AutoANNUAL REPORT 2004 2 Verband der Automobilindustrie IMPRINT

ISSN 0171-4317 Copyright: Verband der Automobilindustrie e.V. (VDA) 2004 Westendstrasse 61, D-60325 Frankfurt am Main Internet: www.vda.de Editor: VDA Communications Dr. Karsten Eichner Design: edition agrippa gmbh Gustav-Heinemann-Ufer 84-88, D-50968 Cologne Printing: Henrich Druck + Medien Schwanheimer Strasse 110, D-60528 Frankfurt am Main FOREWORD Verband der Automobilindustrie Annual Report 2004 3

investment is compelling – today, The fact that the number of jobs virtually two-thirds of all cars produced in Germany that could potentially be in the new EU states bear a German relocated abroad is on the increase badge. Thanks to local production facili- must surely send alarm bells ringing ties and a well-developed sales organi- for Germany’s policymakers. Domestic sation, the German-brand automakers growth is too weak to allow many new have established a leading position jobs to be created. There is an urgent there, commanding over 60 per cent need for measures to create greater of certain markets. And further sales value in Germany. This will require the successes can be expected: the backlog active involvement of the trades unions of demand is huge. and also calls for continued improve- ment of the business backdrop in gen- Besides proximity to the sales mar- eral. Clinging to the status quo, a kets, it is the attractive conditions that no-risk mentality and stubborn refusal to exist there that tempt many businesses change course do not help. Rather, the to invest in the new member states. situation calls for innovative solutions Faced with fierce global competition that will restore greater freedom for and pressure to reduce costs, more and entrepreneurial and creative potential more companies – especially suppliers – in Germany. are opting for a location mix of German and Eastern European production facili- Industrial growth requires an ties to keep their cost structures com- efficient infrastructure. If the transport 2004 marks a turning point in the petitive. For many businesses, a mixed network – especially the major road history of Germany and Europe. On solution like this is the only means of network – is not rapidly developed, May 1, ten states from Central and staying ahead of tough international the potential for economic growth South-Eastern Europe joined the Euro- competition and also maintaining their cannot be exploited and integration pean Union. This biggest-ever enlarge- locations in Germany. With this in mind, of the new member states into the EU ment in the history of the EU represents it is incomprehensible that policymakers will be piecemeal. Centrally placed in a huge challenge for our community of should accuse German companies that Europe as it is, Germany is of key states, but it also holds vast opportuni- invest abroad as being "unpatriotic", a importance here: as a transit country, ties, especially for the auto industry. sweeping statement that is completely it will bear the brunt of most of the The German auto industry is actively unfounded. With the closely intertwined future traffic – and most of this will using the opportunities offered by the relationship between production facili- use the roads. Many major roads in eastward enlargement of the EU, and ties home and abroad, investing in other Germany are already congested and this is not a new phenomenon: since locations where conditions are more the economic impact of traffic jams is the fall of the Iron Curtain, over 10 billion favourable actually helps secure jobs huge. The goal of any consistent infra- euros have been invested in the new in Germany – jobs that for some time structure policy must be to take up this EU states, 8 billion euros of these in have been at much greater risk from challenge in plenty of time, with the production facilities currently capable the problems of high labour costs and necessary means. Cutting expenditure of producing over 700,000 cars. Just as insufficiently flexible working hours than on the transport network is the wrong on the Chinese market, the return on the general public realises. response. 4 Verband der Automobilindustrie FOREWORD

Germany leads the world rankings to remain the world’s number one. tered in Germany already comply with in research and development, as well Although this has been less straight- the strict EURO 4 directive which does as in patents. However, we cannot allow forward than it may have seemed, the not come into effect until 2005. More ourselves to rest on our laurels. On the auto industry is determined to continue and more diesel models also have contrary - Germany cannot afford to down this path. The Technical Congress, particulate traps. Modern petrol cars lose its lead here. In the auto industry, VDA SME Day, Quality Management with catalyst technology emit virtually production and research cannot be Summit and the first-ever VDA 100 per cent clean exhaust gas. Inten- separated at will; they are closely linked Research Conference are now key sive research is going on to find alter- and mutually interdependent. If too platforms of our work. native fuels and power sources. Fuel much production is relocated abroad, consumption and emissions by commer- there is a danger that, sooner or later, Dwelling too much on problems cial vehicles, too, have been steadily the research landscape in Germany will and understating our successes seems falling for many years, as will be impres- be under threat. to be a hallmark of our society. Yet, we sively displayed at the International have a lot to be proud of. Motor Show for Commercial Vehicles The German government has pro- in Hanover in September 2004. claimed 2004 the "Year of Technology", On the safety front, accident figures a clear message that is the right are falling and the number of accident German automakers and suppliers response. Hardly any other industry fatalities in Germany has attained an rightly enjoy international acclaim for invests so much in high-tech as German all-time low. Vast, new potential for their diesel technology. And their suc- automakers and their suppliers. The active safety – preventing accidents – cess is quantifiable – half of all newly suppliers especially are true guarantors is opening up with the arrival of new registered diesel cars are German- of innovation. The supply industry is driver assist systems. The "car of the made. Other regions in the world offer responsible for much of the value gen- future" will be able to "see" and help as yet untapped potential, such as the erated by the auto industry and is a drivers avoid accidents altogether, or at almost diesel-free US market. This bastion of automobile know-how. A least limit their seriousness. Networked potential has now been recognised and number of issues, including financing systems play an important role in is starting to be exploited, as proven factors, low margins and circumstances making the vision of accident-free by the recently successful launch of such as the extremely high price of steel driving a reality. Electronics are a key German top-category diesel models on and primary materials at present, are part of this. the US market. increasing the risks, however, they are faced with. On the environmental front, modern Germany is becoming increasingly cars are cleaner and more environment- dependent on exports. This says little To attain its technological lead, the ally friendly than ever before. Fuel for the state of the domestic economy, German auto industry has invested over consumption has been steadily falling but much for the attractiveness and 110 billion euros in R&D in the last for years. Carbon dioxide emissions export capability of its products. Four- decade, including 15 billion euros in from cars have been falling for several fifths of the German foreign trade sur- 2003 alone. One in every ten jobs in years, despite continually rising plus is thanks to the auto industry. The the auto industry is in research and numbers of cars on the road. The pro- export rate has been well over 70 per development, the result of the industry’s portion of diesel cars – a key lever for cent for many years, and last year even dedication to a high-tech and premium CO2 levels – has risen to over 40 per marked a new record for exports, with strategy, as well as the determination cent. 60 per cent of all new cars regis- 3.7 million cars. Europe continues to be Annual Report 2004 5

the home market for German automakers, "Tank tourism" – the practice in border all involved – policymakers, employers but the new member states have also regions of filling up in neighbouring and unions alike – have to take on posted above-average high growth. And countries where fuel costs less – is rife, board with utmost priority. There must the German automakers are enjoying and many people are putting off buying be no respite in the reform programme. success on the US market without new cars. The average age of cars in As a key industry, the German auto- having to resort to damaging discount Germany is rising, to the detriment of mobile sector has already played its campaigns. Their consistent premium the environment. part, but it still has much to do. It is strategy is paying off – car exports approaching the tasks ahead with to the United States account for one- What we need is an end to uncer- vigour, making active use of the oppor- quarter of the total value of the tainty and rising costs. Endless debate tunities that globalisation offers. But it industry's exports. on new taxes will lower the prospects is also clearly committed to Germany of an upturn on the automobile market and the creative and innovative potential Thanks to exports in particular, after years of already falling sales. Yet this country possesses – to ensure over 5 million cars were produced in even in difficult economic times of that German engineering continues to Germany last year for the sixth year in recent years, the auto industry has set global standards in the "Year of a row, despite a further slight downturn proved to be a mainstay of the econo- Technology" and beyond. on the domestic market. There is an my: It created 9,000 jobs last year and urgent need for growth at home. Too 1,300 in the first quarter of this year. many economical and tax-related fac- Overall, it secures 770,000 jobs in Ger- Yours, tors have so far stood in the way of a many. If we include the upstream and lasting upturn in the automobile sector. downstream sectors, 5.3 million jobs – Besides the never-ending debate on one in every seven in Germany – additional forms of taxation, such as a depend on cars. Cars are also vitally toll on cars, it is environmental tax that important for the national budget, gen- has proved to be especially counterprod- erating one in every four euros of tax in uctive for the automobile sector, all the Germany. more so at a time when oil prices are Prof. Dr. Bernd Gottschalk rising. This has hit people squarely in "Agenda 2010" has set the reform President the pocket and has made mobility even ball rolling. This is crucial, as our coun- Verband der Automobilindustrie more expensive. A good 70 per cent of try once again has to be geared up to the price of fuel in Germany is now tax. global competition. It is a challenge that Frankfurt am Main, July 2004 6 Verband der Automobilindustrie CONTENTS

FOREWORD 3

BUSINESS BACKDROP 11

The German Automotive Industry – A Driving Force for Innovation and a Guarantor of Competitiveness 12 New Markets – New Challenges 14 The EU and Enlargement 16 Industrial and Tax Policy in Europe 21

GLOBAL MARKETS 27

The Economic Situation in the Global Automotive Industry 28 The Economic Situation in the Automotive Industry in Western Europe 38 The Economic Situation in the Automotive Industry in Germany: Passenger Cars 42 The Economic Situation in the Automotive Industry in Germany: Commercial Vehicles 50 The Trailer, Body and Container Industry 55 The Parts and Accessories Industry 56 Distribution and Servicing of Motor Vehicles 64

TRANSPORT 71

EU Enlargement Eastwards – The Challenge Facing Transport 72 Cars are the Undisputed Number One Means of Transport 76 Infrastructure Policy 79 Road Traffic: Cash Cow and Goldmine for Financing Policy 89 Financing Strategies in an Enlarged Europe 95 Telematics – Promoting Mobility 98 Buses: The Ideal Solution for Local Public Transport and Tourism 100 European Harmonisation in the Transport Sector 103 Annual Report 2004 7

ENVIRONMENT AND TECHNOLOGY 111

Environmental Protection - A Key Goal of the Automotive Industry 112 Climate Change Policy 113 Emissions Reduction 121 Innovative Engine and Emissions Technology 126 End-of-Life Vehicles 137 Production-Related Environmental Protection 138 Energy 142 Occupational Safety 144 Hazardous Substances and Chemicals Legislation (REACH) 145

SAFETY AND TECHNOLOGY 149

Road Safety - A Matter of Concern to the Entire Automotive Industry 150 Accident Prevention in Focus 152 Protection of Pedestrians and Car Occupants 157 Steering and Braking Systems 159 Lights and Visibility 160 Evaluation of Vehicle Safety 164 Commercial Vehicles - Transporting Goods Safely 165 Safety and Reliability of Electronics in Vehicles 169 Technical Harmonisation and Standardisation 172 Joint Vehicle-Related Research 176 Logistics 177 Quality Management in the Automotive Industry 180

IAA – THE WORLD’S LEADING MOTOR SHOW 183

FACTS AND FIGURES 189

INDEX 197 8 Verband der Automobilindustrie FIGURES AND TABLES

FIGURES AND TABLES

Business Backdrop International automotive patents 2003 13 Locations of the automotive industry in the new EU member states: Vehicle production and assembly 18 Reasons for establishing production facilities abroad 19 Trends on the car market: registered car 20 A comparison of new EU member states 20 Taxation on 40 t trucks 23

Global Markets World automotive production 29 Sales of light vehicles in the USA since 1995 30 Sales of light vehicles in the USA in 2003 31 Vehicle manufacture in NAFTA in 2003 32 Sales of light vehicles in Brazil and Argentina 33 Production of the Japanese automotive industry 34 Sales of passenger cars in China and South Korea 35 Registration of new vehicles on Asian markets 36 Production and sales in EU accession states of Eastern Europe 37 Registration of new cars in Western Europe 38 Registration of new cars and market shares in Western Europe 39 Diesel share of new car registrations in Western Europe 40 Registration of new commercial vehicles in Western Europe 41 Vehicle production in the European Union 42 Vehicle production of German manufacturers by region in 2003 43 Automotive production of German manufacturers in Germany and abroad 44 Domestic production of diesel cars 45 Car exports by engine type 45 Export value of German cars 46 Car exports by region in 2003 47 Registration of new cars by segment and diesel engine in 2003 48 Registration of new cars in Germany by brand in 2003 49 Development of domestic demand for commercial vehicles 51 Registration of new commercial vehicles by weight category 52 Registration of new commercial vehicles in Germany by brand 52 Commercial vehicle exports by country in 2003 53 Commercial vehicle exports to the new EU member states 54 Foreign production of German commercial vehicles by country in 2003 55 Sales and employment levels in the automotive supply industry 57 Annual Report 2004 9

Some innovations of the coming decade 58 Automotive industry is growing stronger than other sectors 59 Competitive handicaps for OEMs & suppliers 62

Transport No transport growth means lower economic growth 72 Lower transport growth means higher unemployment 73 Freight transport in Germany up to 2015 75 Characteristics of cars and public transport as assessed by population 76 Car ownership by gender 77 Cars: no. 1 mode of transport travels three-quarters of all distances 77 Car ownership increases with age 78 Passenger transport in Germany up to 2015 79 Development of fatality rates on motorways in western Europe and the USA 81 German autobahn network 2020 – ADAC demands 82 Allocation of revenues from mineral oil tax on motor traffic 90 Passenger transport in the EU up to 2010 96 Freight transport in the EU 15 up to 2010 97

Environment and Technology Sustainable development triangle 113 Distance-to-target indicators for the Kyoto Protocol (2001) 115 Distance-to-target indicators for the Kyoto Protocol, EU countries 115 Basic principle of the national allocation plan 117 Market-weighted fuel consumption (NEDC) of cars produced in Germany 119

Voluntary agreement by the European automotive industry on CO2 emissions 120

Trend in CO2 emissions 120 CO emissions from transport in Germany 1990 - 2020 122 HC emissions from transport in Germany 1990 - 2020 122

NOX emissions from transport in Germany 1990 - 2020 123 Particulate emissions from transport in Germany 1990 - 2020 123 FEA environmental indicator: "air pollution" 124 Fine particulate pollution 124 Air pollution model for agglomerations 125 Number of days with ozone values exceeding 240 µg/m3 125 Trend in European emissions standards 127 European emissions standards for passenger cars 129 European emissions standards for trucks and buses 132 Predicted AdBlue requirements by country, 2012 133 Predicted AdBlue requirements in Western Europe 134 Solvent emissions 140 10 Verband der Automobilindustrie FIGURES AND TABLES

Solvent emissions from EU body-painting plants 140 Total waste generated by vehicle manufacturing plants 141 Water consumption of vehicle manufacturing plants 141 Waste water output of vehicle manufacturing plants 142 Trend in industrial electricity prices, 2000 – 2003 143 EU industrial electricity prices in comparison 143 Index of notifiable industrial accidents at German automotive manufacturers 144

Safety and Technology Road traffic accidents and vehicle population 151 Pedestrian fatalities in Germany 152 Example of a lane-change warning system 153 Design for a drowsiness warning system 154 Safety applications employing all-round vision with short-range radar 155 Effects of weather conditions on accident statistics 156 Dynamic bending light 161 Advanced Front Lighting System (AFS) 161 Rear light cluster featuring LEDs 162 Example of a design for an LED headlamp 162 Vehicle thefts in Germany 171 New vehicle registration document 173 New standard graphic symbols 174

Facts and Figures Sales volume of German automotive industry by manufacturer group in 2003 190 Level of equipment in new cars in Germany 191 Workforce in the German automotive industry 191 Exports of automotive products (in million euros) 192 Imports of automotive products (in million euros) 193 Gross capital investment by the automotive industry 194 The 10 Largest Automobile-Manufacturing Countries in 2003 194 Passenger transport in 2003 195 Freight transport in 2003 195 Auto BUSINESS BACKDROP 12 Verband der Automobilindustrie BUSINESS BACKDROP

The German Automotive Industry – A Driving Force for Innovation and a Guarantor of Competitiveness

The German automotive industry investment in the future which pays: occupies a place of prime importance with over 3,300 patent applications – in international competition. Its manu- more than one-third of all patent appli- facturers and suppliers set standards cations worldwide for the automotive in innovation, technology, design and sector – the German automotive indus- quality. They have achieved excellent try is the world leader, followed, far results in reducing fuel consumption behind, by the Japanese and Americans. and emissions, as well as in active and passive safety. Thanks to their exem- The progress resulting from these plary forward-looking – and frequently innovations can be seen in emission trendsetting – policy, the manufacturers and fuel consumption trends, vehicle now cover the entire spectrum of global performance and comfort, as well as demand, from attractively priced small vehicle safety. For example, carbon cars through versatile niche vehicles dioxide emissions by traffic in Germany right through to the luxury car segment. have fallen steadily for many years. They also offer an excellent price- Other emissions have also been cut to performance ratio, despite the growing a fraction of what they used to be since number of safety and luxury features. the introduction of the catalytic convert- er and cutting-edge engine technology. This successful product policy is Vehicles are increasingly efficient – the result of massive investment and a since 1990, fuel consumption has fallen consistent research and development by over one-fifth. The number of fatali- strategy. With investment at over 13 bil- ties in traffic accidents in Germany is lion euros, the automotive industry was also falling and has reached an all-time responsible for more than one-quarter low. This is proof of the massive of the total investment by German progress that has been made in vehicle industry in 2003. It also leads the field safety – and also an incentive for con- in research and development with tinuing down the same path. It is just investment of 14.5 billion euros, which one more way in which the automotive is equivalent to one-third of total R&D industry is underlining its role as the expenditure in Germany. Over the past number one innovator. It generates cut- ten years, the automotive industry has ting-edge products that are in demand invested some 110 billion euros in the world over – last year, some ten mil- research and development. This is an lion vehicles were sold. Annual Report 2004 13

International automotive patents 2003 decade. This early presence on the markets and strategic shareholdings Figures are paying off – more than one in every five vehicles sold around the world now bears a German badge. Germany 3,333

