additional fall against the backdrop of Western economic sanctions.

The revamped “scrappage premium” (the Russian government is subsidizing the purchase of a domestically produced new vehicle until the end of 2015 if it replaces an old vehicle in return) was unable to cushion the decline – in 2014 light vehicles sales fell a good 10 percent short of the previous year’s level.

The future sales situation is likely to remain extremely strained: the Ukraine crisis, inflation, the fall in the oil price and continued Western sanctions could result in the biggest collapse in the Russian light vehicle market since 2009. The end of year uptick – with almost 270,700 units, December 2014 was the most buoyant December of all time for sales – was therefore not to be interpreted as signaling the beginning of a recovery. Instead, December’s increased sales were triggered by panic buying in the face of the falling ruble.

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

80

60

40

20

0

-20

-40 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2011 2012 2013 2014

Source: AEB DATES, FACTS AND FIGURES 28

German market 2014: Neither major nor minor

The year 2014 was no cause for rejoicing for the German automotive industry. At 36 percent the proportion of private Admittedly the market did achieve, and even slightly exceed, the forecast 3 million owners has hit a low units mark. New registrations in the first quarter rose by almost 6 percent. After six months the increase had dwindled to only a good 2 percent, the market leveled off at around 3 percent at the end of the year; this was not least because of a good final sprint – there were 229,700 new passenger car registrations in December – that is plus 7 percent.

As in previous years, the performance is primarily attributable to the persistent spending restraint in the private customer segment. For the year as a whole, new private registrations fell by almost 2 percent. At 36 percent the proportion of private owners has hit a new low.

Admittedly, the economy, available income and the more than robust labor market Average vehicle age is increasing year are positive drivers of consumption, and thus also of new vehicle purchases. But it on year is also clear that in the current low interest phase and an individually experienced uncertainty about medium-term developments, income and savings are also being used from the point of view of “security.” Residential construction activity testifies to this trend. The current situation is also typified by passenger cars lasting longer and being kept for longer. The average vehicle age has been increasing for years.

New car registrations Annual basis (numbers in 1,000s)

4,000

3,000

2,000

1,000

0

19921993199419951996199719981999200020012002200320042005200620072008200920102011201220132014

Source: Federal Motor Transport Authority 29

German marques again managed to maintain their good position in the domestic market. Once more they managed modest growth with a market share of more than The biggest importing nation in 2014 72 percent. The biggest importing nation was once again Japan with a share of was Japan 8.8 percent. French companies remain in third place. South Korean manufacturers in 2014 achieved share of somewhat more than 5 percent. That is a slight fall compared with the year before.

In 2014, Japanese marques sold 5.3 percent more cars in Germany. They therefore outgrew the market as a whole (+2.9 percent). French marques also grew more strongly (+5.1 percent).

Whereas rather more than 28 percent of new registrations from French manufacturers was through the trade, this proportion was a good 32 percent for Japanese marques. In the case of the Koreans, the proportion of dealer registrations was again higher at 34 percent. With almost 45 percent, the Italian marques were in first place. In the case of German marques, registrations via the trade were a good 15 percent.

Market share by country of manufacture

3 % 5 % 5 % 3 %

9 % 9 %

3 % 2 %

8 % 9 % 2013 2014

72 % 72 %

German French Italian Japanese South Korean Other

Sources: Federal Motor Transport Authority, VDA DATES, FACTS AND FIGURES 30

Domestic production: again on course for growth

In 2014 the German manufacturers managed to increase their domestic production In 2014 the German automotive industry output by 3 percent to 5.6 million units. That marks a 13 percent increase in produc- increased its domestic production tion in the past five years, whereas the West European market has shrunk by 11 percent during the same period. The comparison with other European automotive countries also underlines Germany’s keen competitiveness. Both France (-16 percent) and Italy (-39 percent) have had to significantly scale back their production in the past five years. Some 58 percent of passenger cars manufactured in Germany are accounted for by the premium sector. The strategy of backing high-quality models has further strengthened Germany during the slump in sales in Western Europe in recent years. German factories have also managed to withstand competition with foreign production plants.

German passenger car manufacturers source numerous components and assem- blies from European suppliers. The value-added share of European suppliers outside Germany accounts for more than 40 percent of an average German-made passenger car.

The biggest segment in terms of share in 2014 remained the compact class with 29 percent. The next rankings were the mid-class with 23 percent and the increas- ingly popular SUVs with 15 percent, which managed to grow by more than a fifth in 2014. Other high-growth segments were upper range vehicles (+24 percent) and utilities (+19 percent).

Foreign manufacturing: 10 million target

In 2014, German manufacturers managed to increase their foreign production by Growth of domestic and foreign 8 percent to 9.3 million passenger cars. Domestic manufacturing also grew moder- manufacturing ately during the same period. There is a balance between domestic and foreign commitment. Complete local production, which now accounts for 62 percent of German companies’ total production, is becoming ever-more important. It makes it easier for manufacturers to offer customized models capable of taking better account of customers’ requirements and predilections.

Passenger car production in 2014 developed differently in individual regions. In China, outside Germany far and away the most important production country for German OEMs, around 4 million passenger cars rolled off the production lines, an increase of 14 percent. With growth of 10 percent and a volume of 3.3 million, production in Europe outside Germany was also relatively dynamic. This positive production trend emphasizes the fact that Europe, and especially the Eurozone (+8 percent), are slowly but surely moving out of crisis mode. Developments in the Americas were very patchy. Whereas the NAFTA area saw growth of 4 percent 21.2 million units, output in South America plummeted by more than a quarter to 0.5 million units against the backdrop of a temporary recession in Brazil. 31

Exports: Great Britain remains most important partner

Exports were again the mainstay of the German automotive industry and its domestic plants in 2014. The previous year’s good performance was once again exceeded by The most important export country in almost 3 percent, with 4.3 million passenger cars. That made Germany world cham- 2014 was Great Britain pions once again in the passenger car exports category, ahead of Japan and South Korea. Some 77 percent of domestic production was sold abroad, almost equaling the previous year’s high percentage. Especially when it comes to cars, the “Made in Germany” label continues to exercise a strong attraction worldwide.

Diesel’s share of exports exceeded the 43 percent mark. German manufacturers’ export success is based both on volume and premium models. This is apparent from the fact that three out of every five exported passenger cars come from the lower segments up to and including the mid-range category.

The growth locomotive last year, up 10 percent, was the EU, which with 2.24 million units accounted for more than half of all passenger car exports from Germany. The most important partner country was, as in previous years, the United Kingdom (+7 percent) with 821,000 units; German manufacturers achieved a market share of more than 50 percent there. The year 2014 was the year in which the euro crisis countries again purchased large unit volumes from Germany. Both Italy (+14 percent) and Greece (+20 percent), Spain (+31 percent), Ireland (+35 percent) and Portugal (+47 percent) posted clear increases. In a number of Eastern European countries as well, passenger car imports from Germany grew significantly; especially notewor- thy here are the Czech Republic with +39 percent and Poland with +29 percent.

Two potentially promising export markets in the Eurasian region remain behind expectations. Russia slumped by a quarter to 99,000 vehicles. Turkey as well, suffering from the wars in its neighboring countries, posted a decline of 15 percent to 136,000 units.

The second-most important sales continent for German passenger cars was America with 776,000 units (-9 percent). Latin America imported more than one fifth fewer passenger cars from Germany. Exports to Asia reached 741,000, thereby exceed- ing the previous year’s performance by 8 percent. With 274,000 units (+13 percent), China established itself as the third most important export partner after the USA with 613,000 vehicles (-6 percent). Big increases in the regions outside Europe were achieved by the two southeast. Asian tiger countries of South Korea (+29 percent) and Taiwan (+33 percent).

Passenger car exports by country of destination

Rest of the World 13 % Great Britain Spain 19 % 4 % Benelux 5 %

France 6 % America Italy 18 % 6 %

Eastern Europe 10 % Asia 17 %

Source: VDA DATES, FACTS AND FIGURES 32

Mobility costs: Crude oil prices relieve strain on motorists

The year 2014 bore the stamp of a very minor price increase in Germany and Europe. In 2014 the car cost index fell by The inflation rate in the euro area was below 1 percent – and thus a long way short 0.8 percent because of falling crude of the European Central Bank’s target. An important factor in this development was oil prices the falling price of crude oil in the markets. Midway through the year, the WTI grade was still selling at more than 100 US dollars, by the end of this year, prices were barely more than 50 US dollars. Admittedly, the price drop has been somewhat less because of the depreciation of the euro, but is still significant. This was also appar- ent in mobility costs. The car cost index measures price movements in the various cost components as they affect the motorist. It includes not only the purchase cost of a passenger car but also the cost of fuel, spare parts and insurance. This makes it possible to track mobility cost developments. According to the Federal Statistical Office, the car cost index fell by 0.8 percent in 2014. The biggest easing of the burden came from fuel prices (-4.4 percent). Prices in all other subsegments either experienced moderate growth or remained stable.

Fuel costs constitute a considerable cost item for private owners – developments in 2014 therefore made a big contribution to economies in the mobility budget. Purchase costs increased only slightly – by 0.4 percent compared with the year before. The decisive factor was price increases of almost 3 percent in the pre-owned car segment. The price of new vehicles on the other hand was stable.

Development of mobility costs Car cost index 2010 = 100

130

120

110

100

90

80 2008 2009 2010 2011 2012 2013 2014 Fuels Pre-owned cars New passenger cars Total car costs

Source: Federal Statistical Office 33

The situation for commercial vehicles, trailers, bodies and buses

The USA was the growth locomotive in the global commercial vehicle market in 2014. Since the real estate and economic crisis, the US market has celebrated an impressive The US market was the growth locomo- comeback. With 407,000 heavy units it posted growth of 16 percent. Sales increased tive for the global commercial vehicle for the fifth successive year. market

For the BRIC countries, on the other hand, 2014 was a weak year. Only the Indian market matched the previous year's low volume. In China, the heavy goods vehicle market slumped by 6 percent to 992,000 units. Brazil and Russia are faced with a substantial sales crisis, which will continue in 2015.

Developments in the West European market for heavy commercial vehicles weighing more than 6 metric tons were driven by the introduction of the new Euro VI emission The new Euro 6 emission standard standards on 1 January. At the end of 2013, carriers and fleet operators were still resulted in a preemptive effect ordering large numbers of vehicles of the older Euro V emission standard. This resulted – especially in December 2013 – in a massive preemptive purchase effect. As a result, new registrations in Western Europe in this month rose 127 percent. The increase in the German market was 91 percent. This effect was particularly pronounced in the United Kingdom with an increase of 237 percent. An additional incentive program for the early purchase of more environmentally friendly Euro VI vehicles acted as a boost. In total, with 248,400 units, new registrations in Western Europe were up 5 percent in 2013. This preemptive effect also shaped market developments in 2014 as those registrations were absent over the course of the year and the base effect, especially in the final quarter, should create a massive fall. As, however, vehicles ordered and made in 2013 were still allowed to be registered in 2014, sales in the first half of the year were still at a moderate level, new regis- trations were not entering negative territory until August. In October, however, they again turned positive. This in turn was attributable to a special effect in Great Britain: the new whole vehicle type approval that came into force at the end of October ensured that new British registrations again increased by 72 percent. In November (-21 percent) and December (-53 percent) the West European preemptive purchase effect finally kicked in. The market finished the full year with a fall of 8 percent, achieving a volume of 227,400 units. The fall was thus more moderate than had been initially assumed. DATES, FACTS AND FIGURES 34

The trailer and body manufacturers’ economic position in 2014 was stable and charac- The trailer and body manufacturers’ terized by a fundamentally sound sales performance. The pent-up investment restraint situation remained stable throughout 2013 as a result of the transition from Euro V to Euro VI eased significantly. Nevertheless, the Russia-Ukraine crisis throughout the rest of the year created increasing uncertainty for the regions directly affected and neighboring countries. These developments negatively impacted both the pre-owned markets as well as new investment in Russia and the neighboring Eastern European countries.

Despite that, trailer sales in 2014 were 9 percent up on the previous year, totaling 271,300 units. Gratifying increases of almost 13 percent – just shy of 30,500 units – were to be seen for newly registered articulated trailers and multi-axle trailers (plus 8 percent). Overall, measured by turnover, trailer and body manufacturers in 2014 posted a good performance for the year as a whole. The total of 9.8 billion euros of domestic and foreign turnover was a 15 percent increase compared with the year before.

In the European vehicle market the German trailer manufacturers in particular The German trailer manufacturers successfully defended, and in some cases increased, their high market shares. successfully defended their high For example, exports of articulated trailers from Germany grew 11 percent. market shares As the most important market for pre-owned and new commercial vehicles and trailers, Russia suffered significant losses as a result of political developments. The slump that had already begun in 2013 intensified, resulting in a 48 percent drop in the pre- owned trailer and body sector. The year 2014 saw an approximately 60 percent slump. The value of new vehicle exports fell by 40 percent compared with the year before.

The fundamentally positive employment picture for Germany’s medium-sized trailer and body manufacturers continued in 2014. The outcome for the year was growth of 3 percent, to an average of 32,300 employees in the sector. Nevertheless, especially for small companies, the extraordinarily large fluctuations in demand occurring at short notice in the commercial vehicle sector pose considerable challenges in terms of flexibility and resource planning.

New truck registrations of more than 6 tonnes in selected countries of Western Europe Numbers in 1,000s

100

80

60

40

20

0 DE FR UK IT ES 2011 2012 2013 2014

Source: VDA 35

Important indicators of the prospects for logistics markets point to a deterioration of the business outlook for road freight transport in Germany and Europe. According to industry estimates, such as the half-yearly economic poll of Manufacturer Group II, the German and Western European markets for trailers and bodies will not develop any significant momentum. Admittedly the rapid falls in oil prices should have a posi- tive impact on transport and logistics markets. Risks remain as regards the economic performance in important European export markets. The foreign trade stimulus for German trailer and body manufacturers will therefore remain limited.

New registrations of trailers Trailers in 1,000s

25,000

20,000

15,000 2010 2011 2012 2013 2014 2015

Seasonally adjusted Trend

Source: VDA

Turnover and employment in the trailer and body industry

50 50

40 40 Employees in 1,000s Employees

30 30

20 20 Turnover in billions of euros Turnover

10 10

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

Source: VDA DATES, FACTS AND FIGURES 36

The bus market in Germany and Europe

Following growth in 2013 (+3 percent, 30,400 buses), in 2014 the West European bus The West European bus market market dipped slightly by -2 percent to around 29,800. A slight -3 percent dip stagnated (5,700 vehicles) in new bus registrations was also seen in Germany. One likely cause of the slight fall in demand is that the need for replacements from municipal orders for local public transport is materializing only slowly. Whereas around 680,000 public buses and long-distance coaches were in operation in Europe, the vehicle fleet in Germany was unchanged at approximately 77,500 vehicles. In Germany alone, buses carried almost 5.4 billion passengers per year, accounting for almost half the traffic volume. That makes buses the most important means of public transport, even ahead of underground trains, trams and rail. The high quality requirements on local public transport and compliance with emissions and environmental standards require continuous renewal of the vehicle fleet. However, the bus markets in Germany and Western Europe are largely saturated and remain at a lower overall level.

The liberalization of the long-distance coach market was one of a number of sources The liberalization of the long-distance of fresh momentum for German manufacturers. The number of long-distance coach coach market in Germany created new services and passengers has increased rapidly. In the very first year of market liber- momentum alization around 8.3 million passengers took advantage of the new offerings. By the end of 2014, more than 15 million people in Germany had traveled by long-distance coach. As a low-cost and environmentally friendly alternative, the long-distance coach, with 5,000 journeys per week, has established itself as the fourth pillar of long-haul travel, alongside rail, the passenger car and air. According to estimates, market liberalization is likely to go hand-in-hand with an additional requirement for several hundred vehicles per year. Moreover, because long-distance coaches come in for intensive use, a corresponding replacement investment requirement can be anticipated after only four to five years.

The intense competition in the long-distance coach market has resulted in an initial round of consolidation, which will continue. In the medium term, it is anticipated that the German long-distance coach market will be dominated by three or four large companies, or groups of companies. Contrary to initial fears in some quarters, the opening up of the long-distance coach market has also created new opportunities for numerous medium-sized coach operators below the major umbrella brands. As such they have, as before, a major role to play in the German coach market.

Information on medium-sized enterprises in the commercial vehicle industry can be found in Chapter “Suppliers and small and medium-sized enterprises.”

New coach registrations

40,000

30,000

20,000

10,000

0 2007 2008 2009 2010 2011 2012 2013 2014 Western Europe excl. Germany Germany

Sources: ACEA, KBA 37

The situation in the supplier industry

In revenue terms, German suppliers found new strength in 2014. The previous year’s turnover was surpassed once again by 5 percent to reach 73 billion euros. As with Suppliers again succeeded in the motor manufacturers, the automotive suppliers’ foreign turnover (+8 percent) increasing the previous year’s outgrew domestic turnover (+3 percent). Contrary to the vehicle manufacturers, turnover by 5 percent at 46 billion euros the domestic market remained the principal sales region (63 percent) for suppliers manufacturing in Germany. The corresponding foreign share of turnover was 37 percent, with an upward trend.

The persistently high domestic proportion was primarily attributable to Germany’s strong premium and volume customers. If one includes their export strength, the importance of the international markets for the German suppliers’ production plants as well becomes clear. The globalization efforts of recent years emphasize the ambition to have a global footprint with cutting-edge technology. This ambition is also reflected in the suppliers’ top ranking measured by turnover. The world’s three biggest suppliers are now headquartered in Germany.

Domestic and foreign growth bolstered employment in Germany. Once again in 2014, suppliers managed to increase headcount (+2 percent). At the end of 2014, 297,500 people were registered in the components industry. This marked a return to the pre-crisis level. The credit for this new-found strength is first and foremost due to the companies’ innovative spirit and global focus.

German supply industry: Turnover and employment

80 340

70 320

60 300 Employees in 1,000s Employees 50 280

40 260

30 240 Turnover in billions of euros Turnover

20 220

10 200

0 180 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Employees Turnover

Source: Federal Statistical Office

International Trade and Investment

Carmen Block – team leader X-Liner hose production, Veritas AG, Gelnhausen, 2010 INTERNATIONAL TRADE AND INVESTMENT 40

Trade and investment policy

The German automotive industry has a global footprint, with more than 2000 production Since 2010, German manufacturers have sites abroad. Germany depends on exports and open markets. More than 75 percent been producing more vehicles abroad of passenger car production in Germany is exported. That is why access to foreign markets is a key topic for the German automotive industry.

The global growth in individual mobility, but also the existence of barriers to market entry, have prompted Germany’s automotive industry companies to increase the number of their production sites abroad. Since 2010, German manu- facturers have been producing more vehicles abroad than they do in Germany. Whereas only 4.2 million passenger cars were produced abroad ten years ago, today it is around 9.3 million. Contrary to many other European countries, Germa- ny has managed a slight increase in domestic production (from 5.2 to 5.6 million passenger cars). Nevertheless – the big growth in production is abroad. Exports from Germany have been increased in parallel with the increase in foreign produc- tion. In the past ten years, they have risen from 3.6 to 4.3 million passenger cars.

This “twin-track strategy” of export and foreign production is a significant contrib- The VDA advocates a dismantling utory factor to the German automotive industry’s success. Having said that, of trade barriers protectionist measures in many countries are making life increasingly difficult for exports. They constrain Germany’s competitiveness. We are not just talking here about high tariffs and import levies, which in India, for example, can exceed 100 percent. Numerous countries also attempt to increase or protect their own local value creation by imposing demands on imports and production. The upshot of such “artificial” location factors is a distortion of competition. Occasionally, they also prevent the development of an internationally competitive industry. The VDA therefore advocates a dismantling of trade barriers. 41

TTIP – the big opportunity

TTIP, the planned transatlantic trade and investment partnership, offers huge opportunities for the German automotive industry. In addition to the benefits to the The automotive industry says yes to TTIP industry in the EU and in the USA, such an agreement would also be beneficial to the population in both economic areas. The fears expressed in public are being taken seriously, even if they are often unfounded. But in weighing up the risks and opportunities, the verdict is clear: yes to TTIP! For the first time in the history of free trade agreements, the negotiating partner countries’ industries are collabo- rating closely on TTIP: the automotive associations on both sides of the Atlantic have issued joint statements in favor of the trade agreement. They are collaborating on important issues, for example what methodology to apply when comparing standards in the EU and the USA. If different regulations and standards can result in comparable outcomes, they could be mutually recognized. This would save a lot of money and work. Future regulations – for example in the electro-mobility and networked driving fields – could be developed jointly. If the EU and the USA agree on common regulations and standards, this will also have a knock-on effect on other regions. Especially in the context of work on global rules within the UN (Unit- ed Nations), the EU and USA together could serve as a pioneer and role model.

A study by research institute Ecorys back in 2009 investigated the impact of non-tar- iff trade barriers to transatlantic trade. The study concludes that the impact of trade TTIP benefits the environment and barriers on the automotive industry is the equivalent of customs duties of around consumers 26 percent. The existing regulatory differences therefore have the effect of an addi- tional 26 percent in customs duties. The elimination of customs duties alone and a reduction in other non-tariff trade barriers by a quarter would increase the EU’s vehicle and parts exports to the USA in the period 2017 to 2027 by around 150 percent. TTIP would yield enormous reliefs and cost savings to German companies wishing to supply to the USA. The environment and consumers will also benefit because increased resources will be freed up for additional innovation.

Customs duties in the automobile industry for EU-US trade

Light Commercial Import duty Cars/SUV commercial Parts vehicles in % vehicles

EU 10 10/22* 22 2–5

USA 2.5 25 25 0–2.5

*Depending on the power train type, weight and cubic capacity Source: European Commission INTERNATIONAL TRADE AND INVESTMENT 42

The German automotive industry alone would save around one billion euros annually The dismantling of tariffs benefits both by dismantling tariffs. The US industry’s economies are in addition to this. Here economic areas too, the dismantling of tariffs is of strategic importance. Because, at the same time, the USA is negotiating with eleven other trading partners in the Asia Pacific area on the far-reaching Trans-Pacific Partnership (TPP). This partnership includes the dismantling of tariffs and non-tariff trade barriers in Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the USA and Vietnam. Producers in the EU are not permitted to be at any disadvantage against competitors from the aforementioned countries. Such an agreement would also be beneficial to consumers: opening up markets enables more small and medium-size enterprises to offer their products on the market. This increases competition and benefits the customer through a more diverse product offering. According to an EU study, a European family of four would have up to 545 euros more to spend.

TTIP could become the global yardstick for fair and secure investment safeguards. Direct investment in numerous countries The numerous small and medium-sized enterprises in Germany in particular, which requires protection are unable to afford legal departments of their own, would benefit. Numerous TTIP critics fear that investors will abuse the planned arbitration procedures in order to restrict countries’ regulatory autonomy and thereby stymie new laws in areas such as environmental and consumer protection. Investment protection agreements are treaties under international law protecting foreign investment. They ensure protection against discrimination and expropriation without compensation, but also the free transfer of capital. If a country infringes one of these aspects, a foreign investor can avail themselves of the Investor-state dispute settlement (ISDS). International arbitra- tion courts are not intended to prevent higher standards, but to protect investment. Legislative sovereignty is not limited by investor protection such as this. The legislator may continue to pass laws. He must however pay compensation if he discriminates against foreign investors or changes the legal framework to such an extent that investments are made worthless.

Dispensing with an investment protection chapter in the case of TTIP would result in discrimination between countries and also impact forthcoming free trade agreement negotiations.

Additional free trade agreements with trade partners

The German automotive industry supports the worldwide dismantling of barriers to The German automotive industry trade and investment. The objective is a so-called “level playing field” – namely equal advocates open markets conditions for all trade partners within the market. Free trade agreements are an important instrument here for the mutual opening up of markets. The EU has already concluded agreements with numerous countries; others are pending. In addition to TTIP, the priority for the German automotive industry is agreements with India, the ASEAN countries, Mercosur and Canada.

While the agreement with South Korea has improved market access for both sides, trade barriers are still to be encountered in South Korea, making access for European manufacturers and suppliers more difficult. The European commission has been negotiating on a free-trade agreement with Japan since 2013. The particular feature for the automotive industry is that Japan does not levy any import duties on vehicles and parts – meaning that they require no dismantling. Admittedly the share of the Japanese market accounted for by imports has been low for many years by international comparison; latterly it was 6 percent. One reason for this is non-tariff trade barriers. According to studies these have a cumulative customs equivalent of 50 percent. That is why it is important these barriers be dismantled. Japan has already responded and further opened its market. Other steps are still pending. The European Commission will continue to negotiate with Japan so that the agreement can be concluded. 43

Bilateral relations with important trade partners

In addition to the trade partners with whom the EU has negotiated, or is still nego- tiating, comprehensive free trade agreements, there are numerous other important The VDA welcomes the planned partner countries for the automotive industry. China acceded to the WTO more than investment agreement with China twelve years ago – an investment agreement is currently being negotiated with the EU. The further opening up of China since its accession to the WTO was accompanied by a breathtaking development of the market. The German automotive industry is investing heavily in China. That is why the VDA welcomes an investment agreement, which will enhance legal and planning security for both sides. On other issues as well, such as the reform of distribution rights in China, the VDA sets great store by constructive dialog. The VDA is boosting its local presence with its new office in Beijing. The importance of the Chinese market and networking with industry there will continue to grow.

Eastern Europe as a whole is increasingly important to the global automotive industry: many Eastern European countries have established themselves as both automobile The German automotive industry sets markets and production locations. Whereas EU members are making good progress, great store by a constructive dialog the markets of Ukraine and Russia have been unable to develop any further because of with Russia political events and various measures restricting trade. Tariff increases were announced in Ukraine at the turn of the years 2014/2015 – not just for the automotive industry but for more than 100 products. In the context of sanctions, Russia is attempting to further reinforce its own manufacturing base. A purchase bonus was applied for vehicles made in Russia. Passenger car exports to Russia have fallen by around 30 percent in the past year. The German automotive industry remains engaged in Russia and sets great store by a constructive dialog and the prompt end to political crises in the region. Admittedly this is subject to the primacy of politics.

Regrettably it has not been possible thus far to bring the WTO’s multilateral approach to a successful conclusion. For the German automotive industry, a successful WTO must be strengthened as the conclusion of the Doha Round with a comprehensive dismantling of trade barriers guardian of international trade remains the ideal solution. The WTO must be further strengthened as the guardian of international trade. Arbitration processes can reduce, or even avoid, protectionist tendencies. The German automotive industry would like to see a worldwide “level playing field” – as the EU is for non-member country producers. However, as long as the WTO path remains deadlocked, bilateral free trade agreements – such as TTIP – offer enormous opportunities for the German automotive industry.

The network of agreements from the EU perspective

Countries with which the EU has a preferential trade agreement in place

Countries with which the EU negotiates or has a preferential agreement pending official conclusion

Countries with which the EU is considering opening preferential negotiations

Countries with which the EU is negotiating a stand-alone investment agreement

EU and Customs union European Economic Area

Source: European Commission INTERNATIONAL TRADE AND INVESTMENT 44

Foreign trade promotion and development cooperation

The German automotive industry is concentrating its production increasingly on Countries such as China, Brazil, emerging and developing countries such as China, Brazil, Mexico and South Africa. Mexico and South Africa are becoming By creating a common market between the ASEAN members, southeast Asia as well increasingly important for the automo- will in future attain greater significance. In addition to these countries, other developing tive industry countries will also become more important as a part of the value-added chain and as sales markets. To support market access in these countries, the VDA has been working with the German Federal Ministry for Economic Cooperation and Development (BMZ) since mid-2013. For decades, BMZ, with Gesellschaft für Internationale Zusam- menarbeit (GIZ), and Kreditanstalt für Wiederaufbau (KfW) has had at its disposal a very close network of its own experts in currently 130 countries worldwide. With their detailed local knowledge, these experts stand ready to support the German private sector on the ground and initiate joint projects.

For many years now, German development cooperation has been undertaking The German automotive industry is projects with the German automotive industry. German manufacturers and suppliers committed to development co-operation are committed to training and further education projects throughout the world, for standardizing upstream products from developing countries but also for an HIV awareness campaign in southern Africa. In addition to VDA members, the VDA itself collaborates with the GIZ in forums in China and India. On the agenda are topics such as car recycling, electro-mobility, product safety and quality infrastructure. In the process, the VDA uses GIZ’s contacts with political decision-makers in these countries and aims to develop this collaboration in order to support its members’ activities in these markets.

International supply of raw materials

In 2014, the prices of almost all raw materials fell. Both energy raw materials, such Falling raw material prices – joy and as gas, coal and in particular crude oil, as well as industrial metals and other mineral sorrow for European supply chains raw materials became cheaper on a wide front. The HWWI raw material price index documents this development in striking fashion: after falling in 2013, prices fell a further 7 percent in 2014. Crude oil bears the main responsibility for the fall in prices. The index charts a drop of almost 7.5 percent. Industrial raw materials also under- went a significant loss of 5 percent in the same period.

The price falls are admittedly somewhat cushioned by the depreciation of the euro but there is a discernible lightening of the automotive supply chain load. Admittedly, the current price level is a snapshot. There have been similar low-priced phases in the past and a subsequent ramping-up in all relevant industrial segments. A purely demand-driven inflation rate was exacerbated in 2014 by the failure of investment in mines, smelters and semi-manufactured goods plants to materialize. Worldwide capacity was scarcely any greater as compared with the last record price in 2007 and 2008. Taking the example of aluminum rolled products, a product could soon gain considerable price momentum. Especially if globally significant volume models increase the aluminum content, bottlenecks will be unavoidable. 45

Against this backdrop it is important also to take a close look at European commod- ities and raw materials companies. Low prices, on the one hand, and rising energy costs, on the other, are increasingly challenging the business model. This poses a threat to the supply chain, especially in the early stages. The demands of the auto- motive industry as regards lightweight construction are considerable. In this context, geographical proximity and historically established tie-ins between steel, aluminum and other industries and the automotive supply chain are advantageous.

Conflict minerals: European regulation needs sound instincts

In 2014, the European Commission submitted draft regulations on how to deal with conflict minerals. After the USA, that marked the engagement of the second-largest Conflict minerals: regulation with a economic area with the issue of transparency and sustainability in the raw mate- sense of proportion required rial supply chain. As defined by the USA and the EU, tantalum, tungsten, tin and gold rate as conflict minerals. These raw materials are used in almost all industries. The idea behind the regulations is to stop the financing of armed conflicts through mining activities in the conflict regions. Whereas the US regulations opted for a mandatory approach spanning the entire process chain from the mine to the end product, the European Commission proposed a different path. In its draft regulations, it recommended starting with the European importers of metals and ores and with European smelters. These companies could have themselves voluntarily certified to document that their raw material input is not implicated with conflict.

From the automotive industry’s perspective, this is the correct route. The European Commission has recognized that a comprehensive reporting requirement throughout the supply chain can place an excessive burden on small and medium-sized enterprises in particular. Experience has also shown that the US regulations would not improve the situation in the Democratic Republic of Congo. The US approach would instead have resulted in an avoidance strategy – with dramatic consequences for minework- ers in the eastern provinces. Since the outset, German industry has advocated an approach that is effective on the ground. The companies of the German automotive industry want to contribute to a sensible solution for people in the Congo. A report- ing requirement throughout the very complex automotive industry supply chain is however not sensible, and difficult to implement.

Economic Policy in Europe and Germany

Jan Hinrich Müller – auto body and vehicle construction mechanic, diplom in automobile engineering, project leader exterior & interior, body engineering, Semcon Wolfsburg GmbH, Wolfsburg, 2013 ECONOMIC POLICY IN EUROPE AND GERMANY 48

Germany as an industrial location and its competitiveness

Anyone taking only a superficial look at Germany as an industrial location could The challenges facing Germany as easily gain the impression that this is a country spoiled by success: employment is at an industrial location are increasing record levels, exports are buzzing, the interest rate is low, oil prices fell significantly in 2014, thereby giving citizens more scope for other spending. But – anyone taking a more sophisticated view of our country and its economy quickly concludes that challenges are mounting. And that the economic success of yesteryear is no guarantee of future performance.

In view of the majority situation reflected in the grand coalition, the Federal Govern- ment has every opportunity for taking robust decisions to improve the economic environment. Unfortunately, the balance sheet to date has been rather disappointing: the main items dealt with up to now under the coalition agreement revolve primarily around distribution issues or even new sources of tax revenues. Maternity leave and the minimum wage are a done deal, the quota for female representation in large corporations and the passenger car toll are on the verge of agreement.

But strategically important levers have not yet been pulled: energy costs in Germany are – especially by international comparison – very high. And this also affects the collective-bargaining partners: unit labor costs in Germany have been rising steadily for a number of years. And the scope for greater flexibility on the labor market is becoming more limited. All in all that means that Germany is becoming more expensive as a place to do business. 49

Another field of active location policy as yet remains largely fallow: improving the infrastructure. The urgently required maintenance and development of the road Maintaining and developing Germany’s transport infrastructure will be dealt with in detail elsewhere in this annual report. infrastructure is an urgent necessity Suffice to say this on the subject that if increasing toll revenues simply result in a reduction in spending on the road network financed through taxation – a practice to be observed for a number of years now – then we will have to continue living with dilapidated bridges and poor roads. This is not just irksome for the private motorist; inadequate infrastructure results first and foremost in congestion, diversions and bridge closures, which we are already starting to see. This drives up logistic and transport costs in Germany – and puts a strain on companies.

We also have to push ahead systematically with developing digital networks. Admit- tedly, since December 2013 the competent ministry has not just been responsible We must push ahead with developing for “transport” but also for “digital infrastructure,” but it will take more than just new digital networks name plates.

The speed of innovation, especially in this area, is enormous. Germany is engaged in an international competition, led by US American IT companies. Export champion Germany should therefore do whatever it takes to gain ground in this field as well. We need more IT experts, more software engineers, more “Web” and “cloud” experts to meet the needs of the future.

The German automotive industry is investing massively in these new digital technol- ogies – and employing large numbers of young IT experts and software developers. Currently, the automotive industry accounts for around one third of the German economy’s total research and development expenditure. It is far and away the biggest research and development investor and is strategically important for Germany as a technology center. Whether this country will, in future, be able to maintain or even build on its very good position in the international rankings is therefore also critically dependent on this key industry’s research and development intensity here in Germany.

One of the VDA’s founding tasks is to be a vigorous champion for the goal of improving location-related factors. This takes many forms. For example, the VDA International study of location-related supports studies providing empirical facts, thereby providing the discussion on loca- factors by international comparison tion with valid figures. How attractive is Germany as a location for the automotive industry by international comparison nowadays – and what future action is required to continue tapping its potential? What core future competencies will remain indis- pensable in the automotive location that is Germany? Where do other countries have their noses in front? What does Germany need to do for the automotive industry to continue investing in Germany? The answers to these questions are intended to help highlight areas for action and positively shape the prevailing environment.

In collaboration with a consultancy company, the VDA will therefore be conducting a study in 2015 to look at this topic. The research and polls have an internation- al focus and also include new competitors in the growth markets and companies that are becoming increasingly important as a result of networking. Given the very dynamic markets in North America and Asia, there needs to be an improvement not just in the production environment, but in the automotive market environment in Germany and Europe as well. ECONOMIC POLICY IN EUROPE AND GERMANY 50

EU policy for an efficient automotive industry

In May 2014, Europe elected a new parliament. The EU Parliament confirmed the There are many voices critical of new EU Commission, headed for the first time in the person of Jean-Claude Juncker Europe in the new EU Parliament by the lead candidate of a European party as the European Commission President. Many observers judge this to be an indication of a greater democratic identity at European level. Admittedly, the number of parties in the new European Parliament pursuing an agenda critical of Europe, or of the euro, has increased. There are increasingly vociferous voices fundamentally questioning the EU. Obviously this does not make the process of obtaining a majority any easier. Ultimately, solid majorities for a constructive policy can only be achieved if both major parties, the social-democratic S&D Group and the conservative European People’s Party, pursue the same policy. How important the EU is for the German automotive industry requires no special mention here: Europe is the “home market” for Germany’s motor manufacturers and suppliers.

In view of the growth in China and the dynamism with which the US-American The European manufacturing sector’s economy is recovering from the economic crisis of 2008/2009, Europe faces competitiveness needs strengthening critical challenges. The EU needs to do everything in its power to further increase its economic competitiveness. Sustainable growth – yet another of the lessons learned from the financial crisis – above all requires a strong industrial base. The financial and services sector alone is not enough.

There is no shortage of commitments to Europe as an industrial location. One example of this: at the beginning of 2014 the then EU Commissioner for Industry and Entrepreneurship, Antonio Tajani, presented an EU Commission paper on an “industrial renaissance” of Europe. The governments of the 28 EU member states, in the European Commission’s opinion, had to do more to strengthen industry. Industrial competitiveness needed to be factored into all political decisions, this was a “crosscutting task” for all political areas, he said. The goal was to increase industry’s share of the EU’s gross domestic product from 15 to 20 percent. There was talk of developing infrastructure and a “stable, simplified, entrepreneur and innovation-friendly legal framework.” Energy prices as well had to become more affordable, they had risen by 27 percent for European industry since 2005, and thus by more than in almost all other industrial economies.

Car production in Europe in millions

6

5

4

3

2

1

0 1980 1990 2000 2010 2014

Italy Spain Germany Great Britain France

Sources: VDA, SMMT, CCFA, ANFAC, ANFIA 51

The recognition of the right way forward therefore very much exists. But unfortu- nately the EU continues to struggle to implement these objectives. What’s more, in the past many regulations often achieved the very opposite – tending to be more of a stumbling block for industrial competitiveness.

In addition, the indebtedness of individual EU countries – keyword Greece – over- shadowed virtually all other EU-wide measures in 2014. Moreover, there were foreign policy challenges with Russia and Ukraine.

The fact is this, industry’s share of gross value creation in the EU declined slowly, but steadily, between 2011 and 2013: from 15.5 percent in 2011 to 15.2 percent in 2012 and 15.1 percent in 2013.

At the same time, unit labor costs in France, Italy and Germany increased. Apparently only Spain is making headway: this country is pursuing a tough process of adjustment, manifested for years in falling unit labor costs – and just recently enjoying a strong recovery, precisely in the new car market. What that shows is that if an EU country is serious and rigorous about doing its homework, it gets ahead. The responsibility for Europe’s “industrial renaissance” cannot just be left to the EU Commission. The onus of course is on all member states and their governments.

But what is also clear is that the onus is on the European Commission, as the initiator of European law, when the competitiveness of the manufacturing sector is at issue. The European institutions began the new legislative period with grandiloquent statements. President Juncker’s declared intention is to stimulate the economy and make legisla- tion more efficient. In so doing, the intention within one year is to create discernible incentives for growth. The planned investment package is worth 315 billion euros. When it comes to this investment program, the EU Commission and European Invest- ment Bank (EIB) should be guided by the needs of the real economy. In the case of the automotive industry, technologies could be put center stage for which no significant capabilities have been developed to date in Europe – battery technology for example.

Unit labor costs in Europe Index 2010 = 100

110

105

100

95

90

85 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Italy Spain Germany Great Britain France

Source: EUROSTAT ECONOMIC POLICY IN EUROPE AND GERMANY 52

In addition to investment incentives, the investment climate should be improved, Less bureaucracy – more investment first and foremost by reducing bureaucracy. From the very moment the new EU Commission began work, President Juncker overhauled and reorganized the European Commission’s structure. Instead of, as in the past, assigning one topic area to each of the 28 Commissioners – one Commissioner per member country – interdisciplinary project groups were now set up. Each of the project groups is headed up and coordi- nated by a Vice President. The new structures and processes are intended to improve mediation between the individual departments within the European Commission. Moreover, the intention is for substantive differences to be resolved prior to publica- tion of proposed legislation. That is a good start to streamlining future regulation and making it more efficient.

The political content should mirror this organizational focus. The new European Commission’s work program was given a sharper focus. Frans Timmermans, the First Vice-President of the EU Commission, has already withdrawn proposed legislation that had no prospect of success with the institutions. This too sounds cautiously optimistic.

But that is not enough in itself. Especially in the climate and environmental policy A balance needs to be struck between arena, the EU Commission must pay greater attention to striking an appropriate economy and ecology balance between ecology and economic requirements. Unilateral and unbalanced interventions impose an excessive burden on industry in Europe and do damage

in an intense global competition. What is important, for example with future CO2 regulations, is no longer to place the emphasis on newly registered vehicles alone, but to look at the entire passenger car fleet, namely the demand side. The lever would be considerably longer, as the example of Germany illustrates: The 3 million newly registered passenger cars compares with a fleet of fully 44 million cars – namely almost 15 times as many. By changing driving behavior – eco-driving – and

by using second- and third-generation biofuels, the rate of CO2 reduction could be significantly increased.

By the way, the CARS21 working group on the future of the automotive industry – kept in being under its new name CARS2020 – was wound up following submission of its final report in October 2014. For the VDA, which regularly reported on this working group in its annual report, this is not a satisfactory outcome. The automo- tive industry, with its value creation and employment in Europe, is too important simply to call time on this work. The automotive industry is keenly interested in a close and constructive dialog with political decision-makers. Admittedly, there is also the matter of implementation. If the process – possibly “rebadged” CARS2030 – were to be continued, then it would be advisable to give topics a sharper focus. New challenges for the automotive industry, which can only be resolved in concert and in the European context, must be included – for example, networked and automated driving. 53

Suppliers and Small and Medium-sized Enterprises

Emanuel Loudalenis – production supervisor, Valeo Klimasysteme GmbH, Bad Rodach, 2013 SUPPLIERS AND SMALL AND MEDIUM-SIZED ENTERPRISES 56

Globalization and localization: Small and medium-sized enterprises face a challenge

Many German companies lay the foundations for a successful growth strategy with a Many components suppliers decide to commitment on the ground. A branch or production plant of one’s own abroad affords make a commitment abroad considerable advantages in opening up new markets, especially as accessing them via exports is often made more difficult by protectionist measures. Because of such restrictions, many companies have also invested in localization. The dynamism of this upheaval is readily apparent from German motor manufacturers’ production figures. Since 2010, they have been producing more vehicles abroad than they do domestically. This year it will be almost ten million cars.

Against this backdrop the consequences of further regulatory measures imposing additional costs in Germany should be weighed very carefully. This must pay particular attention to the fact that – notwithstanding a number of major corporations – the German automotive industry predominantly comprises small and medium-sized enterprises. Many of these companies have long since expanded beyond the German and European market and have become “hidden champions,” world market leaders, on the back of their expertise. Their importance for the industry’s competitiveness should under no circumstances be underestimated. A forward-looking policy boosting Germany’s credentials as an industrial location must aim to strengthen the environ- ment for small and medium-sized industrial enterprises.

Recently, the VDA arranged for the status quo and the challenges facing Germany The future of Germany as an industrial as an industrial location to be investigated by the consulting company, EY (Ernst and location Young). The study has been published as Volume 49 of the VDA series “Materialien zur Automobilindustrie” [“Automotive Industry Materials”].

Additional production capacity in the USA, Mexico, China and other emerging Without an international posture, small- markets will come on stream in the next few years. The motor manufacturers are er companies will be unable to sustain depending here on support from their Tier 1 suppliers, who can further reinforce their competitive position their business relationship by expanding global parts supplies.

What for larger suppliers seems almost self-evident is far from normality for their smaller brethren. Because executing such a project often requires a major finan- cial and manpower commitment, which places a considerable strain on available resources. That is why these companies should also investigate whether it makes sense to venture abroad in collaboration with other companies. Without an interna- tional posture, smaller companies as well will be unable to sustain their competitive position. Even in the upstream links of the value chain, the skill of being able to produce and deliver worldwide will assume greater importance.

The VDA is gaining valuable experience in supporting the development of the supply cluster in Russia. Twenty suppliers from the most diverse product segments have banded together to invest and localize jointly in Russia (www.vda-kooperationsportal. de/de/ru_pkw). The knowledge gained in developing this cluster can subsequently be applied to other projects.

Even if after careful investigation and initial successes the localization decision seems positive, there are certain risks of a project such as this that cannot be entire- ly eliminated, as can be seen from the current difficult development of the Russian market. However, the long-term market opportunities should not, and must not, be overlooked. 57

The VDA supports the globalization course

The VDA sees itself as a communication platform where corporate, political and economic information converges and is played back to interested companies. In With its opening of an office in developing its own Representative Office in Beijing, the VDA aims to do more for Beijing, the VDA can do more for its members in China, and since the end of 2014 has been ramping up its activities its members in China in the largest overseas market. The self-imposed quality aspiration is for infor- mation to be bang up to date. With its newly constituted team headed by Klaus Billetter, the Representative Office in Beijing is initially concentrating on standard- ization, the aftermarket, logistics and supporting the supplier round table. Under the Round Table umbrella, since 2011 the VDA has been organizing regular meet- ings in Beijing and Shanghai for the CEOs of the suppliers with an active presence in China. The focus is on marketing and production conditions in China, the dialog with motor manufacturers as well as topical value chain issues.

The keen interest in the Round Table in China and the response from the suppliers’ ranks encourage the VDA to investigate networking possibilities in other regions. Similarly, a round table in Mexico is currently getting underway. The German auto- motive industry has invested heavily here in recent years. Suppliers have also been given a high level of representation.

A further opportunity to raise awareness of one’s own company and make and inten- sify contacts in foreign markets is afforded by joint trade fair appearances. The joint Joint trade fair appearances intensify stands that the VDA is offering as part of the foreign trade fair program, namely with contacts in foreign markets the financial and organizational support of the Federal Ministry for Economic Affairs, give small and medium-sized enterprises the opportunity of participating on favorable terms and benefiting from shared organizational arrangements. At present, combined stands of this type are being offered at trade shows in Moscow, Shanghai, Seoul, New Delhi as well as, now, in Bangkok and Yokohama. SUPPLIERS AND SMALL AND MEDIUM-SIZED ENTERPRISES 58

Collaboration in the regions: The VDA dialog with the federal states

Networking abroad often functions better if companies are also integrated in The VDA is in close contact with networks in their home market. The most important supplier network in Germany is supplier clusters the VDA. Many smaller firms are also involved in regional structures. This is often the first step in testing collaborative opportunities for one’s own projects. The VDA maintains close contact with supplier clusters from the individual federal states of Germany; it supports them through cooperation in advisory boards, joint events and at the IAA. The cluster managers from the regions and the responsible repre- sentatives of the federal states’ ministries of economics regularly participate in the exchange of information with the VDA (“VDA regional dialog”). The common goal is to promote the automotive industry in the regions and beyond.

The VDA supports the suppliers’ visibility beyond federal state borders with its freely available database www.auto-world.org. Listed companies can be found bilingually, worldwide, in a search by federal state, place, name and manufactured parts. The database supplements the company directory of VDA member compa- nies of the supplier industry (www.vda-herstellernachweis.de).

Collaboration in Europe: CLEPA

In addition to the VDA office in Brussels, which represents the interests of the The VDA collaborates closely with German automotive industry on the ground there, the VDA collaborates closely CLEPA with CLEPA (Comité de Liaison Européen des fabricants d’Équipements et de Pièces Automobiles) to protect suppliers’ interests. CLEPA enjoys a high reputation among European institutions and operates in partnership with ACEA, the Europe- an Automobile Manufacturers’ Association. Organized by focal areas, dedicated working groups within CLEPA deal with selected topic areas such as technical regulation, warranties or research and innovation. In regard to the latter, CLEPA also provides information, for example, on European funding programs and how to access them. Companies interested in funding can request information via the VDA department for the supplier industry and small and medium-sized enterprises. 59

Company financing: Model for the small and medium-sized enterprise sector

Building new production capacity abroad often requires heavy investment that cannot be financed from equity, or not fully so. In the past, this financing gap was Building production plants abroad usually plugged with bank assistance. The loan financing situation for companies requires heavy investment in Germany has eased significantly in recent years. Solid companies in all sizes and all sectors currently stand to benefit from favorable financing conditions. However, for smaller SME suppliers venturing abroad and looking for financing solutions for the target country, investment finance is fraught with problems. As a result of the European financial crisis, regulatory changes are in the pipeline leading to fears that there will be bottlenecks in long-term financing in the future. The regulation of bank- ing activities – the introduction of Basel III – plays an important role here.

The Finance Working Group of HG III (Manufacturer Group III) to which the CFOs of larger suppliers belong, has been dealing with this topic for some time now, and is New financing solution for emerging in dialog with various banks and the federation that represents them. In the meantime, markets offers an alternative for small a financing solution has been worked out with the DEG (German Entrepreneurial and medium-sized companies Development Corporation) for developing and emerging markets, which can offer a real alternative for small and medium-sized enterprises. The model was unveiled at the 15th VDA small and medium-sized company convention in May 2015 and sounded out as to its practicability.

Pension management and retaining skilled employees

The German labor market is booming: more than 43 million people were gainfully employed at the end of 2014. Companies no longer find it as easy as they once did Companies can use occupational to fill vacancies with qualified employees. Consequently, tools for retaining skilled pension schemes to retain employees employees, such as an occupational pension scheme, are becoming increasingly important. A company pension scheme tailored to the requirements of SMEs gives them good opportunities to attract and retain workers in the face of more attractive offers from larger enterprises. The VDA pension management scheme is an innova- tive industry occupational pension solution available exclusively to VDA members. It includes health-care components (prevention models), various types of basic provi- sion as well as models for flexibly designing comp time and lifetime working time accounts, thereby catering for the most important welfare provision areas. As an industry solution, the VDA pension management scheme also offers optimal benefits and terms via a group contract. Detailed information on the VDA pension manage- ment scheme can be downloaded from www.vda-vorsorgemanagement.de. SUPPLIERS AND SMALL AND MEDIUM-SIZED ENTERPRISES 60

Success factor: Collaboration within the value chain

The automotive industry is typically characterized by the bulk of the end product More than three quarters of the added added value being generated in the preliminary and intermediate stages. In terms of value in vehicle manufacturing is the value of gross production, more than three quarters of the added value in vehicle generated in the preliminary stages manufacturing is already generated in the primary stages.

To the same extent as motor manufacturers are reducing their vertical range of manufacture, they are transferring responsibility and trust to their suppliers. The pressure thereby increases on managing an ever-more complex supplier network, the processes of which have to be precisely coordinated at all times. Supplier selec- tion and the underlying business conditions thus acquire critical importance for the reliability of the entire value chain.

Fair business agreements between manufacturers and suppliers are an impor- The VDA fosters dialog between tant cornerstone for a sustainable and successful partnership. From the supplier’s manufacturers and suppliers perspective, opportunities and risks are not always equally shared – and friction within the value chain results in lost efficiency. In the best case, the resolution to a disputed topic can be found through dialog between the business partners, although it frequently depends on the extent to which the parties involved are prepared to reach a compromise.

In its committees and at its events, the VDA fosters discussion on the issues of collaboration between manufacturers and suppliers and on the upstream links in the value chain. Antitrust concerns are expressly and rigorously observed in the process. This is also in the industry’s interest: Optimal results can only be achieved in open competition.

Development service providers with growth potential

In the past decade, development service providers, who belong in the VDA’s suppliers’ Development service providers Manufacturer Group (HG III), have experienced particularly dynamic growth. Involved are included in the suppliers for the first time in vehicle development at the beginning of the 1970s, their dispropor- Manufacturer Group tionate growth symbolizes, as it were, a structural transformation, creating further effi- ciency increases by optimizing the division of labor. The 25 largest development service providers alone now employ 127,000 people, and in 2013 achieved sales amounting to 5.7 billion euros*. German companies are at the forefront in this segment as well.

In a manner of speaking, the development service providers are taking over develop- ment tasks that were previously the domain of the motor manufacturers themselves and are making a critical contribution to improving the efficiency of the entire value chain. Most development service providers’ area of operation encompasses the development of vehicle components, modules and systems. The development service providers’ business model requires a high degree of flexibility and efficiency. The optimal use of human resources in particular is a central success factor. What this means for the companies is that existing laws and regulations must provide the neces- sary planning certainty. A stable environment is essential to their competitiveness as regards the possibilities for staff deployment. The current discussion in particular regarding regulation of the use of service contracts is causing major uncertainty among companies. Limiting flexibility in the use of labor, whether in production or in research and development, will push structural change further in the direction of globalization – at the expense of Germany as an industrial location.

*Source: Automotive Development Service – Germany as an Industrial Location for the Future, VDA Automotive industry Materials, Volume 48 61

Small and medium-sized enterprises in the commercial vehicle industry, trailers, bodies and buses arena

Manufacturers of trailers, bodies and buses are organized in the VDA’s Manufac- turer Group II. Although it primarily comprises small and medium-sized enterprises, Small and medium-sized enterprises this subsegment of the automotive industry generates an annual turnover in excess are the backbone of the commercial of 9 billion euros and employs more than 32,700 people in its core workforces. The vehicle industry commercial vehicle industry stands for rising employment figures and, with approxi- mately 190,000 employees, occupies an important position in the German economy. Three quarters of the sector’s personnel are accounted for by companies with fewer than 500 employees. They generate more than half of the sector’s total turnover. Small and medium-sized enterprises are thus the backbone of this sector. Whereas there is a tendency for small and medium-sized companies in particular to concentrate on the domestic national and European market, many larger companies also have a broad international presence. Companies are confronting the increasing challenges first and foremost with innovation, flexibility, new ideas and individual approaches to prob- lem-solving.

The varied, frequently very individual customer requirements in the transport and logistics market require the most diverse product and transport solutions. The chal- Individual requirements require the lenge is to take account of a multitude of requirements, such as the type of goods most diverse product solutions and loading facilities, maximum cargo space utilization both in terms of volume and payload, measures for securing the cargo, as well as special regional and legal features. In addition to functionality and quality, the products must, of course, also be affordable. The flexibility and imagination with which companies respond to the various needs and increasingly stringent requirements, setting pan-European and global standards in the process, are impressive. Finding the appropriate solution to every conceivable transport task and every intended purpose is the recurring chal- lenge that the companies of the trailer and body industry have successfully confront- ed for many decades, notwithstanding increasing international competition.

The challenges are to be found not least in the changing legal environment as well as tougher legislative and customer requirements. Above all, the focus is on the goals of safety, climate protection and environmental friendliness, life-cycle costs, payload optimization and weight reduction.

One of the critical reasons for the industry’s enduring success is its rigorous research and development work, where the German trailer and body manufacturers have made a name for themselves as Europe’s quality and innovation champions. In no other country is such a pronounced technology and quality mentality to be found in the trailer and body industry, together with innovative ideas that feed as quickly as possible into production, as in Germany. Research and development are constantly spawning new innovative products.

No other means of transport has developed so radically in recent years as the commercial vehicle, and with it bodies and trailers. Today’s vehicles are a world Environmentally speaking, the apart from the traditional image as an efficient but environmentally and technical- commercial vehicle has come on ly unambitious “work horse”. The majority of small and medium-sized enterprises leaps and bounds in recent years will to a large extent already have been in family hands for several generations. It is new products and innovative solutions that enable them to prevail in international markets. The particular distinguishing characteristic of small and medium-sized enterprises is that they have very strong regional roots and represent stable, long-standing business relationships, reliability and trust, frequently over a period of generations. The product variety is therefore reflected in the sector’s eclectic company structure. This combination means that both small and large have every chance in future of operating successfully in their respective markets.

Energy Policy

Jürgen Kestler – engineering technician, director international operations development, director operations Europe and Asia, SAF-Holland S.A., Bessenbach/Keilberg, 2013 ENERGY POLICY 64

Implementing the Energiewende (energy transition)

The Grand Coalition as well is adhering to the Energiewende objectives set in Although renewable energies have 2010 and 2011. Nuclear power is to be discontinued by 2022. At the same time, expanded positively in electricity the proportion of renewable energies within the energy system is being greatly generation, none of the other factors expanded. Emissions of greenhouse gases are to be reduced by at least 40 percent are on schedule by 2020 and by at least 80 percent by 2050.

Last year, the Federal Ministry for Economic Affairs and Energy (BMWi) issued its first Energiewende progress report. The report shows that the expansion of renew- able energies in electricity generation is following a very positive path and has even surpassed its set objective. Major efforts are still required with all other goals. A similar conclusion is arrived at by the Federation of German Industries (BDI), which is supporting the Energiewende in the form of an “Energiewende navigator.” The Energiewende navigator’s findings are shown in the figure below and illustrate as a colored percentage figure the degree to which the Energiewende target has been achieved in 2014. The percentages in gray show the figures for the previous year 2013.

Implementation of the turnaround in energy policy

Climate and environmental Climate and environmental friendliness declining owing to increasing greenhouse gas emissions friendliness • Greenhouse gas emissions are increasing, especially in the domestic and business arena • Less dynamic expansion of renewable energies, but still on track 93 % 85 % • Energy consumption in the transport arena again increased in 2013; it is becoming more difficult to achieve the target

Economic viability Rising energy consumption is reducing economic viability • Market electricity prices slightly down but duties continue to increase 63 % 54 % • Continued upward trend for domestic electricity prices and energy expenditure • Primary energy consumption is increasing, especially in the industrial, trade and services sector

Security of supply Regional differences exacerbate consistent assessment of security of supply • Security of supply within tolerances, future risks threaten to increase 91 % 95 % • Regional differences in generating capacity, steep decline in capacity to 2018 • Ongoing faltering network expansion

Acceptance Low level of acceptance, as in previous year • Acceptance of major projects among the population drying up, price increases continue to be critical 68 % 68 % • Industrial concerns about reliability of supply continue to mount • Negative trend as regards acceptance provisionally halted at a low level

Innovation Patchy development but negative trend overall • Public energy-related research expenditure increasing 81 % 73 % • Patent registrations falling • Overall assessment deteriorating

Target achieved (10% tolerance) Between 89% and 75% target achievement Target achievement below 75%

Source: BDI – BDI Energiewende navigator 2014, slide 8 65

Renewable Energies Act (EEG) 2014

The new version of the Renewable Energies Act (EEG) in 2014 put down important markers for the Energiewende. The subsidy regime for new EEG installations was The EEG levy is a burden on industry adjusted to curb the rising costs caused by the expansion of renewable energies. From the VDA’s perspective, however. Power exchange sales should have been sig- nificantly greater. Under EEG 2014, as in the past, matching funding is provided by the electricity consumer, who pays the so-called EEG levy. EEG 2014 was the first time that new self-generation power plants had been required to pay a pro rata EEG levy. These installations include, for example, combined heat and power plants.

A company operates these plants in order to use the electricity they generate for its own production. Decentralized electricity generation such as this is consistent with the Energiewende because this electricity does not need to be transported, thereby relieving pressure on networks. Despite that, the electricity from new self-generation power plants that have come on stream after August 2014, will now be liable pro rata to the EEG levy. This affects their profitability, slows their expansion and places a burden on industry, which is contributing to electricity supply through self-generation.

At least the electricity from existing self-generation plants will initially remain exempt from paying the EEG levy. However, the time limitation of this exemption and the liability of new plants to the EEG levy only apply to 2017. Thereafter, the regime for old and new self-generation plants can be completely recast under a new amendment of the EEG.

Next steps for the Energiewende

The Federal German Ministry of Economic Affairs is addressing itself to the future regulatory framework for the electricity market. The proportion of electricity generated The targeted share of cogenerated by wind and solar is growing but the electricity network needs to remain stable. It electricity is not being achieved within must also be ensured that at times when only little wind and solar electricity can be the existing framework fed in that sufficient electricity generating capacity is available. Legislation to this effect is planned. It is planned to amend the Cogeneration Act (KWKG). CHP plants are very common in the automotive industry. The target share of 25 percent of CHP electricity for 2020 will not be achieved by the amendment to the EEG given the prevailing circumstances. Currently, the share of CHP electricity is approximately 16 percent and is estimated to stagnate or even decline over the next few years. ENERGY POLICY 66

Development and composition of the price of electricity for German industry

Developments in the Energiewende context are reflected in energy prices. The diagram The increase in the EEG levy has put showing the development in the average industrial electricity price for companies in up the industrial electricity price Germany with a medium-voltage power supply shows a slight increase in the price of electricity for 2014 as well. The quoted price of electricity generation in the past two years has indeed continued to fall significantly but the increase in the EEG levy has more than offset the falls in the quoted price, driving up the industrial electricity price.

Average electricity prices for industry Status: May 2015

15

12

9 in cent/kWh

6

3

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

Offshore liability allocation Section 19 fee CHP-G Concession Electricity tax StrEG/EEG Generation, transport, sale

Source: BDEW 67

Pan-European comparison of industrial electricity prices

The price of electricity in Germany is among the highest in Europe. This represents a major competitive disadvantage for Germany as a business location compared In Germany, electricity prices are some with most other European countries. This affects both companies’ energy running of the most expensive in Europe costs as well as planned location and production decisions by investors and companies. Especially with strategic decisions on future production and jobs, high energy costs are often crucial when it comes to the non-implementation or relocation of production projects. Against the backdrop of the Energiewende, there is no reduction in electricity prices in prospect for Germany. It is all the more important for the business location, in determining where the Energiewende goes from here, to keep a constant eye on the comparative price and economic frame- work in other European countries. Especially in the case of electricity prices, it is apparent from the significant price differentials that it is not yet possible to talk about a single internal energy market. The prevailing circumstances in the Europe- an member states remain very different.

Comparison of EU industrial electricity prices Group IFL 70 GWh < Consumption < 150 GWh As at: first half-year 2014

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

0 5 10 15 20

Cent/kWh, prices including non-refundable taxes (ex VAT)

Sources: Eurostat, VIK ENERGY POLICY 68

Developments in the emissions trading scheme

Emissions trading will play an essential role in reducing greenhouse gas emissions by Emissions trading plays a major role in 40 percent by the year 2030. It is intended to generate more than half of the targeted reducing greenhouse gas emissions reductions in emissions. The total quantity of emissions certificates within the emissions trading scheme will be reduced annually by 2.2 percent from 2020 onward. The foreseeable shortage of certificates will cause certificate prices to rise. 69

European energy and climate policy 2030

At the end of 2014, the European heads of state and government decided on the objectives of the EU energy and climate policy to the year 2030. They were an The EU energy and climate policy’s extension of the existing goals already contained in the EU’s energy and climate new objectives are very ambitious package for 2020. These goals are extremely ambitious and can only be defined in coordination with other industrialized nations.

Navigator for the turnaround in energy policy 2014

Topic area Stated objective Targets 2020 Targets 2030

Reduction in EU greenhouse gas emissions (compared with 1990) Greenhouse gas emissions -20 % -40 %

Increase in the share of renewable energy in the EU Renewable energies final energy consumption 20 % 27 %

Increasing energy efficiency (reduction in primary energy use) Energy efficiency 20 % 27 %

Sources: EU Commission, VDA

Climate and Environmental Protection Policy

Melanie Neubauer – cnc engineer for milling machines, assistant to the plant manager, leader for systems engineering, smk systeme metall kunststoff gmbh & co. Kg, Berga, 2013 CLIMATE AND ENVIRONMENTAL PROTECTION POLICY 72

CO2 development in Germany

In the past ten years, the German automotive industry has made enormous progress

The German automotive industry has in reducing CO2 emissions. If in 2004 newly registered, German-branded passen-

made enormous progress in reducing ger cars still had an average CO2 value of 175.8 grams per kilometer, in 2014 it was

CO2 emissions only 132.9 grams. That is a reduction of around one quarter (-24.4 percent). The fuel consumption of newly registered, German-branded passenger cars fell by a similar amount; from 7.1 l/100 km (2004) to 5.4 l/100 km today – a 24 percent reduction.

Thanks to its efficient vehicles, the German automotive industry is thereby contrib-

uting to significantly lower CO2 emissions notwithstanding increasing mileage. According to figures published in the national Inventory Report of the German

Environmental Agency, CO2 emissions produced by road traffic in Germany from 1999 to 2012 dropped by about 30 million metric tons. Since 2006, road traffic

CO2 emissions have been below 1990 levels for the seventh successive year and are around 5 million metric tons less than the 1990 figure. German road traffic thereby occupies a special position within the EU. No other Western European

country has so far succeeded on a sustained basis in reducing road traffic CO2 emissions below the level of 1990. The development in passenger cars’ specific energy consumption is impressive: today approximately 35.6 megajoules are required per 100 person-kilometers (pkm). In 1990, comparable performance needed more than 66.1 megajoules – namely almost double the figure.

German road traffic CO2 emissions (fossil) in thousands of tons

175,000

150,000

125,000

100,000

75,000

50,000

25,000

0 1990 1995 2000 2005 2010 2012

Sources: National Inventory Report Germany 2014, German Environmental Agency 73

CO2 regulation of passenger cars and light commercial vehicles in Europe

Official CO2 limits for passenger cars and light commercial vehicles have been in force for a number of years. EU Regulation EC 443/2009 set an official CO2 limit for passenger In 2020 new passenger cars will only vehicles of 130 g/km CO2 for 2012, phased-in gradually by 2015. With effect from be permitted to emit 95 grams of CO2 2020/2021, the European passenger car fleet must not exceed 95 g/km. As for passen- per kilometer ger cars, CO2 limits were decided for light commercial vehicles (so-called vans up to

3.5 metric tons). Here, EU regulation EU 510/2011 envisages an official CO2 limit of

175 g/km CO2 with effect from 2014. With effect from 2020 the European van fleet must not exceed 147 g/km.

The passing of the CO2 regulations poses a considerable challenge for the automotive industry. For example, the passenger car target of 95 g/km CO2 in 2020 requires a 35 gram reduction in only five years (2015 to 2020). That requires an average annual saving of seven grams per year. This target can only be achieved if manufacturers invest massively in new technologies and boost their sales of models with alternative drive systems.

Effective limits should be demanding, but not excessively so. Costly solo initiatives by the EU are counter-productive to ensuring European competitiveness. That is to say, if one compares passenger car limits in an international context then it is very clear that the EU has the world’s most ambitious fleet targets: in the USA, these targets prescribe only 121 g/km CO2 by 2020, in China 117 g and in Japan 105 g.

Chart of specific energy consumption in private and freight traffic energy efficiency in MJ per 100 person-km

80

70

60

50

40

30

20

10

0 1990 1995 2000 2005 2010 2013

Source: Arbeitsgemeinschaft Energiebilanzen e.V. CLIMATE AND ENVIRONMENTAL PROTECTION POLICY 74

In regulatory terms, the CO2 regulations for passenger cars and light commercial vehicles comply with the same basic principles. Noncompliance with the limits incurs penalties related to the amount by which the target is missed. The central elements of the respective regulations for passenger cars and light commercial vehicles are outlined in the overview on page 77.

The important thing is that the European yardstick for passenger cars of 130 g/km CO2 for 2015, for example, does not apply for individual vehicle models but relates to the entire European fleet average. Individual manufacturers are not therefore subject

to absolute values across the board but to company-specific CO2 targets that can

be calculated using the formula shown in Figure 1. The permitted CO2 value based on the relevant vehicle weight is calculated for each vehicle with a new European authorization. Based on these vehicle parameters, manufacturers can then deter- mine the average value for their fleets. In other words, it is not necessary for each

individual manufacturer to comply with the European fleet value of 130 g/km CO2. Such an approach would be tantamount to a uniform European value and would fail to take account of the respective manufacturers’ differing segment structure. Instead, each manufacturer is allocated a manufacturer-specific value depending on the products they sells. The European fleet figure is calculated as the average for all manufacturers selling new cars in the EU.

EU’s 2020 CO2 target is the toughest in the world

in g/km CO2

121 117 120

105

95

60

5.2 l 5.0 l 4.5 l 3.8 l

0 USA China Japan Europe

Sources: Cologne Institute for Economic Research, VDA 75

The basis for the calculation chosen by the EU Commission ensures that manufactur- ers of large passenger cars, whose vehicles naturally create greater CO2 emissions in Greater efforts are demanded absolute terms compared with producers of smaller vehicles, are not systematically from the manufacturers of larger disadvantaged as would be the case with a “single value.” Nevertheless, the demands passenger cars on manufacturers of larger passenger vehicles in terms of results is greater than those on their competitors. That is because while the regulations governing larger passenger vehicles allow them a higher fuel consumption as a basic principle, at the same time they require superior reduction performance.

To achieve the passenger car CO2 target for 2020, having regard to the phasing in by 2021, manufacturers have to electrify all parts of their vehicles’ drivetrain. Incentives for quickly ramping up the electrical vehicle market are therefore fundamental. Especially fuel-efficient vehicles are awarded multiple offsets using so-called “super-credits” and rewarded for their extraordinary climate footprint. For example, a passenger car emitting less than 50 g/km CO2 newly registered in 2020 is not simply included in the

CO2 fleet calculation but is counted twice.