As globalisation advances, it has Japan 1,840 become impossible to do business in the automotive sector without a global USA 1,680 presence. With production and employ- ment so closely intertwined at the inter- France 737 national level, the globalisation process is irreversible and is closing the weak Other countries 1,692 spots in inherited structures. In recent years, cost-related factors have dam- aged domestic competitiveness, pushing European Patent Office manufacturers to relocate production to more economically attractive regions. The automotive industry is a key sec- means that growth in the German auto- Value-added per vehicle produced in tor of German industry, and by securing motive industry is three times that of Germany is steadily falling. This trend growth and prosperity it also plays a German industry overall. With exports has to be stemmed if we are to secure vital role in securing jobs. Besides the worth more than 140 billion euros value at home and, if possible, raise it. 770,000 people directly employed by the (2003), the automotive industry is also automotive industry, another 1.45 million the strongest exporting sector. 80 per One crucial cost item in automotive people work in sectors upstream of auto- cent of the total German foreign trade production is the cost of labour. Here, motive manufacture. Added to these surplus can currently be attributed to the German automotive industry is the are the people employed in car sales, the automotive industry. outright leader worldwide. In 2003, its repairs and service, over 3 million in all. labour costs stood at “33 per working This adds up to a figure of 5.3 million German-manufactured cars are in hour, 20 per cent higher than in the people in Germany – more than one in demand worldwide, and in recent years USA or Japan, and 50 per cent higher every seven employees – who work the success of the German automotive than the average in other Western directly or indirectly for the automotive industry has been based primarily on European states. The gap between sector, 600,000 more than ten years foreign trade. Its ability to export has Germany and the new Eastern European ago. During the same period, 1.5 million secured growth and employment at members of the EU, and between Asian jobs have been lost in the other sectors home. But besides exporting, the manu- countries such as South Korea or China, of German industry. facturers have been setting up produc- is even greater. Employees of the tion facilities abroad for decades. German automotive industry work much Sales in the automotive industry Today, the German automotive industry shorter hours than those in other coun- have more than doubled since 1993, produces vehicles in 45 countries and tries, with an average 1,430 hours a compared with only a 36 per cent rise has more than doubled its volume of year. These cost disadvantages are not in German industry as a whole. This production abroad during the last offset by higher productivity, even 14 Verband der Automobilindustrie BUSINESS BACKDROP

though actual sales volume per employ- There is an urgent need for a new An international production network ee hour has risen by nearly 70 per cent mindset among unions, management secures jobs at home through cost in the German automotive industry over and decision-makers to prevent further advantages. the past ten years. value from "migrating" abroad. On the other hand, Germany, just like other industrialised nations, is facing the challenge of securing employment, New Markets – or at least restoring conditions conducive to employment. In this con- New Challenges text, flexible wage costs and working hours are just as crucial for attracting investment as, for example, transport Prospects and challenges use of foreign countries as an extended connections and the availability of quali- in the face of emerging "workbench" and a market for procure- fied workers. Germany’s competitiveness automotive markets ments. This is a natural consequence as a location for industry has to be In the automotive sector, globalisa- of the vital importance of the foreign secured in the medium and long term tion is advancing, with more and more markets for Germany as a centre of the on this front too, in order to keep the companies looking beyond their nation- automotive sector: activities abroad aid key research and development skills al borders in their quest to tap into new exports from Germany, and help the that go hand in hand with industrial markets and lower production and pur- German automotive industry as a whole production in the country. chasing costs. The latest, continuing to be more competitive on the interna- trend evidences increasing relocation tional market. As for fears that creating Other countries have recognised to China and the new EU member jobs and investing abroad will lower and grasped this opportunity. At the states. employment in Germany, we have same time, their economic development to shift the perspective: in many cases, provides opportunities for the German However, at the same time, the it is precisely these foreign activities automotive industry to sell valuable "made in Germany" stamp remains critic- that make it possible to maintain ideas and products. These opportunities ally important for the German automo- employment at home. Below are some it must not miss. tive industry, as the criticism met by the examples: European Commission’s suggestion for During the last decade, over a European certificate of origin testifies. Setting up sales companies abroad 130,000 new jobs were created in the German technology and the German enables us to sell German automotive industry, partly owing to brand image are still very much in products. excellent business abroad. Since the demand from abroad, as witnessed by crisis year of 1993, revenues from foreign the high market share of German luxury Setting up service networks ensures sales in the automotive industry have vehicles on key markets including, that the goods sold function correctly, risen significantly year on year – growth notably, emerging countries such as thus securing future sales. reaching double figures at times – while China, India and Thailand. revenue from domestic sales, through Creating jobs locally raises remaining positive, grew much less Despite this, German manufacturers acceptance of foreign products in a buoyantly. This means that the foreign and their suppliers are making increasing given country. markets made a major contribution to Annual Report 2004 15

employment at home. We have to upswing in the automotive market there. In the long term, however, opening ensure that this continues. In Colombia, trade policy pressure up the markets rather than interven- changed discriminatory legislation and tionist market protection is more likely The number of foreign-based prod- has helped reduced customs duties on to raise living standards and employ- uction facilities and licensees of the incoming goods in many countries. ment in emerging markets. This can German supply industry has continued be seen in the progress that the WTO to rise in recent years. VDA is currently Nevertheless, barriers still exist to member states, to cite a prime example, updating the list of assembly and prod- numerous world markets, which the have achieved by opening up their uction facilities abroad which are WTO is striving to break down. markets. linked to the German automotive indus- try. Even the last evaluation, dating from There have been setbacks, although Further testimony of the attractive- 2000, illustrates the wide variety of most of these are related to the agricul- ness of the WTO lies in the attempts to activities through which the manufac- tural sector rather than industry. It is to gain membership to it by states such as turers and their suppliers market Ger- be hoped that the WTO negotiations can Russia and the Ukraine. Here again, many’s image and German expertise continue in a constructive fashion and VDA exercises its right to have a say in abroad. The increased activity in China the Doha Round be successfully com- the talks on the terms of accession, and the new EU member states espe- pleted. VDA members support these transmitting the view of the German cially proves how important these efforts. Together with their European automotive industry via the Federal regions have become both as sales partners, they have been contributing Ministry for Economics and Labour and markets and production locations. intensely to the WTO negotiations with the European Commission. Given the Activity by other European, Asian and very firm ideas on the liberalisation of importance of the automotive industry American companies, all vying for the world trade and the dismantlement of for emerging economies, it is vital that customer’s favour, is also keen in these tariff and non-tariff trade barriers. the markets should be open and trans- countries. It is therefore vital for the parent. However, even after joining the German automotive industry to invest in It is of vital importance for the German WTO, new member states do not neces- them to secure market share and its automotive industry – and for Germany sarily respect WTO regulations fully. own global position. as a centre of the automotive industry – For example, numerous member states that trade barriers be dismantled. One maintain regulations that discriminate WTO promotes side of the problem is that customs against importers and foreign investors. market access duties and other obstacles to trade raise Some countries even erect new barriers VDA supports the liberalisation of the price of German-made products, to counteract the dismantlement of world trade and, by extension, the suc- thus lowering their sales prospects. In customs duties. cess of its members on foreign markets. addition, protected markets can have Open markets, a reliable location back- the effect of attracting investment that Together with its European partners, drop and protection of intellectual would not be economically efficient in VDA works to enforce the agreed com- property are all key aspects of this and a liberal market situation. As a result, mitments and supports bilateral and numerous successes have been cash may flow into relatively unproduc- multilateral talks aimed at removing achieved in recent years. tive factories that are only profitable barriers when this kind of case arises. because of the savings on customs For example, although China has greatly The accession of China to the WTO, duties. This then has repercussions on reduced its customs duties on motor for example, has triggered a major employment in German locations. vehicles since joining the WTO, 16 Verband der Automobilindustrie BUSINESS BACKDROP

discriminatory regulations on the distri- To help its members gain access to whole and acts as an intermediary bution and production of vehicles and markets, VDA offers them the possibility between the trade fair visitors and vehicle parts are preventing free access of taking part in foreign trade fairs on German companies. to the market. VDA is actively working joint national stands. The programme of to improve the situation through political foreign trade fairs sponsored by the There is an urgent need to dismantle talks and in sessions of the Sino- Federal Ministry for Economics and trade barriers and, first and foremost, German Mixed Commission. Its efforts Labour offers companies participation at foster growing global markets in order to have met with success – for example, reduced prices, as well as facilitating keep Germany competitive as a location with the introduction of more favourable their task, for example by organising the for industry. The companies in the conditions for financing activities of stand and having joint discussion rooms German automotive industry are proving foreign automotive firms. and communications facilities. VDA that they take the issue of remaining offers joint stands at the motor shows in competitive highly seriously. It is all the VDA also works to ensure that the Detroit, Tokyo, Beijing and Shanghai, more important that the economic and interests of the German automotive Sao Paulo and Bangkok, to name some political backdrop in Germany should be industry are taken into account in the examples. It provides information about conducive to making the automotive negotiation of free trade agreements the German automotive industry as a industry competitive in the long-term. by the EU. It also strives to ensure that Europe is not disadvantaged by bilater- al trade agreements between third states. The EU and Enlargement

VDA supports foreign activities Germany a partner This makes the EU the most significant Besides its trade policy activities, of the new member single market in the world. By way of VDA also supports its members by pro- states comparison, the population of the viding information on foreign markets, After progressive growth from six United States is far below 300,000 million. whether in the form of market data, to 15 members, the enlargement of the legal information, or contact addresses. EU in 2004 is of unparalleled size and The potential of the new members is Conversely, many foreign companies variety. 13 states had applied for mem- vast. Already in the years immediately contact VDA when seeking business bership. Ten of them – Estonia, Latvia, preceding their accession, the former partners. Numerous foreign political and Lithuania, Poland, Slovakia, Slovenia, eastern bloc countries had gone a long economic delegations – especially from the Czech Republic, Hungary, Cyprus way to closing the gap with the West. Asian states in recent years – make and Malta – acceded to the EU on With these countries, the EU has incor- contact with VDA. International compe- May 1, 2004. Bulgaria and Romania porated fast-growth markets – especial- tition for investors is leading increasing are planning to join by 2007 and other ly in the automotive sector. The fact of numbers of investment agencies from states have made it known that they having common regulations in this new all over the world to contact the German are interested in joining. and larger economic zone makes it automotive industry, testifying to the easier for large, internationally operating importance that investment by the auto- With ten new members, the EU has companies, as well as small and me- motive industry has for the development grown by some 75 million inhabitants to dium-sized businesses, to build up busi- of national economies. an economic zone of some 450 million. ness commitments there. Annual Report 2004 17

Even before accession, Germany’s for- European Union many years ago and the total number of production facilities eign trade with the Central and Eastern much progress has already been made and licensed companies in the countries European countries was already growing on integrating Eastern European of Central and Eastern Europe stood fast. Trade between the old and new mem- locations economically with locations at 96; by 2000, this figure had doubled ber states more than tripled during the in the "old" EU. The political implemen- to 191. These figures show that Europe’s 1990s, benefiting companies and employ- tation of the EU enlargement on May 1, enlargement eastward was initiated ees in Germany and the applicant coun- 2004 will bring greater security and shortly after the fall of the Iron Curtain tries. Economic relations with the countries prepare the way for a sound position in by the major automotive manufacturers of Central, Eastern and South-Eastern global markets for the new economic and by the small and medium-sized Europe and the CIS countries reached a zone. supplier businesses. They invested trust new highpoint in 2003, despite a sub- and commitment in the development of dued economy in Germany. With sales Before the fall of the Iron Curtain the Eastern European economy, which of around 160 billion euros, Germany’s and German reunification, German manu- is today paying off in the established trade with these states was above aver- facturers’ sole activity in the East was in market position the German automotive age compared with overall foreign trade. Yugoslavia, where they assembled industry enjoys today. With average trucks and buses. In the early 1990s, market share at more than 40 per cent In 2003, Germany’s foreign trade with they began producing cars and trucks in the five largest new member states the former eastern bloc states grew by in the Czech Republic. In 1992, over and at more than 60 per cent in the 7.4 per cent, while its foreign trade over- 200,000 German-brand vehicles were Czech Republic and Slovakia, the all grew by only 2 percent. Despite a produced there, a figure which had German automotive industry today has strong euro, German exports to Eastern more than doubled ten years later. If we an excellent starting position in the Europe grew by 6.4 per cent, to 81.3 bil- compare Eastern Europe with Mercosur, enlarged EU. lion euros. Imports rose 8.4 per cent to production in Eastern Europe exceeded 78.1 billion euros. The proportion of Ger- that of Mercosur for the first time in Prospects of the new many’s trade with Eastern Europe in rela- 2000 – and by 65,000 vehicles, attaining member states as a tion to overall foreign trade thus continued 685,000 units. In 2003, production in production location for to rise, attaining 13.3 per cent (against Eastern Europe was some 200,000 vehi- manufacturers and 12.7 per cent in 2002). The proportion of cles ahead of production by the Merco- suppliers . . . Germany’s trade with the Eastern Euro- sur states. The production facilities in the East- pean applicant states in relation to its ern European countries have taken on overall trade with Eastern Europe rose The German suppliers were also an increasingly significant role in recent steadily in recent years, accounting for quick to spot the trend and build up years, especially for the German auto- more than three-quarters (76 per cent) in their activities in Eastern Europe. Back motive industry. With 750,000 vehicles 2003. A major part of this trade was done in 1996, when VDA conducted a survey produced there in 2003, nearly one in in the car and automotive parts sector. on foreign production facilities and every five German-brand vehicles prod- licensed companies, its supplier mem- uced abroad came from these countries. Germany’s automotive bers named 46 locations in the Czech The principal locations are Slovakia, industry well prepared for Republic. In Hungary too, the number Poland, Hungary and the Czech Republic, EU enlargement of locations was over 20. By 2000, this this latter country now being the The German automotive industry figure had risen to well above 30, and third largest foreign location of the anticipated the enlargement of the today stands at well over 40. In 1996, German automotive industry after Spain 18 Verband der Automobilindustrie BUSINESS BACKDROP

and China. Although China overtook commitments – Toyota and PSA are due is also increasing. In Hungary alone, the Czech Republic in 2003, the Czech to start producing a small car in a joint annual production capacity attained Republic closed the gap with Brazil and venture in the Czech Republic from 2005, some two million engines and 250,000 Belgium. while PSA is to start up production in gearboxes, while Poland has an estimated Slovakia from 2006. Western manufactur- gearbox production capacity of Manufacturing locally is becoming ers use Russia and its neighbouring states 850,000 units. increasingly important for the automo- as locations for assembly and production, tive manufacturers. This phenomenon for example Skoda in the Ukraine, and As with the manufacturers, the ten- is evident in all of the regions mentioned BMW, Ford and Opel in Russia. dency of automotive suppliers to move above in which the manufacturers into the new Eastern European members already have a strong presence. The But not only whole vehicles are of the EU, already in evidence for a French and Japanese manufacturers being produced in Eastern Europe; number of years, is continuing. A survey are massively stepping up their production of engines and gearboxes conducted by VDA on investments by

Locations of the automotive industry in the new EU member states: Vehicle production and assembly

Company Location Models Production and assembly 2003

Poland Daewoo FSO Motor Warsaw Matiz, Lanos 35,398 Volkswagen Poznan Poznan T5, Caddy 41,167 Fiat Auto Poland Tychy Seicento, Palio Weekend, Panda 203,630 Opel Polska Gliwice Agila, Astra 76,694

Slovakia Hyundai/Kia Zilina Compact cars (from 2006) Capacity 200,000 PSA Trnava Small cars (from 2006) Capacity 300,000 VW Slovakia Bratislava Polo, Touareg, SEAT Ibiza 281,160

Slovenia Revoz (Renault 66.7%) Novio Mesto Clio 118,172

Czech Republic Skoda Mlada Boleslav, Fabia, Octavia, Superb 437,554 Kvasiny, Vrchlabi Toyota / PSA Automobile Czech Kolin Entry-level small cars Capacity 300,000 from 2005 of which Toyota 100,000

Hungary Audi Hungaria Motor Györ TT Coupé, Roadster 33,892 Magyar Suzuki Esztergom WagonR+, Ignis/Subaru G3X Justy Concept S (from autumn 2004), SUV (with Fiat from 2005) 88,446

VDA statistics, Volkswagen AG, Global Insight, misc. press releases, corporate figures Annual Report 2004 19

the supplier industry at the end of Reasons for establishing production facilities abroad 2003 confirms this trend: by 2006, three- Shares in per cent quarters of all investments in foreign locations will be made in the countries Production factor costs 65 Tapping into new markets of Central and Eastern Europe. 60 Proximity to large accounts 34 The new Eastern European locations Taxes and charges, subsidies 21 offer the supplier companies the oppor- Availability of qualified staff 17 tunity to improve their cost structures, Coordination, communication 16 and transport costs take advantage of the rising demand Presence of competitors 16 for vehicles in these regions and at the Local content requirements 15 same time respond to new demands Capacity bottlenecks 12 from the vehicle manufacturers. A study Infrastructure 9 by the Fraunhofer Institute confirms Tapping into new technologies 8 that these factors are the main motives Offsetting exchange rates 6 for building production facilities abroad. Hungary, which no longer numbers Fraunhofer ISI among the countries with the lowest labour costs, is nevertheless attracting direct investment from Germany prim- relocating is not necessarily worthwhile Actual corporate taxation is below arily, according to the study, because simply for reasons of lower wages, as 17 per cent in Slovakia, just over 18 per companies hope to be able to win is proven by a study by the CAR Centre cent in Hungary and just 15.5 per cent market share in Central and Eastern of Automotive Research on the future in the Czech Republic. The level of Europe and take advantage of market of Germany as a centre of automotive income tax is also much lower in many potential in the region from a base in production. According to this study, of the new member states than in Hungary. the impact of lower labour costs is Germany. For example, the nominal rate scarcely perceptible when salaries in Slovakia is just 19 per cent, and in the Although lower labour costs in East- higher even than those in the West Czech Republic between 15 and 32 per ern Europe will continue to be a factor have to be paid because of a lack of cent. in attracting investment for the foresee- qualified staff. able future, investment decisions are German economic and tax policy- based on the medium and long term Even given the "considerations" makers should bear this in mind and and have to take into account lower pledged in return by the new member keep careful watch on Germany’s com- productivity in some cases. This means states, conditions still do not bear com- petitiveness. Perhaps the increasingly that the gain in terms of unit wage costs parison in all domains (such as infra- tough competition for investment will might prove lower than the overall gain structure and education) with those in change their way of thinking and pave in labour costs. Currency fluctuations the "old" EU states. Nevertheless, lower the way for renewed growth in Germany. might also gnaw away at the competi- taxes do provide a greater incentive for tive advantage of lower labour costs. companies and employees to commit . . . and as a sales market Even assuming that there are no differ- themselves, thus contributing to overall In economic terms, the gap between ences in quality and productivity, economic development. the “new” and “old” member states is 20 Verband der Automobilindustrie BUSINESS BACKDROP

Trends on the car market: registered cars the number of new car registrations will not grow as dynamically in the future Country 1993 2003 Increase as, say, in Hungary, as demand for cars

Poland 6.5 million 11.0 million +68 per cent there is not determined by low numbers but exclusively by the need for replace- Slovakia 1.0 million 1.3 million +35 per cent ment. In contrast, Poland, Hungary and Slovenia 0.6 million 0.9 million +50 per cent Slovakia all have high potential for Czech Republic 2.5 million 3.6 million +44 per cent growth.

Hungary 2.0 million 2.6 million +30 per cent Given the still relatively low car den- Total: 12.6 million 19.4 million +50 per cent sity in the new EU member states and VDA statistics the anticipated economic alignment with the other EU states, it is expected that the automotive markets there will relatively wide. While average GDP in and Hungary), the number of registra- continue to grow. That means that we the 15 old member states of the EU tions of new vehicles rose by 50 per can also assume that local production stood at some 24,000 euros per head of cent between 1993 and 2003. Poland will also continue to expand, even if the population, this has sunk to an average alone posted a growth rate of 68 per difference in labour costs with those in 21,200 euros since the accession of the cent. Western Europe are bound to shrink, new members. Average GDP in the ten affecting, in turn, the production struc- new member states themselves stands The main reason for the steep growth tures. at around 6,000 euros per head of pop- in the number of new registrations of ulation – this means that per-capita recent years is the low level of car owner- For enlargement to succeed, align- income is on average four times lower ship in this region. In Poland, Slovakia ment must be achieved and EU legisla- than in Western Europe. and Hungary, car density was less than tion implemented Europe-wide. Give 300 cars per 1,000 inhabitants, com- this, changing labour structures The market for cars has grown pared with 545 in Germany. between the old and new member substantially in many Eastern European states will impact the automotive indus- states. In the five countries with the Slovenia is the smallest of these try, but also the textile, furniture, largest automotive sectors (Poland, countries and also has the highest car construction materials and electronics Slovakia, Slovenia, the Czech Republic density. We can therefore assume that sectors too. Locations in the “old” EU

A comparison of new EU member states

Poland Czech Republic Slovenia Slovakia Hungary

Population in millions 38.6 10.3 1.9 5.4 10.1 GDP 2003, in % 3.6 2.8 2.5 4.0 2.8 Car density per 1,000 inhabitants 280 359 456 239 246 Registration of new cars per 1,000 inhabitants 8 14 28 12 17 Annual Report 2004 21

will thus become more competitive on tion, with skilled workers and new there are no contradictory priorities and the global market as centres of produc- growth markets. that the overall regulatory framework is also consistent.