EU’s weight-related CO2 fleet regulation

200

180

160

/km Daimler 2 Honda 140 Hyundai (CZE) Fiat Ford BMW in g CO GM 120 VW

Renault Toyota

100

80 1,100 1,300 1,500 1,700

Average weight of the vehicle fleet in kg EU: 2006 fleet EU: target curve 2015 EU: target curve 2021

Source: IW Cologne CLIMATE AND ENVIRONMENTAL PROTECTION POLICY 76

So-called Eco-innovations are intended to provide similar scope for potential With Eco-innovations can bring about the engine’s efficiency reserves increasingly depleted, the vehicle needs to be seen a discernible reduction in the car’s all the more as a holistic system. These are technologies that do not show up in the energy consumption official measurement method for measuring fuel consumption (NEDC): for example solar roofs for cooling the passenger compartment or converting waste heat into electrical energy. Such systems can markedly reduce energy consumption in the car, and thus reduce fuel consumption. Unfortunately, the EU Commission has so

far handled the recognition of the impact of eco-innovations on the CO2 balance in a very restrictive and bureaucratic manner. What is required here is to collaborate in making approval regulations for such technologies less bureaucratic within the foreseeable future.

The upshot of the numerous activities is that great progress has been made in recent years in reducing fuel consumption. If, for example, one looks at new passenger car registrations in the EU in recent years, one can see that the 130 gram mark (measured in grams per kilometer) was bettered for the first time in 2013.

This progression cannot however be extrapolated in a straight line. The “low-hanging fruit” – namely technical measures that can be implemented quickly and cost efficiently, have been all but exhausted.

Yet the EU Commission is already planning to submit its initial thinking for the period after 2020.

CO2 emissions by newly registered passenger cars in the EU

Average CO2 emissions by passenger cars in the EU

170

161 160 159 154

150 146

140 140 2 136 132

g/km CO 130 127 123

120

110

100 2006 2007 2008 2009 2010 2011 2012 2013 2014

Source: European Environment Agency (EEA 2013) 77

Elements of CO2 regulations for passenger cars and light commercial vehicles

Definition Cars Light commercial vehicles

2012 target 2020 target 2014 target 2020 target Weight-based Individual manufacturer’s 95 g/km CO 130 g/km CO2 2 175 g/km CO2 147 g/km CO2 calculation CO2 limit is based on the (Regulation EU 433/2009) (EU 433/2009, (EU 510/2011) (EU 510/2011, vehicle’s weight and is Calculation formula: adjusted 2014) Calculation formula: adjusted 2014) calculated individually CO2 = 130 +a (M – M0) Calculation formula: CO2 = 175 +a (M – M0) Calculation formula: • a = 0.0457 CO2 = 95 +a (M – M0) • a = 0.093 CO2 = 147 +a (M – M0) • M = weight in kg of the Flattening of the • M = weight in kg of the a = 0.096 car ready to use gradient of the line to car ready to use • M0 = 1.372 kg a = 0.0333 • M0 = 1.706 kg (Ø weight) (Ø weight) • Adjustment of the • Adjustment of the Ø weight w.e.f. 2016 to Ø weight w.e.f. 2018 to the three-year moving the three-year moving average average

Penalty Should manufacturer fail Target exceeded for € 95 per gram Same for passenger car Same for passenger car

payments to achieve the envisaged • 1st gram CO2: € 5 Failure to meet targets

CO2 targets, a penalty shall • 2nd gram CO2: € 15 per vehicle be paid on a graduated • 3rd gram CO2: € 25

basis depending on the • 4th gram CO2: € 95 per amount by which the vehicle target is exceeded

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

Super-credits Support for highly Vehicles emitting less than Vehicles emitting less than Vehicles emitting less No super-credits

efficient vehicles based 50 g CO2 /km are credited 50 g/km CO2 are credited than 50 g/km CO2 are on multiple credits in • 3.5 times in 2012/2013 • 2 times in 2020 credited

the CO2 balance • 2.5 times in 2014 • 1.67 times in 2021 • 3.5 times in 2014/2015 • 1.5times in 2015 • 1.33 times in 2022 • 2.5 times in 2016 • Once in 2016 and • once in 2023 and • 1.5 times in 2017 thereafter without thereafter limited to a • Once in 2018 and limitation max of 7.5 g over the thereafter without period 2020-2023. limitation i.e. the manufacturers themselves decide when and how many credits to use, as long as the limit is not exceeded.

Eco-innovations Technologies that cannot Can be credited to the fleet average up to a maximum Same for passenger car be measured in the of 7 g/km CO2 (examples include solar roofs, exhaust official test procedure heat recovery, etc.) (NEDC), but that clearly

have scope for CO2 reduction

Exceptions Exception rules Manufacturers with registrations fewer than 1,000 units Manufacturers with registrations fewer than 1,000 units safeguard the economic are wholly disregarded. Manufacturers with registrations are disregarded. Manufacturers with registrations existence of small fleet between 1,000 and 10,000 units are allocated a target between 1,000 and 22,000 units are allocated a target manufacturers. that is individually agreed with the EU Commission. that is individually agreed with the EU Commission.

Manufacturers with Manufacturers with between 10,000–300,000 between 10,000–300,000 passenger car passenger car registrations in the EU: registrations in the EU: reduction target of 25 % reduction target of 45 % related to emissions related to emissions in 2007 in 2007

Pooling Pooling of different Possible Possible vehicle manufacturers within one Group

Source: VDA CLIMATE AND ENVIRONMENTAL PROTECTION POLICY 78

Framing CO2 regulation for the period after 2020 The ideal solution for regulation after 2020 however is still awaiting discovery. What

European CO2 regulation must be is clear is that before the “old regime” is simply and precipitately extrapolated in rethought for the period after 2020 a straight line and significantly tougher emission limits defined, the technical and economic feasibility needs to be looked at and the corresponding calculations of the estimated consequences made.

In any event, European CO2 regulation for the period after 2020 must be reconsid- ered from first principles in order to maintain industry’s indispensable productive capacity. “More of the same” would be accompanied by considerable climate policy weaknesses and even greater economic risks.

• The existing regulations are aimed entirely at new vehicle efficiency and fail to consider either the passenger car fleet (see Figure 5) or customers’ mileage or driving style.

• Excessive targets are counterproductive because technologically-driven higher new car prices would negatively impact demand: the necessary renewal of the vehicle fleet that climate policy requires would also be delayed, new car purchas- es would be deferred, people will simply continue to drive their old car – with a

significantly worse CO2 balance.

• The 2020 target is already incapable of being achieved with conventional tech- nology alone – the conventional combustion engine. Electro-mobility needs to be ramped up. But that takes time. As regards market and cost developments, and infrastructure as well, electro-mobility still poses numerous questions that current- ly defy adequate answers. To that extent, the EU’s purely supply-oriented policy

on CO2 limits, without regard to the demand side, is one-sided and unbalanced.

• A politically enforced, premature end to the combustion engine would deny industry the financial wherewithal for investing in the transition to alternative drive systems. Such a policy would not be technologically neutral and would massively limit the diverse manufacturer portfolio.

• Last but not least, the overarching European goal of increasing industry’s share of GDP to 20 percent must not be thwarted by climate policy overregulation.

Regulation ignoring vehicle fleet in million

12.5 million new registrations Vehicle fleet of 237.5 million passenger cars

Source: VDA 79

In view of these obvious weaknesses and risks, the automotive industry suggests reforming the existing regulation methodology and complementing it with an overall A linear extrapolation of the regulation strategy. A linear extrapolation of the regulation must be avoided at all costs. must be avoided

• In addition to new vehicles, other factors influencing road traffic CO2 emissions should also be taken into consideration. These include the car’s mileage and

service life or the CO2 content of the energy source (fuels, electricity). The vehicle fleet also needs to play a bigger role. To that end, the inclusion of vehicle fuels in emissions trading (ETS) could also supplement fleet regulation.

• Because of the imponderables surrounding electro-mobility and the necessary

discussion on reform, new CO2 targets for the period after 2020 should not be set prior to 2017.

• To ensure that the market for electric vehicles takes off, e-cars must continue to

be credited with zero grams of CO2 in the regulations. An active, demand-oriented policy by the member states is also required to support the new technology (charging infrastructure, etc.).

• Moreover, the next regulatory period – in line with other climate and energy policy targets – should be geared to 2030 instead of 2025.

Rethinking climate protection policy

Comprehensive solution

Look at all approaches to CO2 emission

New car technology Driving style and CO content of energy sources + + Vehicle fleet + 2 + Infrastructure (consumption in g CO2/km) mileage (fuels/electricity)

• No linear extrapolation of regulation / 2030 time horizon • Ramping up of the alternative drive system market not clear / no new targets prior to 2017 • Expand climate protection policy in transport and more flexible regulation

Source: VDA CLIMATE AND ENVIRONMENTAL PROTECTION POLICY 80

Climate protection policy for heavy commercial vehicles

In addition to CO2 regulations for passenger vehicles and light commercial vehicles, The EU Commission is planning a the European Commission is planning to bring forward proposals for regulating

proposal to regulate heavy commercial heavy goods vehicles as well. However, regulation of CO2 modeled on passenger vehicles cars makes no sense for heavy commercial vehicles because they start from a completely different situation:

• The diversity of commercial vehicles in operation is extraordinary (long-distance traffic, urban traffic, coaches and municipal buses, construction vehicles, etc.). Depending on the intended use, there are considerable differences in fuel consump- tion dictated by function (e.g.,: 1.7 l/ 100 tkm for long-distance routes, 5.2 l/ 100 tkm in urban distribution traffic, etc.). There is no such thing as an “average” commercial vehicle so that there cannot be an average/single limit either.

• There is scarcely a commercial vehicle that rolls off the production line “ready to go.” Instead, trailer and body manufacturers finish the vehicles to their customers’ orders, while the vehicle manufacturers do not always need to be aware of this on a case-by-case basis. At the same time, with an eye to weight and aerodynamics, the bodies and trailers have a considerable influence on the vehicles’ fuel consumption. There is thus no one single factor responsible for fuel consumption. Who as a consequence should take responsibility for a limit?

• Moreover, the driving force behind the heavy commercial vehicle market – other than for passenger cars – is purely rational. There is considerable market pressure on companies to reduce fuel consumption. With a share of around 30 percent, fuel costs are far and away the biggest single-line item in the long-haul road freight transport cost structure. That being so, transport companies, and thus the manufacturers as well, have a massive self-interest in HGVs that are as fuel- efficient as possible. 81

Ultimately, unlike for passenger cars, there is no generally applicable test cycle for heavy commercial vehicles, so that currently there are not any recognized It is intended to define heavy commer- calculations of fuel consumption or CO2 emissions either. Against this backdrop, cial vehicles’ fuel consumption perfor- the industry is actively supporting the EU Commission in developing a simulation mance using a simulated environment environment that will enable heavy commercial vehicles’ fuel consumptions, and thus their CO2 emissions, to be determined realistically and in a way capable of certification.

In May 2014, the EU Commission unveiled a strategy paper for reducing heavy commercial vehicles’ CO2 emissions. The initial focus here is on measures for certifying, monitoring and reporting heavy commercial vehicles’ emissions. The objective is to create even greater transparency regarding commercial vehicles’ fuel consumption and CO2 emissions and thereby increase yet further the market pressure for efficiency. The VECTO (Vehicle Energy Consumption Calculation Tool) simulation tool is to be used for this purpose. Other statutory measures are to be investigated in the medium term.

From a climate protection perspective, what is required for further significant reductions in road freight transport CO2 emissions is an integrated approach including all stakeholders. It is of central importance to mobilize all those concerned – away from a purely vehicle technology approach to a comprehensively effective approach.

The European commercial vehicle manufacturers formulated their “Vision 20-20” as far back as 2010 with the goal of reducing 2005 fuel consumption levels by 20 percent by the year 2020 (annual reduction of 1.3 percent). The industry unveiled an even more ambitious approach at IAA 2014, including not just tractor units but the entire vehicle, together with fuels and operational measures, within a compre- hensive approach. According to a study by the University of Leuven, an integrated approach such as this is capable of reducing road freight transport CO2 emissions by more than 20 percent between 2014 in 2020 (annual reduction of 3.5 percent).

Long haul & regional delivery averaged numbers

Vehicle-related measures for fleet Fuel Operations

Vehicle Trailer Tires Renewable 6 % fuels Operation Infra- Fleet -20 % or 2.5 % structure renewal Engine Weights & Low rolling -3.5 % Efficiency dimensions: resistance Biofuels annually EMS and other tires 2nd 13 % Aerody- efficient generation namics solutions Air-pressure control Synthetic Driver Better +5 % Predictive Aerodynamics fuel training infrastruc- additional driving Super ture fleet Light weight single tires Natural gas Consolidation renewal Auxiliaries of freight Telematics (Euro 0, I, II) Driver

s training/ Weights & Improved n

o assistant dimensions: traffic flow i

s systems

s EMS and i

m other e

2 efficient

O solutions C

2014 2020

Source: ACEA TML Report 2014 CLIMATE AND ENVIRONMENTAL PROTECTION POLICY 82

Simulation platform for trailer and body manufacturers

CO2 regulations for heavy commercial vehicles planned at European level will not

CO2 regulations for heavy commercial just affect the major tractor vehicle manufacturers, but also their system partners, vehicles also affect trade and body the trailer and body manufacturers. In a first legislative stage, it is initially expected

manufacturers that from 2018 onwards tractor vehicle manufacturers will have to disclose the CO2 emission values for those of their vehicles engaged in long-distance and distribution transport. In the process, the influence of trailers and bodies on the aerodynamics of the vehicle as a whole will initially be described in the VECTO simulation tool using defined default values. In a second step – probably in the period 2020/2021 – an extension to other categories of vehicle is to be anticipated. Trailer and body manufacturers too will then be confronted with the major challenge of calculating the wind resistance of their respective products under a process that is recognized and certified by the competent authorities. Measurements based on driving tests are expensive and unaffordable for the large majority of the small and medium-sized enterprises concerned. If, in addition, the potential for further aerodynamic optimiza- tion of trailers and bodies is to be tapped, then a different approach is required.

Against this backdrop, the VDA commissioned a feasibility study to investigate key The development of a web-based technical, economic and legal issues in developing a CFD simulation platform (Compu- simulation platform is possible within tational Fluid Dynamics), that is specially tailored to the requirements of small and two to three years medium-sized trailer and body manufacturers. The study was conducted by companies Fluidyna and TMG Consultants and concludes that the development and validation of a central, web-based simulation platform is possible within a two to three year time frame. The necessary coordination is currently in hand with the critical stakeholders in order to be able to commence the project before 2015 is out.

Unlike decentralized software solutions, which would require companies to put in place appropriately trained personnel and operate expensive hardware, the necessary outlay for operating a centralized and web-based solution could be kept within economically acceptable bounds. Should it prove possible to create such a centrally operated platform, companies could use it to corroborate the aerodynamic contribution of their respective bodies or trailers to the aerodynamic characteristics of an entire vehicle and would not have to accept the “default values” defined in the context of the EU’s

planned CO2 legislation, which would presumably be more adverse. 83

Air-conditioning systems and refrigerants

Back in the 1980s, the automotive industry looked at alternatives to the ozone layer depleting refrigerant R12 and replaced it with the significantly more environmen- Vehicle manufacturers have resumed tally friendly R134a. The German automotive industry introduced it long before development of CO2 air-conditioning its competitors. As result of a shift in emphasis of environmental policy, the focus systems switched to the greenhouse effect (influence of the gas on the greenhouse effect after escaping into the atmosphere). The EU therefore enacted a directive in 2006 introducing a limit on the greenhouse gas effect. This is defined in terms of the GWP (Global Warming Potential). The GWP is an index stated relative to its effect on CO2 as a greenhouse gas over a one hundred year time frame. The EU directive requires the air-conditioning system refrigerant in new vehicle models, and with effect from January 1, 2017 in all new vehicles, to have a GWP of less than 150. While the R134a in use today is significantly more environmentally friendly than the previous refrigerant, its GWP nevertheless exceeds the limit. The refrigerant R1234yf has been introduced as an alternative in the European market in a number of vehicle models. Tests on behalf of the German Motor Transport Authority show that these vehicles are safe as construed by the Product Safety Act. A further test indicated, however, that a fire cannot be ruled out in every situation in every vehicle model.

German vehicle manufacturers thereupon decided to resume and complete devel- opment of the alternative CO2 – yet another possibility of introducing safe refriger- ants into the vehicle fleet. Since then, more than 16 CO2 system components have been standardized and the first vehicles are in test operation.

Climate effect and damage caused to the ozone layer by coolants

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

R12 10.890 Yes

R134a 1.430 No

R1234yf 4 No

R744 ( CO2 ) 1 No

Source: VDA CLIMATE AND ENVIRONMENTAL PROTECTION POLICY 84

Biofuels and sustainability debate

Since January 1, 2015, the biofuel and oil industry has been subject to fundamen-

Adding biofuels reduces CO2 emissions tally new rules. The previously applicable subsidy system for biofuels in Germany is being completely revamped. As a result of the new climate protection or green- house gas quota, the oil industry is now required by law to reduce greenhouse gas emissions by 3.5 percent. The oil companies are using biofuels to achieve this goal. Biodiesel and bioethanol emit significantly less by way ofgreenhouse gases than fossil fuels. Adding biofuels to conventional fuel therefore results in an immediate

reduction in CO2 emissions for the entire vehicle fleet.

There has been a long-running discussion on the sustainability of biofuels. In Euro- pean and German legislation, biofuels are subject to tough regulations. Moreover, there are no comparable regulations, either for foodstuffs or for cosmetics raw materials. From the VDA’s perspective, however, these standards should be applied across the board. The German INRO initiative (“Initiative for the Sustainable Provi- sion of Raw Materials for Biomass Use”) is a good example of how industries using biogenic raw materials comply with sustainability criteria.

The EU is planning to amend biofuels directives. This would put biofuels that are established in the market at a disadvantage. The European Commission still

intends to take account of “indirect land use changes” (iLUC) in CO2 imputation. The assumption behind iLUC is that an area previously used for growing food or other biogenic raw materials is now cultivated with plants for producing biofuels. The field crop previously cultivated there, so a further assumption has it, is now grown on another parcel of land that was previously fallow or forested area. The

CO2 emissions arising from the use of this new acreage is not imputed to the plants growing there but to the biofuels on the original field. It is thus apparent that assumptions are being made that are not scientifically robust and do not comply with international standards. They should not therefore serve to underpin political decisions.

The German automotive industry advocates the use of next-generation biofuels. Sustainably produced biofuels are Biofuels are produced from biological residues such as old wood, straw or other an important option, and will be in waste. No foodstuffs are used in Germany to produce biofuels. Energy crops are the future cultivated on only a single-digit percentage of arable land worldwide and only around 6 percent of the world’s cereal harvest goes to produce biofuels. It is thus clear that price increases and shortages cannot be caused by biofuels. 85

Labeling

Passenger vehicle labeling

Anyone buying a car in Germany wants to know, above all, what its fuel consumption is. That is why the German Energy Agency (dena) recommends car buyers look at The passenger car label provides all the passenger vehicle label. The label provides all the energy data at a glance. the vehicle’s energy data at a glance

As a basic matter of principle, EU Directive 1999/94/EC requires consumers to be provided with standardized information on fuel consumption and CO2 emissions for new cars. Exactly how this information is to be presented will, however, be left to the individual European countries themselves. Manufacturers and dealers have already been required since 2004 to provide information about fuel consumption and CO2 emissions for new passenger vehicles under the passenger vehicle energy consump- tion labeling ordinance (Pkw-EnVKV). This labeling was significantly improved in 2011: since then, instead of a fact sheet, there has been a readily comprehensible color-coded scale informing the customer directly at the moment of purchase about a new vehicle’s CO2 performance.

In the same way as with domestic electric appliances, the label provides informa- tion on the efficiency class into which the new car falls: vehicles with significantly The passenger vehicle label enables a better CO2 values than the average for their “weight class” are classified green, sensible comparison between vehicles vehicles that are average are labeled amber and vehicles that are below average of the same class are labeled red. As future passenger car CO2 values improve, the system will be progressively tightened up.

The passenger car label enables a sensible, at-a-glance comparison between vehi- cles of the same class. At the same time, it encourages manufacturers, for compet- itive reasons, to make their vehicles more efficient – be it a compact or a family car. To that extent, according to dena, the passenger car label provides a valuable contribution to climate protection. Admittedly, the passenger car label needs to be amended in the context of the introduction of the new test procedure for fuel consumption (WLTP). You will find detailed information on the passenger car label at www.pkw-label.de. CLIMATE AND ENVIRONMENTAL PROTECTION POLICY 86

Vehicle energy consumption label

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

Brand: Fuel:

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

Fuel consumption combined: /100 km inner city: /100 km outside: /100 km Official fuel consumption CO emissions combined: g/km 2 and CO2 data 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 The specific vehicle’s B ranking within the B efficiency class C D Colored bar

E depicting the CO2 efficiency scale F G

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

Source: European Commission 87

Tire labeling

EU Regulation (EC) 661/2009 envisages mandatory tire labeling for tires in the spare parts business. This labeling describes the rolling resistance (fuel pump symbol), the The revision of the mandatory tire wet-weather adhesion (rain symbol) and the tire road noise (sound wave symbol) labeling requirement planned for 2014 and is divided into classes A to G. The label is capable of further improvement: is still awaited experts consider up to 20 attributes to be required for consumer information. The revision by the EU Commission planned for 2014 is still awaited.

Tires should possess comfortable suspension characteristics, be long-lasting, cause little road noise, exhibit the lowest-possible rolling resistance and possess good breaking performance in wet weather. These diverse requirements are, to some extent, physically mutually contradictory, for example the reduction in rolling resis- tance and the shorter braking distance.

Tire labeling European tire labeling regulation

A B B B C D F G H 72 dB

1222/2009 – c1

Source: European Commission CLIMATE AND ENVIRONMENTAL PROTECTION POLICY 88

Particulates, environmental zones and air quality

The air-quality limit for particulates introduced by the EU is very ambitious. Whereas Breaches of the particulates limit the annual average value of no more than 40 micrograms per cubic meter of air is depend mainly on meteorological usually complied with, the daily average values of 50 micrograms per cubic meter of parameters air are exceeded more often than the 35 occurrences permitted. The year 2014 also demonstrated that breaching the limit mainly depends on meteorological parameters. In the winter the limit is exceeded by a large margin, in the summer as good as never. Road traffic cannot therefore be the cause of these winter exceedances.

By a quite overwhelming margin, the particulates measured in urban areas come from the surrounding area, and to some extent from abroad. It is referred to as “regional background.” About 20 percent of fine dust comes from urban pollution, including house fires. The German Environmental Agency has calculated that wood burning

alone causes average PM10 values to increase by between 4–5 micrograms per cubic meter. The latter therefore exceed the contribution from road traffic. Approximately one quarter of particulate volume is generated at the “hotspots”; typically these are measuring stations close to main thoroughfares. Although road traffic is concentrated in these locations, traffic emissions from engines are low. At a hotspot in Stuttgart, the latter account for only 4 percent of the total volume, for example, in Frankfurter Allee in Berlin for 7.2 percent. This proportion will fall yet further as a result of the increasing prevalence of Euro 6.

Average number of PM10 daily average values all measuring stations in Germany, exceedances almost only in winter

8

7

6

5 3

4 50 µg/m

3

2

1

0 January February March April May June July August September October November December 2013 2012 2011 2005–2010

Sources: German Environmental Agency (UBA), VDA 89

Since 1995 particulate pollution in Germany has fallen by 40 percent. That is essentially attributable to the success road traffic has had in its reduction. In the Particulate pollution in Germany is next few years, engine particle emissions from German road traffic will be reduced steadily declining yet further. There will be a reduction not just in particulate mass but in the number of particles. All particles will thus be filtered out, not just the large ones. That means that a Euro 6 diesel vehicle in real operation will achieve, de facto, zero emissions. Particle emissions from a spark ignition engine are already at this level. The conclusion of a study carried out on behalf of the German Environmental Agency is that total German road traffic engine emissions in 2020 would no longer even equal the level of emissions as a result of the smoking of cigarettes in Germany. Summer barbecue emissions are then significantly higher than all passenger vehi- cle engine emissions together.

The environmental zones introduced in Germany enjoy only limited success if road vehicle traffic alone is regulated. An analysis conducted on behalf of the German An ever-diminishing effectiveness of Federal Department of the Environment identified an ever-diminishing effective- the environmental zone was observed ness of the environmental zone if the latter was based solely on cars, commercial vehicles and buses. Owing to the major successes of the automotive industry, the German Federal Government has discovered that emissions from construction machinery “account for as much as half engine combustion-related road traffic emissions in urban areas.” It is therefore clear that anyone wishing to reduce total particulate emissions needs to keep their eye on all emission sources and not just focus solely on traffic.

Average values of the percentage shares of the geographical PM10 source analysis in Germany the lion’s share originates from the surrounding area

Additional pollution 26.1 %

Regional background 54.3 %

Urban pollution 19.9 %

Sources: UBA/IVU, VDA CLIMATE AND ENVIRONMENTAL PROTECTION POLICY 90

Tire pressure monitoring systems

EU Regulation (EC) 661/2009 for the general safety of motor vehicles serves a Only 40 percent of motorists regularly number of purposes. In addition to protecting consumers it is also intended to check their tire pressure increase road safety. That is why the regulation also required the mandatory fitting of tire pressure monitoring systems.

According to a study by tire manufacturer Bridgestone, scarcely 40 percent of motorists regularly check their tire pressure nowadays. Yet too low or too high a tire inflation pressure has a very pronounced effect on a car’s driving characteristics. A correct tire pressure also saves on fuel, and the tire wears more evenly. If the pressure is too low, the tire is subject to greater stresses. Under-inflation by as little as 0.3 bar reduces mileage by 30 percent. In extreme cases, that can cause braking distance to increase or even cause the tire to blow out.

Since November 1, 2014, the regulation has required the fitting of tire pressure Tire pressure monitoring systems have monitoring systems (TPMS) for all new vehicles (passenger vehicles, RVs (M1) been mandatory for all new vehicles and SUVs (M1G)). There is no requirement to retrofit vehicles already on the road. since 2014 The technology distinguishes between direct and indirect measuring systems, with direct measuring systems being installed in the tire or wheel. Indirect measuring systems operate via the ABS sensors, which detect abnormalities. A subfunction of the ABS sensor system deduces a fall in air pressure from vibration of the rolling circumference of the tire; an additional sensor on the wheel or tire is not required. In the case of direct measuring systems, air pressure and temperature data are passed to the onboard computer via battery-operated sensors in the wheels. All passenger vehicle tires are required to feature this equipment – winter wheels as well need to possess a tire pressure monitoring system for new vehicles registered from November 1, 2014 onwards.

The VDA has founded the tire pressure monitoring system and tire sensor working groups, in which vehicle manufacturers, tire manufacturers and system manufac- turers collaborate. 91

Occupational safety

The automotive industry’s objective is to continue on the same path of improving work processes and reducing accidents in the workplace. Last year too, the number of The number of workplace accidents work-related accidents and resulting days lost fell, although the potential for improve- was again reduced in 2014 ment has been all but exhausted.

The directive on electromagnetic fields could become a fresh example of excessive national implementation of an EU directive. A large number of welding machines are in use in the automotive industry. There is a very simple yet accurate procedure for measuring field strengths and protecting employees against excessive exposure. The Federal Ministry of Labor is drawing up technical rules for these machines, which could significantly exceed the EU’s minimum requirements and require superfluous difficult calculations. This would further weaken Germany as a production location without achieving any significant safety dividend for employees.

Accident frequency index for notifiable industrial accidents per 1 million working hours

30

25

20

15

10

5

0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Accident frequency

Source: VDA CLIMATE AND ENVIRONMENTAL PROTECTION POLICY 92

Sustainable motor manufacturing – acting responsibly in Germany and along the supply chain

The German automotive industry is aware of its responsibility throughout the entire Potable water consumption per vehicle cycle of a car’s production and use: from the selection of materials, via production produced has fallen by more than in Germany and fuel-efficient operation to closing the materials cycle at the end 60 percent of the life cycle. It is constantly researching ways of further optimizing production processes and materials with a view to husbanding resources. A large proportion of the 30 billion euros the German automotive industry invests every year in research and development is invested at home. This puts it in the forefront. In the past two decades, German motor manufacturers have achieved significant successes in the use of natural resources in automotive manufacturing. For example, the consumption of potable water for each vehicle manufactured has fallen by more than 60 percent during this period. More than 80 percent of manufacturing waste these days is recycled. In air quality as well, the German automotive manufacturers have achieved considerable economies. Since 1990, solvent emissions arising from vehicle spraying have fallen by 65 percent. Today, they are the lowest by international comparison. The figures prove that German motor manufacturers and their suppliers have an exemplary environmental protection record. 93

Environmental regulations in Germany are among the toughest in Europe. Eighty percent of German environmental regulations now originate in Brussels. Often German environmental regulations are however there, is no European harmonization of environmental law and so, in among the toughest in Europe passing EU directives into German law, the screw is tightened yet further. The year 2014 saw the start of preparations for the European process of reviewing and adapting so-called best available technologies (BAT) for vehicle spraying (“surface treatment using organic solvents”). This is a highly relevant process as BATs are the basis for deriving emission limits. The German automotive industry is very well placed here in a European comparison. What is critical is that there be no further tightening of the emission limits originally calculated and defined at EU level when passing them into German law. CLIMATE AND ENVIRONMENTAL PROTECTION POLICY 94

Beyond the statutory framework, the German automotive industry is an inter- The German automotive industry is a national pioneer in production-related environmental protection. Environmental pioneer in production-related environ- management standards such as ISO 14001 or EMAS (Environmental Management mental protection and Audit Scheme) are nowadays standard practice in the German automotive industry. This testifies to companies’ keen sense of responsibility. “Industry 4.0” – one of the projects of the German Federal Government’s high-tech strategy – marks the development of conventional production technology into the “intelligent factory” in 2025 based on the digitization of processes. Increasing resource effi- ciency through optimized manufacturing processes is an essential building block in the “Industry 4.0” vision. The German automotive industry is highly committed to this objective.

The responsibility for people and the environment does not end at the factory gate, but extends into the upstream supply chains. But it would be simplistic to foist sole responsibility onto the automotive industry. A fair division of labor is required here between the state and business. This is the only way in which to influence environmental and occupational safety conditions within the individual links of a supply chain. The reference to supply chains is also apparent in the voluntary environmental management standard ISO 14001. In future, key environmental requirements should be communicated more strongly to external suppliers. An international network of automotive manufacturers has developed a questionnaire for quizzing suppliers on aspects of sustainability in a consistent manner. This questionnaire is available for download from the platform of the European network CSR Europe (http://www.csreurope.org/).

There has also been a toughening of regulatory requirements on companies’ exter- It must be mandatory for large corpo- nal reporting. This can be seen in the EU directive passed at the end of 2014 on rations to report on environmental nonfinancial reporting requirements for large corporations. It is now mandatory for aspects of their activities the latter to report on the environmental and social aspects of their activities. Beyond the information already required on environmental and employee matters, in future information will also be expected on combating corruption and respect for human rights. The VDA’s subcommittee on sustainability in the supply chain is dealing with these issues. The steady increase in the membership of this working group illustrates the motor manufacturers’ and suppliers’ keen interest in this topic. 95

Reducing classic pollutants

Road traffic emissions are falling ever further. While mileage is increasing. The past linkage between mileage and emissions has been broken. This enormous Road traffic emissions will be reduced success is due in no small part to the introduction of the catalytic converter, the yet further in the next few years reduction of refueling emissions, the particulate filter in diesel cars, SCR systems in commercial vehicles and the ongoing optimization of engine designs. This costly and innovative technology has been behind the automotive industry’s success as regards air quality in recent decades.

TREMOD, a calculation model developed by the Institute for Energy and Environ- mental Research (Ifeu) in Heidelberg, on behalf of the VDA and Federal Ministry of the Environment, makes it possible to quantify the downward trend in pollutant emissions. Road traffic emissions in the next few years – accompanied by higher mileage – will continue to fall. The models calculate a reduction in emissions from road traffic by 2030 compared to the base year of 1990 by:

• more than nine tenths for volatile hydrocarbons (HC),

• more than nine tenths for particulates (PM),

• more than nine tenths for carbon monoxide (CO) and

• almost nine tenths for nitrous oxides (NOx).

These impressive figures speak for themselves. Both physically and technically there is scarcely any scope for significant improvement over and above the forecast performance – and its high cost would be economically unjustifiable. The automotive industry has achieved its mission of improving air quality. The challenge now is to achieve the quickest-possible renewal of the fleet so that there is a rapid increase in the proportion of new, especially clean vehicles.

Great success in reducing emissions from road traffic: Particulate emissions

1,200 750

900 562

600 375

300 187 bn km in kt

0 1990 1995 2000 2005 2010 2015 2020 2025 2030 Mileage Passenger transport Transport of goods

Sources: ifeu, DIW CLIMATE AND ENVIRONMENTAL PROTECTION POLICY 96

Great success in reducing emissions from road traffic:

NOX emissions

1,200 750

900 562

600 375

300 187 bn km in kt 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 Mileage Passenger transport Transport of goods

Sources: ifeu, DIW

Great success in reducing emissions from road traffic: HC emissions

1,200 750

900 562

600 375

300 187 bn km in kt 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 Mileage Passenger transport Transport of goods

Sources: ifeu, DIW

Great success in reducing emissions from road traffic: CO emissions

6,000 750

4,500 600

3,000 400

1,500 300 bn km in kt 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 Mileage Passenger transport Transport of goods

Sources: ifeu, DIW 97

End-of-life vehicle recycling

A high-quality, certified take-back and recycling network for end-of-life vehicles has been established in Germany. Take-back free of charge is guaranteed. The statutorily Germany boasts a certified take-back prescribed recycling and recovery quotas are being achieved. A figure of approxi- and recycling network for end-of-life mately 1.3 to 1.4 million vehicles annually, the whereabouts of which are unknown, is vehicles frequently bandied about in public as being the (illegal) export of end-of-life vehicles, and thus a loss of resources. This is a misrepresentation. In fact, a large proportion of these vehicles is recycled in an environmentally friendly way in Germany but not captured in the statistics. The principal reason for the constantly declining number of “official” end-of-life vehicles is the reduced importance in recent years of the certifi- cate of destruction when decommissioning vehicles.

All investigations to date demonstrate that only very few genuine end-of-life vehicles leave Germany. Most vehicles leaving the country are pre-owned vehicles. This free flow of goods is important for a functioning economy and must not be restricted. The term “illegal export of end-of-life vehicles” is often advanced in this context, the terms “end-of-life vehicle” and “pre-owned vehicle” become blurred or are used inaccurate- ly. The already existing proof of destruction is the appropriate distinguishing feature here. If the licensing authorities were systematically to demand this proof of destruc- tion upon vehicles being finally decommissioned, the correct treatment of end-of-life vehicles could be better recorded in the recycling facilities and the gray area between end-of-life and pre-owned vehicles banished. CLIMATE AND ENVIRONMENTAL PROTECTION POLICY 98

REACH: Revision and impact on the automotive industry

REACH is an EU regulation which came into force on 1 June 2007. REACH stands REACH: Authorization influences the for Registration, Evaluation, Authorization and Restriction of Chemicals. The REACH automotive industry's value chains system is based on the principle of industrial self-responsibility. Within the scope of the system only chemicals that have previously been registered are permitted to be brought into circulation. But not only chemicals are affected. Increasingly frequently, materials required in motor manufacturing are coming under REACH's authorization procedures. Depending on the available substitute materials or technologies, these materials are supposed to be replaced in a phased manner. In so doing, the process pays no heed to the risks occurring in use. Authorization also focuses on materials which are already comprehensively regulated and capable of being used safely.

One example is the authorization procedure for chrome (VI) compounds used in the manufacturing of chrome-plated exterior and interior components. The finished work piece contains only innocuous elementary chrome. A potential risk exists solely for workers during the chrome-plating process. However, employee protection is already comprehensively regulated and at a high level by corresponding EU directives and their implementation in the Hazardous Substances Regulation. Costly authorization therefore adds no value. At the industry's prompting, the European Commission has addressed itself to this task, especially as the affected components are produced outside Europe without restriction and can then be imported without further ado. Authorization therefore is directly jeopardizing manufacturing jobs in the EU.

Vehicle life cycle

Material Material Component Component Vehicle Vehicle Vehicle Vehicle development production development production development production use recycling

Spare parts Spare parts Spare parts production production in stock 3–7 years 8–20 years 0–X years

OEM SME OEM/SME

Source: VDA 99

Since last year all proposed materials subject to authorization are to undergo a risk management option analysis by the member states. The aim of this analysis is to find The EU is striving for material the best risk management option for the material in question. In addition to autho- substitution rization, this option can also be a restriction, a reclassification, another statutory regulation such as a mandatory limit, but also a waiver of further measures.

An additional major shortcoming in the authorization procedure is the uncertain outcome whether approval will be granted for specific applications. An expiry date is defined when admitting a material to the list of materials subject to authorization. Use is prohibited if by this date no use-related authorization has been granted. The time lag between the Commission's verdict and the expiry date is however far too brief for any necessary conversion of industrial manufacturing processes. Irrespec- tive of the outcome of the authorization this has caused investment in existing, not to mention new, production plant to dry up.

An example of this is the plasticizer DEHP. The expiry date for the use of this substance was 21 February 2015. In future, DEHP will no longer be available for REACH is jeopardizing security automotive industry applications. Therefore, spare parts must in future be imported of supply from production plants outside the EU – production in the EU is being discontinued. The situation is headed in the same direction with chrome-plating. For spare parts as well the authorization procedure poses a virtually insuperable challenge, as there is no derogation for spare parts after the expiry date. REACH is thus jeopardizing secu- rity of supply for parts required to repair vehicles. Redevelopment using alternative materials is uneconomic given the low unit volumes, and is disproportionately expen- sive. Moreover, the original spare parts would in any case disappear from the market within the foreseeable future because demand for them is constantly reducing as the relevant vehicles are progressively decommissioned.

What is incomprehensible is that a number of member states insist on these rigid regulations and are failing to support a pragmatic solution – such as the “repair as produced” principle that has been common practice for years in the end-of-life vehi- cle directive. With each new approval procedure, the companies of the automotive industry are confronted with far-reaching strategic decisions as regards the relevant production processes and component procurement.

Networked and Automated Driving

Michael Bitzer – graduate engineer (FH) electrical engineering, hardware development electronic system gear, business unit automotive, supervising tutor for electrical engineering students, ebm-papst St. Georgen GmbH & Co. KG, St. Georgen im Schwarzwald, 2013 NETWORKED AND AUTOMATED DRIVING 102

From the driver assistance system to automated driving

Mobility – the primeval urge of human beings – has never undergone such a major Networking and automated driving are change as at the present time. The rapid growth in urbanization worldwide is central topics of future mobility pushing transport routes to the limits of their capacity. By 2050, 70 percent of the world’s population will live in cities. By then, the number of automobiles on the roads will have doubled. The challenge is to guarantee functioning mobility in cities at the same time as maintaining quality of life for the population living there. Driver assistance systems and automated driving will play a central role in overcoming these tasks. The networked automobile will offer greater safety, efficiency and reduced driver strain, as well as being even more convenient due to innovative services.

The automobile is undergoing digital evolution – indeed many people call it a revo- By 2016, 80 percent of new cars will lution. IT is being integrated into new cars at a rapid rate. According to studies, at be networked least 80 percent of all new cars sold by 2016 will be networked. (Sources: Oliver Wyman and Bain). Market observations indicate that the social requirement to be “always on” will not cease when it comes to road transport. Car drivers want to be able to use their mobile terminal units when they are driving as well. Future driver assistance systems with higher levels of automation can form the basis for safe use of Internet-based functions in the car.

VDA co-ordination team for networked & automated driving

VDA Co-ordination Center Steering Committee for Networked and Automated Driving for Networked and Automated Driving Working Group for Networked and Automated Driving

Networked and automated driving safe – comfortable – efficient

Networking Inter-modality Automated driving

Means of Parking Partially & highly Fully c2c c2x www Car sharing Assisted transport & jam automated automated

Social benefit

Customer benefit and business models

Technology

Safety, reliability, security

Legal framework & boundary conditions

Public relations acceptance

Source: VDA 103

The German automotive industry is trialing and developing extensive solutions for a broad range of driver assistance systems and automated driving. Some of them Automated driving is a further evolu- are already in use. These systems help to deal with the tasks of driving. At the same tionary development of modern driver time, they make operation easier depending on the requirements and application – assistance systems by means of recommended actions for, and supplementing the actions of, the driver, even as far as replacing driver input. Future developments in driver assistance systems will be oriented towards the phases of assisted driving, taking in partially and highly automated driving, even as far as fully automated driving. However, we should not expect fully automated vehicles to take to the roads in the next few years.

The UK research institute, Centre for Economics and Business Research (CEBR), has calculated that every German car driver spends on average 118 hours annually either The networked vehicle saves time, in traffic jams or taking detours to avoid them. With networked driving, 20 percent resources and costs of the traffic jams in Germany could be avoided. This would be reflected in annual savings of 233 million liters of fuel, 600,000 tonnes of CO2 and 5.2 million euros of overall costs. According to a current study by the Research Association of Automotive Technology (FAT), the car drivers of Germany alone spend 560 million hours a year in total searching for somewhere to park.

In addition to the time, resources and costs saved, networking and automation will also increase safety for all road users. Taking over individual functions such as longitudinal and lateral control of the car (for example in the traffic jam or highway driving assis- tant) through to fully automated and driverless driving, will significantly reduce the dangers caused by people, such as reaction time, distraction and excessive strain or boredom, or indeed eliminate them entirely. Functions such as park assist reduce the strain on drivers, save time and create new possibilities for urban parking and traffic management concepts. As far as the automotive industry is concerned, all aspects of the networked vehicle give rise to a new market of business opportunities such as offering various aftersales services. NETWORKED AND AUTOMATED DRIVING 104

Creating a legal and political framework

To push ahead with topics such as networking and automated driving, the automotive The general conditions must be industry must be able to rely on a secure legal framework within the European area adapted to technological development and in the global context. What is called for is solidarity with national and international policy so as to make future mobility safe, convenient and efficient. For this purpose, the infrastructure will have to be expanded according to requirements, for one thing. For another, information must be able to be exchanged in a standardized format via defined interfaces. Furthermore, the preconditions must be put in place for the vehicle to carry out tasks that only the car driver is allowed to perform nowadays. The Vienna Convention of 1968 states that the driver must have control over his/her vehicle at all times. In March 2014, the article was supplemented at the session of the UNECE, the UN Economic Commission for Europe, in its Road Transport Safety working group. The changes relevant for automated driving still have to be implemented at UN level as well as in national legislation, however. The automotive industry is calling for internationally harmonized requirements on vehicle drivers.

Data protection in the vehicle

With the advance of networking and automation, the requirements on data protection Increasing networking is produc- in the vehicle are also growing. Recording and evaluating mobility metadata as well as ing additional data and information ensuring confidentiality are at the center of attention. In view of its responsibility and streams with confidentiality in customer relations in mind, the German automotive industry will implement principles such as transparency and self-determination as well as a pronounced culture of safety in the product. Irrespective of the data and services input by customers themselves, data will also be created in the vehicle by onboard systems. Primarily, this will involve technical data representing the system and environment conditions so that corresponding vehicle functions can be triggered. Some of these are volatile and are stored temporarily as snapshots, for example for the purpose of a fault message or for displaying operating values. In order to assist with service and diagnosis, they are stored in an aggregated format without time reference, for example as error codes.

The safety-relevant systems in vehicle electronics will be separated from navigation, telematics and infotainment applications by protective mechanisms. As a result, attacks and manipulations of central driving functions such as braking, accelerating and steering should be excluded. 105

Coordination Center for Networked and Automated Driving

The interdisciplinary topics relating to networked and automated driving have been brought together within the VDA since October 2014 under a newly created coor- New in the VDA: Coordination Center dination center. The objective is to coordinate the specified roadmap with the general for Networked and Automated Driving social, legal and economic policy conditions. The coordination center represents the automotive industry on the relevant national and international bodies, and is the central point of contact for the topic of networked and automated driving.

The approach to a holistic concept

Status quo: Fragmented and decentralized partial strategies Target picture: Coordinated VAF overall concept

Functions Map Projects

Vehicle Driver Solution Interface Data Transmission

Road Data Vehicle Driver Data Infrastructure Privacy Solution Interface Transmission

Data Back-end Security Road Backend Data Infrastructure Infrastructure Infrastructure Privacy

Certification Data Usage Law Data Data Usage Security Certification

Homologation Validation Validation Homologation Law

Source: VDA

Transport and Infrastructure Policies

Stefan Müller – PhD in electrical engineering; section manager, engine-ECU hardware engineering, Robert Bosch GmbH, Stuttgart-Feuerbach, 2010 TRANSPORT AND INFRASTRUCTURE POLICIES 108

The road is the number 1 means of transport

In 2014 as well, the car was used in Germany for more than 80 percent of passenger The car is the favorite means of transport. Its transport volume increased to 928.8 billion person kilometers, a rise of transport – and will be in future 1.2 percent compared to the previous year. The most recent traffic forecast by the German Federal Government – with a time frame out to 2030 – expects that the car will also remain by far the dominant means of transport in the future, with a market share of just under 79 percent. Consequently, there is no sign of any cultural aversion to the car. This is also the case for younger age groups. According to corresponding market studies by PSB Research and TNS Infratest, the car is a must-have for 70 percent of 18 to 34 year olds. Only 21 percent of 18 to 29 year olds state that they can do without their own car. Irrespective of this, a new attitude to mobility has developed among this age group. Since the year 2000, their level of motorization has declined. The reason is that – in contrast to the same age cohort in earlier decades – they tend to postpone purchasing their own car to a later stage in life on grounds of cost. Only once they have established themselves in a career, formed their own household and started a family do they buy a car. However, since 2013 it has been apparent that the decline in their degree of motorization has come to a halt.

The coach market is growing apace

The further development will also take place because the road as a means of transport More than six times as many coaches will remain as important as it is today for many years to come, driven also by the will be on the roads by 2030 growth of scheduled coach traffic. Thanks to the high capacity utilization of coaches, the coach scores points in long-distance transport as the most environmentally friendly and cost-effective means of transport, and since deregulation of the market on January 1, 2013, it has enjoyed increasing popularity. The Federal German Ministry of Transport estimates in its most recent forecast that the number of coaches will increase by more than six times between 2010 and 2030.

Passenger transport in Germany in billion person kilometers

1,400

1,200

1,000

800

600

400

200

0 1980 1990 1995 2000 2005 2010 2014 2030

Air transport Rail Public road transport Car

Sources: DIW, ITP, BMVI 109

Trucks shoulder the majority of the load in goods transport

In 2014, road goods transport in Germany grew by 2.7 percent to 465.7 billion tonne kilometers. This means the truck currently shoulders 73 percent of the load in goods 73 percent of goods traffic is carried transport. This corresponds to about the European average. The Federal Ministry of by truck Transport assumes in its most recent forecast that road goods transport will increase by about 30 percent to 607.4 billion tonne kilometers by 2030. It will retain its current market share. This also indicates the need for adequate expansion of infrastructure.

The truck can drive up to every house and every loading ramp. This is only rarely the case with railways and internal waterways, if both the sender and the recipient of the goods have their own railway spur or are located on a riverside. If that is not the case, the truck will be required in any event for carrying the goods to the railway depot and/or collecting them from it. Due to the resulting detours and transship- ment operations, combined road/rail transport as opposed to purely road transport is only generally cost effective beyond a certain distance because of economic and ecological reasons. Consequently, the 78 percent of goods that are transported by road over distances of less than 150 kilometers are not a candidate for involvement by the railway. Even over longer distances, it depends on the specific circumstances. This is because efficient road/rail transport requires large volumes to be transported. The truck, on the other hand, can transport even small amounts economically.

Consequently, trucks and trains are not in competition with one another. Instead, these means of transport serve different markets, or even cooperate directly with Trucks and trains are no competition one another. In combined transport, trucks are used for delivery and collection for other means of transport, accounting for goods totaling more than 250 million tonnes annually. The market segments and market shares of the different means of trans- port consequently arise from their particular performance profiles, and cannot be defined as part of a “centrally planned” approach. Attempts to shift transport onto another carrier would merely increase the costs and the environmental pollution generated by transport.

Goods transport in Germany in billion tonne kilometers

1,000

1000

900

800

800

700

600

600

500

400

400

300

200

200

100

0

0 1990 1995 2000 2005 2010 2014 2030

Inland shipping Rail Truck

Sources: DIW, ITP, BMVI TRANSPORT AND INFRASTRUCTURE POLICIES 110

Infrastructure – increasing efficiency potential

The need for investments in federal highways alone is estimated by the Institute Investments in the road infrastructure for Economic Research at about 8.4 billion euros annually. In fact, investments have are lagging behind requirements averaged only 5.3 billion euros over the past 10 years. There has been a decline in value of the German autobahn network over years. Net invested assets have been declining continuously because less is being invested than has to be written off. This inadequate financing is apparent everywhere throughout the network of federal highways.

In 2014, traffic jams in Germany on the autobahn network alone added up to The foundation of the economy is 830,000 kilometers in length. Measurements of the carriageway status reveal, according crumbling to the Federal Ministry of Transport, that almost 17 percent of the autobahn network at least exceeds the warning value. This means its status is such that refurbishment measures must be planned; 8 percent is even above the threshold value. These roads are regarded as in urgent need of repair, and construction measures must be initiated without delay.

As far as federal highways are concerned, as much as 35 percent of the network is in excess of the warning value while 20 percent of this is already in urgent need of repair. The bridges are the cause of greatest concern: At 47 percent, almost half of the bridges in Germany are over the warning value. Poor carriageway conditions are also a problem for the environment: unevenness of the carriageway leads to weaker and irregular contact between the tire and road surface, thereby increasing fuel consumption and reducing road safety. Last but not least, traffic restrictions imposed because of the poor state of repair have led to significant losses of time.

Investments in federal highways in billions of euros

7

6

5

4

3

2

1

0 2003 2006 2009 2012 2015 Expected 2018 Plan From taxes From truck toll

Source: Pro Mobility

The level of tolls set from January 1, 2015, onwards has already been taken into account for the years 2015 – 2018, but not the expansion of tolls to vehicles between 7.5 tonnes and 11.9 tonnes, and neither has the planned car toll. 111

One example: The detours that vehicles of more than 3.5 tonnes have to drive in order to avoid the bridge over the Rhine at Leverkusen, which is blocked for this 60 percent of German companies category of vehicle, are leading to economic losses amounting to 350 million euros are suffering due to the poor quality annually. In North Rhine Westphalia alone, there are now 31 bridges with load of roads restrictions. This is producing palpable additional costs for the companies affected. According to a survey by the Institute for Economic Research, more than 60 percent of companies in Germany feel they are disadvantaged in their business by the quality of roads. This is problematic not least because, according to an investigation by Kreditanstalt für Wiederaufbau (the German reconstruction loan corporation), the transport infrastructure is the second most important location factor – only behind the availability of skilled personnel.

The infrastructure offensive by the Federal Government is only a first step

Politicians have now recognized the problem of inadequate financing for the transport infrastructure. The grand coalition has agreed to increase the volume of investments Investments in transport routes should in transport routes by about 1.3 million euros annually during this legislative period. be increased by about 1.3 billion euros However, the level of investment going into federal highways will only increase to annually 5.5 billion euros on average during the years from 2014 to 2017, meaning that it will continue to remain well short of actual requirements even over the next few years.

As part of increasing debate concerning the ongoing infrastructure deficiencies and criticism from abroad regarding the general lack of investment in Germany, the Federal Further investments in public Ministry of Finance announced a further investment offensive in November 2014. infrastructure are being discussed According to this, the government will provide a total of 10 billion euros of funding for additional investments during the years 2016 to 2018. Of this, 3 billion euros has been earmarked for avoiding a planned global underspend that was previously in place; 7 billion euros of the amount will be available for “future investments, espe- cially in public infrastructure and energy efficiency.” It is to be hoped that an adequate share of this will be allocated to financing the network of federal highways. At any rate, this concerns the very same transport network on which 80 percent of passen- ger transport and more than 70 percent of goods transport are carried. TRANSPORT AND INFRASTRUCTURE POLICIES 112

New priorities instead of new cash cows

The Federal Government intends to identify new sources of revenue to pay for some New burdens on the road users are of the additional investments. These include introducing a car toll, charging for air unnecessary pollution costs by trucks, expanding the truck toll to additional federal highways as well as applying the toll to trucks between 7.5 and 12 tonnes gross vehicle weight from October 1, 2015, onwards. However, it is unnecessary and unjust for road users to be burdened with new charges. Even today, the government receives 51 billion euros annually in the form of mineral oil tax, value added tax on mineral oil tax, motor vehicle tax and truck tolls, of which only 19.6 billion euros is returned to the roads. The other 31 billion euros is used for purposes other than transport. As a result, sufficient money ought to be available for an infrastructure policy in line with requirements. Politicians should use the significant revenues first and foremost for financing a road network that meets requirements.

A sensible approach to financing federal highways would be for politicians to ring An efficient regulatory framework is fence the necessary 8.4 billion euros annually from this revenue. This would include required for federal highways the entire revenue from the truck toll less the system costs (approx. 3.1 billion euros) as well as the remaining 5.3 billion euros as 13 percent, and thus a mere fraction, of the revenue from the mineral oil tax. Ideally, this amount would be earmarked as an annually fixed value for a federal highways company – such as in the form of a service and financing agreement. Such a reliable financing commitment would avoid the efficiencies of discontinuities over the course of construction projects spanning several years. These result because the available funding only extends up to the end of each particular budgetary year. The discontinuities always result in inefficiency and additional costs. Measured according to this yardstick, the ongoing organi- zational development of the transport infrastructure finance company (VIFG) is a mere trifle. In future, all payment streams in the long-distance road segment should be combined in this. As a result, from 2016 onwards it will not only be in charge of managing the truck toll revenues, but also the tax revenues intended for federal highways during the particular budgetary year. As a result, the transparency and consistency of the data situation would increase for the ministry, for regional admin- istrations and members of parliament. The main problem, namely that tax revenues are only allocated on a year-on-year basis and significantly below requirements, will remain however.

Use of expenditures specifically for motor transport in billions of euros

60

50

40

30

20

10

0 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Expenditure on the road network Surplus = Non-transport expenditure

Sources: BMVI, BMF, VIFG, VDA 113

The new truck toll – change of system in charging external costs

Too much of the money that the government raises from road transport is spent on non-road activities. As a result, insufficient funds are left over to meet the needs of The former truck toll was set at too infrastructure finance. A recalculation of the road costs of trucks in 2014 revealed that high a level the previous truck toll rates had been set too high. According to EU law, this means the government is obliged to reduce toll rates to this new, lower road cost level. The government is now attempting to compensate for the reduction in income. Firstly, it is imposing an air pollution surcharge on the straightforward road costs. Up to this point, air pollution emissions were taken into account by charging only for the actual road costs although at a differentiated rate according to the particular emissions category. Now, however, surcharges will be applied to the road costs depending on the emis- sions category. The question arises as to why “the road” should be the only means of transport in the goods sector that is additionally burdened by these so-called external costs. Railways and internal waterways do not need to carry their external costs.

It is ecologically dubious that the new methodology will reduce the toll rate differential between the cleanest and the most polluting vehicles from a former 13 cent/vehicle The incentive to use the cleanest- kilometer to the current rate of 8 cent/vehicle kilometer. Consequently, there is less possible vehicles is reduced incentive to use the cleanest-possible vehicles. The conclusion is thus inescapable that the change of system has less to do with ecological concerns than with the intention to achieve short-term tax revenues.

The new truck toll has been in force since January 1, 2015. From July 2015 onwards, a further 1,100 kilometers of dual-carriageway federal highways are to be included in the toll as well as, from October 1, 2015, all vehicles with a gross vehicle weight rating of 7.5 tonnes or more. TRANSPORT AND INFRASTRUCTURE POLICIES 114

Car toll with unanswered questions

The Federal Government intends to introduce a car toll in Germany in 2016. This will The car toll is to be introduced in have to be paid by everyone who drives their car on federal autobahns or federal Germany in 2016 highways. All car owners in Germany will have to pay an annual toll, set at up to 130 euros depending on the size and environmental friendliness of the car. Once the owner of the vehicle has approved the direct debit mandate, the vehicle’s license plate will be activated in the electronic toll recording system. Foreigners will have the opportunity to purchase a 10-day vignette for the flat-rate charge of 10 euros or can pay 22 euros for a two-month vignette. Car owners in Germany will receive compen- sation in the form of reduced motor vehicle duty – in the same amount as the car toll that they have paid.

The Federal Government is hoping to generate revenue amounting to 700 million euros The toll could also apply to owners of annually from foreign vehicle owners. From this figure, it will be necessary to subtract vehicles registered in Germany one-off costs for the technology and administration of 379 million euros during the startup phase, with a further 170 million euros annual ongoing costs. The remaining income is to be “ring-fenced for improving the transport infrastructure.”

However, this leaves many questions unanswered: It is not certain whether owners of vehicles registered abroad will generate a toll income of 700 million euros annually. Alternative income estimates by transport experts have produced significantly lower results. As a result, hardly any income would remain following subtraction of the system costs. Furthermore, the Federal Government only wants to ring-fence the revenue for the transport infrastructure as a whole. As a result, it will be possible that the money raised from car drivers would cross-subsidize other means of trans- port. This flies in the face of the basic concept of ring-fencing and using the money where it was raised. Last but not least, it remains to be seen whether the simulta- neous reduction in motor vehicle duty represents an infringement of EU law. According to the EU transport commissioner, this is the case. As a result, there is a danger that if the Federal Government pursues its policy with the car toll, we could end up with the situation that owners of vehicles registered in Germany will also have to pay.

It would also end up too expensive for most German car drivers if the introduction of the car toll prompted non-toll neighboring countries to introduce similar measures. 115

Traffic safety policy

Road transport has never been so safe as it is today

The risk of being involved in a fatal road accident fell yet again in 2014. As a result, road transport is safer than it has ever been. Statistically speaking, there were Road transport in Germany is safer 4.6 fatalities per 1 billion vehicle kilometers in 2014. In the mid-1990s, this figure was than it has ever been three times as high. Normally, the number of fatalities due to accidents also falls in absolute terms year on year, in spite of increasing mileages driven. However, excep- tionally, this was not the case in 2014: The number increased slightly by 1 percent to 3,360. According to the Federal Highway Research Institute, this was due to the very mild winter compared to 2013. This meant that bicyclists and motorcyclists were driving very soon and very frequently right from the first months of the year.

The number of fatalities on autobahns declined significantly in 2014, on the other hand. It fell by about 9 percent year on year to 430. The autobahns are the safest Speed limit without effects on safety roads bar none. There were 1.9 fatalities per 1 billion vehicle kilometers on them, whereas the figure for the remainder of the road network was 5.8. German auto- bahns are some of the safest in the world in international comparison as well. Yet again, this demonstrates that a general speed limit, which is a topic that often comes up for discussion, would not produce any safety benefit.

Agreement on eCall

At the end of 2014, the European Parliament, Council and Commission agreed on the design of the Europe-wide automatic emergency call system, eCall. As soon as eCall allows the emergency services a vehicle’s sensors detect a serious accident, the system automatically sends an to locate the accident immediately via emergency call to a rescue control center. The emergency services can use satel- satellite lite location to pinpoint the accident immediately via satellite – thereby shortening the time taken for help to arrive. According to the agreement, all new passenger cars and vans will have to be fitted with this system from April 2018 onwards. The carmakers can continue to offer their customers a proprietary emergency call service that does not use the general emergency number 112, which can provide the control center with additional information about a vehicle, for example. The infrastructure for the system outside the vehicle, such as equipment for rescue control centers and communication networks, will have to be installed by the EU countries by October 2017. TRANSPORT AND INFRASTRUCTURE POLICIES 116

The long truck: Successful in field trials in Germany

The field trials involving long trucks are currently ongoing with the scientific support Long trucks are safe, environmentally from the Federal Highway Research Institute (BASt) to examine in detail what effects friendly and economical are expected on the environment, infrastructure and transport systems due to the use of long trucks. As a result, the arguments in favor of and against the long truck should be weighed up carefully on the basis of practical experience. The results from the investigations were published in an interim report in September 2014. They confirm the positive expectations and underscore that long trucks are safe, environ- mentally friendly and economic when used in road transport.

One long truck replaces on average 1.56 conventional truck journeys in the field trial. Two long trucks replace about three This means that two long trucks replace about three conventional truck/trailer units. conventional trucks The field trial demonstrates that using long trucks can achieve cost savings of about

25 percent per transported tonne or per transport unit. The CO2 emissions decrease

in proportion to the reduction in fuel consumption. Fuel consumption and CO2 emissions decrease – that is one of the important motivating factors in using longer trucks on roads.

The braking distance of a long truck is shorter than that of a conventional truck. The gross vehicle weight rating does not increase, as a result of which there is no need for braking additional weight. Quite the contrary: a long truck has more axles for applying greater braking effort. The BASt study measured a braking distance for a long truck of 36 meters from a speed of 80 km/h to stationary. A standard truck produced the distance of 44 meters in the study.

Further results are:

• For the road infrastructure there is no expectation for additional maintenance requirements due to the increased number of axles on long trucks.

• It was not possible to observe any technical vehicle problems under the general conditions of the field trial.

• There were no signs of greater stress or increased psychological strain on the drivers of long trucks.

Long trucks are not an alternative to transporting goods by rail either. Quite the Long trucks encourage multimodal contrary: Both means of transport supplement one another. Long trucks and all the transport load units transported on them can be used in combined transport, as a result of which they promote multimodal transport. Fears that greater loading capacity might migrate from rail to long trucks are unjustified, according to the findings of the BASt as well. With a gross vehicle weight rating of 40 tonnes, the payload of the long truck would be reduced by between three and eight tonnes due to the additional vehicle equipment (dolly axle, additional trailer). With its volume orientation, the long truck is thus exclusively aimed at increasing efficiency when transporting light, high-value goods and general cargo, in combination with a payload reduction. This market segment does not correspond to the performance profile of railways, since by its very nature it has typical requirements involving flexibility and speed. As a result, transferring goods from the rails to the road would not be economical when using long trucks. Consequently, long trucks are not expected to have any negative effects on the transport of goods by rail either. 117

In order to further verify and supplement the insights already gained from the field trial, the German federal states that have not yet participated in the field trial should now join in the process. With active involvement in the field trial, more companies would have the opportunity to test the vehicles in practical applications under the defined general conditions of the field trial. The dimensions and weights already successfully tested in the field trial should also apply to long trucks in future: A combi- nation of vehicle modules that does not exceed a maximum length of 25.25 meters. The gross weight of long trucks should not exceed 40 tonnes in regular operation, or 44 tonnes when used as feeder and completion delivery for combined transport.

Long trucks must be able to operate on the existing infrastructure safely and without causing damage. As a result, they should be used in future predominantly on auto- Long trucks should be used on bahns and federal highways, so as to make road transport even more efficient there. autobahns and federal highways Long trucks are not intended for urban delivery transport. As a result, a network should be defined that basically comprises federal autobahns and all suitable federal highways. Other route sections and roads should be authorized in a positive network on request, following careful examination of the driving suitability based on uniform nationwide criteria. Experience from other European countries should be taken into account when defining the approved route network. The general conditions already successfully tested in the field trial should apply to the technical equipment of long trucks and the qualification of drivers. This means:

Drivers must have been in possession of the category CE driving license for at least five uninterrupted years, and possess more than five years of professional experience in commercial road haulage or own-account transport.

Long trucks must meet minimum technical requirements including automatic cruise control systems, lane guard systems, automatic axle load monitoring, electronically controlled brake systems, rear-mounted camera systems, contour markings and lane holding lights on the trailer. TRANSPORT AND INFRASTRUCTURE POLICIES 118

Coaches in Germany – new coach stopping points

Since the liberalization of the coach market in 2013, coaches have quickly established The success story of the coach is themselves as an important additional mobility provider for long-distance passenger continuing transport. According to surveys by the Federal Statistical Office, 8.2 million passengers were carried by coach during the first year after liberalization. According to initial estimates, more than 15 million passengers took advantage of the new services offered during the second year. Thanks to the high level of acceptance among passengers and a continuing expansion to the route network by operating companies, the coach has established itself as an attractive and environmentally friendly fourth column in long-distance transport alongside the train, cars and aircraft.

MeinFernbus, Flixbus, Postbus and other companies are companies that have quickly established a strong position for themselves in the market, which is above all characterized by medium-sized coach partners. Today, a large number of medium- sized bus operators are active under the major umbrella brands; they have been able to grow into new areas of activity with the opening-up of this market. Coach operators have announced that they will be expanding their coach fleets further and also intend to grow the network of routes in the future as well. As a result of intensive use of the vehicles, this is also delivering benefits for bus manufacturers.

Value-added levels of coach transport

Communities

Visitors

Tax revenues (indirect)

Transport companies Commerce

Revenues from fares Revenues

Passengers/jobs Customers/jobs

• Hotels • Pubs & restaurants Central/regional government • Retail • Cultural institutions Tax revenues (indirect) • Leisure facilities • Others

Source: “New coach stopping points and approval practice – opportunities for communities,” study commissioned by MeinFernbus, ADAC Postbus and VDA, kcw 2014. 119

However, the dynamic development in the market is confronting many communities and approval authorities above all with new challenges. The infrastructure is not New challenges for communities keeping pace with development everywhere; in many places, the necessary stopping points are either absent or do not adequately meet the needs. As a result, economic opportunities are being missed by communities, and the positive image of the industry is suffering. In view of this situation, the VDA has teamed up with the German Tourism Association DTV to support a project instigated by the coach operators MeinFernbus and ADAC/Postbus entitled “New coach stopping points and approv- al practice – opportunities for communities.” This aims to highlight the economic opportunities of new coach routes for communities. Guidelines have been worked out for administrative bodies indicating best-practice examples for setting up and successfully operating coach terminals. In many places, there is need for central action to “simply” upgrade existing stopping points. Networking with other means of transport such as local public transport by rail or bus will further strengthen the attractiveness of locations, and also deliver environmental benefits. New or addi- tional coach stopping points are only required at a few intensively used hubs, so as to permit passengers to benefit from an attractive offer. Intelligent solutions are also conceivable in terms of financing, based on not only usage fees but also further income from renting and leasing.

Taxes and Customs

Christian Vetter – engineer electrical engineering and IT, team leader software test, Bertrandt Group, Ingolstadt, 2010 TAXES AND CUSTOMS 122

Taxes

Competitive tax framework conditions are a key condition for making Germany an VDA champions a tax policy attractive site for the automotive industry. Germany faces significant competition favorable to growth from growing production abroad and from internationalization. The VDA focuses on dealing with the following topics regarding a tax policy favorable to growth and with an international focus:

• prevent tax increases and double taxation risks

• flank innovations and new technologies, such as electromobility, with taxes

• improve tax framework conditions for research and development

• simplify taxes and increase planning and legal safety

International tax policy

Combating a shift abroad of profits to the detriment of taxes is a major tax policy profit of the OECD, the G20 states and the German Federal Government in its 18th election period. The aim is to prevent artificial shifts of profits. In particular, cross-border information transfer between the tax authorities of the different states should be improved. A new international standard is being developed, which results in an automatic transfer of information. In addition, existing regulations relating to double taxation agreements, transfer prices and operating sites are to be amended: Profits are to be taxed where the actual economic activity took place.

The OECD initiative for fair international tax competition, the so-called BEPS Action The BEPS initiative results in compet- Plan, contains the risk of competitive disadvantages for German companies from itive disadvantages for the German the perspective of the automotive industry. Possible measures, such as a restriction automotive industry to the deduction of license fees as operating expenses, would put Germany as a high-technology site at risk and would mean a disproportionate tax strain on common economic activities. In addition, the new transfer price documentation results in high administrative costs for companies.

Effective tax rates on license revenues in percent

Effective tax rate on Regular Year of Country license revenues tax rate introduction Belgium 6.8 34 2007 France 15 33.33 2000 Liechtenstein 2.5 12.5 2011 Luxembourg 5.72 29.63 2007 Malta 0 35 2007 Netherlands 5 25 2007 Portugal 11.5 23 2014 Switzerland, Nidwald Canton 8.8 20.60 2011 Spain 10 30 2008 Hungary 9.5 19 2003 UK 10 24 (from 2012: 22) 2012 Cyprus 0 10 2012

Source: BT-Drs. 18/1238 123

The stronger international competition for sites further creates an increasing need for action to help the research and development activities of companies in Germany with targeted tax support – such as through tax support for research or by introducing a patent box. Most other EU states allow tax reductions for license revenues. Germany as a high-technology country must not be disadvantaged in this area.