Moreover, impact assessment should Industrial and Tax Policy also be used to monitor the effective- in Europe ness of regulations once they come into force. The aim should be to examine both existing and projected legal require- Industrial policy preventing European industry from ments for their consequences in a holis- needs to strengthen becoming more competitive. Nearly tic context. competitiveness 100 EU directives and regulations apply In late 2002, the European Commis- to motor vehicles which have already Another prerequisite for improving sion issued a communication on indus- been amended more than 200 times. legislation is to provide industry with trial policy in an enlarged Europe under- The European Commission now has to sufficient lead-time before a directive lining the key role that industry plays in take the initiative and dismantle exces- or regulation becomes effective. Europe’s economic future. Industry took sive regulations, as well as improve the up the Commission’s initiative, asking quality of its regulations. In the past, this need has often been for improvements to be made to the ignored. For example, the directive on basic political backdrop in Europe in One key means of achieving this emissions by commercial vehicles stipu- order to strengthen its competitiveness. is improved assessment of the impact lated that the Commission should sub- of EU legislative initiatives. A specialist mit a supplementary proposal on on- At a conference on competitiveness team of staff needs to be created for board diagnostics and service life by held at the end of last year in Brussels, this purpose, for example at the 2000 to enable regulations to be submit- UNICE pointed to Europe’s backward- Secretariat-General of the European ted in plenty of time before taking effect ness compared with the USA and Japan Commission, which would work with in 2005, at the same time as the EURO 5 and demanded that securing and raising the Commission’s departments, the emission limits come into force. In fact, competitiveness be made a priority of other European institutions and the the Commission did not adopt the pro- European policy. That was the only way, sectors concerned, to conduct a com- posal until 2003, which shortened the stated the conference, of achieving prehensive assessment of the impact time between the proposal and the the EU’s goal of becoming the most of proposals on competitiveness. This enforcement of the regulation to an competitive economy in the world by assessment should be carried out on unacceptable extent (see also chapters 2010. The conference also made it clear the basis of objective criteria using "Environment and Technology" and that this is not about claiming EU generally accepted methodological "Safety and Technology"). subsidies, but improving the business principles. It would not be meaningful context for companies. if only the Directorate-General respons- Another point to be considered is ible for a proposal were to assess its that implementing and respecting regu- Similarly, the automotive industry impact. The issue calls rather for an lations is extremely costly for industry has repeatedly pointed to the fact that integrated approach which has to in terms of research and development. in Europe, the sector is suffering from ensure that European law is consistent This money is then unavailable for the effects of a business context that is in the different policy domains, that developing vehicle characteristics to 22 Verband der Automobilindustrie BUSINESS BACKDROP

which buyers on the markets in Europe competitiveness when a new Commis- than ten years after the completion of and elsewhere attach greater impor- sion is formed in autumn. He or she the single European market, it is be- tance when choosing a vehicle would play a central role in proposing coming urgent to make a move in this initiatives on competitiveness and make direction. This means, last but not least, that sure that sufficient consideration is European legislation has to take the given to competitiveness in all political It is therefore regrettable that the international dimension into account. measures. This commissioner would Commission has so far failed to submit For example, EU regulations on vehicle also accompany the work of the Council the announced draft directive on the technology often differ widely from of Ministers on Competitiveness. How- gradual abolition of car registration tax. those in other regions of the world and ever, in this case, the commissioner are sometimes much stricter. The would have to have genuine decision- In its position paper on this commu- danger here is that regulations will lead making powers on all proposals relating nication, the European Parliament to the development of specifically Euro- to competitiveness. demanded that the Commission at least pean products for which there is no submit new proposals for transitional demand on other markets and which, No progress on measures before abolishing car registra- more to the point, people there cannot harmonisation of taxation tion tax completely. It also demanded afford. in the EU proposals for ways of overcoming the In autumn 2002, the European Com- barriers within the single market that This is why global harmonisation is mission submitted a communication on result from these taxes – for example to called for in regulations on vehicle tech- car taxation in the EU in which it tabled prevent cars from being taxed twice nology. Moreover, the EU needs to take a proposal to abolish the tax on car pur- when their owners move from one mem- heed of the requirements on other mar- chase and registration which still exists ber state to another. Nevertheless, we kets in its legal stipulations. in some states. should not lose sight of the ultimate ob- jective of abolishing car registration tax Even within the EU, there is a lack The automotive industry fully sup- throughout the EU. EU member states of consistency in the application of ports this proposal. Car registration tax are also invited to take steps towards existing provisions. For example, rates of up to 180 per cent in certain this independently of EU regulations. European directives are interpreted, im- states are one of the main reasons for plemented and applied in divergent the differences in the pre-tax price of Harmonisation still ways in the member states. Even within new cars in the EU, and they run con- outstanding in freight Europe, therefore, the legal and political trary to the principles of the single Euro- transport sector background conditions for industry need pean market. Moreover, high car regis- Neither has anything yet been done to be more closely aligned. tration tax can make people put off buy- to close the wide divergences in the taxa- ing a new car, which has the effect of tion levied on road haulage operators in The governments of Germany, delaying the replacement of current the individual member states. Taxation France and the UK have taken on board models with modern, low-emission and on a 40 t truck in Germany is still more the need for greater consideration of low-fuel consumption models. At the than 50 per cent higher than that in cer- competitiveness in European law and same time, the automotive industry is tain other EU states, for example. have suggested enshrining this in Euro- aware that car registration tax cannot pean institutions. They have proposed be abolished overnight, but that this has All that the energy tax directive creating a post of vice president for to be done in stages. However, more adopted last year has done is to raise Annual Report 2004 23

the existing minimum tax threshold, Taxation on 40 t trucks Higher fiscal charges which many member states exceed in In euros on diesel cars must be any case. Moreover, the directive prevented provides for lengthy transition periods 20,000 However, we have to beware that the and contains numerous special clauses, issue of greater harmonisation of fiscal so that no notable alignment will be charges in the commercial sector is not 15,000 perceptible before the next decade. misused to raise mineral oil tax on private diesel vehicles. The automotive industry 10,000 A final point is that the directive rejected certain parts of the Commission’s provides that France and Italy should be proposal for precisely this reason. allowed to continue to refund part of 5,000 the mineral oil tax levied on road The Commission had proposed to haulage vehicles until the end of this 0 align mineral oil tax rates on diesel fuel year, even though the European Com- for cars with those on petrol. This is France mission views this as aid which is con- Belgium absolutely unacceptable, unless it is part Germany trary to the Treaty of Rome. In contrast, LuxembourgNetherlands of a fiscal policy aimed at taxing both the German government has still not ful- BGL - Federal Association of Road Haulage, types of engine fairly, without biasing Logistics and Disposal filled the promise by the former Federal competition and without losing sight of transport minister Kurt Bodewig to the overall tax burden, of which mineral begin providing similar relief if refunds oil, motor vehicle and car registration were not stopped in other countries by tax form a widely diverging part depend- the end of 2002. France has even which would have meant a step towards ing on the EU state. For example, in increased the refunds by exploiting a complying with reiterated demands from Germany and some other EU states, clause in the new energy tax directive the industry and the road haulage oper- diesel car owners pay more motor which exempts diesel used for commer- ators to align competition within the vehicle tax to compensate for the lower cial purposes from the tax on diesel and Single European Market. mineral oil tax rates. Motor vehicle tax restricts tax rises on diesel for private therefore has to be corrected before use. As a result, taxation on commercial However, the proposal was broadly there can be any rise in taxation on diesel has remained at 38 cents a litre rejected by the Council of Ministers. The diesel fuel. despite the 2.5-cent tax rise, while the European Parliament too evidently also refund has risen to 3.7 cents. feels that there is no need to act on this Whatever happens, we have to avoid issue. No breakthrough thus being a situation in which taxation puts diesel No heed has so far been taken of expected at the European level in the cars at a disadvantage and affects sales. the EU Commission’s proposal to har- foreseeable future, the responsibility lies This would be counter-productive in monise mineral oil tax on commercial all the more heavily with the member terms of climate policy, as diesel tech- diesel vehicles within specific tax rate states to exploit existing room for nology plays a vital role in reducing CO2 categories and narrow these to a single manoeuvre to harmonise taxation on the emissions by road traffic. In its position rate over the long term. Even if the road haulage industry. In Germany, for paper on the Commission’s communica- automotive industry has objections to example, diesel tax is still 35 per cent tion on car tax, the European Parliament the details of the Commission’s propos- higher than the minimum European also stated that a rise in diesel tax al, it welcomes the basic approach threshold that came into force in 2004. would be counter-productive to the goal 24 Verband der Automobilindustrie BUSINESS BACKDROP

of reducing emissions of greenhouse to quantify. It is incorrect to state that damage to Germany, including as a base gases. Moreover, detriment to the posi- investors, as it might sometimes appear, for holding companies. Stage III of the tion of diesel cars in Europe could only choose locations in terms of edu- tax reforms, that was half-heartedly counter current efforts to establish cation systems, labour costs or infrastruc- brought forward to 2004, did not bring diesel technology in North America and ture. Neither is it true that in assessing any economic recovery and the resulting Japan, which would mean market losses the tax system of a potential location or rise in overall economic growth is not for the German and European automo- list of locations investors only look at expected to be more than 0.3 per cent. tive industry there. corporate taxation rates. What does count is how high taxation ultimately is The tabled reform models are prima- Against this background, the in relation to the taxable base and salary rily isolated reforms, such as a three- energy tax directive adopted by the scales, and how to transfer results. stage tariff for income tax, but do not EU Council of Ministers, which could represent a reform of the entire tax sys- mean a substantial rise in the tax bur- In Germany, a debate on tax reform tem, neither do they treat all legal enti- den on diesel cars, is a cause of serious was launched some time ago – actually ties identically and fairly. Some draft concern. It provides that a distinction restricted to income tax – which has led reforms – such as that proposed by the may be made between diesel fuel for to numerous proposals. The initiators of CDU/CSU – are no more than hypothe- commercial and non-commercial use these proposals are striving to radically ses that make forecasts about the long- in future rises in mineral oil tax, a provi- simplify the direct tax system, dismantle term effects of levied taxation impossi- sion that is already being exploited in subsidies and thus broaden the taxable ble. Cutting what some refer to as France. However, this possibility of base with the ultimate aim of lowering "de facto tax subsidies" – each author imposing differentiated rates could rates. Given its repercussions on the outdoes one another on this point – allow the member states to raise miner- economy, no reform of the tax system often does not comply with the consti- al oil tax on diesel for private use can be undertaken without taking a tutional principle of taxation according without affecting the competitiveness look at the other EU member states. to performance. of the road haulage sector. However, the directive lays no obligation on the However, the chances of arriving at So what considerations should be member states to compensate for a modern, fair, simple and international- taken into account in a fundamental any tax rises, for example through ly competitive tax system in Germany in reform of the tax system? motor vehicle tax. This is left to their the foreseeable future are slim, given discretion. that 2004 is a year of elections. The Economic and tax policy has to be amendments to the tax laws which have aimed at rationalising the national Tax policy in Germany only just come into effect – the Abolition budget, attaining full employment and The tax systems in the member of Tax Incentives Act, the 2004 Budget enabling fulfilment of international states of the European Union are largely Supplement Act and the "Korb II-Gesetz" commitments. Germany has already unharmonised. The system in force in a (Basket II Act) – do nothing to improve twice contravened the Maastricht Treaty, given member state therefore has a Germany’s attractiveness for investors. which was introduced to achieve direct impact on its prosperity. On the contrary, the first ever minimum stability of the euro. tax threshold, the new rules governing A country’s tax system has a major taxation of thin capitalisation and the As regards rationalising the budget, impact on its attractiveness for investors, reduction of tax exemptions on capital if public spending is cut, tax revenues as taxation, unlike other factors, is easy gains and dividends have done much should be levelled by a similar amount. Annual Report 2004 25

Furthermore, tax reforms have to be that taxation should not affect the type est. Most reform models do not take for the long term and free from interven- of investment financing. We cannot this in to account and favour financing tionist fiscal charges. Subsidies have to be expect investors to have to search through borrowed capital. dismantled in several large stages – the through a tax jungle for the most proposal is for cuts of 10 per cent. For the advantageous form of financing. The best approach to a reform of the sake of corporate forward planning, con- German tax system would be to make it tinuity of the basic principles of tax and The objective of taxation should be part of a Europe-wide harmonisation of the fiscal regulations has to be ensured to to impose identical charges on the tax systems. But we are a long way from give investors confidence that their invest- injection and transfer of capital regard- unanimity in Europe. Moreover, none of ments are safe now and in the future. less of whether it is equity or borrowed the reform proposals so far take all the Another vital aspect of any reform is capital, dividends, capital gains or inter- requisite criteria sufficiently into account.

Auto GLOBAL MARKETS 28 Verband der Automobilindustrie GLOBAL MARKETS

The Economic Situation in the Global Automotive Industry

Increased global demand to match the previous year’s result for automobiles in 2003 (-3 per cent). By contrast, markets in 2003 saw an increase in overall Central and Eastern Europe proved an global demand for automobiles, despite important driving force behind the auto- a decline in North American and West- motive industry, recording 7 per cent ern European markets. During the growth. The Chinese market has still not course of the year there was a recovery reached saturation point, and last year in sales of motor vehicles in the Merco- was the most dynamic in Asia, growing sur countries, which had been crisis- by 35 per cent and boosting overall ridden for several years, and develop- growth in the Asian automotive industry ments in the states of Central and East- to 11 per cent. ern Europe were similarly positive. But the best results came from Asia, where Asia gains importance continued growth on many automobile as a production location markets boosted overall sales by 2 per In 2003, a total of 59.2 million motor cent to 56.3 million vehicles. Demand vehicles were manufactured worldwide, for passenger cars (a category that in improving on the previous year’s already America includes light trucks ) grew impressive result by 2 per cent. Global by 1 per cent to 47.3 million, while at passenger car production (including 9.0 million, over 6 per cent more com- light trucks in America) was up 2 per mercial vehicles were sold. cent at 50.1 million units, and commer- cial vehicle production grew by as much Trends varied greatly from one as 6 per cent. Automotive production in region to another. Within NAFTA, sales the NAFTA countries – the USA, Canada were 1 per cent down on the previous and Mexico – was 3 per cent down at year at 19.6 million vehicles. Passenger 16.2 million units in 2003, reducing that car sales were particularly badly hit region’s share of global production by (-6 per cent), whereas light trucks were 1.5 percentage points to 27.4 per cent. able to repeat the modest growth of In the countries of the European Union, previous years (+3 per cent). Sales of production declined half a percentage medium and heavy trucks were also point to 16.8 million units, and the EU 2 per cent up. In Western Europe, over- countries’ share of global production all sales declined by 1 per cent to was down 0.7 percentage points at 16.3 million vehicles, mainly as a result 28.4 per cent. By contrast, the countries of a slump in the economy, and the of Asia, including Japan, were able to countries of South America also failed increase production by 10 per cent to Annual Report 2004 29

World automotive production In million vehicles

60

50

40

30

20

10 EU countries Eastern Europe NAFTA Japan Other countries 0

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

VDA statistics

21.5 million vehicles – boosting their meant that, for the third year in succes- um weight trucks (categories 4-7) share of global automotive production sion, more light trucks (utility vehicles, rose significantly by 6 per cent, heavy by 2.5 percentage points to 36.3 per minivans and pick-ups) were sold than trucks (category 8) were almost 3 per cent. passenger cars. Last year, light trucks cent down at 142,000. The market for this accounted for 54.3 per cent of overall category of vehicle was clearly affected Strong incentives stimulate light vehicle sales, whereas in 2000 the by the stricter emission regulations US automotive production figure had been 49.0 per cent and in introduced in autumn 2002. In advance Last year saw almost 17 million vehi- 1990 a mere 32.8 per cent. of their introduction, many freight opera- cles sold in the USA – only 1 per cent tors had brought forward purchases of fewer than the previous year. This performance can be partly category 8 vehicles to the first nine explained by the massive discounts and months of 2002, triggering a short-term Sales of new light vehicles in 2003, incentives on offer from US manufactur- boom on the US market, and it was only at over 16.6 million, were only marginally ers, which last year averaged 4,300 US$ to be expected that this would have an lower than in 2002 (-1 per cent). Tradi- per vehicle or 13 per cent of the price. impact on the figures for 2003. However, tional passenger cars declined by a there was a distinct recovery in demand further 6 per cent to 7.6 million units, Sales of medium and heavy com- for heavy trucks during the course of whereas new registrations of light mercial vehicles also recovered last year the year. Whereas sales for the first trucks rose to a record level of more and achieved overall growth of 2 per three quarters were 7 per cent down than 9 million units (+4 per cent). This cent to 328,400. Whereas sales of medi- compared with the same period in 2002, 30 Verband der Automobilindustrie GLOBAL MARKETS

Sales of light vehicles* in the USA since 1995 outside NAFTA (3.3 million units, +1 per cent). The light truck segment continued In million vehicles to grow, and overseas imports increased 9.5 from 12.2 per cent in 2002 to 13.6 per cent as a result. Foreign manufacturers 9.0 are being increasingly successful in 8.5 penetrating the highly lucrative light truck 8.0 market, which used to be dominated 7.5 by US manufacturers. Whereas US com- 7.0 panies only marginally increased their Saloons/estates sales to 6.7 million units, foreign manu- 6.5 Light trucks facturers achieved a 14 per cent increase 6.0 to 2.3 million, expanding their market 1995 1996 1997 1998 1999 2000 2001 2002 2003 share by 2.4 percentage points to Ward’s Communications 25.8 per cent. *light vehicles = passenger cars and light trucks