Inheritance tax – favorable treatment of operating assets under review

On December 17, 2014, the German Federal Constitutional Court ruled that current inheritance tax law is partially anti-constitutional. The exclusion of operating assets as such from inheritance tax remains constitutional, but corrections are required where large company assets are transferred.

Now, it is up to the legislator to redesign inheritance tax law with regard to the exclu- sion of operating assets to make it constitutional by June 30, 2016. The automotive industry with its numerous large companies and strong medium-sized family enter- prises – particularly in the automotive supply area – is particularly strongly affected by these reform considerations. The German Federal Government has announced that it does not intend to increase the overall financial costs of inheritance tax. The favorable treatment of transferred operating assets in line with the German Constitution will be kept. A proposal for a design of the exclusion rules for operating assets in line with the German Constitution is being developed.

The VDA welcomes that the Federal Government wants to limit the current reform considerations to the minimum adjustments required legally. In light of protecting The companies in the supply indus- family companies and jobs, operating assets must also be excluded from inheritance try should not suffer disadvantages tax in the future. New requirements regarding an exclusion of large companies must regarding inheritance tax be practicable and take account of the special characteristics of family companies. A new provision of inheritance tax law must not lead to higher charges when trans- ferring a company to the next generation.

Reform of the option to report oneself to avoid fines

The possibilities for avoiding punishment by voluntary disclosure in the event of tax evasion were restricted in 2015. The aim is to consistently combat tax evasion. In the future, the option to report oneself to avoid fines (§ 371 of the German Tax Code) will only be possible up to the tax evasion amount of 25,000 euros. Previously, this had been 50,000 euros. From this tax evasion amount, and in particularly serious cases of tax evasion, criminal prosecution can only be avoided if a surcharge is paid at the same time. For simple tax evasion, the limitation period will continue to be five years, but the adjustment period will be extended to at least ten years. Previously, in the case of simple tax evasion, taxpayers were only obligated to provide explanations for the five-year period of limitation for criminal prosecution.

For companies, the legal clarification whether corrections to tax self-assessments and tax returns will remain exempt from punishment is particularly important. In the interests of legal safety, the VDA has expressed this repeatedly to politicians and administration. This has now been clarified regarding advance tax returns for VAT and wage tax self-assessments, and a so-called partial self-assessment remains possible (exemption from the completeness requirement of § 371 (2a) of the German Tax Code). This at least creates legal safety regarding tax self-assessments. TAXES AND CUSTOMS 124

Recognition of development costs

The topic “Recognition of development costs” is increasingly becoming a topic for tax audits – primarily in the automotive supply area. Tax audits question the recog- nition impact in the profit and loss account of development costs. According to the tax authorities, companies using serial production should in many cases increasingly be subject to contract research and development, which must be capitalized. The so-called “Letter of Intent” is in many cases already treated as a placing of orders.

For years, the VDA together with the Federation of German Industries (BDI) has Research-intensive companies have lobbied the Federal Ministry of Finance to allow development costs to be recognized a site disadvantage in the profit and loss account. Especially for the research-intensive companies of the supply industry, which were previously allowed to recognize research and develop- ment costs in the profit and loss account, a lack of tax recognition of R&D costs results in a significant disadvantage for the sites. As a result, the framework conditions of R&D costs are thus exacerbated indirectly, which is not acceptable given the continual increase in competition between sites. It should thus be made clear that the capitalization prohibition according to § 248 (2) HGB or § 5 (2) of the Income Tax Act (EStG) continues to apply to development costs and that these costs can be recognized in the profit and loss account.

Tax framework conditions for electric vehicles

In order to increase acceptance of electric vehicles in Germany, the VDA is supporting NPE recommends special depreciation the introduction of special 50-percent depreciation for commercial electric vehicles for commercially used electric vehicles in their year of purchase. For many years, special depreciation has been a tried-and- tested market tool for creating investment incentives. In its “Progress report for 2014 – Taking stock of market preparation,” the National Platform for Electromobility (NPE) recommends the introduction of special depreciation for commercially used electric vehicles. The Federal Ministry of Economics’ “National Action Plan” agreed by the Federal Cabinet on December 3, 2014, and the Federal Ministry of the Environment’s “Climate Protection Action Plan 2020” provide for such special depreciation.

According to first calculations, the effects of such special depreciation for electric vehicles on taxes will remain limited: Depending on the new registrations accepted and the average purchase price, special depreciation for electric vehicles will reduce total annual tax income for year by only 0.2 billion euros. In the year in which it is introduced, tax income would fall by only around 30 million euros.

125

Natural gas vehicles – extension of the energy tax reduction

The coalition agreement for the 18th election period states that the energy tax reduction for climate-friendly liquefied gas and natural gas would be renewed until If the energy tax reduction is not the end of 2018. Now, this stipulation, which is of key importance for the further renewed, the incentives to buy a natural development of the market for natural gas vehicles, must be implemented in law. If gas vehicle will be reduced the energy tax reduction is not renewed, this would reduce incentives to buy a natu- ral gas vehicle. Given the life cycle of natural gas vehicles of up to 15 years, vehicle manufacturers and their customers need a clear perspective beyond 2018 as early as possible. In light of the investment safety required for buying natural gas vehicles, the VDA supports the renewal of this tax deduction. Joint initiatives with other associa- tions also speak out for a timely ratification by law. The proportion of 20 percent of regeneratively produced methane in natural gas already achieved today (largely from waste materials) plus the 24 percent from the fuel chemicals industry compared to petrol and diesel could – if the tax deduction is renewed until 2026 – already result in total savings of around 1.7 million tons of CO2 emissions a year.

Company car tax – achieving system-compatible tax

Politics repeatedly offers suggestions for new tax rules for company car tax. Tax on the monetary benefit from the private use of official and company cars should, e.g., The current company car tax has been be based on ecological aspects. The VDA is expressly against such tax on the private tried and tested use of official and company cars based on ecological aspects. The current tax on the private use of official and company cars based on the 1-percent rule or total cost method (driver’s log method) is systematically correct and has been tried and tested in practice. This was also confirmed by the Bundestag’s Financial Committee as a result of its hearing on November 7, 2012, and an ecologization of official and company car tax was not pursued further. An ecological focus of company car tax would lead to system-incompatible faults in tax law. Environmental requirements for cars should not be part of income tax law. The EU passenger vehicle CO2 regulation is the administration law for lowering CO2 emissions. This already sets out highly ambitious CO2 requirements.

New registrations of company cars in 2014 by segments Units in %

Other Small cars Compact class 0.8 7. 6 28.1 Mid-class Motor homes Mini 19.5 0.3 4.4 Upper mid-class Utilities 7. 1 6.0 Upper class 1.7 Large vans Sports cars 6.2 1.4 Minivan 2.6 SUV Off-road vehicles 5.2 9.3

Sources: Federal Office for Motor Traffic, VDA TAXES AND CUSTOMS 126

Customs and purchase taxes

Customs duties, macroeconomic conditions and purchase taxes play a key role VDA champions a reduction in for the automotive industry as the most important German export industry. In the customs tariff barriers interest of competitive foreign trade, VDA champions simple customs and export regulations and a reduction of customs tariff barriers.

Energy taxes: Simplification regarding the obligation to provide supporting documents for the peak tax balance scheme

Under certain conditions, manufacturing companies can enjoy tax relief for energy From 2015, an energy management taxes. Since 2013, this so-called peak tax balance scheme is however only possible if system certification will be required the companies can provide evidence that they are improving their energy efficiency. The VDA member companies feared that this condition could mean a disproportionate administrative expense. The VDA lobbied for a simplification. Subsequently, the Federal Ministry for Economic Affairs and Energy, in consultation with the Federal Ministry of Finance, largely approved this simplification suggestion. According to the new “Ordinance on the Amendment to the Efficient System Ordinance for the Peak Tax Balance Scheme (SpaEfV)” issued on October 31, 2014, 100 percent of the energy consumption of all sites and properties need now no longer be submitted to provide evidence of energy efficiency. In order to receive a reimbursement of energy and electricity taxes as part of the peak tax balance scheme, it is now sufficient for the majority of a large company (95 percent of total energy consumption) to have an energy or environmental management system. Large companies no longer need to provide evidence of energy efficiency for all of their branches. It can be assumed that companies can now acquire the energy management system certification required from 2015 without disproportionate costs.

Revision of the EU Energy Tax Guideline

As early as 2011, the European Commission already presented its first proposal The EU Commission continues to strive for an update of the Energy Tax Guideline. Since then, new proposals were made for an agreement regarding minimum repeatedly. Whereas the Energy Tax Guideline in its current version from 2003 tax rates provided the bases for an EU-wide harmonization of minimum taxes for electricity and energy products, the new guideline draft pursues the aim of implementing the 2020 EU targets regarding energy efficiency, climate protection and renewable energies. In terms of content, the EU Commission continues to strive for an agree- ment regarding minimum tax rates. The equivalence principle, which would have led to an increase in the diesel tax rate, will however not be pursued further. A drastic increase in the minimum rate for natural gas as a fuel will also not be implemented. A revision of the EU Energy Tax Guideline is currently postponed until the member states can reach an agreement regarding the disputed items. 127

Export controls – Russia sanctions

Effective on August 1, 2014, the EU issued far-reaching economic sanctions against Russia. As part of these sanctions, the EU published a list of goods, that may no The sanctions against Russia longer be delivered to Russia directly or indirectly without the prior approval of the have far-reaching consequences Federal Office of Economics and Export Control (BAFA). These requirements have for the automotive industry far-reaching consequences for the automotive industry: Some products of the auto- motive industry may not be exported without approval. As a result, manufacturers and suppliers have asked the VDA for help, and the VDA is asking for a quick solution in direct contact with the Federal Office of Economics and Export Control (BAFA) and the Federal Ministry for Economic Affairs and Energy (BMWi) in order to prevent undesired ancillary effects on exports beyond the sanction objective. A remedy was then found in the short term. The approval process for companies was shortened significantly. In the future, the VDA wants to increasingly focus on the topic of export controls in order to support future developments in this area early on.

TTIP: Preferential rules of origin in the free trade agreement between the EU and the USA

The preferential rules of origin are playing a key role in the negotiations regard- ing a free trade agreement between the European Union and the United States of Companies had the option to choose America with the aim of reducing current customs tariff barriers. The German auto- under the original rules motive industry welcomes the TTIP negotiations, because the planned reduction in customs tariff barriers and non-tariff trade barriers would allow for the free traffic of goods between the two negotiating partners and would provide the required incentives for sustainable economic growth. In terms of the preferential rules of origin to determine reduced customs duties on the import of goods, rules so far contain significant differences: The EU applies the value chain method, whereas the USA uses the manufacturing cost method. In its statements to politicians and the administration, the VDA has expressed a preference for giving companies the choice between applying the EU’s value chain method or the USA’s manufacturing cost method. This choice allows companies to freely select their preferred calculation method and to continue with the calculation methods with which they are familiar. In addition, internationally trading companies have the option to harmonize processes and IT-supported calculation systems for all company sites in the EU and the USA. However, a condition for this is that the determination of the preferential source of goods leads to roughly similar results based on both sets of rules. Goods must therefore reach the same preferential status based on both calculation methods. For this purpose, a transfer mechanism is required, which would harmonize both sets of rules and whose design the VDA is currently developing internally. TAXES AND CUSTOMS 128

Modernization of the Customs Code (UZK)

In 2012, the EU Commission issued a proposal to modernize the European Union’s Customs Code to be applicable Customs Code (UZK), which the European Parliament agreed on September 11, from May 2016 2013. This Customs Code is to become applicable from May 2016 after the required detailed regulations are issued. As part of the agreement of numerous delegated legal acts, the VDA is lobbying for economic framework conditions, which are favorable for the automotive industry.

Fuel additives – simplification regarding evidence of transport

Effective on January 1, 2013, additive used as fuel additives were included in the application of the control and transport provisions of the European Commission Guideline 2008/118/EC. In practice, this regulation results in a significant adminis- trative burden for deliveries of low quantities to other member states – both for the participating companies and for customs administration. In order to achieve a relief, the VDA has held talks with the Federal Ministry of Finance and in the interest of reducing bureaucracy has pleaded in favor of excluding deliveries of low quantities from the scope of the EU guideline. A concrete simplification proposal was submitted, which is supported by the Federal Ministry of Finance, and which it presented to the EU Commission’s purchase tax committee. 129

Drive Engineering

Jennifer Weise – industrial mechanic apprentice, ixetic GmbH, Bad Homburg, 2010 DRIVE ENGINEERING 132

Exhaust emissions legislation in Europe

Conventional vehicles still determine the look of our roads – and with good reason. In 2015, the Euro 6 exhaust emissions Modern vehicles are extremely clean, use the energy of their fuel frugally and convert standard will become binding on all raw energy into the necessary propulsive power in extremely efficient ways. The newly registered cars Euro VI standard has been binding on heavy commercial vehicles since 2014. From September 2015 onwards, the Euro 6 exhaust emissions standard will be binding on all newly registered cars This means pollution emissions can be reduced by about 95

percent compared to Euro 0. NOx and particulate emissions have been reduced partic-

ularly markedly over recent years: 80 percent NOx reduction and 50 percent particulate reduction from trucks in the last level alone (i.e., compared to Euro V). As far as cars are concerned, the 80 percent particulate reduction has already been implemented

with Euro V. In Euro 6, it is now the NOx emissions above all that are being reduced by a further 56 percent.

Even if no new exhaust emissions level is currently under discussion – the exhaust emis- sions legislation in the EU and the UNECE continues to develop further. The Euro VI c level has been mandatory on heavy commercial vehicle since 2014, and imposes tighter OBD limits (on-board diagnosis). For cars and light commercial vehicles, the EU is planning to introduce what it calls RDE legislation as part of a new Euro 6 level c.

Reduction in heavy truck exhaust emissions Trend in exhaust emissions from diesel cars

100 100 100 100 80 -88 % 80 60 40 -98 % 40 33 60 CO [%] 17 12 12 12 40

20 CO [%] 0 13 20 5 3 2 2 2 0 100 100 Euro 0 Euro 1 Euro 2 Euro 3 Euro 4 Euro 5 Euro 6 80 -97 % 60 38 100 40 25

PM [%] 100 20 5 5 3 73 80 0 -98 % 60 100 30 100 PM [%] 40 19 9 80 20 2 2 -95 % 60 47 42 0 40 25 Euro 0 Euro 1 Euro 2 Euro 3 Euro 4 Euro 5 Euro 6 HC [%] 18 18 20 5 0 100 100 100 100 83 80

[%] -97 %

80 X -97 % 60 60 49 [%]

X 35 40 24 40 23 NO 14 12 10 20 3 HC + NO 20 5 4 3 0 0 Euro I Euro II Euro III Euro IV Euro V Euro VI Euro 0 Euro 1 Euro 2 Euro 3 Euro 4 Euro 5 Euro 6

Source: VDA Source: VDA 133

Euro exhaust emissions limits are closely linked to the underlying New European Driving Cycle, NEDC for short. In future, the WLTP (Worldwide Harmonized Light The new legal basis for the Euro Vehicles Test Procedures) will form the legal basis for Euro exhaust emissions legis- exhaust emissions legislation will be lation. The RDE legislation (Real Driving Emissions) is an addition to Euro exhaust the WLTP emissions legislation directed towards areas of driving and parameters that lie outside the type test procedure. RDE regulates any kind of driving under any conditions.

The proposal of the EU Commission is for additional possible driving and ambient boundary conditions, extreme weather, environmental conditions and driving condi- tions to be included. Pollution emissions will be measured using a mobile measuring device (PEMS, portable emission measurement system) attached to the vehicle being measured. As a result of the physics of combustion, pollution emissions from internal combustion engines increase under extreme driving and ambient conditions.

NOx emissions-reducing exhaust gas recirculation is restricted under harsh ambi- ent boundary conditions. Exhaust post-treatment can limit this effect of increasing emissions, but not eliminate it. As a result, other limit values will have to be defined for harsh driving and ambient conditions rather than those for the strictly defined measurement conditions in the type test based on the NEDC.

The automotive industry is tackling this challenge by developing new exhaust post-treatment systems. The VDA assumes that the RDE legislation will mean The RDE law is expected to be that the majority of diesel vehicles will have to be equipped with additional NOx approved at the end of 2015 post-treatment technology in future. The EU Commission is planning to introduce legislation for new vehicle types from September 2017 onwards, and for all new vehicles from September 2018. The RDE law is expected to be approved at the end of 2015. As a result, the automotive industry does not have adequate time to prepare for the technical implementation and retrofitting additional exhaust post-treatment technologies to ongoing series production. As a result, the planned date of introduc- tion for ongoing series production in September 2018 must be regarded as particu- larly critical. The planned introduction of RDE legislation at the present time must be reconsidered under the aspect of a cost-benefit ratio instead. Consequently, the VDA proposes that the regulation should be introduced from September 2017 onwards with a higher limit value (conformity factor), and that this factor should be tightened up five years after publication of the law.

The introduction of RDE legislation is justified by the difficult situation of enabling compliance with air-quality limits in future, even at the measuring points in Europe that are exposed to severe pollution. Euro-6 technology can solve the remaining air- quality problems. A precondition is that vehicles equipped with this particularly clean technology achieve rapid market penetration. The automotive industry has presented a proposal to permit rapid introduction of RDE at the same time as drastically reduc- ing real emissions in road transport. DRIVE ENGINEERING 134

Air-quality simulations carried out by the independent AVISO Institute show that Further requirements of the regulations the regulatory approach proposed by the industry will enable the number of violations can no longer be achieved technically of air-quality limits in Germany to be reduced by almost two thirds over the next ten years. In the long term, it will even be possible to avoid air-quality violations in Germany almost entirely. As a result, the automotive industry is calling for the regu- latory approach that it has proposed to be discussed seriously. Regulatory require- ments set far beyond this cannot be achieved either technically or economically, and would lead to a scarcely measurable environmental benefit.

Key positions of the VDA with regard to RDE

1. The law must be complete and applicable. Only if the law is complete and robustly applicable will the automotive industry work on its technical and administrative implementation.

2. The law must be introduced with a two-stage approach. The lead-up time for introduction of the complete regulation by September 2017 is too short. Consequently, the VDA proposes that the regulation should be introduced from September 2017 onwards with a higher conformity factor for new vehicle types. This factor should be tightened up five years after publication of the law, and apply to all new vehicles one year later.

3. The difference between cycle and urban driving must be taken into account when setting the conformity factors. It is the intention of the EU Commission that these conformity factors should only compensate for tolerances in the measuring sequence; differences between driving on public roads and driving in the NEDC should not be applied. The VDA is calling for realistic conformity factors to be defined that are oriented towards the available vehicle technology, the established ambient and driving conditions as well as the physical qualities of internal combustion engines.

4. Limitation of dynamic band reconditions. Extreme driving and statistically irrelevant driving conditions can falsify the emissions result and, as a result, it is essential for them to be limited to sensi- ble and statistically relevant parameters in advance so that unnatural driving simply with the intention of increasing emissions will be avoided (e.g., driving only in first gear, pumping the accelerator pedal). 135

Electric mobility in Germany

For more than four years now, the National Electric Mobility Platform (NPE) has brought together the main players from industry, the scientific community, politics The NPE is observing developments and unions in strategic discussions. The NPE has been observing and analyzing devel- in electric mobility opments in the area of electric mobility since May 2010. In December 2014, the NPE submitted its 2014 progress report to Federal Chancellor Angela Merkel as a summary of the market preparation phase. With this report, the NPE has concluded the market preparation phase (2010 to 2014), and presents the current status. In addition, it is submitting proposals for the coming phase of market ramp-up (2015 to 2017), indicating how Germany can reach the targets that have been set by 2020 so as to become an internationally leading provider, and above all the leading market, for electric mobility. DRIVE ENGINEERING 136

The German car industry is well on the way to becoming the “leading provider” of In 2014, German manufacturers electric mobility. Up to the end of 2014, German manufacturers launched 17 series launched 17 series production models production models on the market with electric drive, with twelve more to follow in on the market with electric drive 2015. The market for electric vehicles – considered in units – remains small, but it is growing rapidly. Since 2007, the registration figures for electric vehicles have grown strongly year on year.

In 2014, 8,522 purely battery electric vehicles (BEV) were newly registered in Germany, representing growth of 40 percent compared to 2013 (6,051 electric vehicles). The number of plug-in hybrids increased by 180 percent to 4,596 units. Overall, this represents more than 13,100 new vehicles with alternative drive – an increase of 70 percent.

With the new models that German manufacturers will launch on the market in 2015, the range covers almost all vehicle segments. Electrification of the automobile must be promoted further, because electric mobility allows questions relating to future mobility to be answered. However, demand for vehicles with alternative powertrains will have to increase significantly by 2020. 137

Electric mobility is becoming more and more important internationally – it is the key to a sustainable mobility system with resource conservation in mind. For this reason, A wide range of incentives and opti- governments as well as the business and scientific communities worldwide are mized general conditions are required setting ambitious goals for electric mobility. During the market preparation phase, the emphasis was placed on promoting research and development, standardization as well as education and qualification. The success speaks for itself: In international comparison, Germany is one of the leading providers in the overall electric mobility system. Now, it is necessary to set the right incentives so as to convert the potential of German industry into higher market share, thereby achieving the status of lead provider for electric mobility. With regard to possible measures by government, the NPE believes that emphasis should be placed on the following:

• Introducing a special depreciation system (Sonder-AfA) for commercial users

• Co-financing of publicly accessible charging infrastructure

• Continuing pre-competitive research and development

The Federal Government will examine the recommendations of the NPE, observe market development and introduce further aspects of the policy framework. The cabi- net approved the Electric Mobility Act on September 24, 2014. Accordingly, communi- ties will be able to decide for themselves in future how they propose to favor electric cars locally – such as through free parking or special access rights for example. The NPE will continue its work. In summer 2015, the Federal Government will organize a national conference on electric mobility in Berlin.

Transporting batteries

Extensive, internationally standardized hazardous substance regulations apply to the transport of lithium-ion batteries. Among other things, these lay down the Lithium-ion batteries must also be requirements for packaging, transport, documentation, the labeling of packages and approved for air transport vehicles, and safe handling during transportation. Consequently, global, fast and high-performance logistics networks for transporting batteries will also be decisive for the future of electric mobility.

Nowadays, it is possible to transport new, used and even damaged lithium-ion batteries on road and by rail under certain conditions. These newly introduced rail and road transport regulations should also be incorporated into air transport based on empirical values. To date, the transport of new and damaged lithium-ion batteries in excess of 35 kilograms has been banned. Lithium-ion rechargeable batteries for vehicles are always heavier, however. There is therefore no guarantee of worldwide service certainty. In accordance with experience of automotive lithium-ion batteries, the VDA is calling for this 35 kilogram limit to be lifted. DRIVE ENGINEERING 138

CNG, LNG, fuel cell

Natural gas has a CO2 advantage of more than 20 percent compared to conven- The VDA welcomes the initiative by tional spark-ignition engines with petrol fuel. Compared to the diesel engine as

the EU to push ahead with developing well, CO2 reductions of up to 10 percent can be achieved. Nevertheless, natural the LNG infrastructure of the EU gas vehicles have only accounted for a minor share of the vehicle fleet up till now, although with an upward trend. During the first three quarters of 2014, 6,921 new natural gas vehicles were registered in Germany (growth of about 5 percent). Natural gas is now available at more than 920 filling stations.

LNG represents an important alternative to diesel for heavy commercial vehicles. It also offers the necessary energy density and long range. The high operating hours of long-distance goods transport make it particularly suitable for LNG. Consequently, the VDA welcomes the initiative by the EU to push ahead with developing the LNG infrastructure of the EU so as to make a breakthrough in LNG mobility easier.

At present, the proportion of natural gas vehicles is still less than 1 percent of the The proportion of natural gas vehicles fleet. The natural gas mobility initiative by the DENA (German Energy Agency) also still accounts for less than 1 percent involves the automotive industry and has set the objective of achieving a natural gas of the fleet proportion in the energy mix of German road transport accounting for at least 4 percent by 2020. The sectors involved will tackle their individual tasks to make this possible. For the German automotive industry, this primarily means developing and marketing attractive vehicle models with natural gas powertrains.

Commitment from politicians is also expected alongside the engagement by industry. The VDA is calling for an extension of the favorable tax treatment for natural gas, which is due to expire in 2018. The attractive price of natural gas at the filling station is a key factor to promote the spread of natural gas mobility and achieve the set goal of a 4 percent market share. As a result, the VDA stands behind the concept of the natural gas mobility initiative, which initially recommends continuation of the reduced tax rate for natural gas, and proposes that the rate should be increased gradually in line with growing market penetration

Natural gas can also be substituted by sustainable components. The fuel referred to as

biomethane has a very small CO2 footprint because of its biogenic creation. Even today, the natural gas sold for use in transport in Germany contains 20 percent biomethane.

Manufacturing biomethane from electricity represents a new and ground-breaking approach (power-to-gas). The term power-to-gas (PtG) stands for a concept in which electricity is used for producing chemical energy sources that can be stored. “Green hydrogen” is produced from renewable and preferably surplus electricity then converted

into methane using a synthetization process in which CO2 is bound up. Irrespective of

the manufacturing approach, the result is methane (CH4) which can be admixed to the natural gas network in any quantities. Consequently, renewable methane represents the ideal “drop-in fuel” and a source of energy that is available today for storing volatile renewable electricity in very large amounts. 139

All three methane fuels (natural gas, biomethane and PtG methane) can also be stored jointly in gaseous form within underground tanks, thereby serving as a source With methane, is it possible to of energy for buffering the volatility of renewable energies. With methane as a source establish a sustainable and fully of energy, it is thus possible to establish a sustainable and fully flexible fuel system. flexible fuel system

Power-to-gas in the form of CH4 enables an optimum entry point to the electricity storage technology that is required in the long term, because the infrastructure and end-user markets for natural gas are established, and only one additional techno- logical element is required. Rapid expansion in PtG technology will enable the costs of electrolysis technology to be reduced because of learning-curve effects, thereby accelerating its market integration. Consequently, establishing a decentralized PtG methane infrastructure could also represent the key to building up an H2 infrastruc- ture. As a result, it would also be likely to simplify the direct use of hydrogen in the sectors of energy and mobility. The urgent need for market integration of renewable energy systems (such as wind farms, photovoltaic systems) could be significantly simplified in combination with PtG facilities (grid stabilization, compensating for errors in forecasting, avoiding grid bottlenecks).

This development is being supplemented by continuing activities aimed at achiev- ing hydrogen mobility. The fuel cell remains of interest, above all, with regard to its PtG and PtL should help to reduce efficiency and practicality. PtG and PtL are thus new pillars in the propulsion and further the proportion of possible fuels fuel strategy of the German automotive industry. In the medium and long terms, in the fuel mix these solutions should help to reduce further the proportion of fossil fuels in the fuel mix and make it possible to offer CO2-neutral long-distance mobility as an efficient overall concept. DRIVE ENGINEERING 140

AdBlue®

The Euro 6 standard has applied throughout Europe for type tests of new cars since RDE legislation is regarded as the September 1, 2014; from September 1, 2015 onwards, it will be binding on all newly greatest challenge for diesel vehicles registered vehicles. In addition to this exhaust emissions level called Euro 6 b, work is currently ongoing as part of a Euro 6 c level to produce RDE legislation (Real Driving Emissions). According to a proposal by the EU Commission, the RDE regulation will become binding on new types of vehicle from September 2017 onwards, and for all new vehicles one year later.

Above all with regard to nitrous oxide emissions, the RDE legislation is regarded as the greatest challenge facing diesel vehicles since the introduction of EU exhaust emissions standards. In addition to a further reduction in engine-out emissions, two systems have proven effective in reducing nitrous oxides for almost one decade

now, depending on the vehicle weight and its engine: the NOx storage catalytic converter (NSC or LNT) and selective catalytic reduction, abbreviated as: SCR.

In SCR technology, aqueous diesel exhaust fluid, AdBlue® is injected into the exhaust stream using injection technology. Ammonia is released and, in the subsequent

SCR catalytic converter, it reduces up to 80 percent of the nitrous oxides (NOx) into

harmless nitrogen (N2) and water (H2O). Diesel models equipped in this way comply

with the values of the Euro 6 exhaust emission standard with NOx post-treatment. AdBlue® is a significant component of this highly efficient and clean drive concept. SCR technology and AdBlue® have laid the foundation in vehicle technology for diesel-powered commercial vehicles to reduce their pollution emissions – especially of nitrous oxides.

In heavy vehicles, AdBlue® has proven itself as an effective solution for post-treat- The proportion of SCR models has ment of exhaust gases and is in widespread use. AdBlue®’s time has now also come increased significantly for diesel-driven passenger cars. This is because a significant proportion of diesel cars that comply with the Euro 6 exhaust emission standard will be equipped with an SCR system. One in two new cars registered in Western Europe is a diesel vehicle, which means the number of cars with SCR technology is set to rise. For example, the proportion of SCR models produced by German carmakers increased by about 50 percent within only eight months. This upward trend will continue.

The independent institute, Integer Research, published a forecast that is in line with other studies indicating annual production of between 5 and 7 million cars, SUV and van models with SCR technology in Europe up to the year 2020. A study by the VDA revealed that 20 million vehicles from German brands will be driving on Western Europe’s roads by 2020 equipped with this modern technology. AdBlue® consumption depends on the vehicle weight and the individual driving style. On average, a car will consume about 1.5 liters per 1,000 kilometers. 141

A comprehensive infrastructure for providing cars with AdBlue® is currently being established throughout Europe. The number of replenishment points is still relatively The network of AdBlue® filling points is low. Until AdBlue® pumps are available across the entire network, bottles containing also increasing with growing numbers 1 to 2 liters or canisters with 5 liters are helping to provide a transitional solution. Fuel of relevant vehicles on the roads stations offer both types of container. With increasing numbers of relevant vehicles on the roads, convenient AdBlue® pumps will be installed at fuel stations through- out Europe. The mineral oil and automotive industries must work closely together on setting up a comprehensive network for cars all over Europe. Several garages are already installing AdBlue® pumps. The mineral oil industry is testing modern AdBlue® replenishment points in cooperation with German vehicle manufacturers, and is transferring the first results into further improvements of the technology used at the replenishment points.

Demand will show where further pumps can be installed. A map such as that on the findadblue.com website will inform drivers of modern diesel vehicles with an SCR system where they can replenish their AdBlue® tanks in future. As a result, car drivers will conveniently find an up-to-date list of where replenishment points are available. Navigation devices and mobile applications will also play their part in guiding AdBlue® customers to the nearest outlet.

The AdBlue® brochure published in German and English offers an overview of the product, its operating method, handling and infrastructure questions for anyone who The AdBlue® brochure provides is interested. The AdBlue® flyer contains all important information about the product an overview of the product and its practical handling in a clearly laid-out format for anyone who is interested. and its handling The flyer is also available in German and English.

Development in vehicle fleet from German brands in the EU

30,000

25,000

20,000

15,000

10,000

5,000

0 2014 2015 2016 2017 2018 2019 2020 2021 2022

Source: VDA DRIVE ENGINEERING 142

Type approval at ECE level

The European Union is continuing its efforts to guarantee the greatest-possible level The new version of the EC of safety for all road users, and as a result is revising the EC type approval system for type approval system is due to motor vehicles “2007/46/EC.” be published in mid-2015 The content of the present draft 2007/46/EC by the EU Commission is still being worked on as part of the European legislative process involving the member states and the EU Parliament. Publication is planned for mid-2015.

The most important changes are:

• The new version will be published as a regulation

• Annex II (Definition of vehicle categories and vehicle types) will remain unchanged

• Vehicle type approvals should be subject to an expiry date (not applicable to parts approvals) with the possibility of extending the existing type approval (no statement has yet been made about the period, it is assumed that five years will be allowed)

• Specification of the conformity of production (CoP) requirements (up to now, the approving authority alone has been responsible. In future, the Commission would like to have the final decision)

• The topic of market monitoring will be taken from the two-wheel regulation

• “Ends of series” will be harmonized on a European basis, there should not be any national approvals any longer and individual approvals should apply internationally 143

International Whole Vehicle Type Approval

The system of type approval exists exclusively on EU level with its EC Directives and ECE regulations, and is thus applicable to the 28 member states of the European The system of the type approval is Union. Work is ongoing on a similar system at ECE level – namely, a type approval applicable for 28 member states based on ECE, referred to as I-WVTA (International Whole Vehicle Type Approval). of the EU The ECE has 51 contracting states. At present, however, there is no whole vehicle type approval at the UNECE.

The reasons for a type approval on ECE basis are as follows:

• Worldwide harmonization of vehicle regulations for whole vehicles

• Mutual recognition of these regulations on the basis of type approval regulations

• Reduction in the administrative overhead for vehicle manufacturers

• Strengthening the process of type approval at international level

• Increasing the attractiveness of the UNECE for developing countries

• Elimination of trade barriers due to worldwide harmonization

Experts from Europe, Japan and Russia are working together to prepare the ground for a type approval on ECE basis, which will be capable of phasing out the EU type approval in the long term. The scope of use will be significantly greater if all ECE states accede to the regulation. In order to enable developing countries, with their lower legal requirements, to use the IWVTA, there will be an L-IWVTA (IWVTA of limited recognition), which should have a limited area of validity. The system will come into force once the necessary changes have been made to the 1958 agreement so as to create the legal framework.

Vehicle Safety

Reinhard Eder – technician control engineering, manager measurement & testing, Anvis Deutschland GmbH, Steinau an der Straße, 2013 VEHICLE SAFETY 146

Road traffic accident statistics in Germany

The positive trend followed by German accident statistics continued in 2014, albeit The vast majority of accidents on the on a lower level than in the previous year. The number of fatalities was slightly higher road only involved vehicle damage than the previous year, however. From January to November 2014 around 2.18 million road traffic accidents were recorded. This corresponds to a slight fall compared to the same period in 2013 of 1.2 percent. The number of accidents resulting in personal injuries rose during the period to 278,500 (+3.4 percent). The vast majority of accidents on the road (approx. 1.90 million) only involved vehicle damage.

During the same period, 3,062 people lost their lives in traffic accidents on German roads. That represents an increased of approx. 0.7 percent over the first eleven months of 2013. From January to November 2014 the number of minor and major injuries on the roads rose by 3.5 percent to 357,800.

The main differences between 2014 and 2013 were particularly stark in spring 2014 when the relatively large increase in injured two-wheel vehicle riders was the result of the comparatively mild weather. In the first six months of 2014, almost one-third more cyclists and motorcyclists lost their lives than during the same period in 2013. In the second six months, however, considerably fewer injuries were recorded than in 2013. Since the group of fatally injured two-wheel riders is the second-largest group after car passengers, in addition to the continuous improvement in the safety standards of cars, greater attention must also be given to the group of two-wheel vehicle riders. Because this group must receive a different type of protection than car passengers, a whole different set of measures is required. Greater visibility in the dark using new lighting concepts is required for cyclists and work is also required to encourage them to improve their own protection, for example by wearing helmets.

The picture is similar on a European level. Over the last decade, the number of road The number of fatalities on the roads deaths has fallen by almost 40 percent. The reasons for this include the continuous of Europe has fallen by almost improvement of vehicle safety and the more restrictive implementation of national 40 percent during the last ten years traffic law in various countries. This is supplemented by the steady expansion and renewal of the infrastructure in many European countries. 147

Plastic windshields in motor vehicles

The various windows used in motor vehicles must be certified as part of the homo- logation process. The requirements of UN Regulation 43 apply to the certification The requirements of UN Regulation and govern the so-called safety glazing materials and their installation. This regulation 43 apply to the certification of glass also applies to almost all glass and plastic windows. Exceptions apply to plastic windows in motor vehicles windshields since to date they have not been certifiable in Europe. However, a special approval was issued by the Department of the Interior in 1988 for special vehicles designed for a maximum speed of 40 km/h. Since 2001, this special regu- lation has also been extended to cover all police vehicles.

The experience gathered to date with plastic windshields demonstrates the wide range of advantages that they offer compared to glass windshields, which are used Plastic windshields are lighter and less as standard at the current time. Plastic windshields are lighter and allow a wide susceptible to break variety of shapes to be manufactured. They are drastically less susceptible to fracture than glass windshields, which is why they are particularly used in forestry and agricultural vehicles. The subjects of durability, scratch resistance and resistance to ultraviolet radiation must be given special consideration for the use of plastic windshields. The various types of plastic and different surface coatings require trials and field tests.

Plastic windshields must satisfy the pedestrian safety requirements if they wish to achieve general homologation. In addition, a plastic windshield must not represent an obstacle to rescue workers in the event of an accident. The rescue workers must be able to gain access to the accident vehicle regardless of whether the vehicle has a glass or plastic windshield.

In April 2010, an informal working party led by Germany was formed by the United Nations Economic Commission for Europe (UNECE). The objective was to prepare test methods for the homologation of plastic windshields. The work of the informal working party was completed in 2014. In October 2014, an amendment proposal for UN Regulation 43 was approved in the UNECE Working Party on General Safety Provisions (GRSG).

This amendment proposal defines the test requirements for plastic windshields and contains the following criteria: Evaluation of the light permeability, fire properties, chemical resistance, weather and moisture resistance, and temperature, ultraviolet and temperature cycle resistance. In addition, the following tests are conducted: flexibility test, a ball drop test with a 227 g ball, a phantom drop test, a wear test and a cross-cut test. The definition of a suitable test method for assessing abrasion proved to be particularly complicated. Abrasion is measured on standard glass windshields using an abrasion roller. This unit, whose rollers are fitted with abrasive media, rotates on a circular path over the windshield’s glass surface. After a fixed test duration the scattered light on the glass surface is measured. A certain limit value must not be exceeded if the windshield wishes to achieve homologation. VEHICLE SAFETY 148

This test method proved to be useless for plastic windshields because during tests The manufacturers can now use a new, in various laboratories it was discovered that the deviations between the results three-part test method of the tested plastic materials were simply too great. At this point, three new test methods were proposed, and a combination of them proved to be successful in reflecting the abrasion properties of plastic windshields. These three tests are a washing test based on ISO 20566, a modified sand drop test based on UN R22 and a wiper test with a clearly defined number of cycles. The manufacturers can choose between the method used in the past or the new three-part test method for the certification of the plastic windshield.

Wiesbaden Fire Service conducted a series of cutting tests to investigate the properties of plastic windshields in the event of an accident. The tests showed that it takes an almost identical length of time to cut glass and plastic windshields. The Fire Service came to the conclusion that the plastic windshield does not present an obstacle to a fast rescue in the event of an accident.

In another test project, the effects of the plastic windshield on pedestrian safety The plastic windshields have pronounced were studied. Impact tests were carried out as described in UN Regulation 127. elastic properties This test method requires the impact of an adult head test model on a real windshield. Plastic windshields with a range of thicknesses were tested in direct comparison to a glass windshield on the basis of four impact positions. The head injury criterion (HIC), which measures the head injuries caused by acceleration was used as the analysis category. Although the impact of an adult head test model on a plastic windshield produced a higher HIC value than glass windshields, the defined limit value was only exceeded by an 8 mm plastic windshield – and only if the impact point of the adult head test model is in the direct vicinity of the bottom windshield frame. Plastic windshields have pronounced elastic properties and did not fracture in any of the tests.

The spread of plastic windshields will depend on the development of surface coatings for them. The surface coatings for plastic windshields must be resistant to abrasion from the wiper blades and stone strikes. The use of plastic materials can also reduce weight. However, a different shape and the ability to glue the wind- shield into position is a requirement for this. To date, there is no conflict between static and dynamic stability requirements for windshields and their high energy absorption in the event of an accident involving a pedestrian.

Action to improve pedestrian safety

The European Commission has set an ambitious target for further reductions in A quarter of all fatalities in road traffic the number of people killed on the road by 2020. In the period from 2011 to 2020, accidents in Europe are pedestrians the number should halve from its current level of approx. 30,000. The EU Commis- sion is therefore supporting global and national initiatives aimed at improving transport infrastructure, driver training and the definition of technical requirements for vehicle safety. 149

Almost a quarter of all fatalities in road traffic accidents in Europe are pedestrians. In urban areas this figure rises to almost one-third. This fact has been used as an incentive by the EEVC (European Enhanced Vehicle-safety Committee) to conduct extensive research into pedestrian safety in the field of vehicle technology. The EEVC working parties have developed various tests for this purpose, which may affect the design of motor vehicles. The results of the studies have been taken up by the EU Commission to form the basis for a statutory regulation on pedestrian safety as part of the homologation process for motor vehicles. In the so-called Phase I, a head impact on the hood, an impact of a leg test model against the fender and the impact of a hip test model against the bumper have been required by law since 2005. The simulated head impact has to be conducted with two different test models, one of which corresponds to the mass of an adult’s head and the other to that of a child’s head. To comply with the specified limit values in the various test procedures the vehicle manufacturers must ensure adequate ener- gy absorption during the test model impact. This resulted in modified front-end structures and new designs of hoods with impact-absorbing properties. Hoods are now available with absorbent structures, actively opening hoods, alloy hoods and special pedestrian safety airbags.

This action helped to reduce fatalities among pedestrians by around 25 percent between 2005 and 2012 in Europe. Similar positive trends were also recorded in Global legislation should be harmonized Japan, Australia and Canada. A Global Technical Regulation (GTR 9) was created in 2009 by the UNECE based on the European regulation to harmonize legislation around the world. To date, GTR9 has been implemented in national law by the member states of the European Union, Russia, Korea and Japan.

GTR 9 is divided into Phase I and Phase II. Phase I is based on current European legislation and requires the use of the EEVC leg test model to evaluate the injury risk of the thigh, lower leg and knee.

The technical development of the leg test model has been driven forward over the last few year by Japan in particular. Japan had been working on a new test model (Flexible Pedestrian Legform Impactor – FlexPLI) since the year 2000, which is now ready for use and has been defined as the new test model for GTR 9 Phase II. The regulatory requirements for the adoption of the test model into law have been satisfied by a UNECE working party. At the same time, a new UN Regulation 127 based on GTR9 Phase I and Phase II has been drafted to ensure the mutual acceptance of homolo- gations for pedestrian safety in the countries that have signed the treaty of 1958.

The new FlexPLI flexible leg test model will also be used in the future by Euro NCAP and will replace the previous EEVC leg test model used throughout the world in other Various countries amend the pedestrian consumer safety programs. At the same time, various countries will amend their safety regulations pedestrian safety regulations and from 2015 they will allow the use of the new test model and from 2018 at the latest, the use of the new flexible leg test model will be mandatory for new homologation procedures.

At the same time as the implementation of the action to improve passive safety, a whole series of active systems are being installed in motor vehicles to prevent acci- dents. The increasing spread of systems to affect longitudinal and lateral dynamics (for example automatic emergency braking systems, intersection assistants and lane change assistants) will also have an effect on improving pedestrian safety. Simulta- neously, action must also be taken to improve the infrastructure. Examples of this are priority systems for pedestrians at intersections, light signal systems or crossing tools at wide intersections and illuminated pedestrian crosswalks. VEHICLE SAFETY 150

Theft protection

Vehicle criminality is a global problem. The fight against it must be regarded as a Theft figures have once again risen task for the whole of society. The number of stolen vehicles in 2013 rose slightly in the German states worst affected compared to 2012. The official statistics for 2014 have not yet been published, but by crime experts expect that no downturn will have taken place.

In 2013, there was a slight rise in the number of permanently stolen vehicles. This means that the number of cases since 2009 is still at a stable level. The theft figures rose once again in the German states that are worst affected by crime, Berlin, Brandenburg, Saxony and Mecklenburg-Vorpommern. The trend is downward in southern and southwest Germany, on the other hand. Nobody is expecting a major change in this situation since the main conditions such as the expansion of the Schengen Area (a lack of border controls in the EU, only at the EU borders), the technical facilities available to criminals to overcome modern immobilizers and the good opportunities for sales of stolen vehicles have remained unchanged.

Vehicle crime in Germany has been dominated by criminal gangs from Eastern Europe for many years according to the German Federal Criminal Police Office (BKA). International vehicle trafficking continues to be based on the sustained demand for motor vehicles and components in southeastern and Eastern Europe as well as in the Middle East. The motor industry continues to hold the upper hand in the tech- nological struggle with professional gangs. Close cooperation between national and state criminal police officers ensure that the latest findings about new methods of attack are used in the design of new theft prevention systems.

Theft statistics in Germany 1990 to 2013

Use of the first generation electric/electronic immobilization systems 150,000

120,000

90,000

60,000

Schengen

30,000

0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Annual totals – permanently lost Annual totals – sought by police

Sources: Federal Criminal Police Office (BKA) – SO 41 and Federal Motor Transport Authority (KBA) 151

The 48 V vehicle electrical system is gaining support

Since 1997, the VDA has been looking into questions relating to higher vehicle elec- trical system voltage to meet the growing power demand of modern motor vehicles. The 48 V vehicle electrical system can The first deliberations assumed that a 42 V system would be possible. Ultimately, transfer more energy however, a 48 V system will shortly find its way into new vehicles.

The technical equipment in motor vehicles is changing constantly and very rapidly. Many functions that were once mechanical have been converted into electrical functions in recent times. The increasing electrification of motor vehicles means that 12 V batteries have now reached the absolute limit of their capacity, however. That is why carmakers and their suppliers have now developed a 48 V electrical system. Braking energy recovery and stop/start systems are the driving forces between this 48 V technology, which has the ability to transfer more energy to consumers.

The 48 V electrical system also provides a basis for hybrid power systems. Its greater kilowatt output allows implementation of functions such as electric starting, boosting, The first 48 V partial electrical system stop-start driving in traffic jams, parking and efficient energy recuperation to be is expected to go into mass production implemented. Many systems cannot be electrified properly without this higher voltage, in 2015 for example air-conditioning systems, active chassis controls, high-performance heating systems or an electric turbocharger. This will not only increase the efficiency of vehicles, but also their comfort and safety levels.

The mass production of the first 48 V partial electrical system is expected to start in 2015, initially in upper segment cars. With its manufacturers and suppliers, the VDA has prepared VDA Recommendation No. 320 on the standard development of a 48 V electrical system.

Standards and Technical Specifications

Leonhard Fuchs – paint shop plumber, specialist carfinish, production paint-finish assembly, BMW AG, Munich, 2010 STANDARDS AND TECHNICAL SPECIFICATIONS 154

Fuel consumption in NEDC

Since the start of the nineties, the introduction of the standard European exhaust The NEDC determines vehicle emissions regulations has meant that vehicle emissions in the EU are measured on emissions on the basis of a standard the basis of a standard driving cycle (the New European Driving Cycle, or NEDC for driving cycle short). It was developed by the EU Commission and the UN Economic Commission for Europe (UNECE) to provide consumers and politicians in Europe with a standard scale. The NEDC therefore provides a basis for verifying compliance with emission limits within current emissions legislation and also for finding the official consump-

tion values and the CO2 emissions of a vehicle. The NEDC applies to all cars and light commercial vehicles. The electric range of plug-in hybrids and electric cars is also calculated on the basis of the NEDC.

The NEDC describes the actual driving profile but also the measuring and ambient conditions for a measurement. For example, it states very precisely how a vehicle must

be loaded for the CO2 measurement and at what temperatures the measurement must be taken. Objective comparisons of various NEDC measurements is only possible if these standards definitions of ambient measurement conditions are observed.

In real traffic, of course, vehicles will not match to these NEDC-based consumption figures. The reasons for this are wide-ranging-drivers have possibly the greatest influence on the figures through their driving style. The range of possible conditions and driving profiles can only be reflected to a limited extent by a standard test cycle.

The VDA has published a brochure on the subject of fuel consumption in conjunc- The brochure entitled “Facts and tion with the VDIK and TÜV Nord. This explains how fuel consumption and emissions arguments about fuel consumption” measurements work in the European Union and how fuel consumption in reality may is available at vda.de differ from the certified consumption figures based on the NEDC. The brochure is entitled “Facts and arguments about fuel consumption” and is available to download at www.vda.de/de/publikationen/publikationen_downloads/.

Speed profile in future “World cycle” W LTP

Low Middle High Extra-high 140 120 100 80 60 40 Speed in km/h 20 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800

Time in s W LTP NEFZ

Source: UNECE 155

WLTP – Worldwide Harmonized Light Vehicles Test Procedure

Despite many objective benefits, the NEDC is increasingly attracting criticism, some of it justified, that it is no longer representative for the average driving style of a vehicle The new WLTP cycle is much more or driver. The member states which signed the 1998 treaty of the UNECE (including all dynamic than its predecessor the European countries as well as Japan, the USA, China, Russia and India) therefore decided to develop a new test procedure under the auspices of the UNECE. This should be properly representative of the driving style of a vehicle anywhere in the world. The automotive industry played a major role in supporting and advancing this initiative.

The new WTLP cycle (Worldwide Harmonized Light Vehicles Test Procedure) was developed on the basis of driving data gathered from around the world and covers driving situations from urban traffic to highways. In contrast to the NEDC, the cycle is much more dynamic since it has many more acceleration and braking cycles than its predecessor. In addition to the actual driving profile, the measurement procedure has also been standardized globally and tailored to current automotive engineering. Questions relating to the temperature at which a vehicle is measured or the definition of the correct tire pressure are included in the standard.

New cycle WLTP

W LTP NEDC

Start temperature Cold Cold

Cycle time 30 min. 20 min.

Stationary time proportion 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

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

Optional equipment is taken into account for weight, Influence of optional equipment aerodynamics and VES requirements Not considered at present and air-conditioning (AC) (no-load current). No AC

Source: VDA STANDARDS AND TECHNICAL SPECIFICATIONS 156

The aim of the new test cycle is to simulate reality as closely as possible, minimize The WLTP must determine fuel variances and keep the cost of tests as low as possible. As with the NEDC, the consumption on a representative basis measurement process should be reproducible and achieve conformity all over the world. A vehicle of the same type must produce the same test results anywhere in the world at any time if the measurement procedure is followed correctly. To ensure this, the procedure must be able to determine the fuel consumption and emissions of a vehicle reliably and on a representative basis.

The development of the WTLP was divided into two phases. The first phase included the cycle and the test procedures and therefore provided the basis for the applica- tion of the WLTP in legislation. Phase 2 will then harmonize additional points such as on-board diagnostics, consideration of additional consumers and in-use topics.

Phase 1 of the WLTP development was completed in principle in March 2014 in a first After the conclusion of Phase 1b phase, referred to as phase 1a. The completion of this phase saw the cycle and the the WLTP will become law procedure being practically applicable for conventional vehicles. The outstanding points from Phase 1 will be dealt with by the end of 2015. These include the correct treatment of plug-in hybrid vehicles and fuel cell vehicles, but also the continued revision of marginal conditions for tests. Only after the so-called phase 1b has been completed can the WLTP also become law in Europe.

Sensitive CO2 monitoring in Europe will initially remain the basis of the NEDC until The EU Commission is working on the planned introduction of the WLTP starting in September 2017. This is why vehicles a correlation of NEDC and WLTP that are newly certified using the WLTP must initially be regarded as having being certified using the NEDC. The EU Commission is working on a correlation of NEDC and WLTP for this purpose. This correlation work is expected to be completed by mid-2015. The correlation only covers conventional vehicles and does not consider alternative powertrain types such as plug-in hybrids. Together with the industry, the EU has agreed on the required accuracy of this correlation work with a maximum individual error of 3 g/km. This high accuracy level is necessary because for every

gram by which the CO2 target is missed, a fine of 95 euros per vehicle is imposed.

The introduction of the WLTP must therefore not result in CO2 legislation becoming

more stringent. The EU Commission is currently planning the conversion of CO2

monitoring to the WLTP. Individual CO2 target values for the NEDC for each manu- facturer will be converted to the WLTP for this purpose. Starting from 2020, the EU

Commission has stated its intention to monitor CO2 target achievement exclusively on the basis of WLTP monitoring and the manufacturers’ WLTP target values.

The VDA has major reservations about this early conversion of CO2 monitoring to The monitoring will not be converted the WLTP since the achievement of the targets in the WLTP cycle requires different to the WLTP until the NEDC targets engineering measures from those required for the NEDC. This situation will in fact

have been achieved result in the CO2 targets becoming more stringent, which would be illegal. The VDA therefore demands that the monitoring is not converted to the WLTP until after the NEDC targets have been achieved. Regardless of this, with the help of the correlation tool the WLTP can be used immediately after the introduction of the procedure to obtain the important consumption information. The VDA has prepared concrete proposals to this end. 157

VDA projects in the joint electric mobility research project – implementation of the standardization roadmap

The Federal Ministry for Economic Affairs and Energy (BMWi) supports the develop- ment and market launch of electric and plug-in hybrid vehicles with a wide range of There is a large number of support measures and programs. The Ministry is supported in this by the lead project part- programs for the development of ner in the DLR (German Aerospace Center, Electric Mobility Department), which is electric vehicles responsible for project organization and implementation. The main topics are drive unit technologies, production and production processes, international joint ventures and the BMWi’s standardization initiative.

The National Electric Mobility Platform has approved a standardization roadmap Electric mobility and the added value chain resulting from it require closer collab- The National Electric Mobility oration between the various industries and the relevant standardization bodies. Platform has approved Standards must now be produced jointly by the relevant institutions such as DIN, the a standardization roadmap Standards Group for Automotive Engineering within the VDA and DKE. This process is supported by the standardization initiative of the BMWi. The program of works for this initiative has been approved by the National Electric Mobility Platform in the form of the so-called standardization roadmap. Acting as the ministry involved, the BMWi has started several projects in conjunction with the standardization bodies to implement the standardization roadmap.

Three projects are currently being handled by the Standards Group for Automotive Engineering. The contents of these projects are aimed at vehicle batteries, the charging column-vehicle interface and the drivetrain. The aim of these projects is to define new requirements relating to electric mobility for a whole series of areas. This will result in the definition of limit values and possibly even new test methods. The project participants have been engaged for the relevant project by an official tender- ing process (SGS Germany GmbH – vehicle batteries, University of Duisburg-Essen – charging column-vehicle interface, Robert Bosch GmbH – vehicle measurements).

All the projects were started in 2014 and are due to be completed in 2015. The results produced to date have all been very practical in nature. They have imme- diately been used in current standardization work. Other project proposals for this initiative are currently being reviewed. STANDARDS AND TECHNICAL SPECIFICATIONS 158

Standardization of driving dynamics and driver assistance systems

The ISO Committee responsible for road vehicles has been restructured over the last The Driving Dynamics Working two years. This restructuring has led to committees being merged to prevent work Party is given responsibility for on ever-more complex topics being duplicated and to ensure improved collaboration additional sectors between the working parties and groups, which now number over 50. The Driving Dynamics Working Party, of which the DIN Automotive Standards Committee of the VDA is the international lead, has therefore been given responsibility for additional sectors such as driver assistance systems and test equipment for active safety.

Previously, the standards relating to driving dynamics have mainly defined important driving maneuvers to standardize the marginal conditions for evaluating driving behavior. One example of this is the lane-change test ISO 3888-2 from 1999, known as the “moose test.” By expanding its fields of responsibility, the plan is to describe methods in the future that provide a normative framework for new assistance systems automated driving. One significant point in this respect is the collaboration with other working groups that have already looked at the system aspects of driver assistance systems. As these systems become ever-more complex, this new structure at ISO provides a good basis and interface for the preparation of future ISO standards and a method for coordinating them with other interesting working groups, organizations and partners. 159

Preparation of a DIN specification series for CO2 air-conditioning systems

Under EU Regulation (EC) No. 842/2006 it has only been possible since 2011 to use substances that have a global warming potential (GWP) of less than 150 in air-con- As from 2017 a GWP of less than 150 ditioning systems in new series of cars. The GWP is an index that denotes the ratio will apply to all new vehicles of its effect as a greenhouse gas over a period of one hundred years. This limit value also applies to all new vehicles as from 2017. Refrigerant type R1234yf, which satisfies the requirements of this regulation, is an alternative to refrigerant R134a, which has previously been used in air-conditioning systems. As a result of the almost total compatibility of R1234yf with the existing equipment in established air-condi- tioning systems, carmakers and suppliers can continue to use the components that have been used for many years in their systems. This is one very good point in favor of R1234yf. A wide range of tests has confirmed that R1234yf can be used safely in motor vehicles. However, tests whose scope went beyond the requirements of product safety legislation showed indications that the possibility of a fire could not be ruled out completely in every vehicle model in the event of an accident.

R744 (CO2) is a safe alternative refrigerant to R1234yf. However, the use of R744 requires considerably higher operating pressures. That means that it cannot be used CO2 is a safe alternative refrigerant with the components of established air-conditioning systems without modification. In view of the partly critical test results with R1234yf, German motor manufacturers have decided to concentrate on and complete the development of air-conditioning systems that are suitable for the use of R744.

At the same time, as the development and testing work, a series of specifications entitled “Road vehicles – R744 air-conditioning systems” has been prepared. The aim of this is to standardize the components for R744 systems for cars. In addition to the requirements on components of R744 air-conditioning systems, these specifications also describe the process requirements for their development and qualification. The series of specifications was prepared in 2014 and will be published in the second half of 2015 in German and English. It currently consists of 18 individual specifications with the label “DIN SPEC 74102 and following numbers” for individual components such as heat exchangers, compressors, valves and connectors. Other specifications for other components are still being developed. The specifications provide valu- able information for the qualification of components for component developers and manufacturers. This will make it possible to use components with the same or similar design in all R744 vehicle air-conditioning systems, regardless of vehicle type. In this way, the series of specifications will make an important contribution to safety, quality and cost optimization for the manufacture and operation of air-conditioning systems containing R744 refrigerant. STANDARDS AND TECHNICAL SPECIFICATIONS 160

Standardized video interface for in-car applications

Since driver assistance systems have been providing drivers with important safety Cameras provide all-round vision functions, cameras have also been used as functional elements to provide all-round in a vehicle vision. Originally still integrated in ECUs, highly equipped vehicles now have between six and twelve multi-function cameras in the form of independent units. A high-perfor- mance digital interface is required to connect the cameras to the appropriate ECUs.

Standards for this video communication interface were developed and published in the ISO 17215 (Parts 1–4) series of standards. This series of standards defines both the requirements for the communication protocol and those for the physical interface.

The illustration shows the allocation of the individual parts of the standards in terms of content, based on the ISO/OSI reference model for communication between cameras and control units.

The ISO17215 series of standards used the ISO/OSI reference model

ISO/OSI Applications (ISO 17215-1) Reference model Service Discovery – Service Control – Flash Update – Helper Protocols

7 Application Layer Camera-based API (ISO 17215-3) Message dictionary 6 Presentation Layer

DHCP (ISO 17215-4) SOME/IP (ISO 17215-2) 5 Session Layer IPv4 SOME/IP-SD

4 Transport Layer TCP/UDP (ISO 17215-4)

3 Network Layer IPv4 (ISO 17215-4) IPv6 (ISO 17215-4)

2 Data Link Layer Ethernet MAC + VLAN (ISO 17215-4)

1 Physical Layer Ethernet (ISO 17215-4)

Source: VDA 161

To enable a camera to be operated in the vehicle and evaluate the image infor- mation, the communication protocol must support the appropriate functions on the application interface. Essentially, these are, on the one hand, function for the controller, for calibration and error handling for the camera, and on the other, functions for the periodic transfer of image data. The “Scalable Service-oriented Middleware over IP,” or “SOME/IP” for short, has been specially developed for the automotive industry to sequence these functions and data structures.

One of the features of SOME/IP is that data types and structures that are defined in the application layer can be transferred without complex recalculations. The “service orientation” of this middleware makes the following transmission methods possible: request/response, fire and forget), event, field and event group.

The illustration below visualizes the messages of the corresponding transmission methods between sender (client) and receiver (server).

The TCP/IP protocols familiar from PC networking and the Internet are used to transfer between protocol layers 4 to 1 (see Figure 1). Ethernet has been specified Ethernet connects cameras to in the ISO 17215 series of standards for the physical transfer. Ethernet provides a the ECUs in the vehicle more bandwidth and faster data transfer compared to other vehicle bus systems such as CAN, MOST and FlexRay. Ethernet in the vehicle is based on general stan- dards, which have been specially adapted to the requirements and conditions in the vehicle. The “SOME/IP” middleware has been specially developed and adapted for the use of Ethernet in the vehicle to enable the bus properties familiar from CAN and FlexRay to be reproduced better.

SOME/IP transmission methods

Request / Response Fire and Forget

Client Server Client Server

Events Field

Client Server Client Server

Source: VDA STANDARDS AND TECHNICAL SPECIFICATIONS 162

Product Life Cycle Management and the Digital Factory

Good ideas are exactly what the German motor industry and its engineering rely Data errors in the design of a car must on. But as soon as the ideas go digital, the quality of the data provides the uncom- be identified as early as possible promising basis for every additional step.

When designing a car on a computer (computer-aided design, CAD), data errors can occur, which cause problems in virtual production (computer-aided manufactur- ing, CAM). If these data errors are not identified early enough, the costs of the production planning process can increase massively. So the aim is to identify any inadequate data quality of all the product-relevant technical details for cars and commercial vehicles immediately, propose corrections and therefore prevent errors in the design process. Designers have test programs available for their software, which work in a similar way to a spell checker for word processing programs. The results then provide a reliable basis for decisions on whose criteria data may be regarded as good geometric information and from when data contain deviations that cannot be tolerated.

The Product Life Cycle Management Working Party in the VDA, abbreviated to All the steps in the production PLM-AK, has been regarded as an innovation accelerator and efficient manufacturer cycle can be reduced by VDA and supplier network throughout the entire sector of product creation and mainte- recommendations nance for more than 25 years. The platform was formed to improve what was then the new technology of the digital exchange of CAD/CAM data. Interfaces are iden- tified in the product life cycle at which the quality of the data of all product-relevant technical details for cars and commercial vehicles is particularly important for the success of the project. Readily comprehensible process methods and recommenda- tions are prepared with which the required quality of the virtual product data for the development of automobiles can be achieved and assured.

Using these VDA recommendations it is possible to reduce all the steps in the production cycle of a new vehicle model, from planning and production to repairs and sustainable recycling, and make them more efficient. Furthermore, it is possible to check whether the data are relevant, complete and consistent. The recommen- dations save time, costs and retrospective corrections – and also speed up the work. The work of the PLM-AK is therefore also a quality pacemaker throughout the entire production and usage cycle of the vehicle. 163

Plan production virtually and reduce costs with the Digital Factory

Innovative techniques are becoming ever-more important in the face of increasing pressure of competition between companies and the resulting necessity for cost- Factory processes can be regarded efficiency. One of these techniques involves the “digital factory.” Using these as a whole in the digital factory increasingly important techniques, it is possible to validate and optimize the design of production plants in virtual form during the planning phase. A network of digital models and methods such as simulation and 3-D visualization helps with this process. All the main factory processes and resources related to the product can be viewed and improved as a whole in a digital factory.

Logistics

Manfred Schleicher – car mechanic, service employee chassis and engines, Daimler Buses/EvoBus GmbH, Neu-Ulm, 2010 LOGISTICS 166

Logistics and IT in the supply chain

German carmakers are building new production plants in all their relevant markets, Logistics processes in the supply chain above all in the Nafta area and in China. Local sourcing is an important component continue to gain importance for establishing the supply process for reasons of costs and to manage the logistics processes. On the other hand, the efficient method of “best-cost country sourcing” often entails long delivery chains. Hardly any factory in the world can produce all the required makes and models of a vehicle manufacturer, the range of models is simply too great. Consequently, the past few years have also witnessed a growth in the global transport chains for distributing finished vehicles, and they need to be coordinated and controlled.

Time-tested concepts of logistics organization in Europe and North America cannot always be used without adjustment in other regions. The requirements are wide- ranging: It is not always the case that high-quality, standardized packaging is available to ensure reliable protection of components in all transport and production processes on a cost-efficient basis. In markets such as China, there are also no standardized load-space dimensions. Or there is a lack of interfaces and standards for global communication between the partners in the supply chain. 167

The companies involved in the committees in the Logistics Department develop solutions to these new process requirements. They have formed a logistics body in which the highest-ranking management staff in charge of logistics processes in the companies identify the main strategic topics for the entire industry and assign them to the committees to deal with them. In the working groups, the VDA member companies are working closely with their partners from other industries – above all with logistics and IT service providers.

One of the main topics is the use and management of reusable packaging, particu- larly small load carriers (SLC). In the past, recommendations have been prepared for such containers by CoC Packaging in the VDA. About 100 million containers have been introduced into circulation so far. In 2014, for the first time tools from a manufacturer in China were certified. More are sure to follow. This will be an important step toward supplying the Chinese market and replacing disposable packaging within China.

The management of such a large number of packaging units is a massive challenge. In the industry there are various concepts to provide suppliers with empty containers. The management tools also differ widely and are a bureaucratic obstacle that causes unnecessary costs. A project group formed in 2014 is studying these processes and preparing recommendations for the possible standardization of information and control processes.

Transparency and control of logistics processes in current conditions demands a growing, global exchange of information between suppliers, manufacturers and The control of logistics processes service providers. The VDA recommendations developed in the past and widely requires the global exchange of used in Germany for data transmission only meet these requirements to a limited information extent. For this reason, the work on the development of new, globally applicable messages has been continued and intensified. Recommendations for the global exchange of inventory data, call order data, delivery advices and invoice data are now available. In addition, a new version of the recommendation for the form and content of transport papers accompanying goods has been produced. This means that globally applicable formats are now available, some of which have already been implemented and are in use. The members of the relevant working party provided information about the implementation process at a roadshow event, which was attended by 750 people and resulted in a lively amount of feedback. LOGISTICS 168

The subject of Industry 4.0 is driving forward the digitization of the added value Many concepts of Industry 4.0 are chain. The competitiveness of Germany as an industrial location is to be secured already in use in vehicle production by linking machines, tools and systems, on the one hand, and IT systems, on the other. Many of the concepts are already in use in vehicle production (for example in just-in-time and just-in-sequence production) but to date the subject has not been addressed in its entirety.

The aspect of smart logistics is of particular interest to logistics specialists. In this case, the use of these principles results in a high level of transparency in the supply processes, and reactions to faults are also improved. Intelligent containers are one of the main requirements for these systems. Consequently, experts in the two working groups of “CoC Packaging” and “Auto-ID” have worked out a requirement profile for the next generation of VDA small load carriers equipped with RFID technology, and that permit a further process automation. The concept has been approved by the logistics committee and the development of this generation of containers, which also gives due consideration to sustainability aspects such as material use, improved transport volume and protecting the environment, has now been started.

In addition to the increasing penetration of digital services into logistics processes, Production plants are improved during the logistics working parties are also looking into the digital development of components the planning phase in the digital factory and vehicles. The “Auto-ID” working group is also continuing to pursue the topic of the “glass prototype.” The aim of these activities is to continue to expand the digital development of vehicles and components and thus to reduce the number of physical development stages up to the start of production. These activities are supplemented by the digital design and simulation of production and internal logistics processes by the “Digital Factory” working party. Using these innovative techniques, it is possible to validate and optimize the design of production plants in virtual form during the planning phase. This allows all the main factory processes and resources related to the product to be viewed and improved as a whole.

The range of activities within the VDA relating to digital collaboration between New working party for functional data manufacturers and suppliers will be expanded in 2015 with a functional data- exchange exchange working party. This working party will develop standards and IT tools for planning, completing and evaluating function tests on components and assemblies. It will be monitored by the Logistics Department in close cooperation with the Engineering Department. 169

Law, Sales and After-sales

Judith Dreckmann – business studies / logistics (bachelor of arts), projectmanager, Formel D GmbH, Ingolstadt, 2013 LAW, SALES AND AFTER-SALES 172

Current development in sales and service

The automotive industry in Germany primarily uses a network of dealers for selling Selective sales are the preferred motor vehicles (cars and commercials). In large urban areas, some individual brands business model in the automotive even have local plant offices that handle sales directly for manufacturers. To date, industry no new sales channels have managed to become established in new sales forms outside the existing system. The Internet has also not advanced to become a relevant transaction medium for new vehicle business. It is still mainly used as a source of information for customers. In terms of the technical competition between the brands, selective sales continues to be the system of choice to sell customers new drive unit forms such as electric cars.