Asian manufacturers were able to further expand their market share new registrations actually rose 10 per "Big Three" (GM, Ford, Chrysler) across the entire light vehicle segment. cent during the final quarter of the year. suffered a further decline in sales and A total of 5.4 million vehicles were sold, continued to lose market share. In 2003 3 per cent up on the previous year, and US manufacturers suffered a the three companies together only their market share rose from 31.5 per significant loss of market share on the took 61.8 per cent of the overall light cent to 32.7 per cent. However, Korean domestic market, and overall vehicle vehicle market (1.2 percentage points companies suffered a reduction of 2 per production at the "Big Three" dropped. down), and in the traditional passenger cent to 637,700 vehicles, giving them In the USA, manufacturing declined by car sector their share declined from 3.8 per cent of the US market. Japanese 2 per cent during the year. Although 48.4 per cent in 2002 to 47.1 per cent companies once again increased sales more light trucks came off the assembly in 2003. by 3 per cent to 4.8 million units, lines than ever before (7.3 million units, expanding their market share by +5 per cent), production of traditional In the light truck segment, 74.2 per 1.2 percentage points to 28.9 per passenger cars had to be cut back 10 per cent of vehicles sold on the US market cent. cent to 4.5 million units. There was also a were American, but this, too, represent- decline in the number of medium and ed a loss of 2.4 percentage points Great success of heavy commercial vehicles manufactured compared with 2002. In all, just under German manufacturers (almost -4 per cent at 250,800 units). 10.3 million light vehicles were sold by on US market the Big Three (including their European Despite the weakness of the dollar, Further decline in brands) on the domestic market (-3 per German companies were able to further US manufacturers’ share cent). expand their market share in the USA. of domestic market In a market characterised by record Despite offering massive discounts 20 per cent of all light vehicles sold levels of discounting, they managed to and generous credit terms, the Detroit in the USA were actually produced sell a total of 913,300 light vehicles, Annual Report 2004 31

Sales of light vehicles in the USA in 2003 where they were not represented in the past. As a result, they are increasingly Units +/- % Share 2003 Share 2002 able to offer products across the entire

Chrysler Corp. 2,127,451 -3.5 12.8 13.1 light vehicle range. Ford 3,437,692 -3.9 20.7 21.3 GM 4,716,039 -2.1 28.3 28.6 Poorer results from Big Three 10,281,182 -3.0 61.8 63.0 Canada Asian brands 5,444,712 2.7 32.7 31.5 Last year saw declining sales and BMW 276,869 7.9 1.7 1.5 vehicle production in the Canadian Mercedes 218,921 2.6 1.3 1.3 Porsche 28,418 33.3 0.2 0.1 automotive industry. The SARS and BSE Audi 86,421 0.8 0.5 0.5 crises had a negative impact on the VW 302,686 -10.5 1.8 2.0 Canadian economy, and demand for VW total 389,107 -8.2 2.3 2.5 motor vehicles, at over 1.6 million units, German brands 913,315 -0.2 5.5 5.4 was 6 per cent down on the record level Total 16,639,209 -1.1 100.0 100.0 achieved the previous year. Just under 1.6 million new light vehicles were sold Ward’s Communications (-6 per cent), with sales of light trucks and passenger cars down 5 per cent and 7 per cent respectively. By contrast, sales of medium and heavy trucks actu- representing a market share of 5.5 per truck segment, increasing sales by ally increased by 8 per cent overall, with cent and only falling short of the previ- 15 per cent to 113,000 units and expand- new registrations of medium trucks in ous year’s record by 1,800 vehicles. As a ing their market share by 0.2 percentage categories 4-7 up 2 per cent, and heavy result, they consolidated their position points to 1.3 per cent. Their strategy trucks (category 8) up 11 per cent. as No. 2 in the league table of foreign of developing new models and vehicle manufacturers behind the Japanese concepts has earned them considerable Loss of market share by the major but well ahead of the Koreans. As in success in a segment characterised by US manufacturers, combined with rela- previous years, the number of vehicles intense competition over prices and tively weak domestic demand, meant imported from Germany increased purchase conditions. that domestic vehicle production had to significantly (+5 per cent), whereas be cut back in 2003. 3 per cent fewer sales of German vehicles from North Last year also saw German manu- vehicles (2.5 million units) came off American transplants declined by 10 per facturers consolidate their commanding Canadian assembly lines, with car manu- cent. position in the luxury car segment, facture declining by 2 per cent and light increasing their market share by a fur- truck production by 4 per cent. In the In the traditional passenger car ther 4.1 percentage points to 36.8 per medium and heavy commercial vehicle market, German manufacturers continu- cent. In the "luxury light truck" segment segment, production was down 6 per ed the success story of previous years, they also achieved sales 18 per cent cent at 28,800 units. This means that the selling 800,300 vehicles and further higher than the previous year. As well scaling down of Canadian automotive expanding their market share by 0.4 per- as supplying the traditional premium production in favour of US production centage points to 10.5 per cent. They segment, German companies are also observed in recent years has gained were particularly successful in the light selling in niche segments or segments further momentum. 32 Verband der Automobilindustrie GLOBAL MARKETS

Production in Mexico Vehicle manufacture Sales trends were less positive. A declines in NAFTA in 2003 total of 1.6 million vehicles were sold in In 2003, Mexico failed to repeat the Share in per cent Brazil and Argentina in 2003 – a good growth figures of recent years. While previous year’s values in brackets 1 per cent more than the previous year. demand for automobiles, at just under Canada Following a long period of deep reces- Mexico 1 million units, was roughly the same 15.7 sion, Argentina was able to increase (15.7) 9.7 as in 2002, production declined by (10.8) sales and production from the start of considerably more than 12 per cent to 2003 onwards, whereas the Brazilian 1.6 million units, largely because certain economy – including the automotive manufacturers had transferred their industry – only started to show signs of operations elsewhere within NAFTA. recovery towards the end of the year. The result was that Mexico failed to USA strengthen its position within NAFTA for 74.5 Brazilian automotive the second year running and saw its (73.5) market recovers during Ward’s Communications share of NAFTA production decline by 2003 one percentage point to 9.7 per cent. In 2003 saw a total of 1.4 million 2003, 19 per cent fewer passenger cars automobiles sold in Brazil – 3 per cent and 5 per cent fewer light trucks came Light truck production in the region fewer than the previous year. The main off Mexican assembly lines, whereas was 3 per cent up at 9.2 million units, reason for this decline was the high production of medium and heavy trucks whereas almost 10 per cent fewer pas- interest rate, which had a particularly rose 2 per cent to 54,600 vehicles. senger cars (6.6 million) were built. As a negative impact on sales of passenger result, NAFTA’s overall share of global cars (1.2 million) and buses (15,900). In The establishment of new plants vehicle production declined to 27.5 per both cases, these figures represent a over the next few years should boost cent decline of 4 per cent. Sales of light Mexico’s position as a production location. trucks remained at the previous year’s 2003 saw sales of medium trucks (cate- Slight recovery in Mercosur level of 177,600, and sales of medium gories 4-7) increase marginally by 1 per region and heavy trucks were up 1 per cent at cent, whereas heavy trucks in category Economic and political turmoil in the 66,400. It was only towards the end of 8 declined by 6 per cent. Sales of pas- Mercosur states of Brazil and Argentina the year that the Brazilian automotive senger cars declined 3 per cent to has had a negative impact on automo- market as a whole began to show signs 685,600 vehicles, whereas new registra- bile production and sales in recent of recovery. Sales during the first three tions of light trucks were 6 per cent up years. In 2003, however, there was a quarters were 9 per cent down com- at 287,000. slight recovery in the South American pared with the equivalent period in 2002, automotive market, with overall produc- whereas new registrations rose by almost Automotive production in tion increasing by 3 per cent to almost 13 per cent during the final quarter. NAFTA scaled back 1.9 million units. Production of medium Last year saw production of light and heavy trucks rose 15 per cent, German manufacturers’ market vehicles in NAFTA scaled back by 3 per light trucks were 21 per cent up at share declined by 4.1 percentage points cent to 15.9 million units, and produc- 260,000 vehicles, and passenger car to 22.3 per cent in the light vehicle seg- tion of medium and heavy commercial production remained roughly at the ment. However, in the case of medium vehicles reduced 1 per cent to 341,250. previous year’s level (1.5 million). and heavy trucks (including buses) they Annual Report 2004 33

Sales of light vehicles in Brazil and Argentina of medium and heavy commercial vehi- cles and buses rose by 44 per cent and In units 45 per cent respectively. Only produc- 160,000 tion of passenger cars continued to decline, ending the year 1 per cent 140,000 down at 109,800 units. The total number 120,000 of vehicles produced in Argentina last 100,000 year was 169,600 – which is still the 80,000 Brazil third worst result since 1990. As a 60,000 Argentina result, Argentina’s share of vehicle 40,000 production in Latin America remained 20,000 at a mere 6.0 per cent. 0 1999 2000 2001 2002 2003 2004 Japan: automotive

Monthly figures, trend production and sales VDA statistics stagnate Signs of recovery in the Japanese economy triggered greater optimism in the country in 2003, but there was only were able to further expand their share Argentinean automotive a slight upturn in demand for automo- by 3.4 percentage points to 65.2 per market recovers from deep biles. Some 5.8 million vehicles were cent. This means that almost two-thirds recession sold - a mere 1 per cent more than in of all commercial vehicles sold in Brazil In 2002, vehicle sales in Argentina 2002. Commercial vehicle sales were last year bore German badges. In the had declined by more than 53 per cent, up 1 per cent at almost 1.4 million, but case of buses, the figure was almost but 2003 saw this trend reversed for the passenger car sales remained at the 74 per cent. first time in 5 years, with an increase previous year’s level of just under 4.5 of 88 per cent to a total of 155,100 vehi- million. This meant that for the 6th year The figures for vehicle production cles. Car sales were up 77 per cent (a running, Japanese production failed to in Brazil were considerably better than total of 104,608 units sold). Light truck top the 6 million mark. Despite this for new registrations, with an overall sales were also up 114 per cent at stagnation in demand, importers were increase of 2 per cent to just under 43,600 units, and medium and heavy able to improve their position slightly by 1.7 million – the second highest figure trucks also experienced strong growth 1 per cent (278,800 vehicles). ever achieved. At almost 1.4 million, the of 147 per cent. Sales of buses rose number of passenger cars coming off 122 per cent. German companies once again the assembly lines was the same as in predominated amongst foreign car 2002, and production of medium and Parallel to this increase in the num- importers, taking a market share of heavy trucks was only slightly down at ber of units sold, Argentinean automo- more than 60 per cent. Japanese manu- 68,000. By contrast, production of light tive production also recovered last year, facturers also marginally improved their trucks increased 21 per cent (209,200 albeit to a much lesser extent. 22 per export figures to 4.7 million vehicles, in units), and production of buses was up cent more light trucks came off the particular as the result of a 20 per cent 14 per cent. assembly lines (50,900) and production improvement in sales to neighbouring 34 Verband der Automobilindustrie GLOBAL MARKETS

Production of the Japanese automotive industry

In million vehicles

Commercial vehicles Cars

3.54 3.49 3.12 2.73 2.48 1.78 1.64 1.81 2.75 2.59 2.48 1.99 1.80 1.66

9.95 9.75 9.38 8.49 8.49 8.36 8.62 8.48 7. 80 7. 6 0 7. 86 8.06 8.10 8.12

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

JAMA

countries in Asia and also to Europe due (-20 per cent) represent a substantial had to be scaled back 10 per cent to to the positive exchange rates. On the reduction over the previous year. 446,100 units because of poor levels of other hand, Japanese exports to North Foreign manufacturers continued to domestic demand. Korean car exporters America declined by 14 per cent. The make little leeway on the highly protect- were particularly successful in Europe, relatively constant figures for domestic ed South Korean market, despite where they were able to increase sales and foreign sales last year meant that performing rather better than Korean to Western European countries by more overall Japanese production remained at manufacturers. Sales of 29,700 units than a third (509,500), and to Central 10.3 million units, with a slight decline represent only 2.2 per cent of the mar- and Eastern Europe by three-quarters. of 1 per cent in passenger car produc- ket, but at 39.7 per cent, German manu- Exports to the USA were also up 12 per tion to 8.5 million units being balanced facturers took the largest share. cent at over 704,300 vehicles. by an increase in commercial vehicle production of almost 10 per cent. A sharp increase in passenger car Continued growth on exports by 11 per cent to almost 1.6 mil- Chinese automotive Uneven developments in lion meant the Korean automotive indus- market South Korea try was able to increase domestic pro- China is the major growth market in Last year saw a sharp decline in duction by 4 per cent to 2.8 million units. the region and provides an important vehicle sales in South Korea. The figures In the case of commercial vehicles, source of stimulus for many Asian of 1.0 million passenger cars (-17 per despite an increase in exports of 3 per economies. The main driving forces cent) and 322,600 commercial vehicles cent to 99,000 vehicles, production still behind its booming economy are Annual Report 2004 35

exports, foreign direct investment and price reductions by manufacturers and a that car production in China last year steadily increasing private consumption. rise in household incomes, have consid- expanded faster than sales. Car produc- The automotive industry has benefited erably boosted demand. German manu- tion rocketed by 83 per cent to almost from this, and almost 4.4 million vehicles facturers were able to sell 698,000 cars 2.0 million units, and commercial vehicle were registered in 2003 – an increase of in 2003, surpassing their strong perfor- production was up 12 per cent at 2.4 mil- 35 per cent over the previous year. This mance of the previous year by a further lion. China is now the world’s fourth was mainly due to flourishing sales of 36 per cent. This means that 35.6 per biggest manufacturing centre for motor passenger cars, which increased 74 per cent of all new cars registered in China vehicles, with a total production figure of cent to almost 2.0 million vehicles. The in 2003 were German brands. more than 4.4 million. 35.1 per cent of all increase in commercial vehicle sales, at cars manufactured were German brands. just under 14 per cent, was more mod- China already in fourth est, but the total of 2.4 million vehicles place for worldwide South-East Asian markets sold makes China the world's largest vehicle production contribute to overall commercial vehicle market. In recent years, many manufacturers performance of automotive have intensified their activities in China, industry Over the last 5 years, sales of pas- systematically expanding local capacity. 2002 had already seen a rise in senger cars in China have increased As more and more foreign companies demand for motor vehicles in South- almost five-fold. For many years, the enter the market with local joint venture East Asia as a result of the booming Chinese market was extremely isolated, partners, they are being subjected to regional economy, and this trend con- but since the country joined the World increasing pressure from the aggressive tinued in most of the Asian tiger states Trade Organisation in December 2001, pricing strategies of Chinese companies, in 2003. Overall sales in India increased car sales have boomed. Reductions in which are keen to obtain a share of the by almost 23 per cent to 1.1 million import duties, combined with significant market themselves. The effect of this is vehicles, of which 837,900 were passenger cars (+20 per cent) and 238,300 were commercial vehicles Sales of passenger cars in China and South Korea (+34 per cent). Thailand also returned In thousand units strong growth (+31 per cent) as did 220 Indonesia (+12 per cent), Taiwan 200 South Korea (+11 per cent) and the Philippines 180 China (+11 per cent). Only Malaysia experi- 160 enced a decline of 8 per cent in overall 140 sales to 399,600, due to poor demand 120 for passenger cars. 100 80 60 All this made South-East Asia con- 40 tinue to be one of the key markets for 20 the global automotive industry in 2003, 0 1999 2000 2001 2002 2003 2004 and it is likely to remain so in the future. Demand for vehicles in the region is Monthly figures, trend driven mainly by a sharp growth in pur- VDA statistics chasing power, combined with greater 36 Verband der Automobilindustrie GLOBAL MARKETS

Registration of new vehicles on Asian markets states, and sales of commercial vehicles were up by as much as 11 per cent Changes in per cent 2003/2002 126.4 (487,400 units).

35.2 30.2 There were significant increases in 22.5 new registrations of passenger cars in Hungary (+20 per cent), Poland (+16 per 11.6 7. 2 7. 9 cent) and Slovenia (+12 per cent). In 0.6 Romania (+20 per cent), the Czech Republic (+1 per cent) and the Baltic -6.9 states (+2 per cent), more vehicles were -18.6 also sold than the previous year. Only in Slovakia (-12 per cent) were fewer vehi- India Japan China Taiwan Turkey cles sold, but this figure is partly due to Malaysia Thailand Indonesia Philippines South Korea changes in the recording of statistics within the motor vehicle sector. Demand VDA statistics for motor vehicles in the other countries of Eastern Europe including the coun- tries in the Commonwealth of Indepen- competition, reduced import duties, passenger cars rose by 150 per cent to dent States (CIS), rose 2 per cent to lower vehicle taxes and a general desire 227,000 vehicles, and 100 per cent more 1.2 million units. for greater mobility. commercial vehicles (168,200) were put on the roads. Overall motor vehicle Sales of commercial vehicles In addition to achieving improved production in Turkey also rose 54 per were particularly buoyant in Romania sales figures, these countries in Asia cent to 533,700 vehicles, with car pro- (+23 per cent), Poland (+17 per cent) also managed to expand production by duction up 44 per cent at 294,100, and and Slovakia (+55 per cent) as well as 18 per cent to a total of over 3.0 million commercial vehicle production up in the Czech Republic (+18 per cent). vehicles and increase their share of 68 per cent at 239,600 units. Positive results were also recorded in global automotive production to 5.2 per Slovenia (+6 per cent), the Baltic states cent. If major producers like China, Positive developments in (+8 per cent) and the Russian Federa- Japan, South Korea and Turkey are Central and Eastern Europe tion (+11 per cent). The other countries included, this region now accounts for The majority of automotive markets of Eastern Europe also recorded higher 36.4 per cent of global production, in Central and Eastern Europe put in levels of demand than in 2002. All in all, making Asia the world's most important a strong performance in 2003, and final- this means the markets in Central and region for automotive manufacture. ly began to live up to longstanding Eastern Europe significantly boosted expectations. A total of over 2.6 million global commercial vehicle sales. Substantial recovery vehicles - 7 per cent more than the in Turkey previous year - were sold. Car sales At 2.6 million vehicles, production in After two extremely weak years, the rose 6 per cent to almost 2.2 million the countries of Central and Eastern Turkish automotive market more than units, largely because of positive deve- Europe was 2 per cent above the previ- doubled in 2003. New registrations of lopments in many of the EU accession ous year's level. 2.2 million passenger Annual Report 2004 37

cars were manufactured - 3 per cent presence and buoyant export figures, man cars manufactured abroad origi- more than in 2002. Whereas in Romania they occupy a strong position on the nated in these countries. (+19 per cent), Poland (+4 per cent) markets in this region. In addition, and the Ukraine (+11 per cent) more German manufacturers are increasingly German car manufacturers took a vehicles left car manufacturers' assem- serving the eastern European market market share of 43 per cent in the major bly lines, production in Hungary (-12 per with products manufactured in their five EU accession states in 2003. In cent), Slovakia and Slovenia (-7 per cent own plants in the region. In Poland, Poland, Hungary and Slovenia, they each) and the Czech Republic (-1 per Hungary, the Czech Republic and accounted for between 35 and 40 per cent) had to be scaled back. In the Slovakia, a total of 740,000 German cent of the market, and the figure for Russian Federation, car production motor vehicles were produced last year. the Czech Republic and Slovakia was grew by 3 per cent. This means that almost one in five Ger- over 60 per cent.

The picture for commercial vehicle production was considerably better. A Production and sales in total of 321,200 units came off Central EU accession states of Eastern Europe and Eastern European assembly lines - almost 12 per cent more than the previ- 2001 2002 2003 Change 03/02 in % ous year. Particularly good figures were recorded in Romania (+38 per cent) Car production and Russia (+12 per cent), whereas the Czech Republic 456,927 441,312 436,297 -1.1 Czech Republic (-6 per cent), Hungary – German manufacturers 456,905 441,308 436,279 -1.1 Slovakia 88,733 201,742 186,807 -7.4 (-3 per cent), Poland (-2 per cent), – German manufacturers 88,733 201,742 186,807 -7.4 Slovakia (-9 per cent) and the Ukraine Poland 331,153 293,796 306,501 4.3 (-9 per cent), had to cut production. – German manufacturers 101,614 85,728 76,882 -10.3 Slovenia 116,094 126,661 118,172 -6.7 Although the overall situation for Hungary 140,681 138,681 122,338 -11.8 motor vehicle production was positive – German manufacturers 55,576 53,606 33,953 -36.7 in Central and Eastern Europe, the share EU accession states 1,133,588 1,202,192 1,170,115 -2.7 of global production taken by these – German manufacturers 702,828 782,384 733,921 -6.2 countries remained low at 4.4 per cent. – Share in % 62.0 65.1 62.7 EU enlargement means Central Euro- Registration of new cars pean vehicle manufacturers in particular Czech Republic 152,145 147,754 149,546 1.2 will face stiffer competition within the Slovakia 69,655 65,312 57,513 -11.9 European context in the future. Poland 327,251 308,158 358,414 16.3 Slovenia 54,156 52,038 58,074 11.6 German manufacturers Hungary 148,125 173,491 207,953 19.9 well represented in the Baltic States 27,401 30,715 30,877 0.5 EU accession states 778,733 777,468 862,378 10.9 new EU countries – German manufacturers 330,000 325,000 370,000 13.8 German vehicle manufacturers play – Share in % 42.4 41.8 42.9 a key role in the EU accession states of Eastern Europe. With their strong local VDA statistics 38 Verband der Automobilindustrie GLOBAL MARKETS

The Economic Situation in Over the year as a whole, 14.2 mil- lion new passenger cars were regis- the Automotive Industry in tered, which is only 1 per cent fewer than the previous year. In some markets, Western Europe car sales even increased.

Sustained growth Western Europe: sales duction of commercial vehicles rose by in United Kingdom and exceed expectations almost 2 per cent to more than 2.1 mil- Spain At 16.3 million units, the figure for lion vehicles. The United Kingdom put in a strong automobile sales in Western Europe in performance for the 4th year running. 2003 was only 1 per cent down on the Car sales only slightly Registrations of new cars rose almost previous year. This is a better result than down on previous year 1 per cent to a record level of just under had been expected at the start of the During the first six months of 2003, 2.16 million, further consolidating the year. Once again, the automotive indus- registrations of new cars in Western UK's position as the second biggest try in Western Europe proved to be an Europe were 2 per cent down largely individual market in Western Europe, important pillar of the economy. Higher because of consumer uncertainty result- accounting for 18.2 per cent of sales, levels of exports to countries outside ing from the Iraq war and a combination ahead of Italy (15.8 per cent) and Western Europe meant that production of higher oil prices and poor stock mar- France (14.1 per cent). This performance in EU countries developed rather better ket performance in the aftermath of the was largely the result of continued dis- than sales. A good 14.6 million passen- war. However during the second six counting campaigns and consumer ger cars left the assembly lines - only months, sales returned to the previous optimism encouraged by attractive 1 per cent fewer than in 2002, but pro- year's level. credit terms. Demand from private con- sumers increased once again and now Registration of new cars in Western Europe accounts for almost 50 per cent of new car registrations. Growth was particular- Changes in per cent 2003/2002 ly dynamic in the small car segment, which grew 5 per cent and is now the Belgium -2.0 biggest market segment in the UK, Denmark -14.0 accounting for almost 34 per cent of Germany -0.5 sales. Diesel cars are also becoming France -6.3 UK 0.6 increasingly popular, with sales more Italy -1.2 than doubling since the year 2000. One Netherlands -4.3 reason is the fact that company car tax Austria 7.4 concessions are higher on diesel cars Portugal -16.0 than on petrol models. Sweden 2.5 Spain 3.8 New registrations in Spain were also Switzerland -0.8 buoyant, bettering the previous year’s result by almost 4 per cent (1.4 million VDA statistics vehicles). During the second half of the Annual Report 2004 39

year especially, sales boomed in antici- models they were offering. Japanese German manufacturers pation of the end of the financial incen- brands achieved double-figure growth maintain market position in tive scheme for the scrapping of old rates, but the most important importers Western Europe cars. There was also an above-average remained Opel and Volkswagen, with Last year saw German manufactur- increase in leasing transactions. some 120,000 cars each. ers once again retain their lead in West- ern Europe. Various changes of model Slow-down in most Double-figure reductions in regis- meant they suffered a slight loss of mar- other countries trations were recorded in Denmark ket share by 0.3 percentage points to The Italian market was boosted last (-14 per cent) and Portugal (-16 per 46.1 per cent, but by December there year by individual manufacturers’ cent). In Portugal, general economic were indications that this trend was promotional campaigns and the weakness has caused a slump of beginning to be reversed, and they look withdrawal of financial incentives for 36 per cent in passenger car sales to set to increase sales in 2004. Volume the scrapping of old cars in March 2003. 189,800 over the last 4 years. The models like the VW Golf, BMW 1 Series, As a result, new registrations for the German market did rather better than Ford Focus or Opel Astra should help year as a whole were only down 1 per those in the rest of Western Europe, strengthen their position again. cent at 2.3 million. Given the context of ending the year only slightly down at increased car ownership costs (in par- 3.2 million passenger cars (-0.5 per French manufacturers also saw their ticular, higher insurance premiums and cent). market share reduced by 0.3 percentage motorway tolls), this is a respectable result, and is due partly to massive promotions by manufacturers. The Registration of new cars and launch of various new models also market shares in Western Europe helped prevent the slump in sales that had been feared. The only major loser 2000 2001 2002 2003 was Fiat: a 10 per cent collapse in sales Manufacturer Units in % Units in % Units in % Units in % meant the company suffered a signifi- German group- cant loss of market share. owned brands 6,629,850 44.9 6,889,123 46.5 6,683,944 46.4 6,543,565 46.1 French brands 3,490,135 23.6 3,714,879 25.1 3,704,987 25.7 3,611,243 25.4 In France, the 4th biggest Western European market for motor vehicles, Japanese brands 1,679,815 11.4 1,540,137 10.4 1,644,768 11.4 1,799,554 12.7 there was a significant drop in new reg- Italian istrations by some 6 per cent to 2.0 mil- brands 1,492,439 10.1 1,415,167 9.6 1,177,183 8.2 1,056,113 7.4 lion cars. The industry’s worst figures Korean since 1998 were due to economic stag- brands 505,690 3.4 409,973 2.8 391,502 2.7 469,576 3.3 nation, continued high unemployment, British above-average inflation and general brands 617,636 4.2 511,505 3.5 461,960 3.2 410,095 2.9 consumer reticence. Car importers Other increased their market share to over brands 350,334 2.4 330,478 2.2 327,015 2.3 318,104 2.2

40 per cent, whereas domestic manu- Total 14,765,899 100 14,811,262 100 14,391,359 100 14,208,250 100 facturers lost one percentage point of market share because of the older VDA statistics 40 Verband der Automobilindustrie GLOBAL MARKETS

points to 25.4 per cent, or 3.6 million Diesel share of new car registrations in Western Europe cars. But the biggest losers on the Euro- Shares in per cent pean car market were the Italians, who suffered a slump in sales of over 10 per Sweden 7.7 cent. With 1.1 million registrations of Switzerland 21.5 new cars, they only achieved a market Norway 23.0 share of 7.4 per cent (-0.8 percentage Denmark 23.0 points). The biggest winners were the UK 27.3 Asian manufacturers, with Japanese Germany 39.9 companies increasing their market Western Europe total 43.6 Italy share from 11.4 per cent in 2002 to 48.5 Spain 59.4 12.7 per cent in 2003. The Koreans also France 67.4 gained ground, increasing their share Belgium 68.2 by 0.6 percentage points and selling Austria 71.5 470,000 vehicles or 3.3 per cent of the total for Western Europe. VDA statistics, AAA

Diesel boom continues In recent years, a combination of (68.2 per cent) and France (67.4 per cent). in western Europe. Registrations of new engine technologies and signifi- At the bottom of the list, as before, are new commercial vehicles declined for cantly higher fuel prices has consider- Sweden (7.7 per cent) and Greece the third year running, ending the year ably boosted demand for diesel cars in (1.5 per cent), where the sale of diesel 2 per cent down at over 2.0 million. Western Europe. In 2003, over 6 per cars to private individuals is forbidden. Light trucks under 6 t were less badly cent more diesel cars (6.2 million) were In Germany, diesel ownership runs at hit than the over 6 t category. Van sales sold in Western Europe than the previ- 39.9 per cent - 3.7 percentage points were 2 per cent down at 1.8 million ous year. By contrast, registrations of below the Western European average. units and registrations of new trucks new petrol cars were 7 per cent down over 6 t totalled 288,000 (-2 per cent). at 8.0 million. 43.6 per cent of new reg- German cars are still much in demand, The trend towards heavy trucks observ- istrations in Western Europe are now and more than half the 15 most popular able in recent years continued, with diesel cars, whereas ten years ago the models sold in Western Europe in 2003 sales of medium-weight categories figure was less than half that (20.3 per were German brands. Despite a slump (6 - 16 t) declining 9 per cent to cent). in sales as a result of model changes, 73,400 but trucks over 16 t up 1 per the VW Golf/Bora took second place cent at 214,500. Registrations of new Virtually half of all newly-registered behind the Peugeot 206. buses over 8 t also declined by 2 per diesel cars in Western Europe came cent to just under 24,000 vehicles. from German manufacturers (49.2 per Commercial vehicle sales cent). A further 30 per cent were French, decline once again German commercial vehicle manu- 7.7 per cent Japanese and 5.8 per cent Continued overall economic weak- facturers succeeded in strengthening Italian. In terms of diesel ownership, ness and poor levels of investment in their overall presence in Western Austria leads the league table with many countries once again left their Europe. In the van segment, their mar- 71.5 per cent, closely followed by Belgium mark on the commercial vehicle market ket share remained stable at just under Annual Report 2004 41

27 per cent, in the 6 - 16 t category they below-average growth. In Italy, where Automotive production in increased their share to 47 per cent and the previous year’s figures had been the EU virtually unchanged in the over 16 t category they also mar- very positive, the termination of state Total automotive production in the ginally expanded market share to 38 per subsidies at the end of 2002 resulted European Union declined by just under cent. in a 23 per cent decline in new regis- 1 per cent to 16.8 million vehicles last trations to 223,000. In France, new year. By increasing its share of the EU Levels of registrations of commercial registrations were 6 per cent down at market to 32.8 per cent (2002: 32.4 per vehicles fluctuated amongst individual 431,500 units, with sales of heavy cent), Germany retained its position at Western European countries. Sales trucks over 5 t suffering from reduced the top of the list of manufacturing in the UK increased 13 per cent to demand for capital goods and declining countries in Western Europe. Next came 363,700 units, and the situation in Spain by almost 12 per cent. In Portugal and France (21.5 per cent), where overall car improved considerably after a poor Switzerland too, considerably fewer production was 2 per cent down at showing in 2002, with an increase of commercial vehicles were newly regis- 3.22 million units. A good 4 per cent 9 per cent to 333,200 units. In both tered than the previous year. However, fewer vehicles left French manufactur- these countries, light truck sales record- it is expected that 2004 will see a mod- ers’ assembly lines, whereas foreign ed double figure increases, whereas the est upturn in demand as the economy companies increased production by medium and heavy categories recorded as a whole begins to recover. 23 per cent. In the commercial vehicle sector, French production was 3 per cent down at 390,100 units. Registration of new commercial vehicles in Western Europe In 2003, 18 per cent of all European 2001 2002 2003 motor vehicles were manufactured in In '000s +/-% In '000s +/-% In '000s +/-% Spain. Production of passenger cars Belgium/Luxembourg 75 8 64 -15 67 4 increased at a higher rate (6 per cent) Denmark 36 -1 36 0 37 -1 than new registrations. Opel achieved Germany 297 -6 271 -9 265 -2 the highest growth rate, with 22 per Finland 18 -3 18 1 19 3 cent, whereas Peugeot completely France 496 4 461 -7 431 -6 closed down production in Spain. Over- Greece 23 -9 20 -11 20 -1 all commercial vehicle production rose Ireland 43 -7 38 -11 35 -10 Italy 251 -2 291 16 224 -23 7 per cent to 630,500 units. Light trucks Netherlands 101 -11 96 -6 91 -5 under 3.5 tons were 9 per cent up, but Austria 34 -11 31 -8 36 14 poor levels of investment meant the Portugal 106 -18 85 -20 73 -14 medium and heavy truck sectors Sweden 35 -8 35 -2 34 -1 declined by 6 per cent. Spain 326 -4 306 -6 333 9 UK 313 5 322 3 364 13 In the UK, overall car production EU 15 2,156 -2 2,074 -4 2,026 -2 was 2 per cent up in 2003, with a total of Norway 37 5 29 -24 31 10 1.66 million passenger cars rolling off the Switzerland 31 7 27 -15 24 -11 Western Europe 2,224 -2 2,129 -4 2,081 -2 assembly lines, even though British manu- facturer MG Rover suffered a fall in prod- VDA statistics uction of almost 10 per cent. Commercial 42 Verband der Automobilindustrie GLOBAL MARKETS

Vehicle production in the European Union manufacture of commercial vehicles rose 2 per cent to 782,700. All in all, 1990 2002 2003 German companies were able to main- In '000s Share % In '000s Share % In '000s Share % tain their strong position on global com-

Germany 4,977 32.2 5,469 32.4 5,507 32.8 mercial vehicle markets despite the France *) 3,769 24.4 3,683 21.8 3,609 21.5 process of consolidation that has taken Spain 2,053 13.3 2,855 16.9 3,030 18.0 place in this sector in recent years. UK 1,566 10.1 1,819 10.8 1,846 11.0 Italy 2,121 13.7 1,427 8.5 1,322 7.9 If the figures for Chrysler are includ- Sweden 410 2.7 519 3.1 566 3.4 ed, German manufacturers produced Belgium 386 2.5 591 3.5 473 2.8 a total of 12.5 million vehicles in 2003 - Netherlands 139 0.9 212 1.3 194 1.2 2 per cent fewer than the previous year. Portugal – – 190 1.1 168 1.0 Austria 16 0.1 96 0.6 77 0.5 As a result, German companies’ share Finland – – 21 0.1 13 0.1 of global production was 21.2 per cent. This means that more than one in five European Union 15,437 100 16,882 100 16,806 100 vehicles produced in the world came *) New calculation method as of 1997 from a German-owned plant. VDA statistics Slight fall in foreign-based production vehicle production also rose by a further built 10 per cent fewer cars. In the Following a decade of steady expan- 1 per cent to 188,900 units. commercial vehicle segment, produc- sion of foreign-based production, 2003 tion was 2 per cent down. Van produc- saw fewer motor vehicles produced out- In Italy, motor vehicle production tion was relatively stable (-1 per cent), side Germany than the previous year was scaled back by 7 per cent over- whereas there was a 7 per cent (2003: 4.4 million, -1 per cent). However, all, and the crisis-ridden Fiat Group decline in the medium and heavy truck levels of production were still more than - the country's leading manufacturer - sectors. twice as high as in 1993. The overall fig- ures for commercial vehicle production (421,500 vehicles) and passenger car The Economic Situation in the production (4.0 million vehicles) were 1 per cent lower than in 2002. Automotive Industry in Germany: China third most important Passenger Cars production location for German car manufacturers Whereas production of passenger High levels of German car 9.9 million vehicles were produced at cars declined in most German plants, production maintained home and abroad, equalling the previ- China continued to gain importance as 2003 saw production remain at a ous year's figure. Passenger car produc- a manufacturing location for the high level in the German automotive tion, at just under 9.2 million units, was German automotive industry. German industry, thanks to buoyant global sales. marginally lower than in 2002, but manufacturers produced or assembled Annual Report 2004 43

Vehicle production of German manufacturers by region in 2003

3,151,300 737,600 (-5%) 7,192,300 (-6 %) (–2 %) 632,900 (+43 %)

161,100 (+1 %)

543,500 (–7 %)

VDA statistics

708,000 units in the country - an increase In contrast to recent years, foreign- which the proportion of diesel vehicles of 50 per cent. This means that China is based production of diesel cars did not rose, overall production was also higher now the third most important produc- continue to rise. A total of 993,500 such than the previous year. tion location for German car manufac- vehicles were produced abroad - 2 per turers after Germany and Spain. Broken cent fewer than the previous year. As a There was an above-average increase down according to regions, the EU 15 result, the proportion of diesel vehicles in production of niche vehicles in 2003, still accounts for the lion’s share of produced remained constant at 24.7 per with over 20 per cent more off-road foreign production of German brands, cent. However, this still means that vehicles, convertibles, vans and utility but the trend towards globalisation in production has quadrupled since 1983. vehicles produced outside Germany the German automotive industry now Not all segments were equally affected, (601,400 units). In the segment with the affects all parts of the world, and regions and some, like off-road vehicles and highest production volume, the lower like Asia and Eastern Europe are convertibles, saw a sharp increase in mid-range, foreign production was becoming increasingly important. diesel production. In those segments in 10 per cent down at some 1.3 million 44 Verband der Automobilindustrie GLOBAL MARKETS

Automotive production of German manufacturers in Germany and abroad In million units

Abroad Germany 4.4 4.5 4.4 3.3 3.5 4.2 3.1 2.8 2.5 2.2 2.0

5.7 5.7 5.5 5.7 5.5 5.5 4.7 4.8 5.0 4.0 4.4

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

VDA statistics

units, but this result was distorted by domestic production accounted for by case of mid-range passenger cars, the launch of a number of new high- diesel vehicles by 2.8 percentage points however, the models available meant volume models. to 42.7 per cent. A mere 10 years ago, that production declined by 8 per cent the figure was only 19.6 per cent. By to 3.7 million units. Car production in contrast, the number of petrol vehicles Germany rises produced was 4 per cent down on the Record level of exports For the 6th year in succession, previous year. despite weaker foreign passenger car production in Germany markets broke through the 5 million barrier. In addition to diesel cars, sales of Last year saw German car manufac- Buoyant foreign sales meant that niche vehicles also did well in 2003. turers sell more vehicles abroad than 5.1 million cars came off the assembly German companies produced a total of ever before - despite the general weak- lines - 22,200 more than in 2002. 760,300 off-road vehicles, convertibles, ness of foreign markets. Almost 3.7 mil- vans and utility vehicles - an increase lion cars were exported - 1 per cent In contrast to the trend in foreign- of 48 per cent. The proportion of total more than in 2002. based production, domestic German domestic production accounted for manufacturers were able to significantly by such vehicles has now risen from Despite global tensions and the increase their output of diesel vehicles. 10.0 to 14.8 per cent. Especially in the strength of the euro, exports once again 2.2 million such vehicles - 7 per cent off-road and van categories, the intro- proved to be the main pillar of the more than in 2002 - were manufactured, duction of new models had a strong German automotive industry, guarantee- increasing the proportion of overall impact on production levels. In the ing high levels of employment in Germany. Annual Report 2004 45

Domestic production of diesel cars

Diesel production in millions 42.7 39.9 38.2

Share of diesels as a percentage of car production 34.9 30.3 24.8 22.5 23.4 20.8 22.5 17.5 19.6 15.2 14.2

0.6 0.7 0.9 0.7 0.9 0.9 1.1 1.1 1.3 1.6 1.8 2.0 2.0 2.2

90 91 92 93 94 95 96 97 98 99 00 01 02 03

VDA statistics

Car exports by engine type In million cars

2.4 2.4 Diesel engine Petrol engine 2.4 2.4 2.3 2.2 2.1 1.9 2.0 1.7 1.7 1.4 1.3 1.3 1.1 1.1 0.9 0.7 0.7 0.6 0.5 0.4

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

VDA statistics

Increased foreign demand vehicles achieved an above-average rise rose by 2.2 percentage points to for German diesel cars of 7 per cent to more than 1.4 million units. 39.1 per cent. A majority of exports This positive development was due (more than 2.2 million) still had petrol above all to higher foreign demand for This means that the proportion of engines, but this figure was 2 per cent German diesel cars. Exports of such exported vehicles with diesel engines down on the previous year and the 46 Verband der Automobilindustrie GLOBAL MARKETS

decline observed over the last decade figure was recorded by utility vehicles, manufacturers were able to increase continues. with a 90.8 per cent diesel content, fol- exports to most of their major European lowed by vans, with 65.9 per cent. neighbours, and the total value of cars Off-road vehicles on exported to this region rose by 2 per the ascendant Value of cars exported cent to almost 42 billion euros. This German manufacturers bettered continues to rise meant that the EU 15 accounted for their export results in seven out of ten The continued trend towards diesel 55 per cent of the total value of vehicles segments last year. Thanks to the engines, niche vehicles and higher exported from Germany. launch of new, attractive models, the specifications meant the value of strongest growth was recorded in the exports increased in 2003 for the tenth German manufacturers managed off-road segment, where exports almost year running, and at 76 billion euros to significantly increase exports to the trebled to 47,200. Vans also performed was 2 per cent up on 2002. This means 10 new EU member states - by 13 per strongly, as did small cars, but sales that since 1983, the value of exports has cent to 142,700 cars. Poland remained of lower mid-range and mid-range vehi- increased by 162 per cent. During the the most important destination, with cles declined. Nevertheless, at 71.4 per same period the average value of each 56,600 units, but the strongest growth cent of total exports, these two cate- car increased from 14,000 euros to was recorded in exports to Slovakia, gories still accounted for the highest 20,700 euros. which increased by 35 per cent. The proportion of sales. EU accession states may only have The EU accounted for 61.7 per cent accounted for 3.9 per cent of total The launch of new models, particu- of exports by German manufacturers in exports last year, but German manufac- larly in the small car and van segments, 2003, even though the actual volume turers are well represented in this resulted in a sharp rise in the proportion exported was 2 per cent down at just region, having established many local of diesel vehicles exported. The highest under 2.3 million vehicles. German production facilities.