Selective sales are still the preferred business model for the automotive industry in Germany and the EU for selling new vehicles. The various brands in the EU attempt to achieve maximum territory coverage and customer proximity with a selected number of independent car dealerships, which generally have a connected workshop business. At the same time, the selective sales system is regarded as efficient, profit- able and good for competition. 173

For car sales, a nationwide network of dealerships means an opportunity to maintain regular customer contact and therefore to communicate the values of the brand The aim of the dealership is concerned. The communication of the emotional elements of a brand to private to communicate the emotional customers is one of the major duties of the dealership. The dealerships in the sales elements of a brand network compete with each other in terms of price and service and thus enhance what they offer to customers.

In contrast to car business, sales of commercial vehicles are mainly aimed at business customers. These customers are now interested in purchasing complete Commercial vehicles sales are mainly packages, which may include the vehicle, the body, the finance and other after- aimed at business customers sales services. Commercial vehicle customers have three main demands on sales, namely detailed sales support, the availability of demonstrators and easy access to the sales staff for the needs of the commercial vehicle company. The sales staff are expected to have relevant experience in the customers’ sectors. This means dealers must continually invest in training their staff. Commercial vehicle custom- ers demand a complete “full-range” service network from the brand, which can provide efficient support for running a commercial vehicle fleet – for example by ensuring low downtimes for servicing and repair work.

The EU’s Vertical Block Exemption Regulation (No. 330/2010) dated 20 April 2010 provides a reliable legal basis for the industry and trade for continuing selective sales The EU’s Vertical Block Exemption systems. The planning and investment security that the regulation brings is a decisive Regulation provides a secure legal factor that will allow businesses to remain viable in the competition among the basis for selective sales systems brands, especially for medium-sized dealer businesses. The more flexible provisions in the Vertical Block Exemption Regulation enable manufacturers and dealers to reduce costs and increase the efficiency of the sales network. In view of the sustained competitive pressure on the industry and motor trade, production and sales costs are under great adjustment pressure. The Vertical Block Exemption Regulation will enable the players in the motor industry to adjust to changing conditions more easily. The various brands can adjust their business models to this. However, there is no need for a standard route for the design of the vertical sales structure.

The Internet has now become established as a trading and information platform in the automotive industry. It has become an essential source of information for the The Internet plays a major role in buying process. In the used car trade it has been more important than all other car sales sources of information for many years, and for some years it has also produced new usage forms such as social networks, forums and blogs. Before buying a new car, the Internet also plays a major role as an information source. However, there is still no particular demand for buying portals for new cars. The status of an online portal for new cars as a transaction location is therefore still in its infancy, particu- larly since the delivery of the vehicle is still mainly handled by dealerships. LAW, SALES AND AFTER-SALES 174

Current challenges for after-sales

The brand network of workshops is designed to ensure that servicing and repair A stable situation in service business work can be completed and the parts and accessories business operated as part is expected for 2015 of after-sales. In 2014, the service business once again recorded good growth. The number of workshop hours and motor parts sold has taken a good upward trend over the past few years. The after-sales business is not directly affected by the volatility of new and used car business and has therefore recorded stable business volume as a result of the continuous demand on the part of customers for servicing work. The after-sales business is more affected by medium-term changes and is therefore a sort of stability factor within the automotive industry as a whole. According to the DAT report for 2015, workshop business is still a major source of revenues for motor businesses. The annual costs of servicing work, the rectification of signs of wear, repairs and accident damage has now reached a level of over 37 billion euros. A stable situation at a high level is expected in service business for 2015.

The increase in the intensity of competition in after-sales cannot be ignored. Vehicle Competition in after-sales is rising manufacturers, suppliers, the parts trade and workshops make a valuable contribution steadily to creating attractive market conditions for automotive customers with their inno- vative offerings. The amount of servicing work required for many new vehicle models continues to fall since servicing intervals are stretching. This may mean a further fall in revenues for workshops. The ever-greater use of electronics also means increased complexity in automotive engineering, which means that owners can carry out less and less servicing work themselves.

The sustained marketing of cars and commercials by manufacturers can only succeed if there is a nationwide and competent service organization for servicing and repair- ing those vehicles. The service organization continues to supply a comprehensive range of spare parts that must work correctly as soon as new models are launched on to the market. Buying a car often results in customers considering whether the dealership making the sale will also be a reliable service partner. In many cases, the workshop services of a dealership will result in a new purchase from the business of the same brand.

After-sales service remains a “round the clock” requirement for commercial vehicles with nationwide coverage essential. The strategies that have been adopted by manufacturers of commercial vehicles therefore include 24-hour service, extended warranties, full-service leasing, a range of service packages and also telematic services. The aim is to create customer loyalty for the entire life cycle of the vehicle, which must remain functional at all times for forwarding contractors as it represents their main investment. 175

Challenges to digitization

Previous and current providers of online motor services supplement the websites of their customers in the service sector with similarly dynamic content to those that Motor workshops often have their have long existed for new and used car sales. Workshops and motor businesses often own websites have their own websites with many of them also providing details of their services. These providers expect that more and more customers will look at workshop business portals for information about their services. Potential online customers should be able to obtain information on a 24/7 basis on service portals about all the repair offerings that the motor business advertises on its homepage in addition to its billing rates. The Internet has become much more important for workshop customers – but more as an information platform than as a transaction medium.

The DAT report 2015 states that workshop customers on average are very satisfied, awarding grades of 2 or better. This continues a trend from previous years, which the DAT has identified through its customer surveys.

The preparation of the service business for looking after cars with electric motors has already started. In fact, hybrid vehicles can already been serviced and repaired. Brand workshops have the technical facilities (above all in terms of workplace design) to handle vehicles with electric motors, batteries and, above all, with high-voltage systems. The career of motor vehicle mechatronics specialist, which was created in 2003, actually set the stage in terms of professional qualifications for dealing with alternative drive concepts. The industry and trade are also training existing employees in how to handle high-voltage systems safely. LAW, SALES AND AFTER-SALES 176

VDA statement on data protection in networked vehicles

The car and the Internet are growing ever-more closely together. The advancement Manufacturers and suppliers have of networking means the creation of additional data and information streams. Data formulated data protection principles protection is particularly important in the development of these technologies. With for networked vehicles this in mind, in November 2014 the member companies of the VDA (vehicle manu- facturers and suppliers) formulated joint data protection principles for networked vehicles to supplement the existing statutory regulations in Germany. These cover the three main points of self-determination, transparency and data security.

The principles refer both to vehicle-based data such as the brand, model and mileage, and also to personal data such as the name, age, date of birth and address of the vehicle keeper. The members of the VDA work with IT companies on the networking of vehicles. And the VDA member companies also ensure that the principles are used in this work.

Self-determination: The collection, processing and use of personal data depends on Self-determination, transparency and the consent of the keeper of the vehicle. The drivers can always decide for themselves data security in a networked vehicle whether and which data they wish to disclose. If the customers do not want certain data to be saved, they must also not use certain services. Data that they have entered into assistance of infotainment systems can be deleted at any time.

Transparency: Motor manufacturers provide customers with a wide range of vehicle- based information and help services. Information can be taken from these data, which may be required for the operation and safety of the vehicle but which may also be useful for new services. The important point is that the customer is informed of which data are collected and used and for what purpose. The technical data relevant for service purposes, such as levels or fuel consumption, can be read via interfaces in the vehicle. These data are used by service advisers and technicians in the work- shop to rectify malfunctions or by the manufacturer to analyze vehicle functions. German manufacturers inform their customers about these processed vehicle data, for example using function displays in the vehicle, through online services or in user handbooks. The use of online services such as Google or Facebook on the onboard computer is based on a contract with the service providers. The manufacturers inform the customer at the appropriate interfaces who their contract partner is.

Data security: VDA member companies protect their customers from the abuse of the data required for vehicle communication systems. The security-relevant systems in the vehicle’s electronic systems are separated from navigation, telematics and infotainment applications and comprise two completely different systems for the navigation unit and engine management system, for example. Gateways and firewalls are used to cordon all the security-relevant areas in the networked vehicle and the data are encrypted. The software and hardware architecture in the vehicles under- goes ongoing development and therefore ensures a high technical security level at all times. 177

Establishment of an EU patent system

The VDA supports the establishment of an EU patent system. A standard patent must be affordable and legally secure so that it is perceived as an attractive alterna- The EU patent is designed to make tive to the existing European patent. A leanly structured and low-cost EU patent is European patent applicants more designed to make European patent applicants more competitive on a global scale. competitive The introduction of European jurisdiction must also not result in any deterioration in quality and legal security.

Negotiations for the creation of an EU patent have been ongoing for some consider- able time in the EU. In June 2010, the EU Commission finally submitted a proposal under which the only legally binding languages would be English, French and German. However, since no consensus could be achieved about the language regulation, all EU member states with the exception of Spain and Italy decided to work togeth- er more closely and at the end of 2012 the so-called “patent package,” consisting of two regulations and an international treaty, was signed.

To date only six of the 25 participating countries have ratified the treaty for the Unified Patent Court. However, at least 13, including Germany, France and Great Britain, are required for the new court and patent to start. The main item that requires clarifi- cation is cost. But the concrete drafting of the procedure and in particular the exact level of cost for patent applications are currently under discussion. LAW, SALES AND AFTER-SALES 178

Automotive banks’ new business volume increases

The manufacturers’ banks once again had a successful year in 2014. In their core Automotive banks continued to leasing and finance businesses they managed to build on their market position. The build on their leasing and finance automotive banks continued to help sales by their parent companies. For the first businesses in 2014 time, contract volumes rose to a record value of 95 billion euros. The automotive banks thus managed to add 1.34 million new contracts to help sales by the manufac- turers – an increase of 9 percent. That means that they actually grew faster than vehicle sales by the manufacturers. The volume of new business behind these figures actually increased by 11 percent. Overall this means that the automotive banks provided finance and leases for new vehicles worth around 33.41 billion euros. In the commercial market, commercial customers used the economic recovery to invest in their mobility. The manufacturers’ banks managed to support this rise in demand with their good offerings policy. The automotive manufacturers’ banks recorded a rise of 14 percent compared to the previous year with new commercial contracts worth 21.8 billion euros. Commercial finance accounted for 3.5 million euros of this with around 18.4 billion euros being recorded by the traditionally stronger commer- cial leasing market.

In contrast to market trends, private customers used the offerings of the manufac- turers’ bank even more in 2014 with around 595,000 new private finance and leasing contracts worth 11.5 billion euros, a rise of 6 percent. Around 5.5 million contracts meant that the banks have highly stable order books. The volume of contracts rose by 5 percent to a record value of over 95 billion euros. The average finance or leas- ing amount was 24,970 euros (a rise of 2 percent).

The used car market is a major area of growth for the automotive banks. Dealers sold around 2.7 million used cars in 2014, accounting for 38 percent of all used car sales. Manufacturer-affiliated financial service providers have increasingly entered the fiercely competitive used car market over the last few years and made good progress during 2014. With over 600,000 contracts they grew slightly in terms of unit sales while the contract volume actually rose by 7 percent to 8.75 billion euros.

Another steady growth market for the manufacturers’ banks is the range of addition- Business involving additional services al automotive services such as insurance, extended warranties and maintenance continued to grow and wear services. With over 3.6 million service contracts, the manufacturers’ banks once again grew by 7 percent in this sector. The finance subsidiaries of the automotive groups recorded around two additional services for each concluded leasing and finance contract during 2014. They also managed to achieve satisfactory growth of 4 percent in the fiercely competitive motor insurance market. That means that around 40 percent of all finance and leasing customers also hold motor insurance provided by the manufacturer.

179

Another major component is the ever-closer intermeshing of offline and online offer- ings for consumers. The manufacturers’ banks have recognized this trend and are Financial services will also be avail- playing an active role in trying to get closer and closer to the customer. These effects able online in the future extend from the consistent spread of brand-specific online calculators to new methods of attracting customers on the Internet and getting them to visit a dealership.

On the one hand, the automotive banks create a link between the manufacturer and the end customer, while on the other, they are linked to the equity markets for refinanc- Automotive ABS should be regarded ing. This connection to the real financial world is a special role on the equity markets as high value assets since the automotive banks are still very different from commercial banks since they are not active in speculative markets. So-called “asset-backed securities” (ABS) are the main tool that are used to refinance the automotive banks. Once again in 2014, automotive ABS were among the most commonly issued investment classes and accounted for more than one-third of the European securities market. For the first time, the EU Commission has assigned a separate asset class to automotive ABS in its special liquidity regulations for banks and the Solvency II regulations for insurance companies. The VDA believes that this is the first acknowledgment of security from the automotive industry as high value assets. In addition, the ECB and EU Commission also called for support for securities for improving finance for the real economy during 2014. The Basel Committee, the EU Commission and the European Banking Authority (ABE) are now developing the future framework for simple, standard, transparent securitizations (SST). In this respect, the VDA is calling for automotive ABS products to be given a high (triple A) rating to acknowledge their status as high-value assets due to the low loss rates they have suffered in the past. LAW, SALES AND AFTER-SALES 180

Public procurement system: Implementation of the EU Procurement Directive

Public bodies are large customers of the motor industry. The regulations for public Changes to public procurement system tendering is therefore of massive commercial significance for the motor industry. The reform of public procurement law means a great deal of change for public procure- ment on both a European and a national level. The award of public orders above the EU threshold value was amended in many ways at European level when the directives for classic procurement, for procurement in sectors and for awarding concessions took place on 17 April 2014.

Germany has until 18 April 2016 to implement the EU Procurement Directives into national law. In principle, the VDA welcomes the objectives of the directives such as equal treatment, non-discrimination, mutual acknowledgment, proportionality, transparency, support for small and medium-sized enterprises and the clarification of basic terminology and concepts to ensure legal security.

Unfortunately these objectives of the European legislators have not been consistently The VDA continues to reject the achieved. The VDA will continue to campaign for these deficits in the implementation restructuring of procurement law of the directives in national law to be balanced out.

The VDA continues to reject the restructuring of procurement law pursued by German legislators. The practical implementation of the EU procurement directives can only take place in the time-tested cascade system, in other words while retaining the VOB, VOL and VOF procurement regulations.

Sensible procurement practice and the acceptance by all parties of the procurement regulations can be ensured simply by the expertise of the persons involved in the procurement process, in other words the customer and contractor, are included. In addition, the special role of the state must be given due consideration. In this case it is not only acting as regulator, but also as a party involved in the market.

The VDA rejects the possibility for direct payment to the subcontractor proposed for public bodies since this option does not comply with the principle of the duty of reciprocity that applies in German civil law. Under this principle the fulfillment of the contract between the customer and contractor must be separate from the fulfill- ment of the contract between the contractor and subcontractor. In principle, each must meet its duties to the party with which the contract has been concluded. In view of this, a regulation of this nature will interfere with contract relationships in the automobile added value chain and will result in considerable disadvantages for small and medium-sized enterprises. 181

In addition to price and costs, it should be possible to demand details of the social and ecological aspects at every stage of the production process when the order is The existing principle of product and awarded as long as they are related to the item being ordered. Since no direct prod- service referentiality is being removed uct and service reference is required, the existing principle of product and service referentiality will be removed. The VDA regards the implementation of general political objectives by procurement law very critically. This concept is contrary to the intrinsic main objective of procurement law – efficient, low-cost procurement and fair compe- tition between bidders. Global delivery flows and supply chains are also not considered by this. The VDA will campaign for the commercially sensible delimitation of the definition and the range of strategic aspects.

Digitization of the procurement process

The VDA welcomes efforts to digitize the procurement process. However, the point must not be overlooked that the prompt creation of the necessary framework Efforts to digitize the procurement parameters for complete digital procurement has been a failure to date. This means process are welcomed by the VDA that there are now serious incompatibilities between digital application systems. In particular, there is no agreement in terms of data and transfer formats or on soft- ware and hardware systems. This situation is particularly unsustainable for small and medium-sized enterprises. The VDA will commit to undertaking a standardization offensive. Customers, solution providers and bidders must work on joint standards under the “XProcurement” project. LAW, SALES AND AFTER-SALES 182

The importance of contracts for services in the automotive added value chain

There is a deal of public debate currently about generalizing in respect of “contract Contract work in the German motor work.” It is often regarded as being synonymous with “wage dumping.” Cases of industry has nothing to do with wage abuse are used and entire industries are accused on a general level of the abusive dumping use of external personnel. However, there is as good as no evidence for these accusations in the actual working world, particularly not in the motor industry and its development sectors, which are mainly manned by engineers and technicians with a correspondingly high income. In addition, public discussion has long been causing companies in the motor industry to take a wide range of action to eliminate individual cases of abuse or to ensure that they do not recur. On the basis of the precedents from the Federal Labor Court, lists of criteria and training have been developed to improve internal controls.

Over the last 30 years the motor industry has undergone many different structural changes. Motor manufacturers are using more and more external support to enable them to manage increasing model ranges, volume increases and globalization effi- ciently. The volatility of the market also affects production and workforce numbers. The business model used by many highly specialized companies is based on contracts for services to be provided at the customer’s site. This concentration on expertise provides the basis for the innovation leadership of German industry.

Like other companies, the German motor industry also uses contracts for services Over the last three years the motor and personnel leasing. In Germany over the last few years, there has also been industry has created 55,000 permanent a drastic rise in employment. The motor industry alone currently employs around jobs 775,000 people in permanent jobs. Over the last three years the motor industry has created 55,000 additional permanent jobs. This increase in employment is on the same scale as overall personnel leasing in the motor industry.

The complexity of the development and production of an automobile, the extremely Collaboration based on the division of short development period and increasing overseas production all require a great labor means entrepreneurial flexibility deal of labor division, flexibility and efficiency. The optimal use of personnel is and efficiency a central factor for success and essential to maintain the competitiveness of compa- nies in the motor industry. The legal framework for personnel leasing and contracts for services are an additional factor support the permanent workforce and allow companies to react quickly to short-term capacity requirements in development and production.

The VDA has issued an express warning in view of the impending statutory changes VDA warning about over-regulation in to prevent the abuse of contracts for services about placing restrictions on collabo- the legal framework ration between the actors based on the division of labor, over-regulation of the legal framework and interference in the entrepreneurial freedom of skilled workers. Limiting the maximum personnel leasing period to 18 months does not take account of the actual situation presented by the development and production of an automobile, which can take up to four years. This labor law discussion may result in drastic increases in costs for the German motor industry. The competitiveness of Germany as a location could therefore be jeopardized. The VDA is calling for the forthcoming regulation of the labor market to ensure that regulations to maintain Germany as a major car-making location to be retained. 183

Non-tariff barriers to trade: a position paper for the aftermarket

Non-tariff barriers to trade also play a role in the aftermarket. Motor manufacturers and suppliers who ensure that spare parts are available are faced with massive Unfair trade barriers create massive challenges. They must satisfy the requirements created by these trade barriers, such challenges for the aftermarket as providing documents, supplying additional information on labels and adding features to products. In some cases entire processes must be revised. There is also additional work required for the procurement of information and for coordination between departments and processes. All this gives rise to unnecessary costs, which ultimately have to be charged to customers.

Certifications and licenses make sense in principle. They enable a review of compli- ance with quality and safety standards and of general regulations to be made. This More and more regulations do not is the reason that UN regulations were created. There are now two additional large provide consumers with any real collections of regulations from the USA and China (FMVSS and CCC). And the benefit tendency for countries to introduce more and more new standards and regulations is on the rise. Normally these do not provide consumers with any real benefit – not even the increased safety which is often claimed. All they do is increase the already high level of complexity in the aftermarket supply chain. Since the volumes involved in the aftermarket are very low compared to mass production, the cost of meeting these requirements is disproportionately high and very cost-intensive.

The VDA has therefore prepared a position paper with its member companies. The aim is to sensitize politicians and authorities to this problem and to provide arguments for negotiation, so that the overriding aim of creating global standards does not become unattainable. Since it is difficult for companies to obtain an overview of the wide range of trade barriers in the aftermarket and identify the action required to overcome them, the VDA also provides support by the organization of a working party and the establishment of a database.

Remanufacturing, in other words the repair and preparation of defective old parts, the so-called cores, is also affected by trade barriers. The challenge here to distin- Old parts must be distinguished from guish between old parts and waste is often ignored. The VDA is playing an active waste for remanufacturing role in the revision of a technical regulation, the “Basel Convention,” to eliminate this uncertainty, particularly for cross-border transport. Using the definition of remanu- facturing prepared in 2013, the VDA and other organizations are campaigning for a clear difference to be made in the regulation between old parts and waste. This will enable old parts to be remanufactured on a cross-border and economical basis. LAW, SALES AND AFTER-SALES 184

The Open Telematics Platform in the aftermarket: positioning paper

Recently the topic of data has been a subject of much controversy. The car gener- Basic principles and assumptions ates large quantities of data to support it’s onboard functions, and the tendency behind “The Open Telematics is for that to further increase. Technical advances have made it possible to transfer Platform” the data in new ways. Currently, workshops connect diagnostic equipment to the vehicle via cable; technically wireless transfer is also possible. A wireless connec- tion opens up new usage models. In addition to established diagnostic and repair solutions, in future new service offerings will become possible.

Unfortunately, new opportunities are often accompanied by risks, and that could be the case with transfer of data from the car. Providing access to data increases the risk of inappropriate data usage or data manipulation by a hacker. This is the reason for the topic “Open Telematics Platform” being one of the subjects addressed in the context of the European ITS action plans and the ITS guideline (2010/40/EU).

Sharing the same motivation, the VDA, together with its members, has prepared a positioning paper on the subject. The paper describes the basic principles and assumptions behind “The Open Telematics Platform.”

“Quality is added value” initiative

The “Quality is added value” industry initiative was started by supplier companies The “Quality is added value” initiative in 2010 and since then it has had the support of the VDA. The initiative is primarily is designed to appeal to workshops designed to appeal to workshops to increase their awareness of product quality. In 2014, the homepage (www.qualitaet-ist-mehrwert.de) was revised and now provides new information and training courses for workshops. From September to November 2014, the initiative was unveiled at six company open days in Germany and the newsletter has been redesigned. At the end of 2014, an online survey was started and its results have been published on the website.

As a result of this exchange, the initiative started a campaign entitled “We make it exact!” to increase awareness on the part of workshops and consumers of the risks of fitting non-genuine spare parts. Arguments to be put to customers have been formulated for this purpose. These have been available to workshops since the start of 2015 in the form of a poster. 185

Quality Management

Thomas Blechschmidt – technical model maker, metrologist, Bertrandt Ing.-Büro GmbH, München, 2013 QUALITY MANAGEMENT 188

Quality Management in the VDA

The quality of the German motor industry’s products, processes and systems is high. Quality is the trademark of the German The QMC is an operative center of quality management for the German motor industry. motor industry The VDA Quality Management Committee (QMA), the German motor industry’s highest body for quality, controls all quality management activities. The results of the working parties, QM experts from the manufacturers and suppliers are implemented by the VDA’s Quality Management Center (QMC). 189

Status of global ISO/TS-16 040 system certification activities

At the end of 2014, some 24,675 or the global total of around 58,000 valid ISO/TS-16949 certificates had been issued by the 13 certification companies, which are licensed The number of certified production and monitored by the IATF representatives of the VDA QMC. Around 24 percent of sites continues to rise these certificates have been issued to protection sites that supply at least one IATF OEM. As in the previous year, the number of certified production sites rose once again by around 8 percent.

Number of certified production sites

Region Dec. 2013 Dec. 2014 Development

Africa 479 480 + 0.2 %

Asia-Pacific 34,081 37,336 + 9.6 %

Europe 10,483 11,009 + 5.0 %

Middle East 1,503 1,575 - 4.8 %

North America 5,598 5,933 + 6.0 %

South America 1,579 1,615 + 2.3 %

Total 53,723 57,948 + 7.9 %

Source: VDA QMC

System Certification Activities

North America South America Africa Europe Middle East Asia-Pacific 5,598 sites 1,579 sites 479 sites 10,483 sites 1,503 sites 34,081 sites (3.4 %) (0.2 %) (3.2 %) (2.0 %) (-2.5 %) (10.7 %)

Source: VDA QMC QUALITY MANAGEMENT 190

QMC basic and advanced training

The number of people taking training at the VDA QMC has risen steadily over the Upwards trend in VDA QMC advanced last few years. Every year more than 4,000 people attend training courses in Germany. training continues However, the number of attendees stagnated in 2014. This is due to the fact that the VDA QMC licensees have extended their range of courses from the VDA QMC product portfolio. This meant that the attendees and revenues underwent a certain amount of delay. On a global basis, the number of attendees rose compared to the previous year by approx. 38 percent to approx. 19,800. The qualification for the VDA 6.x standards was the main focus.

Attendee development global

10,000

9,000

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0 VDA QMC DE VDA QMC Cn VDA QMC Ru National licensees International licensees

2013 2014

Source: VDA QMC 191

Assurance of automotive software development processes using Automotive SPICE

The subject of electronic and software development in the vehicle has become an important part of the VDA QMC’s activities. Software quality is one of the main The global focus of the VDA is shown requirements for the safety and reliability of a modern, increasingly networked by the rise in new certification vehicle. The assurance and evaluation of the development processes using Automo- processes tive SPICE plays a central role in this. Since the takeover of personnel certification by SPICE assessors in the motor industry in 2007, the VDA QMC has consistently bundled its activities in this respect. This means that Automotive SPICE has become a globally accepted standard in the motor industry. The year 2014 once again saw a major rise in new certifications for the VDA QMC’s Automotive SPICE personnel certification body. In June, the 1,000th Automotive SPICE assessor was certified.

Globalization of Automotive SPICE

Italy France 12 11 Ireland Great Britain 7 7 Austria 21 Romania 23 Others China 54 23

India 29

USA 39 Germany 595 Korea 47

Japan 259

Source: VDA QMC QUALITY MANAGEMENT 192

Development in assessor numbers

The increasingly global focus of the VDA is shown clearly by the listing by country. The proportion of international assessors has risen from 22 percent to almost 50 percent in the last five years – a trend that will continue in the next few years.

Development in the number of assessors

1,200 1,000 800 600 400 Active assessors 200 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Year

Source: VDA QMC 193

QMC offices in China and Russia

The VDA QMC China once again provided support to VDA member companies in China during 2014 with its core expertise, QM training. In the growth market that is The VDA Quality Management China, VDA member companies and the local supply chain are offered VDA QMC Committee China has been established training and discussions on quality management at their sites. The VDA QMC China organized 115 training courses for automotive VDA quality management in 2014. With over 2,200 people attending these courses, growth reached a level of around 50 percent. Around 920 (a rise of 130 percent) VDA QMC document series were published. The quarterly VDA Quality Management Committee China has now been established.

Despite the difficult economic situation in Russia, more people were also able to complete QM training courses there as well during 2014 (a rise of around 10 percent). The VDA standards prepared in Germany were thus able to become more established in Russia.

University initiative by the QMA – focus on a foundation department

Prof. Dr.-Ing. Robert Dust took over the chair of the newly established Faculty of Quality Strategy and Quality Competence at the Technical University of Berlin in New Faculty of Quality Strategy and October. This new department and its equipment are being financed by the founda- Quality Competence at the Technical tion funds of the German Association of the Automotive Industry Quality Manage- University of Berlin ment Center (VDA QMC). The aim of the collaboration is to support research into quality management and assurance and to increase the attraction of this sector for newly qualified scientists and experts. The faculty is the first foundation department at the Faculty of Transport and Machine Systems. It is located at the Institute for Machine Tools and Factory Operations.

Prof. Dust studied in Berlin and Munich. He held a leading position at various motor manufacturers in Germany and elsewhere for 15 years. At the Technical University of Berlin, Prof. Dust plans to intensify his research work and share it with future engineers. He has an extensive network of manufacturers and suppliers that he has established over the years, an ideal basis for the successful combination of science and practice.

Classic Cars

Olaf Kolodziej – machine operator, stamping, Schürholz GmbH & Co. KG, Plettenberg, 2010 CLASSIC CARS 196

The Classic Cars Committee

The VDA’s “Classic Cars” section indicates the growing importance of traditional work Automotive heritage should receive among its member companies. German motor manufacturers and some suppliers widespread acceptance are increasingly using their history to improve their brand values and set themselves apart from their competitors. The committee’s activities are mainly focused on the survival of classic cars. Above all, the political conditions in Germany and Europe should be set up in such a way that our automotive heritage receives widespread acceptance from the general public.

The maintenance of classic vehicles requires expert technical care and attention. The initiatives started with the German Federation for Motor Trades and Repairs are now starting to bear fruit – over the last few years around 600 classic car workshops have been identified and the offer of an additional qualification for classic and new cars certified. Six institutes at chambers of trade are now offering this extended training for motor mechatronics specialists.

Activities to supply spare parts for these vehicles, some of which are very rare, are The subject of electronics in being expanded. The manufacturers, together with the suppliers, are striving to find classic cars was the focal point suitable methods to secure the availability of components for the most common vehicle at the committee meetings series by securing stocks for the long term or manufacturing equivalent new products. In any event, the original condition of the vehicles should be maintained. The condition of the original serves as the template for all repair and restoration work.

Another major aspect is to maintain vehicle safety. The production of the parts required for this purpose is becoming ever-more complex and in some cases cannot be carried out by suppliers on the free market. While in the past, the challenges have been the production of drop-forged, sheet metal or cast parts for classic cars, in the future the new materials and techniques used of the past few years for car production will see the traditional sectors of motor manufacturers face a whole new series of problems. This is why the subject of electronics in classic cars was the focal point at the committee meetings last year. The current supply guarantee of 15 years after the end of series for components could result in the roadworthiness of classic cars with a minimum age of 30 being jeopardized due to the lack of nationwide supply coverage. It was discovered that there is no simple, quick solution to ensure the long-term availability of these components. The VDA Aftersales Committee has therefore formed a working party to look into possible solutions with manufacturers and suppliers while giving due consideration to the special features of the problem. 197

Another subject for the committee relates to safety at classic car events. The organizers of these events attempt to increase the attractiveness of their rallies by staging them The committee is committed to on more and more demanding routes and including various tests. The safety standards ensuring the safety of classic car events of classic cars are by no means equal to the standards of modern vehicles, however. Often these events include vehicles from a motor sport background that are particu- larly difficult to handle compared to modern cars with their wide-ranging assistance systems. In contrast to all motor sport events, however, there are no special require- ments for classic car rallies such as a health certificate or a driver’s license. This development and the resulting potential dangers are already causing concern in the media. The member companies of the Classic Cars Committee are often participants or sponsors of these events and want to contribute to ensuring maximum safety for spectators and drivers. This subject has therefore been taken up with representatives of the German Motorsport Federation (DMSB) and the German Sports Drivers Club (DSK) with the aim of developing the appropriate measures. The results are due to be presented by the end of the year.

Cars with an H registration Date of issue 01/01/2015

350,000

310,694

300,000 279,250

254,053 250,000 231,064

208,319 200,000 188,360

164,225 154,479 144,810 150,000 140,169

100,000

50,000

0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Source: Federal Department of Motor Vehicles CLASSIC CARS 198

Political committee work

The VDA recognized very early that it is essential to have direct contact with the politi- The Parliament Group forges direct cal legislative for the politically marginal subject of classic cars. The “Parliamentary contact to the political legislative Group for Automotive Heritage” was formed in Germany in 2009. This group meets at least twice a year to discuss current political topics. The establishment of this interface to the German Parliament helps the mutual exchange of information, brings together as many interest groups as possible and performs a type of early- warning function.

This group came up with the idea that automotive heritage should be registered Automotive heritage should be as UNESCO intangible cultural heritage. Classic car groups in the Netherlands registered as UNESCO intangible are planning a similar move together with the national UNESCO Commission. In cultural heritage France, the Ministry of Culture has submitted an application to UNESCO entitled “Carrosserie Française” to register vehicle bodies manufactured from 1920 to 1970 as intangible cultural world heritage. In Italy, the Italian automobile association ASI has a project entitled “Turin: World capital of classic cars and design.” In this respect, UNESCO recognized the city of Turin as a “Creative City” in the design category on December 1, 2014. The Parliamentary Group for Automotive Heritage working party believes that its application to register the conventional automobile as intangi- ble world heritage against a backdrop of a possible paradigm shift in automotive engineering, in other words the move towards electric mobility and networking, is well founded. All these initiatives would help to create a broad basis for regarding classic cars as heritage among the general public.

Another working party is looking at the subject of modern-era classic cars. This term has been adopted in recent times for older vehicles that are regarded as classics but have not reached the minimum age of 30 to actually become a classic car. The working party discusses proposals for an age definition and possible protection through legislation. The aim is to ensure that as many different models as possible reach the minimum age of 30 since automotive heritage should be maintained on a wide basis.

In a similar move to what is happening in Germany, the EU also has an interest group of parliamentarians and representatives from the classic car movements. This European Parliament Historic Vehicle Group (EP-HVG) was reconstituted after the parliamentary elections. In the new legislature period it plans to redouble its efforts to work with the Commission for Education and Culture. Here, too, the aim is to achieve recognition of classic cars as automotive heritage.

In October 2014, FIVA (Fédération Internationale de Véhicules Anciens) was given There is now a standard definition of an opportunity to present the results of their classic car study in a public event with classic cars parliament to the members of the EP-HVG. The leader of the EP-HVG confirmed that the results of this Europe-wide survey could provide additional backing to these topics.

One result of the group’s activities has been the adoption of a standard definition of classic cars in relation to the new version of the Vehicle Testing Regulation in Germany. The formulation, which is essentially identical to the German definition, was adopted unchanged in the final text of the regulation. The German Federal Ministry of Transport and Digital Infrastructure confirmed that there will be no changes from the current situation for classic cars, either for the main testing processes or for the special test under § 23 of the Road Traffic Licensing Regulation for vehicles with an H registration plate. 199

Political topics

In relation to the planned Infrastructure Levy Act (road tolls), the VDA is attempting to achieve a special exemption for classic cars. The VDA is campaigning for classic cars to be exempted from As far as classic cars are concerned there is a worry that the neutrality of the infra- infrastructural levies structural levies will not be ensured in the future. Instead it is assumed that future increases in tolls will not go hand in hand with simultaneous fiscal exemptions for classic car drivers. In view of future classic car generations, additional charges would be very unfavorable for the acceptance of the H registration plates, which are particularly important for public perception of the difference between these and old everyday cars. In view of the limited number of cars with an H registration plate and in particular as a result of their low mileage, the VDA is pleading for them to be exempted from infrastructural levies to help maintain them as automotive heritage. This exemption could have the same structure as similar provisions for driving in environmental zones since classic cars are easy to identify by their registration plates. The draft law states that the annual levy for a classic car will cost 130 euros. Classic cars with a red 07 registration plate will have a general exemption from infrastructural levies.