Export value of German cars 75.9 74.7 Car exports in million units 70.2 62.7 Car exports in billion euros 55.7 51.8 44.8 38.5 34.4 33.7 29.0

2.0 2.3 2.5 2.7 2.83.3 3.4 3.5 3.6 3.6 3.7

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

VDA statistics, Federal Office of Statistics Annual Report 2004 47

Following the United Kingdom, the and over the last 5 years this has more prices had a negative impact on car USA is the second largest single market than doubled. sales. Over the course of the year, the for German manufacturers in terms of unit cost of fuel rose by 5 per cent above the sales. A record total of 567,000 vehicles Weak consumer demand already high level of the previous year. were exported to the USA - 1 per cent hits car sales in Germany Diesel prices rose particularly sharply more than the previous year. Over the In 2003, the Germany economy went (+6 per cent), but the price of Normal last ten years, the USA has become into recession for the first time since 1983. and Super petrol also increased. Fuel increasingly important for the German The main source of weakness was con- now costs 40 per cent more than in automotive industry, with German sumer demand, which for the first time early 1999, when the environmental tax manufacturers stepping up exports by since the 1980s declined in real terms for was first introduced. Much of the an average of 13 per cent per year. 2 years in succession. This had an impact responsibility for this lies with the gov- on car sales, with domestic orders in 2003 ernment, as 72 per cent of the price of The USA plays an important role for only 1 per cent above the already low fuel consists of tax. German manufacturers in both quantita- level of the previous year. New registra- tive and qualitative terms. The US market tions, at 3.2 million units, did not even Decline in exports of accounted for almost a quarter of the total reach the 2002 figure (-0.5 per cent). used cars affects domestic value of German car exports in 2003, This means that over the last 4 years the market making it the most important destination German passenger car market has shrunk Between 1999 and 2001, exports of for German automobiles in terms of value. by 15 per cent to 565,200 vehicles. used passenger cars helped stimulate domestic sales. In 2002, however, this After succeeding in increasing Higher fuel prices hit trend started to weaken, with an imme- exports to Latin America for 3 years in car sales diate impact on demand for new cars in succession, German manufacturers In addition to the general weakness Germany. Last year, only 414,400 used saw deliveries slump by 44 per cent to of the economy, a further rise in fuel cars were exported - 43 per cent fewer 32,900 cars in 2003. Significant losses occurred in all major markets. Car exports by region in 2003 China most important Shares in per cent UK export destination in Asia 18 Following two relatively weak years, Other 13 German manufacturers achieved their Italy Japan 11 second best figures for exports to Asia 3 in 2003 (353,600 units, +31 per cent). China 3 Japan used to be the leading Asian New EU France importer of German cars, but this role member states 8 has now been taken over by China, 4 with an increase of 138 per cent to Spain USA 112,800 vehicles. When it comes to 8 15 Belgium/ maintaining a market presence in China, Other Luxembourg Netherlands 4 local production is even more important EU countries 9 4 for German manufacturers than exports, VDA statistics 48 Verband der Automobilindustrie GLOBAL MARKETS

than the previous year. In Poland, in Registration of new cars by segment particular, a sharp increase in duty on and diesel engine in 2003 used cars resulted in an 84 per cent Changes in per cent decline in imports to 14,300. As a result, Poland's share of used-car exports Mini range shrank to 3.5 per cent, having stood at Total 19.7 per cent only three years previously. Small cars Of which diesel

Lower mid-range In addition to these lower figures for used car exports, imports of nearly-new Mid-range cars that had already been registered Upper mid-range abroad also affected new car sales. Usually 2 years old at the most, these Upper range vehicles represent good value for money Off-road vehicles and are able to compete with factory- Convertibles new cars. In 2003, registrations of such cars rose by a further 14 per cent to Vans 125,000 - the third increase in succes- Utility vehicles sion. -30 -20 -10 0 10 20 30 40 50

Reductions in stocks boost VDA statistics, Federal Motor Transport Authority new registrations New car registrations in 2003 were boosted by a significant reduction in registrations of reimports slowed signifi- commercial sector in the narrower order stocks. By December 2003, these cantly during the course of the year. sense (+1per cent) perform better than amounted to 384,700 units - 6 per cent During the first 6 months of 2003, they the market in general. On the other down on December 2002 and 39 per were 26 per cent above the previous hand, automobile retail sales declined cent down on December 1988. This was year’s level, but during the second half by 2 per cent. Increased consumer solely due to reductions by German of the year they declined sharply by restraint depressed private demand, manufacturers, who have now virtually almost a fifth. and new registrations declined by 1 per halved their stocks over the last 5 years. cent to some 1.6 million vehicles. Private By contrast, importers increased order The introduction of the EU Block households now account for 48.9 per stocks by 16 per cent to 121,400 cars Exemption Regulation on October 1, cent of all new registrations, whereas during the last 12 months. 2003 means that reimports are likely five years ago the figure was 54.9 per to become even less important in the cent. However, a significant proportion New registrations of reimported pas- future, as the Regulation will result in of leased vehicles and cars newly regis- senger cars rose 1 per cent last year. even greater convergence of prices tered by the retail trade end up in Reimports are vehicles that are newly within the EU. private hands after a relatively short registered in Germany but were period, so the proportion of car sales originally intended not for the domestic Last year saw new registrations in accounted for by private households is but for the foreign market. However, the leasing sector (+5 per cent) and the probably considerably higher in reality. Annual Report 2004 49

Niche vehicles retain contrast, new registrations of mid-range 30 days. The average proportion of popularity cars with diesel engines declined 3 per short-term registrations for all manufac- Niche vehicles continue to be a cent to 827,100 vehicles. turers was 5.0 per cent, but the figure popular way for drivers to express their for foreign companies was 10.1 per individuality. At 685,700, 25 per cent In 2003, importers were able to signif- cent, and in some cases reached almost more vehicles of this kind were pur- icantly increase their range of diesel vehi- 25 per cent. The figure for German man- chased in 2003. Sales of off-road vehi- cles and succeeded in selling 14 per cent ufacturers was 2.8 per cent. cles rose by 23 per cent, convertibles more in Germany (297,900 units). Their by 18 per cent and vans by 38 per cent. share of new registrations of diesel vehi- Foreign manufacturers Only utility vehicles failed to reach the cles increased by 1.9 percentage points increase market share same figure as last year (-1 per cent). to 23.0 per cent, but this was still far below A combination of new models, Niche vehicles now account for 21.2 per the figure of 77.0 per cent for German improved availability of diesel vehicles cent of the entire market (1999: 13.7 per companies. The domination of German and strong incentives to consumers cent). This development has been at the manufactures on the diesel market is resulted in importers increasing their expense of mid-range cars, sales of underlined by the fact that all 15 models sales in 2003 by 4 per cent to more than which declined by 8 per cent to 1.7 mil- at the top of the league of diesel regis- 1.1 million vehicles, expanding their mar- lion. However, the launch of many new trations were German brands. ket share by 1.5 percentage points to high-volume models in 2004 is liable to 35.5 per cent. reverse this trend. During 2003, foreign companies made increasing use of short-term reg- Last year, Asian manufacturers were Diesel sales hit record high istrations as a sales instrument. This particularly successful, with the Japan- Diesel cars remained extremely pop- involves registering vehicles and then ese increasing sales by 7 per cent (a ular in 2003. 5 per cent more (1.3 million) taking them off the road again within total of 366,700 units) and taking an were sold in Germany - a record result and the eighth increase in succession. Registration of new cars in Germany by brand in 2003 Compared to 1993, the proportion of total new registrations accounted for by Shares in per cent Volkswagen diesel vehicles has risen from 14.9 per 19 cent to 39.9 per cent. New registrations Others 15 of petrol cars failed to match the previ- ous year's figure and dropped 4 per cent Mercedes Skoda 13 to 1.9 million, continuing the decline 3 observed over the past five years. Fiat 3 Toyota The segments recording an increase 3 Opel in the proportion of diesel cars also 10 PSA achieved better overall sales figures. Thus 6 2003 saw 332,300 more diesel-powered Renault BMW 6 8 niche vehicles registered (+27 per cent) Ford Audi 7 and new registrations of small diesel 7 Federal Motor Transport Authority cars rose 9 per cent to 107,600 units. By 50 Verband der Automobilindustrie GLOBAL MARKETS

11.3 per cent share of the market. Increased popularity of In 2003, the increase was 17.0 per cent Korean companies also performed well, imported German brands to 548,700. If German-owned foreign albeit at a low-level, selling 73,800 cars The last ten years have seen a brands are included, more than 22 per (37 per cent more than in 2002) and doubling of the proportion of German cent of German cars newly registered increasing their market share to 2.3 per cars newly registered on the domestic are now manufactured abroad and cent (2002: 1.7 per cent). French com- market that were manufactured abroad. imported from 14 different countries. panies also expanded their market share, and 3 per cent more of their cars (393,400) were newly registered in The Economic Situation in the Germany. This means that French cars accounted for 12.2 per cent of the entire Automotive Industry in Germany: market - 0.5 percentage points higher Commercial Vehicles than in 2002. By contrast, Italian com- panies performed relatively poorly for the fifth year in succession, selling Upswing in commercial The improved order situation meant 15 per cent fewer cars (89,600). As a vehicle sales that order stocks expanded in 2003 result, their market share sank 0.4 per- Continued recession once again result- compared to the previous year’s very centage points to 2.8 per cent. In 1996 ed in low levels of corporate investment in poor showing, increasing by 2 per cent the figure was 4.9 per cent. 2003. Investment in plant and equipment to 52,800 vehicles. The most significant declined for the third year in succession, expansion took place during the second A third of the market-share increase and capital spending on new construc- half of the year. of foreign manufacturers, however, was tion was 20 per cent lower than in the accounted for by German-owned mid 1990s. Despite this discouraging Uneven developments on brands, whose share of overall new reg- backdrop, the fortunes of the commer- domestic market istrations in Germany rose from 4.7 per cial vehicle business improved last year The increase in orders in 2003 failed cent in 2002 to 5.2 per cent last year. and it is now on the road to recovery. to have an impact on all weight categories on the domestic market, and Despite selling 3 per cent fewer Overall domestic demand for commer- 2 per cent fewer commercial vehicles passenger cars in 2003 (just under cial vehicles increased significantly during were newly registered (264,700) during 2.1 million), German manufacturers 2003. While it was 2 per cent down for the year. This was the 4th year in suc- continued to dominate the German mar- the first 6 months, it grew by 8 per cent cession that the domestic market had ket, taking an overall share of 64.5 per during the second half of the year. In the registered minus growth, and the final cent. If brands acquired by German light truck segment (under 6 t) some 2 per figure for 2003 was almost 19 per cent manufacturers through mergers are cent more vehicles were ordered during lower than in 1999. included, then the proportion of cars 2003 - the second increase in succession. coming from German companies was Growth was even higher for trucks over In the light truck segment (under 69.7 per cent (-1 percentage point). 6 t, at 7 per cent. This was entirely due to 6 t), new registrations declined 4 per The popularity of German brands is an increase of over 12 per cent in demand cent to 188,300 vehicles. The main demonstrated by the fact that they for vehicles over 16 t. Domestic orders impact was felt by German van manu- accounted for 14 of the top 15 most for trucks in the 6 – 16 t category once facturers, who sold only 109,200 units popular cars in Germany. again declined marginally by 1 per cent. (-6 per cent) between January and Annual Report 2004 51

December 2003. This meant their market their market share to 72.1 per cent benefited most from this recovery in the share declined by 1.3 percentage points (+4.8 percentage points). During the market, increasing sales by 8 per cent to to 58.0 per cent. Italian manufacturers same period, the Italians lost ground 34,100 units. This meant they accounted were also affected, and saw their mar- significantly, and their market share shrank for almost three-quarters of all new reg- ket share drop 0.4 percentage points to from 25.8 per cent to just over a fifth. istrations in the heavy truck category 17.0 per cent. But - despite lower sales (2002: 72.8 per cent). The market share figures - the French were able to mar- In Germany as a whole, three manu- of swedish manufacturers declined by ginally increase their market share to facturers accounted for more than 0.9 percentage points to 16.7 per cent. 17.3 per cent, and the Japanese also 90.6 per cent of the medium-weight sold more vehicles in the under 6 t cat- category (Mercedes: 46.5 per cent, Sales of buses declined in 2003 egory, though the absolute figures MAN/ERF: 23.7 per cent and Iveco: for the 4th year running. Just under remained at a low level. The Japanese 20.4 per cent). However, new driver 5,700 were newly registered in Germany share of the total market increased by license regulations mean the impor- - 1 per cent fewer than in 2002. Howev- 1.0 percentage points to 5.7 per cent. tance of this weight category has been er, German manufacturers were able to considerably reduced. Whereas almost marginally expand their market share, Last year also saw a decline in new half of all new registrations over 6 t in achieving 88.7 per cent of new registra- registrations of trucks in the 6 – 16 t 1993 were in this category, the figure tions (2002: 88.1 per cent). category. Parallel to the drop in orders, for 2003 was a mere 34.9 per cent. the market was almost 6 per cent down Decline in exports of used at 24,700 units - the lowest level since Improved levels of orders meant that commercial vehicles German reunification. However, German new registrations in the heavy truck cat- Over the last 3 years, an increase in manufacturers were able to buck this egory over 16 t were 6 per cent higher at exports of used commercial vehicles trend, increasing sales by 1 per cent to 46,100 units. Semitrailers even increased helped stimulate the German domestic 17,800 vehicles and further expanding by 8 per cent. German manufacturers market. In 2003 however, the flow began

Development of domestic demand for commercial vehicles

130 Over 6t 125 Under 6t 120

115

110

105 Index: 2002 = 100 100

95

90 1/2002 4/2002 7/2002 10/2002 1/2003 4/2003 7/2003 10/2003

VDA statistics 52 Verband der Automobilindustrie GLOBAL MARKETS

Registration of new commercial vehicles by weight category Shares in per cent

56.5 51.7 52.1 1993 1998 2003

15.0 17.1 17.8 13.9 13.5 13.8 14.2 11.6 10.6 5.2 3.4 3.5

Under 2 t 2 t to 3.5 t 3.5 t to 7.5 t 7.5 t to 16 t Over 16 t

VDA statistics, Federal Motor Transport Authority

Registration of new commercial vehicles in Germany by brand Shares in per cent

63.9 62.9 62.7 2001 2002 2003

15.1 14.4 14.1 12.9 11.9 12.7

3.8 3.4 4.1 3.1 2.9 3.0 1.3 1.3 1.4 1.9 1.6 1.7

German Italian French Japanese Swedish Dutch Other foreign brands brands brands brands brands brands brands

Federal Motor Transport Authority Annual Report 2004 53

to slow down and competition between launched, such as the Ford Fiesta van or the figure for trucks over 16 t rose 8 per new and used commercial vehicles in the Volkswagen T5. cent. Bus exports increased during 2003 Germany increased. A total of 137,300 by a good 4 per cent to 7,600 units. used vehicles - 11 per cent fewer than In the over 6 t category, German in 2002 - were delivered abroad. The manufacturers were able to increase Exports of German commercial vehi- main market was still Eastern Europe, orders by 10 per cent. Once again, the cles to the EU 15 grew at a below- but exports to this region were down largest increase occurred towards the average rate of 1 per cent to 184,200 units. significantly by 10 per cent at 89,200 end of the year, going from 5 per cent in This meant that the EU, with a share of vehicles. The reason for this decline was the first quarter to 15 per cent in the 70.5 per cent of exports, was the main a dramatic increase in import duty on last quarter. market, but its share was down from used vehicles in Poland, where sales 74.7 per cent in 1998. The UK remains slumped by 41 per cent. Exports to the Positive export figures the most important individual market, second most important region, Western Buoyant levels of orders meant that followed by France, Italy and Spain. A Europe, also fell dramatically by 27 per German manufacturers exported break-down according to weight cate- cent. The only region to which more 261,200 commercial vehicles in 2003 - gories reveals that German manufacturers used commercial vehicles were 5 per cent more than the previous year. exported 2 per cent more vans to the delivered was Asia (+4 per cent). Both the van segment (+5 per cent, EU, but 3 per cent fewer trucks over 6 t. 152,400 vehicles) and the over 6 t truck Foreign demand rises segment (+5 per cent, 101,200 vehicles) Strong increase in exports during course of year were able to improve on the previous to new EU states and Asia Despite the decline in the commer- year's results. In the 6 - 16 t category, German manufacturers exporting to cial vehicle markets of Germany's west- exports were 3 per cent down, whereas the ten new EU member states recorded ern European neighbours, 2003 saw the same number of foreign orders for Commercial vehicle exports by country in 2003 German vehicles placed as in 2002. However, trends in the under 6 t and Shares in per cent UK over 6 t categories differed considerably. Others 18 13 In the van segment, German manu- France facturers received 3 per cent fewer 12 orders from abroad over the year as a New EU whole, though the situation improved member Italy significantly during the course of the states 9 7 year. For the first quarter of 2003, orders were 11 per cent down, whereas this Asia Spain was reduced in the second quarter to 8 10 7 Netherlands per cent and in the third to 7 per cent. Other Austria 6 In the 4th quarter, German manufactur- EU 15 Belgium/ 5 ers recorded a strong increase in orders 9 Luxembourg 4 by 14 per cent. This development VDA statistics reflects the large number of new models 54 Verband der Automobilindustrie GLOBAL MARKETS

strong rates of growth. Last year, Commercial vehicle exports to the new EU member states 17 per cent more commercial vehicles In units (17,900 units) were exported to these countries, with all weight categories reg- 18,000 Other countries istering a significant increase. Almost a 16,000 Czech Republic third of deliveries went to Poland, but 14,000 Hungary German exports to Hungary and the Czech 12,000 Poland Republic also increased significantly. 10,000 8,000 Over the year as a whole, German 6,000 manufacturers also exported more com- mercial vehicles to Asia than ever before 4,000 (26,300 units, +42 per cent). Turkey 2,000 expanded its position as the most impor- 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 tant individual market (+82 per cent), VDA statistics followed by Saudi Arabia and Iran.

Strong recovery in domes- tic production during year Production abroad declines scaled down because of the launch of A significant increase in domestic further the new Ford Connect. As a result, and foreign demand during the second Reduced demand for commercial though Belgium and Spain still account half of the year stimulated production of vehicles in Western Europe, combined for 80.4 per cent of total foreign produc- commercial vehicles in Germany. Follow- with the launch of several new models tion of light trucks, the importance of ing two years of decline, 361,200 vehi- in the van segment, had a negative impact the EU 15 has been reduced over time. cles - 4 per cent more than in 2002 - on production abroad by German manu- Foreign-based manufacture in the new rolled off the assembly lines. In the van facturers. 2003 saw foreign production EU member states is at present of little segment, 219,400 vehicles were prod- decline by 1 per cent to 421,500 vehicles. significance (2003: 2,400 vans), but the uced - 3 per cent more than last year. As in 2002, the main reason for this start-up of production of the VW city This development was aided by the poor showing was a drop in foreign van in Poland and further transfers of launch of new high-volume models like production of light trucks under 6 t. production are likely to increase the the Ford Fiesta van and Volkswagen T5, importance of these countries in the production of which started at the end In particular, a change of models next years. of 2003 (4th quarter 2003: +18 per cent). in the van segment resulted in produc- In the over 6 t category, production was tion in Belgium and Spain declining by In contrast to the light truck segment, 6 per cent up at 131,400 units. This was 15 per cent to 148,400 vehicles in 2003. the main focus of foreign-based produc- made up of a drop of 6 per cent in the 6 Spain saw the launch of the new tion of medium and heavy trucks is the - 16 t segment and an increase of 9 per Mercedes-Benz Viano in autumn 2003, NAFTA region. In 2003, 115,100 vehicles cent in the over 16 t segment. After two but production of the VW Caddy ceased. over 6 t - 13 per cent more than in 2002 - years of steep decline, the volume of The successor model to the Caddy will were produced there. The USA remained buses produced was 7 per cent up on now be produced in Poland. In Belgium, the most important production location 2002 at 10,400 units. production of the Ford Transit was in the region, with DaimlerChrysler in Annual Report 2004 55

Foreign production of German commercial vehicles by country in 2003 In units, change rates in brackets

Argentina 7,102 (+43 %) Belgium 76,603 (-10 %) Brazil 19,078 (-24 %) 47,013 (+16 %) Indonesia 269 (+438 %) Canada 16,629 (-4 %) 2003: 184,681 commercial vehicles under 6t (-14%) Mexico 12,173 (+12 %) Austria 2,0820 (+5 %) 2003: 188,459 commercial vehicles over 6t (+13%) 1,123 (+1 %) Poland 840 Spain 71,803 (-20 %) South Africa 7,697 (-17 %) Czech Republic 1,275 (+10 %) Turkey 4,368 (+50 %) USA 86,347 (+18 %) 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000

VDA statistics

particular benefiting from stabilisation in tant region, with a share of 24.9 per An additional factor was the uncer- the medium truck segment. NAFTA’s cent, while the EU 15 accounted for tainty resulting from the delayed start share of total foreign production was a mere 11.0 per cent of German manu- of the distance-related toll on trucks, maintained at 61.1 per cent. The Merco- facturers' foreign production (2002: which made it difficult for freight opera- sur states were the second most impor- 12.3 per cent). tors to calculate costs and set prices. Faced with only vague and inadequate promises of compensation, freight operators started to reconsider their The Trailer, Body and Container investment plans for the future. Industry This had an impact on the trailer and body industry in Germany, where domestic sales of conventional trailers Developments varied in the trailer on developments in the truck industry, over 6 t fell by a further 4 per cent and body industry in 2003. Sales were which began to show the first signs compared with 2002, but semitrailers marginally higher than in 2002, but of recovery towards the end of 2003. recorded an overall increase of 6 per most of this improvement came from However, the continued weakness of cent. In particular, this was the result of increased exports. the economy, combined with a slump strong growth in semitrailers with swap in investment in plant and equipment, bodies (+52 per cent) and insulated Domestic sales continue especially in the construction indus- bodies (+16 per cent). to decline try, and an increase in the cost of The situation in the trailer and road transport, had a negative Overall domestic sales of ordinary body industry is closely dependent impact. trailers and semitrailers over 6 t 56 Verband der Automobilindustrie GLOBAL MARKETS

increased by almost 2 per cent to 33,100 level-pegged with 2002. Nevertheless, cent to 4.25 billion euros. When it came units. There was a further decline in the German caravan sector was able to to exports, the sector also improved on new registrations of tipping trailers increase sales revenue by a good 4 per the positive figures recorded in 2002. (-12 per cent overall) in particular because of continued weakness in the construction industry. Developments for The Parts and Accessories Industry platform trailers with sheets were rather more positive, and the registration figure of 10,200 units was marginally higher than in 2002. Supply industry back on survey by CAR (Center of Automotive a growth path Research), two thirds of all suppliers Stimulus from abroad The increasing proportion of diesel polled stated that they had problems Sales revenue in the trailer and body cars sold in Europe, the trend towards meeting their demand for skilled labour industry was 1 per cent up in 2003 at more highly specified vehicles and the in Germany. Manpower shortages are 6.8 billion euros. As in previous years, growth in on-board electronic systems becoming a "bottleneck factor" which the only reason for this was a sharp resulted in record sales revenues in the could potentially cramp the growth of upturn in revenue from exports by 8 per German supply industry last year, follow- German suppliers. cent to 3.2 billion euros, increasing their ing a static period in 2002. At almost share of overall revenue to 47 per cent. 60 billion euros, sales reached well over German suppliers hold At the same time, revenue from domes- double their level of the early 1990s. their own in the tic sales declined 5 per cent to 3.6 bil- Domestic and foreign sales showed a international market lion euros. This meant that, as last year, 5 per cent increase on 2002 to 35.4 bil- German suppliers are making a very positive results for exports margin- lion and 24.7 billion euros respectively. strong bid in the international market- ally compensated for poor performance Domestic sales thus continue to account place. This is clear from the increase in on the domestic market. Towards the for almost 60 per cent of total sales. their foreign sales, which at 24.7 billion end of 2003, however, there were signs euros accounted for more than 40 per that the domestic market was stabilising Further increase in cent of their total turnover in 2003. somewhat. employment The increase in employment record- The German supply industry has Signs of recovery in domestic orders ed by the German automotive industry manufacturing bases in more than 60 and the first indications of a slight in 2003 is solely due to increased countries around the world. Recently, upturn in the economy as a whole mean employment in the supply sector, where the focus has been on Central and East- that a modest increase in domestic mean annual employment increased by ern Europe, spurred by the growth in sales can be expected for 2004. 12,400 over the previous year (+4 per these countries' local automotive indus- cent), to 327,300. This represents an tries and by favourable cost factors. Stable developments for increase of almost 89,000 – more than German suppliers are already operating leisure vehicles one third – over the low point of 1994. at approximately 200 sites in this region Last year saw 17,800 motor caravans alone. The German presence has registered in Germany - the same num- However, the automotive supply sec- already had a significant influence on ber as in 2002. At 22,600 units, domestic tor has for some years been experienc- the automotive industry in countries like sales of towed caravans also effectively ing a shortage of skilled labour. In a Hungary and the Czech Republic. Annual Report 2004 57

German suppliers are also showing particular, has many factors on its side – enhancing the attractiveness of eastern renewed interest in China, attracted by the factors like technological competence, Germany for business and industry. If expanding market and by the increased product quality, productivity and flexibility. the growth in the east German supply activities of OEMs in that country. sector is to continue however – and The automotive sector is now the there is a realistic prospect of this – the With their innovative drive and flexi- most important industry in eastern political leaders must ensure the neces- bility, German suppliers are a driving Germany. BMW, DaimlerChrysler, Opel, sary regulatory environment. force behind the success of German- Porsche and Volkswagen are already built vehicles and of German auto- operating in Saxony, Thuringia and Suppliers taking on makers' strong competitive positioning Brandenburg, and this will encourage new tasks in the international marketplace. further supply firms to follow. The manu- Surveys indicate that in both devel- facturers' plants tend to act like gravita- opment and production, the automotive Eastern Germany also a tional fields, exerting a strong pull over manufacturers and suppliers are facing popular location suppliers and service-providers. major or even drastic changes in their Central and Eastern Europe have value-added structures. According to become increasingly attractive locations Flexible working conditions and the "Future Automotive Industry Struc- for suppliers. However, investment deci- continued wage differentials between ture (FAST) 2015" study by Mercer sions depend on a wide range of factors. western and eastern Germany will be Management Consulting and the Fraun- Germany too, and eastern Germany in important factors in maintaining and hofer Society for Production Technology

Sales and employment levels in the automotive supply industry

60 350

50 300

250 40 200 30 150

20 Employees in '000s Sales in billion euros 100

10 50

0 0

1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

VDA statistics 58 Verband der Automobilindustrie GLOBAL MARKETS

and Automation, the large manufactur- Many of these innovations will be in quality and cost/benefit performance. ers in particular will be scaling down what is arguably the most important Demographic trends in Germany, with their in-house value-added operations category, namely safety – for example an increase in the average age of new- and stepping up their outsourcing in all head-up displays, reversing cameras, vehicle buyers, are reinforcing this. the main modules. By 2015, value- pedestrian sensing, object recognition added by the supply industry is expect- and night vision systems. Improved A host of innovations can also be ed to increase by approximately 280 bil- steering and braking systems will help expected in the field of comfort and lion euros, or 68 per cent, to 700 billion drivers to keep their vehicle safely convenience. Self-cleaning paint is one euros. under control and electronic assistance example. Many of these convenience feat- systems will fuse active and passive ures will be aimed at the compact class. Even more than in the past safety features more closely than ever They include individually adjustable ride therefore, automotive suppliers will before into an efficient, integrated sys- characteristics, intuitive seat ergonomics become key partners to the manufactur- tem (compare the chapter "Safety and and physiologically controlled air-condi- ers in achieving the predicted market Technology"). tioning, which uses the actual occupant growth and implementing future model skin temperatures measured by an policy. New business models and a In market terms too, according to a infrared camera to individually control "new quality" of cooperation, supported study by B&D-Forecast GmbH, active the interior climate for each passenger. by transparency, trust, partnership, risk- safety systems – for the most part driver sharing and opportunity-sharing, will be assistance systems – will be the most Banks and analysts needed in order to successfully navigate important category of innovation over underestimate potential these structural changes. the next decade. In Germany particular- Evaluations by banks and analysts ly, vehicle safety is an important buying frequently fail to adequately recognise Innovative drive gives motive, ranking some way above vehicle the potential of firms in the automotive strong competitive edge The car of the future will incorporate Some innovations of the coming decade a raft of new equipment features. Many of these innovations will be concealed Infotainment Powertrain beneath the exterior however and thus digital TV low-emission cars for the not immediately obvious to the final Internet mass market segments networked games small high-powered consumer. Two factors are critical to the consoles (turbocharged/super- charged) engines success of any product-related innova- "smart" navigation systems "four-litre" cars for tion. As well as providing additional … mass production … benefit for the customer, the innovation must also be profitable for the manufac- turer. Thus although a large crop of Comfort Safety self-cleaning paint innovations can be expected to appear active safety systems physiologically controlled reversing camera air-conditioning on the market in the coming years, not windscreen display software-controlled, all of them will establish a lasting place active pedestrian adaptable handling protection characteristics for themselves on the market, or at least … intuitive seat adjustment not as a standard feature on compact … McKinsey/PTW-Hawk Survey models. Annual Report 2004 59

Automotive industry is growing stronger than other sectors

Index 1995 = 100

Growth in turnover indices 180 Total Average 170 growth growth p.a. Automotive 63.4 % 9.1 % 160 Electronics 40.6 % 5.8 % 150 Chemical 14.0 % 2.0 % 140 Machinery 12.5 % 1.5 % 130 120 110 100 Automotive Electronics, office equipment etc. 90 Chemicals Machinery 80

1995 1996 1997 1996 1999 2000 2001 2002 2003

DESTATIS Basis: Monthly trend indices

supply sector. The automotive industry landscape will continue. M&A Interna- expected to offer new qualities in the has far outstripped other sectors, with tional, for example, predicts that the form of an extended product and serv- average growth of over 9 per cent since full-year figures for 2004 will show an ice portfolio, new competencies, addi- 1995, yet the trend in share prices for increase in acquisitions. This, according tional resources and trans-regional publicly listed automotive-sector com- to the survey, is because many compa- business alliances. panies regularly lags behind that for nies will be forced to expand into new publicly listed companies in general. markets in Eastern Europe, South Am VDA does not entirely share such erica or Asia, partly in order to escape assessments. Although the consolidation Global consolidation the slack market conditions in Europe process can be expected to continue, process and North America and partly in order such drastic shrinkage in the number of Globalisation trends, and major to follow their customers. firms seems unlikely on several counts. shifts in automotive-sector value-added Such changed value-added structures structures have led to a fall in the num- According to the "Future Automo- would have far-reaching consequences ber of suppliers in recent years. Experts tive Industry Structure (FAST) 2015" on the OEM side, for example necessi- expect this trend to continue. study by Mercer Management Consult- tating long-term joint ventures and part- ing and the Fraunhofer Society for Pro- nerships aimed at safeguarding access Even though the consolidation duction Technology and Automation, the to supplier competencies and capacities, process is currently moving more slowly, number of automotive suppliers world- and manpower levels at the OEMs would more and more observers take the view wide will shrink by half to 2,800 by 2015. have to be adjusted in line with the (new) that the contraction in the supplier These remaining suppliers will be core competencies. On the supplier 60 Verband der Automobilindustrie GLOBAL MARKETS

side, the transfer and development of existing forms and also the formation of network, where requests can be submit- competencies would make it necessary new ones. There are many examples of ted, retrieved and automatically matched. to maintain close linkage with selected this, even among large suppliers. By Member companies registered in the key customers and to undertake mas- pooling their competencies, these joint VDA manufacturer database can use all sive investment. ventures can often quickly establish parts of the cooperation portal free of themselves as competitive market players. charge. Furthermore, in some areas of the supply sector the consolidation process Network of networks: the At www.auto-world.org, the coop- already appears to be largely completed. VDA cooperation portal eration portal is being integrated with At the same time some OEMs will want Based on the VDA Directory of the databases of other German automotive to continue their cooperation with small Automotive Industry, VDA has developed initiatives and foreign automotive organ- and medium-sized suppliers in order to an Internet-based cooperation portal isations, to create an increasingly inter- continue to be able to take advantage which can be used by both member and national cooperation tool. of their flexibility and innovative drive. non-member companies. The portal went on-line at the beginning of 2003. It High investment and Cooperation versus can be accessed on the VDA website or development expenditure consolidation at www.vda-kooperationsportal.de. German automakers and suppliers Joint ventures and other forms of The portal provides information about invest heavily not only in production cooperation provide an alternative to events and publications, checklists for activities but also in research and devel- acquisitions which allows smaller firms, various forms of cooperation and details opment aimed at securing their in particular family-run businesses, to of service-providers. The most important business into the future. This high level preserve their independence. function is the cooperation exchange of research and development is what

More and more suppliers are enter- ing into joint ventures with other sup- pliers, for example on procurement or distribution. Such strategies are also increasingly used to expand into down- stream and upstream value-added oper- ations and to provide additional servic- es. In this way it is possible with reduced financial risk and minimised efficiency losses not only to supply, combine and integrate complete systems but also to move into additional areas of operation, for example assem- bly operations for automakers or for downstream production stages.