With effect from January 1, 2014, Chapter 97 of the Combined Nomenclature of the EU introduced a new formulation for customs tariff 8705 00 00. This describes Seven percent import duty is payable the requirements for importing classic cars into the EU if they are classed as collec- on collectors’ vehicles tors’ items of historical and ethnological interest. The aim of the revised version was to ensure equal treatment in all EU member states. If the imported vehicles are classed as “collectors’ vehicles” (classic cars), import duty of just 7 percent is payable on them. Even after the publication of the new text, some customs authorities were hesitant or simply refused to accept the new duty rates. The German Federal Ministry of Finance has expressly confirmed, however, that the amended passage is primarily an attempt to ensure simplification and standardization and is therefore binding. If customs offices refuse to accept these arguments, the ministry recommends that a request for binding, free customs tariff information is made to the Central Customs Office in Hanover.

If evidence of a technical test approved by the EU regulations in another member state of the EU is provided, under § 7 of the Vehicle Licensing Regulation (FZV), The VDA is in favor of an amendment a repeat test is not required in Germany under § 29 of the Road Traffic Licensing to the planned new version of the Regulation. When vehicles are imported (often classic cars) from EU member states, licensing regulation therefore, the situation arises quite frequently that rebuilt or modified vehicles are imported with doubtful documentation. There is now a whole range of vehicles that do not comply with either EU directives or German registration regulations. For example, in England the engine number may be shown in registration documents as a reference number while, at the same time, the VIN of the original vehicle has been transferred to a completely different vehicle. This procedure devalues some very high-value original vehicles, thus harming the image of classic cars. The VDA is therefore in favor of an amendment being made to the new version of the registration regulation that is currently being planned. As long as the registration regulations in the EU are not standard, all imported vehicles without an EC homologation should be tested under §21 of the Road Traffic Licensing Regulation. CLASSIC CARS 200

Dates, Facts and Figures

The German Classic Car Index published every year by the German Association The German Classic Car Index of the Automotive Industry rose by 4.5 percent in 2014. This means that the average increased by 4.5 percent in 2014 value of classic cars in Germany last year rose at a slightly lower rate than in the previous year. The index has now reached 2,285 points. To calculate the index 88 cars are selected that are a representative sample of the German classic car market in terms of their specifications, their country of manufacture and their frequency. The appropriate registration figures are taken into account in this. The basis for the index is provided by the Bochum-based valuation specialists classic-analytics. In the long term, the German Classic Car Index shows a clearly positive trend upwards. However, there are now two completely independent segments in the classic car market. On the one hand, record prices are being achieved at public auctions for rare vehicles, one-offs or racing cars – often with famous previous owners. This segment is hardly representative of the classic car market as a whole, however. Genuine classic car enthusiasts love their cars regardless of its rarity value or potential to increase in value. On average, they spend considerably less than 20,000 euros on a classic car, which means that any increase in value of these cars is often compensated by the cost of servicing and maintaining them. These cars form the basis of the German Classic Car Index. It does not include any one-offs, but instead only covers cars that were produced in certain quantities and which are therefore often still traded today.

German classic car index Index development since 2000

2,400 2,285

2,186 2,200

2,023

2,000 1,941

1,776 1,800 1,732 1,690

1,600 1,511

1,430

1,400

1,215 1,190 1,200 1,090 1,104 1,015 1,040

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

Source: classic-analytics 201

FIVA study

FIVA (Fédération Internationale des Véhicules Anciens) has conducted a Europe- wide study on the subject of classic cars. The last comparable study was conducted FIVA has published a new study on in 2006. The necessity was identified to question the results at that time and also to classic cars in Europe ask for more information. The Internet-based survey is directed at classic car owners, workshops and clubs. More than 20,000 questionnaires from 15 EU countries were available for evaluation. The main results of the survey are as follows:

• One percent of the full vehicle population in Europe is more than 30 years of age and can therefore be described as classic cars.

• The annual mileage of a classic car on average is 1,433 km.

• The annual mileage of a classic car corresponds to 0.25 percent of the complete vehicle population.

• The average price of a classic car is 13,421 euros.

• Between 100,000 and 140,000 people in Europe now work directly in the classic cars sector.

The study comes to the conclusion that classic cars are not expensive, that their share of total emissions is negligible and that classic cars are a major economic factor.

Trade Fairs and Events

Daniel Gandner – junior marketing manager, F.S. Fehrer Automotive GmbH, Kitzingen, 2010 TRADE FAIRS AND EVENTS 204

65th IAA Commercial Vehicles 2014 – drive the future

The 65th IAA Commercial Vehicles trade fair fully lived up to its slogan of “Moving The slogan of the 65th IAA Commercial the future.” Networking, efficiency and flexibility – these three topics of the future Vehicles trade fair was “Moving the were the focus of the event held in Hanover from September 25 to October 2, 2014. future” The topic of “Networking” in particular became the main arena for innovations. The exhibitors demonstrated to great effect that the trends and issues of the future are set and defined at IAA. A total of 1,944 accredited journalists from 58 countries reported on the trends, highlights and news from IAA, including 322 world premieres that demonstrated the enormous power of innovation in the area of commercial vehicles. Fully 70 percent of the world premieres were presented by suppliers, although the manufacturers also exhibited many novel products from trailers and bodies to buses.

The dynamic energy behind the advances in networking and automation in commercial Commercial vehicles, trailers as well as vehicles in particular was in full evidence at IAA. For instance, in a presentation on the associated components suppliers the “VDA Innovation Stage,” a truck driver demonstrated how he was able to leave were the focus of attention in an area the cab and, simply by using a tablet computer, back up his 25-meter truck toward covering 265,000 square meters the loading dock. With the world’s first automated truck maneuver, IAA set its sights far into the future. Many other exhibitors as well – chiefly suppliers – focused on networking and automation. A total of 2,066 exhibitors – nine percent more than in 2012 – from 45 countries exhibited their companies and diverse range of products at IAA Commercial Vehicles. At almost 265,000 square meters, IAA provided ample space to showcase the entire value chain for commercial vehicles; an increase of two percent. This year’s participation was the second-highest ever since the IAA Commercial Vehicles has been held as an independent trade fair.

The international diversity of this leading trade fair increased yet further this year: 59 percent of exhibitors hailed from abroad, which is a new record. Since being divided into IAA Passenger Vehicles and IAA Commercial Vehicles, the trade fair has never had so many international exhibitors. IAA fully lived up to its objective of being the world’s most important trade fair for mobility, transport and logistics. China again occupied first place in the Top Ten list of participating foreign countries, followed by Italy and Turkey. The suppliers again formed the largest group of exhibitors: over 1,000 producers of parts and accessories (often small or medium-sized companies) exhibited, making up almost half of all exhibitors and occupying 23 percent of the entire exhibition floor. 205

As the world’s most important trade fair for mobility, IAA reaches its target groups like no other trade fair for commercial vehicles in the world. IAA is a platform 84 percent of visitors to IAA were for forging first-class contacts and connecting high-level professionals in the trade visitors commercial vehicles industry with their customers. By participating in the trade fair, exhibitors decisively pursued their objective of making personal contact with existing and potential customers. Aside from the ability to address visitors, IAA is highly relevant to exhibitors as a platform for discussion and information as well, which enables exhibitors to enter into dialog directly with one another. To an even greater extent than in previous years, the exhibitors valued the high quality of visitors and in-depth discussions with customers. Trade visitors accounted for 84 percent of all visitors, and of those trade visitors, 42 percent worked in management positions. The international diversity of trade visitors is always on the rise: a new record high was set with 27 percent of trade visitors hailing from abroad.

VDA President Matthias Wissmann summarized this year’s IAA positively, emphasizing: “IAA has demonstrated its position as the world’s most important trade fair for mobility, transport and logistics. Innovation and international diversity – both of these hallmarks were inseparably present at this year’s IAA.” TRADE FAIRS AND EVENTS 206

MOBILITY CONNECTS September 17 – 27, 2015 · Frankfurt/Main

Outlook on the 66th International Motor Show 2015

From September 17 to 27, 2015, the world’s most important sector trade fair, Inter- German Chancellor Angela Merkel to national Motor Show, returns in its 66th edition. All major international manufacturers open the IAA on September 17, 2015 and suppliers will be represented and will present the most significant innovations and developments for the mobility of the future. German Chancellor Angela Merkel is set to officially open the IAA in Frankfurt am Main on September 17, 2015. The slogan of the 66th IAA Passenger Vehicles is “Mobility connects.” The slogan puts the focus on a new major trend in the automotive industry: networking. In the future, vehicles and drivers will remain continuously connected. The IAA key visual shows a fascinating and dynamic world that symbolizes the future of mobility, primarily in the urban environment.

Its broad exhibition program makes IAA a unique event. No other trade fair reflects The International Motor Show the automotive value chain as comprehensively. In addition to passenger vehicles, presents the entire automotive tuning and special vehicles, the fair’s traditional areas of focus include trailers value-added chain for passenger vehicles, parts, accessories, telematics and many other specialized areas. Large and medium-sized system and module manufacturers and suppliers provide a wealth of information to visitors, particularly those from the industry. One third of the trade visitors come to IAA specifically to keep abreast of innovations and market developments relating to suppliers. Apart from the exhibitors themselves, IAA also offers various special events in which the exhibitor companies give interactive and “in motion” presentations that involve the visitors. With attractions such as new models and concept cars from manufacturers, these events attract automotive fans of every age. Examples include the test-drive event and SUV test track. The goING and workING activities will also be offered again this year, which VDA hosts in cooperation with the exhibitors to attract young potential employees to the automotive industry. This year, however, these activities will be supplemented by a “job and career” area where automotive industry companies profile themselves in various ways as attractive employers for graduating students and technical profes- sionals. Furthermore, IAA is also a large, international convention where experts from the worlds of economics, politics and associations gather for diverse symposiums and discussions on technical and practical topics of the future. 207

True to the motto of the 2015 International Motor Show, the “New Mobility World” provides an exhibition area with a completely redesigned concept for current The new exhibition area, “New developments, products, services and solutions from the following five topic areas: Mobility World,” shows mobile Connected Car, Automated Driving, E-Mobility, Urban Mobility and Mobility Services. lifestyle environments relating to The goal is to present new perspectives on mobility as seen from across several the topic of networking sectors to a broad audience in a comprehensive and integrative way. In exhibition areas, shows and talks presented on stages, in topical exhibits, courses and B2B areas, visitors will experience the most exciting trends and possibilities – from automated driving to Car-to-X Communication to intermodality – including from some exhibitors who are making their first appearance at IAA. The German Federal Ministries of Economics and of Transport have already agreed to serve as patrons.

Automotive fans who want to learn in detail about the current topics and new trends in the automotive universe can’t pass up a visit to IAA. To purchase a ticket for the 66th IAA Passenger Vehicles, or give a ticket as gift, please go to www.iaa.de and do so online.

International Commercial Vehicles Press Workshop in Frankfurt am Main

The International Press Workshop is traditionally held in advance of the IAA Commercial Vehicles trade fair. High-profile national and international representa- 150 international journalists learn tives of the commercial vehicle industry gathered on June 25 and 26, 2014 to give about commercial vehicles a press conference on innovations and developments in the world of commercial vehicles for around 150 international journalists. The focus was on measures Outlook on the 66th International Motor Show 2015 capable of augmenting transport efficiency yet further – network-capable vehicles, efficient diesel engines and driver assistance systems, in particular.

“Trucks account for more than 72 percent of goods transported in Europe. And that figure is set to rise even higher,” said VDA President Matthias Wissmann in his opening address at the event. He also discussed how this development could further boost business for vehicle manufacturers and their suppliers. On the other hand, Wissmann continued, the main challenge faced by manufacturers of

industrial trucks is the further reduction of fuel consumption – and CO2emissions. And yet industrial trucks are not, in his view, comparable to passenger vehicles or

transporters, for which EU-wide CO2 regulations are already in place. It is the great diversity among industrial trucks, which Wissmann identified as the reason that

introducing “uniform CO2levels” would be impossible – with the spectrum of vehi- cles in this class ranging from dump trucks and delivery trucks to long-distance trucks, not to mention city and tour buses. “Many of these vehicles are custom produced for customers. Fuel consumption is influenced by many factors; size, weight, area of use, driving performance as well as usage conditions all differ, as well as the prime factor of truck payloads,” explained Wissmann. “For many years now, it has been the market itself that has been responsible for the constant reductions in the

fuel consumption of industrial trucks – without any CO2 regulations.” TRADE FAIRS AND EVENTS 208

Global Truck Study

In a joint study introduced at IAA 2014, A.T. Kearney and VDA have been investigat- The Global Truck Study is investigating ing the prospects of the international commercial vehicles industry through 2030. the prospects of the commercial After a decade of volatile, yet continuing growth, the global market for medium vehicles industry through 2030 and heavyweight commercial vehicles will experience annual growth of 4.8 percent through 2020, according to estimates. Although in China, the world’s largest market, growth will be slower than in the past, Asia as a whole will continue to be the driver of global demand for commercial vehicles. India could potentially replace the United States in the second position by the end of the decade, although major uncertainty factors continue to exist. According to the study, Africa will likely experience faster growth than the global market, even if the continent as a whole still needs time to forge connections to other markets. In both Asia and Africa, infrastructure improve- ments, increasing urbanization and a more professional logistics sector are ensuring that demand for larger and more sophisticated trucks continues to grow, in addition to the traditional low-price segment.

The number of international manufacturers of commercial trucks will grow by 2030. The study is available online Some companies in the emerging markets have the potential to grow beyond their current position of regional providers. However, the current group of large regional companies will contract and according to projections, only a few Chinese and Indian manufacturers will remain. Consolidation activities among global corporations are already in full swing. Some of the up-and-coming manufacturers, whose activities have been primarily focused in regional markets to date, will break through to join the ranks of the global players in the next ten years. Some regional manufacturers and niche players will disappear, particularly if they are unable to achieve the size necessary to ensure their long-term existence. The ability to take optimal advantage of their size while being able to capitalize on regional differences between markets will be the key to success for international manufacturers.

More information and the study itself are available at www.vda.de. 209

VDA Medium-sized Business Day

The annual VDA Medium-sized Business Day has long been an established high- light for all medium-sized companies in the VDA. Again in 2015, more than 200 high-placed representatives from the supplier, trailer and bodywork industries gathered at the event.

The 15th VDA Medium-sized Business Day took place on May 7 and 8, under the slogan “Working together in a globalized world: medium-sized companies on an equal footing?!” Technological trends, the international character of cooperation and the challenges faced by Germany formed the central topics. This year too, the event offered many opportunities for obtaining information and taking part in discussions, as well as face-to-face exchanges. The VDA Medium-sized Business Day is an essential networking opportunity and therefore an indispensable event on the annual schedule for VDA member companies.

The 16th Meeting of Small and Medium-sized Companies will be held on May 19 and 20, 2016, in Grafenbruch near Frankfurt am Main. TRADE FAIRS AND EVENTS 210

Technical Congress

The subjects of the environment, energy and electro-mobility, as well as vehicle safety The 17th VDA Technical Congress was and electronics were the focus of the 17th VDA Technical Conference, which took hosted by the Filderstadt Philharmonic place on March 19 and 20, 2015, in Filderstadt. The event was officially opened by VDA President Matthias Wissmann. In his welcome speech, he emphasized that networked and automated driving would also make the mobility of tomorrow safer and more efficient, not just more convenient.

The VDA president was joined at the opening session by EU Commissioner Günther Oettinger, State Secretary Rainer Bomba, Dr. Volkmar Denner, Chairman of the Board at Robert Bosch GmbH, Gabriele Dönig-Poppensieker, Mayor of Filderstadt, Winfried Hermann, Minister of Transportation and Infrastructure of the State of Baden-Württem- berg, Joseph Bakaj, Vice-President Product Development Europe, Ford of Europe, and Peter Langen, BMW Group, Head of the Development, Driving Dynamics and Driver Assistance Division.

Other speakers included Dr. Stefan Jockusch, Siemens Product Life-cycle Management Software Inc., Prof. Dr. Klaus Mainzer, Munich Technical University, Chair for Philosophy and Philosophy of Science, Wolf-Henning Scheider, Robert Bosch GmbH, member of the Board, Speaker for the Motor Vehicle Technology Division and Prof. Dr. Thomas Weber, Daimler AG, member of the Board for Group Research and & Mercedes-Benz Cars Development. A related exhibition was held in conjunction with the Technical Congress.

A special highlight of the 2015 Technical Congress was an event entitled “Looking back to the future.” The PROMETHEUS Project was completed in 1994. One of the outstanding results of this project was the development of Adaptive Cruise Control (ACC), which is a distance and speed controller for use on highways – and now available on almost all vehicles. ACC can be seen as a major step forward on the road to automated driving functionality. A series of major players in the research program spoke during a PROMETHEUS session at the Technical Congress. PROMETHEUS has provided a huge impetus for improving safety and efficiency in road transportation. 211

The 11th QMC Quality Summit in Berlin

On November 17 and 18, 2014, the 11th QMC Quality Summit was held in Berlin. Under the slogan “Working together for quality in the supply chain,” the presentations The QMC Quality Summit meeting is and discussions centered on the strategic focus of quality management in relation to the most important industry gathering the automotive supply chain. In addition to presentations by representatives of the in Europe for quality management in automotive industry and politics, this year’s audience was introduced to the current the automotive industry status of the initiative for universities of applied science and the recently established “Automotive Quality Alliance.” This initiative is intended to raise global awareness of quality issues along the supply chain over the long term. It is oriented to suppliers, as they are the companies that form the first link in the supply chain, yet in the past have not been regarded as part of the global automotive supply chain. The trade fair, held in conjunctio, featured 19 exhibitors from the German automotive industry – including manufacturers, suppliers and consulting companies – who discussed current issues and future developments with the participants. TRADE FAIRS AND EVENTS 212

VDA Logistics Department Events: Automotive Logistics Forum and VDA Logistics Award 2015

Automotive Logistics Forum 2015

The Automotive Logistics Forum, Europe’s most important meeting for the automo- The Automotive Logistics Forum 2015 tive logistics sector, was held in Leipzig on February 3 and 4, 2015. Around 520 was held in Leipzig participants, including logisticians and supply chain managers from the automotive industry, were joined by automotive experts from logistics and IT services and consul- tation companies to discuss the latest trends in automotive logistics, under the slogan “Intelligent Supply Chain Control – Global, Transparent, Efficient.” Grouped according to many relevant topics, some 40 speakers and presenters delivered a comprehen- sive program, which dealt with issues ranging from globalization of supply chains to container management and further integration of logistics and IT. Once again, various tours were offered in addition to the presentations and discussions. For instance, the Porsche factory and BMW i-Production in Leipzig opened their doors. Tours also visited the DB Schenker Logistics Center in Leipzig, which supplies components to automotive factories in China and South Africa.

VDA Logistics Award 2015

The VDA Logistics Award for 2015 was conferred on Adam Opel AG for a new, intel- Adam Opel AG was honored in 2015 ligent logistics system that extensively networks order planning and material supply with the VDA Logistics Award management from both an organizational and process engineering perspective. The system compares incoming new vehicle orders with material availability data. In particular, the material pipeline from suppliers abroad is also taken into consideration. The award winners explained the many advantages of the new system, such as trans- parency, flexibility, lower material inventories and reduction of special transports for materials. Not to mention yet more precise compliance with vehicle delivery schedules. 213

E-Fleet 2014

For commercial fleets, the use of electric cars is already viable. All questions relating to efficiency, use profiles and loading infrastructure were answered at the Electric cars can be profitable for VDA E-Fleet Conference held in Berlin, from March 25 to 27, 2014. The days of the certain use profiles, despite limited conference were specifically oriented to the questions of fleet managers working range in public administration, at large corporations and also at small and medium-sized companies. Aside from the technical presentations, the experience of electric cars was the main focus: During the driving event, more than 300 participants were able to choose between over 50 vehicles and test the various manufacturers’ models in urban traffic. More than 700 test drives took place. The accompanying exhibition featured around 15 service providers and companies. Aside from VDA President Matthias Wissmann, other speakers included State Secretary Stefan Kapferer (German Ministry of Economics and Energy) and Rainer Bomba (German Ministry for Transport and Digital Infrastructure). Furthermore, many experts shared infor- mation on all the key topics relating to electric vehicles in corporate fleets. It was emphasized that despite higher procurement costs and a more limited range, electric cars can already be profitable for certain use profiles. When it comes to e-fleets, it’s crucial to consider the operating costs of electric cars over the entire vehicle life cycle. Creating the necessary loading infrastructure for fleet operators, financing opportunities and tax aspects of e-vehicles were also discussed. TRADE FAIRS AND EVENTS 214

Trade shows abroad and cooperative events

New markets – new opportunities – VDA accompanies its members abroad

Coming together abroad under the slogan “Made in Germany” – the VDA has been VDA accompanies companies in promoting this through shared German stands at foreign trade fairs. In 2014, shared foreign markets stands were held in India (Auto Expo) and Russia (Interauto/MIAS). South Korea (Seoul Motor Show), China (Auto Shanghai) and the COMTRANS commercial vehicle trade fair in Moscow are on the schedule for 2015. In 2016, the VDA plans to organize shared stands in India, Thailand, Japan and Russia. The local engagements are a way for the VDA to provide support in foreign markets to not only the participating companies but also to communicate the political positions and perspectives of the association locally. Accompanying discussions focus on the topics of market access and cooperation. Accompanying events, like the traditional reception at the local German Embassy, provide additional local networking opportunities.

The VDA engages in continuous monitoring of sales in various markets and evaluates trade fairs to ascertain whether applying for a shared German stand makes sense for the companies. In addition to the foreign trade shows, the VDA offers information events for its members and interested members of the general public, both in Germany and abroad. Information and cooperation events on key international markets are organized on a regular basis. In this endeavor, the DA regards itself as a host for the international automotive industry.

The traditional IAA events include “IAA India Day.” The year 2014 marked the ninth Country presentations at IAA are time the event has been held during IAA Commercial Vehicles. “IAA India Day” is a tradition a joint event with the VDA partner organization in India. India Day has grown into a recognized platform for promoting contact between members of the German and Indian automotive industries. Both ACMA, the Indian supplier association, and SIAM, the manufacturer association, participate. Both associations regularly attend IAA and send a high-level delegation of well-known representatives of the Indian automotive industry. IAA India Day is traditionally also supported by the German-Indian Chamber of Commerce (IGCC). Through the chamber, the VDA maintains a close partnership, which benefits members of both organizations seeking to establish contact. The presentations held on IAA India Day can be viewed on the IAA 2014 website, in the “Technical presentations” section, including after the conference has ended. Another key event for German-Indian partnership was held alongside the trade fair: the 9th meeting of the Indo-German Working Group on Automotive.

“IAA China Day” was yet another highlight of IAA 2014. In cooperation with the Chinese partner organization CCPIT, high-level speakers from Germany and China were able to appear. A delegation of more than 150 participants from China’s busi- ness and political communities also visited IAA. At the same time, there was record participation of Chinese exhibitors, and with more than 100 exhibitors, they formed the largest group of foreign exhibitors.

An event to promote foreign trade rounded out the program at IAA Commercial Additional country information events Vehicles 2014. Country information events are also planned in 2015 for IAA Passen- are planned for IAA Passenger Vehi- ger Vehicles in Frankfurt; related information appears regularly on the Internet. cles 2015 Aside from the country presentations at IAA, the VDA cooperates with many nation- al and international partners to participate in events relating to foreign markets – such as with BDI/DIHK at the German-Brazilian Business Days and with OAV at an event in Thailand. 215

Jacques Henri Lartigue | Automobile Delage au Grand Prix de l’A.C.F., Circuit de Dieppe, 1912 © Ministère de la Culture – France / AAJHL

“On the Move” – contemporary photography exhibited by the VDA

Movement has always fascinated photographers. It has now been also the subject of an exhibition entitled “On the Move” organized by the German Association of the Exceptional photographers interpret Automotive Industry (VDA), showing works by renowned photographers of the motion 20th and 21st centuries. The exhibition was created in cooperation with the gallery °CLAIR (Munich, Zurich, Saint-Paul-de-Vence).

“On the Move” – a world-premiere exhibition exploring movement as captured by the most acclaimed photographers of the 20th and 21th centuries. The selection focuses especially on the role of the automobile and mobility in photography. “On the Move” have featured both legendary photographers such as Alvin Lang- don Coburn, Jacques Henri Lartigue, Lee Miller, Philippe Halsman, Erich Hartmann and Inge Morath, and the brightest stars of contemporary photography such as Oliver Mark (Germany), Gundula Friese (Germany), Chien-Chi Chang (Taiwan) and Petr Lovigin (Russia).

The exhibition have featured more than 100 photographs from 13 photographers. The work spans more than a century, from the earliest photographs by Alvin Lang- don Coburn (1882–1966) to an original photo series created for the exhibition by Russian photographer Petr Lovigin (b. 1981).

“It is extraordinary to have so many exceptional photographers on display at one time,” says Anna-Patricia Kahn, the curator of On the Move. “This is a tremendous oppor- tunity to see how motion has been interpreted by the greatest artists photography has known.”

Index

Doris Radke – retail saleswoman, assembly operator locksets and tailgate latches, Huf Hülsbeck & Fürst GmbH & Co.KG, Velbert, 2013 INDEX 218

List of Figures and Tables

Dates, Facts and Figures

German automotive industry turnover performance 16 German automotive industry employee numbers 19 New registrations of passenger cars worldwide by region 20 New registrations of commercial vehicles worldwide by region 20 Motor vehicle sales in China 21 Long-term development of light vehicles in the USA 22 New passenger car registrations in Western Europe 24 Passenger car sales in Central and Eastern Europe 26 Passenger car sales in Russia 27 New car registrations 28 Market share by country of manufacture 29 Passenger car exports by country of destination 31 Development of mobility costs 32 New truck registrations of more than 6 tonnes in selected countries of Western Europe 34 New registrations of trailers 35 Turnover and employment in the trailer and body industry 35 New coach registrations 36 German supply industry: Turnover and employment 37

International Trade and Investment

Customs duties in the automobile industry for EU-US trade 41 The network of agreements from the EU perspective 43

Economic Policy in Europe and Germany

Car production in Europe 50 Unit labor costs in Europe 51

Suppliers and Small and Medium-sized Enterprises

Energy Policy

Implementation of the turnaround in energy policy 64 Average electricity prices for industry 66 Comparison of EU industrial electricity prices 67 Navigator for the turnaround in energy policy 2014 69 219

Climate and Environmental Protection Policy

German road traffic CO2 emissions (fossil) 72 Chart of specific energy consumption in private and freight traffic energy efficiency 73

EU’s 2020 CO2 target is the toughest in the world 74

EU’s weight-related CO2 fleet regulation 75

CO2 emissions by newly registered passenger cars in the EU 76

Elements of CO2 regulations for passenger cars and light commercial vehicles 77 Regulation ignoring vehicle fleet 78 Rethinking climate protection policy 79 Long haul & regional delivery averaged numbers 81 Climate effect and damage caused to the ozone layer by coolants 83 Vehicle energy consumption label 86 Tire labeling 87

Average number of PM10 daily average values 88

Average values of the percentage shares of the geographical PM10 source analysis in Germany 89 Accident frequency index for notifiable industrial accidents 91 Clean water 92 Clean air 92 Minimal waste 93 Safe work 93 Great success in reducing emissions from road traffic: Particulate emissions 95

Great success in reducing emissions from road traffic: NOX emissions 96 Great success in reducing emissions from road traffic: HC emissions 96 Great success in reducing emissions from road traffic: CO emissions 96 Vehicle life cycle 98

Networked and Automated Driving

VDA co-ordination team for networked & automated driving 102 The approach to a holistic concept 105

Transport and Infrastructure Policies

Passenger transport in Germany 108 Goods transport in Germany 109 Investments in federal highways 110 Use of expenditures specifically for motor transport 112 Value-added levels of coach transport 118

Taxes and Customs

Effective tax rates on license revenues 122 New registrations of company cars in 2014 by segments 125 INDEX 220

Drive Engineering

Reduction in heavy truck exhaust emissions 132 Trend in exhaust emissions from diesel cars 132 Development in vehicle fleet from German brands in the EU 141

Vehicle Safety

Theft statistics in Germany 150

Standards and Technical Specifications

Speed profile in future “World cycle” WLTP 154 New cycle WLTP 155 The ISO17215 series of standards used the ISO/OSI reference model 160 SOME/IP transmission methods 161

Law, Sales and After-sales

Quality Management

Number of certified production sites 189 System certification activities 189 Attendee development global 190 Globalization of Automotive SPICE 191 Development in the number of assessors 192

Classic Cars

Cars with an H registration 197 German classic car index 200

Trade Fairs and Events

Index 221 INDEX 222

D Index Data manipulation by a hacker 184 Data protection 104, 176 Development service providers 60 Diagnostic 184 Numbers Diesel 95 48 V vehicle electrical system 151 Diesel engine 138 Digital Factory 162 Digitization 175, 181 A Doha Round 43 Accidents in the workplace 91 Domestic production 40 AdBlue® 140 Driver assistance systems 102, 158 Additive 128 Driving Cycle 133 Aftermarket 183, 184 Driving dynamics 158 After-sales 174 Air-conditioning systems 83 Air quality 88 E Arbitration courts 42 eCall 115 Automated driving 102 Eco-innovations 76 Automotive ABS 179 EEG levy 65 Automotive banks 178 Electric cars 213 Automotive Heritage 198 Electric mobility 135, 157 Automotive Logistics Forum 212 Electric vehicles 124, 136 Emissions trading scheme 68 Employment 19 B End-of-life vehicle recycling 97 Battery electric vehicles 136 Energiewende (energy transition) 64 Biodiesel 84 Energy costs 48 Bioethanol 84 Energy tax reduction 125 Biofuels 84 Environmental protection 94 Bodies and trailers 34, 61 Environmental Protection Policy 71 Environmental zones 88 Ethernet 161 C EU Commission 50 CAD/CAM data 162 EU Energy Tax Guideline 126 Car cost index 32 EU Parliament 50 CARS2020 52 EU patent system 177 Car toll 112, 114 EU Procurement Directive 180 Charging infrastructure 137 Euro 6 standard 132, 140 Classic Cars 196 Euro VI 33, 132 CLEPA 58 EU’s Vertical Block Exemption Regulation 173 Climate protection policy 80 CNG 138

CO2 72 F

CO2 air-conditioning systems 83, 159 Family companies 123

CO2 emissions 72, 84, 85, 116, 154 Field trials 116

CO2 regulation 52, 73, 80, 82, 207 FIVA 201 Coach 108, 118 Foreign trade promotion 44 Combined transport 116 Foreign trade shows 214 Commercial vehicles 33, 61, 73, 204, 207 Foundation department 193 Commercial vehicles industry 61, 208 Free trade agreement 41, 127 Company car tax 125 Fuel cell 138 Competitiveness 40, 48, 50 Conflict minerals 45 Contract work 182 Customs 121, 126 Customs Code 128 Customs tariff barriers 126 223

G New cars 196 German Classic Car Index 200 Non-tariff barriers to trade 183

Globalization 56 NOx 140

Global Truck Study 208 NOx emissions 132 Goods transport 109 NPE 135 Greenhouse gases 64, 84 GWP 159 O Occupational safety 91 H Heavy commercial vehicles 80, 82 H registration plates 199 P Hydrogen 139 Park assist 103 Particle emissions 89 Particulate emissions 132 I Particulate filter 95 IAA 204, 207 Particulates 88 Industrial electricity prices 67 Passenger car toll 48 Industry 4.0 168 Passenger vehicle energy consumption labeling ordinance 85 Infrastructure deficiencies 111 Passenger vehicle labeling 85 Infrastructure finance 113 Peak tax balance scheme 126 Inheritance tax 123 Pedestrian safety 149 International Press Workshop 207 Pension management 59 Investment safeguards 42 Plastic windshields 147 I-WVTA 143 Plug-in hybrid 136, 157 Procurement process 181 Product Life Cycle Management 162 L PtG 139 Label 85 PtL 139 Labor costs 48, 51 Purchase taxes 126 Leasing 178 Lithium-ion batteries 137 LNG 138 Q Loading infrastructure 213 QMC Quality Summit 211 Location policy 49 Quality management 188, 211 Logistics 166 Long-distance coach 36 Long-distance transport 108 R Long truck 116 R1234yf 159 Raw materials 44 R&D 18, 124 M RDE legislation 133, 140 Mandatory tire labeling 87 REACH 98 Medium-sized Business Day 209 Real Driving Emissions 133, 140 Mercosur 23 Recycling 97 Methane 139 Refinancing 179 Mineral oil tax 112 Refrigerants 83, 159 Motor industry 20 Renewable energies 64 Motor workshops 175 Research and development 18, 92 Resource efficiency 94 Road goods transport 109 N Road infrastructure 110, 116 National Electric Mobility Platform 135 Road safety 90 Natural gas 138 Road traffic accident statistics 146 Natural gas vehicles 125 NEDC 133, 154, 155 Networked and automated driving 101 Networking 103, 176, 204, 207 INDEX 224

S Sales 172 SCR 140 Service 172 Shared stands 214 SLC 167 Small and medium-sized companies 56, 61 Small load carriers 167 Spare parts 184 Special depreciation 124 Special depreciation system (Sonder-AfA) 137 Speed limit 115 Speed of innovation 49 Standardization 158 Standardization roadmap 157 Standard patent 177 Super-credits 75 Suppliers 17, 37, 57, 204 Supply chain 166 Sustainability debate 84

T Tariffs 40 Taxes 121 Technical Congress 210 Telematics platform 184 Test cycle 81 Theft protection 150 Tire labeling 87 Tire pressure monitoring systems 90 Toll income 114 Trade barriers 40 Trailer 34 Train 109 Truck toll 112, 113 TTIP 41, 127 Type approval 142

U UNECE 104 UNESCO 198

V VDA dialog with the federal states 58 VDA Logistics Award 212 Vehicle safety 146 Vienna Convention 104

W WLTP 133, 155 WTO 43 Imprint

Publisher VDA

Verband der Automobilindustrie e. V. (German Association of the Automotive Industry) Behrenstr. 35 10117 Berlin Phone +49 30 897842 - 0 Fax +49 30 897842 - 600 [email protected] www.vda.de

Editor VDA Press Department VDA Communications Department

Design DANGEROUS. Berlin

Printing DCM Druck Center Meckenheim GmbH, Meckenheim

ISSN 1869-2915

Copyright Verband der Automobilindustrie e. V. (VDA) 2015