Not infrequently in recent years, cooperation has involved the merging of Annual Report 2004 61

drives the fast pace of innovation in the for International Settlements will intro- sentative deterioration in the balance sector. The automotive sector accounts duce new rules (the Basle II guidelines) sheet and consequently to a poorer rating. for approximately one third of the total in the banking sector. The new rules are This in turn results in increased financ- research and development budget of based on three main cornerstones: min- ing costs and increased costs per unit. German industry. Small and medium- imum capital requirements, monitoring sized companies in the automotive sup- of operational risks and more intensive These factors in conjunction with ply sector play a particularly prominent banking supervision. The main changes increased cost pressures at the OEMs part, since their research and develop- under Basle II as far as the companies have the potential to stoke the consoli- ment expenditure is generally higher in are concerned relate to the banks' lend- dation process in the supply sector. A relation to their output than that of the ing terms and credit rating procedures. resulting deterioration in the competi- larger companies. Ratings are based on companies' per- tiveness of the automotive supply sector ceived future ability to keep up with and thus of the entire German automo- Growth has to be financed repayments. Both quantitative and qual- tive industry must be prevented however. With its increasingly important role itative criteria are used to determine in the value-added process, the supply credit ratings. Financing must not become the sector will also need to maintain a high stumbling block for innovation and level of investment. A joint study by It is clear that stricter minimum cap- growth. Mercer Management Consulting and ital requirements will make borrowing the Fraunhofer Society predicts that the that much more difficult, particularly for Alternative financing investment ratio in the supply sector will small and medium-sized companies. In solutions increase from 4.7 per cent in 2002 to order to minimise their own business To meet this challenge, suppliers are 5.6 per cent by 2015. This would mean risks, banks will impose higher lending amongst other things resorting to alter- that in 2015 the supply sector would rates in cases where borrowers' strate- native financing solutions such as asset- account for 79 per cent of total invest- gies are perceived to involve corporate backed securitisation, factoring, sale- ment by the automotive industry, com- risk. leaseback of intangible assets or pared with 66 per cent in 2002. synthetic leasing. However, there is as But without corporate risk, there yet no obvious "best option". The most This growth has to be financed how- would be no technological progress and usual forms of financing are still financ- ever, which means tying up substantial no expansion. ing via bank loans or from cash flow. amounts of capital. Particularly for small Studies by IKB Deutsche Industriebank and medium-sized companies, financing The new Basle II guidelines mean show that the smaller companies with has now joined product attractiveness, that suppliers will face a more restrictive their often highly specialised product competitive costs and value chain man- bank lending policy in the future. This range are generally more profitable than agement as a pivotal factor in the busi- will create a vicious circle: development the large companies. This is only logical ness policy of the supply sector. projects entail high investment and ini- given that company growth has to be tial costs with a delay, sometimes financed, thereby reducing profits. More restrictive bank extending right up to the start of deliv- lending policy poses a eries, until income starts to come on The above-mentioned challenges threat to SMEs stream. In order to fill this gap, funding require automotive suppliers to achieve On December 31, 2006, starting with requirements have to be met by external very high efficiencies. In the past, oper- a one-year transitional phase, the Bank borrowing. This leads to an unrepre- ational excellence, reflected for example 62 Verband der Automobilindustrie GLOBAL MARKETS

Competitive handicaps for OEMs & suppliers know-how and for PR purposes. Used correctly therefore, the tool can become an important controlling instrument for strategic corporate decision-making. Ẇ ẅ

Ẅ Optimisation must ẇ address the value chain as a whole . . . The intersecting relationships along the value chain are the cornerstone of Ẉ Ẋ the German automotive industry's tech- nological leadership and innovation, ẉ competitive factors which have given it a position at the head of the world mar- ket. Although manufacturer/supplier relations will never be entirely free of tensions, there is nevertheless a grow- ing understanding that only improve- in high employee productivity or excel- order to assist with financing issues and ments which address the value chain as lent service levels, automatically led to Basle II, the VDA Mittelstandkreis, com- an integral whole will be successful. profitable growth. This operational effi- mittee for small and medium-sized com- ciency must be further improved, since panies (see inset), initiated the develop- it is a basic requirement for competing ment of a VDA rating tool. This rating The VDA Mittelstandskreis in the international marketplace. But it is tool, which is geared to the The small and medium-sized sup- no longer the only requirement. requirements of the widest possible pliers in particular are an important range of external ratings, was developed spur to innovation and growth in the Rather, all over the world, future in association with the Prof. Schneck German automotive industry. growth in the supply sector will be Rating GmbH company and is available In August 2000, VDA formed a based on three main cornerstones: vol- free of charge to all VDA members in committee for small and medium-sized umes (that is, growth in the world auto- the manufacturer groups "trailers, spe- companies, the VDA Mittelstandskreis, motive markets and growth due to glob- cial bodies and containers" and "parts with the aim of spotlighting issues of alisation), content (that is, growth in the and accessories". major, and sometimes crucial, impor- value of vehicle content) and growth in tance for these companies. Since then, the proportion of vehicle value generat- This tool makes it easier for com- the Mittelstandskreis has played an ed by suppliers. panies to assess how they will be rated invaluable role in VDA's SME activities, by banks and to prepare themselves helping to ensure that the interests of Rating tool for VDA accordingly. Using automotive sector VDA's SME member companies, parti- members data, internal benchmarking is also pos- cularly on issues relating to financing, Financing, particularly of sible. The rating tool can also be used globalisation and cooperation, receive development and tool costs, plays an to explore alternative forms of financing, even greater attention. important part in the work of VDA. In to increase business management Annual Report 2004 63

principles for collaboration have been set out in a paper entitled "Success through partnership", which was prepared jointly by the vehicle manufacturers and their suppliers under the auspices of VDA. However, declarations of intent alone are not enough. The principles of fair coop- eration also have to be actively applied in the course of day-to-day business if this model of successful and harmonious partnership in the German automotive industry is to evolve and advance.

VDA attractive for new members The appeal of VDA for automotive suppliers remains as strong as ever. Over the last six years, its membership registered a net increase of over 100 Only through relationships based on and more responsibility for the full vehi- companies. For the most part these partnership and trust will manufacturers cle, across all stages of the value chain, were small and medium-sized firms, and suppliers be able to achieve busi- and are also cooperating amongst although some larger firms also joined ness success. themselves to combine complementary the ranks. All the major suppliers oper- competencies. ating an independent company in . . . not just individual Germany are members of VDA. VDA's stages Thus the focus has shifted towards current membership comprises 480 com- The change in value-added optimising the development and manu- panies from the supply sector. An up-to- structures is reflected in a restructuring facturing process throughout the entire date list can be found on the VDA web- of manufacturer and supplier roles and value chain, rather than just in individual site www.vda.de under "The VDA", responsibilities. The traditional distinc- parts. Members, Manufacturer Group III. tions between providers (suppliers) and clients (manufacturers) are becoming VDA promotes increasingly blurred. Firstly, manufactur- development collaboration ers are taking on supplier roles by Cooperation in the supply chain is a cooperating with, and offering modules recurring theme in the main VDA commit- and services of, other manufacturers tees. VDA, as the umbrella organisation and suppliers. This can frequently lead of all companies operating in the auto- to manufacturers spinning off compo- motive sector, attaches utmost impor- nent plants, or to suppliers buying into tance to fruitful cooperation within these plants. Secondly, suppliers and the value chain. All sectors and organs service-providers are taking on more of VDA share this goal. The basic 64 Verband der Automobilindustrie GLOBAL MARKETS

Distribution and Servicing doubtful, however, whether the prohibi- tion of "location clauses" from October of Motor Vehicles 1, 2005 will really lead to the opening of new sales outlets given that the prevail- ing trend is rather towards continued Motor vehicle distribution hindered rather than helped by the new consolidation in the motor vehicle trade, under the new Block Block Exemption Regulation. with a continued risk of more previously Exemption Regulation independent dealerships becoming On October 1, 2003, EU Commission The motor vehicle manufacturers manufacturer-owned. It must also be Regulation 1400/02, the new Block and trade had one year to negotiate and borne in mind that the changeover to Exemption Regulation (BER) for the conclude new dealer contracts, a task the euro and increased use of the Inter- motor vehicle sector, came into force. which was not facilitated by the net have already led to a high level of The Commission believes that the con- complexity of the new BER. Even for price transparency which is acting as an troversial new competition rules for experienced practitioners, there were important driver in the harmonisation of motor vehicle distribution will offer addi- many questions to be clarified, which new-vehicle prices. tional benefits for consumers. Even resulted in a flood of enquiries to the before the new Block Exemption Regu- European Commission (Directorate Gen- As well as showing continued diver- lation was adopted however, the indus- eral for Competition). Nonetheless, the gence between list prices, the latest EU try had already criticised the fact that German brands were able to introduce comparison of new-vehicle prices for there is little rationale for it, given the their new dealer contracts by October 1, spring 2004 also reveals that in countries already intensive level of competition in 2003, even if the dealers in particular such as Greece or Denmark which the EU new-vehicle market. did not always welcome the new impose high vehicle-registration taxes arrangements. At the same time, the or luxury taxes on new vehicles, prices It is also becoming clear that as well new dealer contracts attempt to actually tend to be particularly low. This as requiring the motor vehicle industry minimise workload in the area of distri- is because in these low-volume and trade to modify tried-and-tested bution chain management and to opti- markets, commercially viable pricing is processes, the new Block Exemption mise resources consumption. Lean dis- only possible if the high tax burden is Regulation also makes management of tribution processes and customer- partially offset in the sale price. The EU the distribution network more difficult friendly solutions continue to be the Commission has so far been unable to and makes distribution processes less number one priority of the automakers. eliminate these tax anomalies in the EU efficient. Under the new Block Exemp- market. Nevertheless, the automotive tion Regulation for motor vehicles the BER fails to deliver on industry is continuing its efforts to bring amount of bureaucracy involved in com- consumer benefit about price harmonisation in the Single plying with competition law has There is as yet no sign of the new European Market, particularly when it increased significantly, both for the BER for the motor vehicle sector leading introduces new models. companies and for the European and to lower new-vehicle prices in countries national competition authorities. There such as Germany or France. The Com- The twice-yearly price comparisons are therefore grounds for wondering mission expects an increase in cross- carried out by the EU Commission still whether in terms of developing its earn- border purchases from October 2005, fail to adequately take account of the ing power and capital base, the and that this will bring about more differences in retailer/consumer price- automotive sector may not actually be downward pressure on prices. It is negotiating practices between the Annual Report 2004 65

member states. Comparing list prices relationships in the sales and service value chain which operate in the market also inevitably fails to take into account sectors. The quality of advice provided under the brand name. The central which models are sold at discounts and must be steadily raised. In the service branding message must be delivered at which models are in heavy demand. The sector, ongoing investment is needed in all points in the network. Under the new price structure in the German vehicle training and technology. Customer sup- BER, however, the task of carrying out market for example is highly differenti- port by the dealership is a holistic activ- integrated, vertically organised brand ated. A European comparison which ity which starts with purchase of the management has now become much simply classifies the German new- vehicle and continues with maintenance more difficult. vehicle market as high-priced ignores and repair. the market realities. If, furthermore, the One of the areas which requires additional possibilities offered by finan- The new Block Exemption Regula- active management in keeping with and cial services are taken into account, tion has now simplified the conditions to the benefit of the brand is distribution. then clearly a list price comparison is relating to "multi-branding" within one The vehicle dealership is the place too crude. dealership. "Multi-branding" means where customers' perceptions about simultaneously offering for sale brands brand content, and preferences which Distribution efficiency of different manufacturers within the may have evolved on the basis of obser- suffering same franchised outlet. As before, deal- vation or product experience, are meas- In most cases German manufactur- ers are required to display different ured against reality. In the interests of ers and importers have chosen a selec- brands in different areas of the show- efficiency, therefore, manufacturers and tive distribution system as provided for room. However, there is still a risk that dealers must see themselves as parts of under the new BER. This results in high- brand mixing will detract from the brand one and the same value chain. Value er financial and administrative burdens. exclusiveness which is a basic require- creation by the former is enhanced by Since territorial management of the dis- ment of the automotive industry. the latter's activities in the area of pres- tribution network is no longer possible, entation, advice and appropriate pricing. new and complex instruments have had Another risk posed by increased to be used. Also, the scope for delinking multi-branding is that the contribution Thus strict brand management of sales and servicing activities deprives which dealerships are able to make to depends on the cooperation of the manufacturers and dealers of a single strict brand management may be dealers. broad-based communication platform. reduced, thus making it more difficult to A separation into sales outlets and plan sales and to meet sales targets. Since all German vehicle brands are servicing outlets also requires a duplica- Market launches and successful sales now offering considerably extended tion of communication channels and will therefore involve a greater workload model ranges, the tasks of franchised the communication workload and is also in the future. dealerships have grown. Selling problematic in view of the current anything from sports cars and saloons importance of hard- and software Future of brand to off-road vehicles makes heavy calls investment and application training. management on their personnel as far as professional Brand management is one of the advice and support are concerned. Ever-increasing customer require- tasks which faces all vehicle manufac- These tasks demand a brand-specific ments and the increasing technical turers operating with an existing or approach. Only with brand-specific complexity of the vehicles require inten- future brand. The task of brand training will sales personnel be able to sified customer contact and customer management spans all parts of the provide customers with competent 66 Verband der Automobilindustrie GLOBAL MARKETS

support and to make a winning pitch for results. And they are also an attractive Flexible financing – often on a vehicle of that brand. In this environ- and increasingly important tool in fos- extremely attractive terms – has further ment, brand indifference on the part of tering customer relationships, with ben- important advantages for customers. the sales personnel can only have nega- efits for all concerned. Research has shown that the availability tive consequences for the brand. of a wide range of financing solutions As subsidiaries of automotive com- meant that 27 per cent of customers Manufacturer banks: panies, and thus as brand players, the were able to purchase their vehicle successful specialists automotive banks have a somewhat dif- earlier than planned, 21 per cent bought Financial services are a big and fast- ferent mission from other lending insti- a new car instead of a used model, growing business in the automotive tutions. Their job is to keep brand cus- 17 per cent opted for a more highly industry. Currently a good 40 per cent of tomers "on board" in the financing and specified model and 9 per cent opted all new vehicles – and the proportion is leasing sector. This means the customer for a larger model. These figures are growing – are either financed or leased is viewed not only from the perspective further evidence of just how important by the automotive banks, making these of a lending institution but also from automotive financial services have banks the market leaders in the that of an automotive manufacturer. become for manufacturers and dealers. automotive financial services sector. Thus the brand is able to offer its cus- tomers a package which meets all their Other leasing companies too, along The automotive banks are generally vehicle-related and mobility needs. with commercial banks and building wholly owned subsidiaries of the rele- societies, are trying to move into this vant vehicle manufacturers. In some This makes the product spectrum sector in increasing numbers. However, cases these "captives" as they are easier to explain and communicate to a comparison of the automotive banks' known have been active on the market customers. Each segment – credit, leas- finance and insurance (F&I) products for decades, but they have expanded ing, insurance, guarantee and service – with other products on the market sharply since the advent of private cus- must be transparent and easily intelligible. shows that in practice the competitors tomer lending and manufacturer leas- find it very difficult to compete with ing. They now not only finance the pur- This has direct benefits for the cus- these highly specialised operator. The chase of new or used vehicles for pri- tomer in the form of tailor-made services, captives have the strategic advantage of vate and commercial customers, they while the captives enjoy the strategic extremely close cooperation between also – amongst other things – support advantage of close cooperation with the manufacturer, sales organisation and the automotive retail sector by financing manufacturer and the sales bank, based on established relation- demonstration and stock vehicles, or by organisation. Vehicle, financing and ships. Vehicle, financing and an increas- financing investment in business and services are provided from a single ingly wide range of services are offered workshop equipment. Some of these source. The portfolio, comprising for as a one-stop solution, thus saving the banks are even beginning to move into example three-way financing, target customer time and journeys. Ideally, an the regular commercial banking market. financing, residual value products and optimal range of products and services insurance, can therefore be precisely throughout the period of ownership will As they move into new areas, so the tailored to meet the customer's personal result in a very high level of loyalty automotive banks are able to transfer budget. As a result, customers enjoy towards the relevant brand. swiftly growing profits to their parent optimal service throughout their owner- companies, thus making an important ship of the vehicle, which is an impor- The provision of leasing and financ- contribution to the latter's financial tant factor in building brand loyalty. ing services at highly attractive rates by Annual Report 2004 67

the manufacturer banks has manifest specific servicing creates unnecessary One of the most onerous tasks for advantages not only for the customers problems for the customer. This even the manufacturers is that of providing but also for the dealers. For example, applies to such a basic question as the brand-specific training for workshops the dealer knows exactly when the cus- performance of work by outlets in the new to the network. Often, in order to tomer will be looking around for a new manufacturer's network in the event of ensure good take-up of their training car – namely when the financing or product defects and the resulting cus- and thus to provide optimal service for leasing agreement runs out. The dealer tomer claims vis-à-vis the retailer – or customers, the manufacturers refrain can then get in touch with customers in vis-à-vis the manufacturer in the event from charging workshops the full price good time, offering them not only vehi- of guarantee claims. Now, if the dealer for this training. Thus in the servicing cle and financing products but also – chooses not to operate its own servicing sector too, the BER creates costs which for example – customised service pack- workshop, customers have to be ultimately have to be passed on in some ages or guarantee products. Leasing referred to a subcontracting workshop. form to the customer. There are similar and financing can also boost the deal- Thus they can no longer necessarily consequences, namely increased distri- er's used vehicle business. have the matter dealt with where they bution and servicing costs, when the bought the car. optimal number of workshops is Future of customer service exceeded, since the brand's total work- The changes under the Block This is the scenario desired by the shop resources can no longer operate Exemption Regulation (BER) have a sim- Commission and which it has incorpo- at optimal utilisation. This negative ilar impact on customer service as they rated into the BER. The Commission effect is further compounded if it is have on sales and marketing. It is now wants to open the repair market to all accompanied by an excessive concen- illegal under European competition law workshops provided that they meet tration of workshops in large towns and for manufacturers to conclude dealer certain manufacturer-specified cities. contracts which oblige the dealer to standards. provide servicing as well as distribution. The experience so far suggests that The BER forces automotive manu- restructuring in response to the BER is The automotive sector was the first facturers to reduce or increase the size proceeding only hesitantly, partly to realise, more than 90 years ago, the of their workshop network in line with because many workshops would find value which consumers attach to demand from workshop owners, without it expensive to advertise one or more dependable, manufacturer-specific regard to location and number of work- franchises. This could change very customer service, and to put such a sys- shops. Provided they meet certain crite- quickly, however, if financially high- tem in place. The automotive industry ria, workshops have a right to join the powered companies from other sectors could almost be said to have "invented" servicing network of one or more manu- decided to enter the vehicle repair mar- service. Since then, it has been custom- facturers. This entails a considerable ket. If this happened, unpredictable ary in the industry to provide customers workload for the manufacturers since in reductions in servicing network density with a broad-based network of franchised the interests of the customer and of fair could be the result, to the detriment of combined sales and service outlets. competition, the workshops have to be the consumer. On the other hand, there regularly inspected to ensure are signs of a trend towards more deal- The fact that the BER provisions compliance with manufacturer-specific erships becoming manufacturer-owned which came into force in October 2003 standards, for example on workshop and towards increased manufacturer no longer allow vehicle manufacturers size, equipment, personnel and penetration into the retail sector, includ- to require the dealer to provide brand- training. ing servicing. 68 Verband der Automobilindustrie GLOBAL MARKETS

The fluctuations in network density in the interests of speed, repairs need to continue to use design protection in the would be cyclical and would feed be carried out where the problem has automotive industry as a defence through to the manufacturers' new- occurred. Cross-border repairs are the against Eastern European and Far East- vehicle sales. exception, not the norm. However, this ern product pirates. has not deterred the Commission from The acknowledged service benefits intervening, via the BER, in established The EU Commission is currently for customers of having a franchised structures. reviewing the options for a revision of workshop within easy reach, and the per- the above-mentioned Design Directive sonal contact between service personnel Despite the worsened regulatory in respect of original parts. The Directive and the customer, still play an important environment, no negative effects have currently allows the member states to role in ensuring customer loyalty to a so far been observed on the volume of retain existing levels of protection for particular vehicle brand. The manufactur- repair and maintenance business. The original parts. It is now possible that the ers have a strong interest in maintaining slack state of the new vehicle sales Commission will propose abolishing an extensive service network and in con- market is triggering an increase in the design protection for original parts. tinuously improving quality standards. average age of the vehicle population and thus in after-sales business, partly The EU Commission appointed the The EU Commission, which is moni- due to an increase in wear-and-tear French management consultancy toring and assessing the market impact repairs. Technopolis to assess the impact of the of the BER, apparently regards the man- various legislative options for the origi- ufacturers' standards as in some cases The automotive servicing sector is nal parts market. The study, which was too high. However, these standards are showing continued growth, both on rev- presented to the Commission in late set in accordance with the brand values enues and market share. The real 2.5 per 2003 and subsequently published, in which customers put their trust. It cent increase in servicing revenues in examines four options: would not be in consumers' interests if 2003 to almost 24 billion euros rebuts new workshops joining the service net- survey data suggesting declining 1.Abolition of design protection work were to have lower standards on customer loyalty in the servicing sector. 2.Reduction of the term of protection to equipment, personnel or corporate iden- approximately 10 years. tity. The quality of all workshops in the Review of EU design 3.Remuneration system for holders of network must be identical, regardless protection for parts design rights of whether they are long-standing The new German law on design 4.A combination of remuneration and franchised servicing workshops or new- protection entered into force on term-limited protection comers. June 1, 2004. The new law implements the EU Design Directive of 1998, whose Technopolis does not specifically Also, the EU Commission has no objective is to harmonise national recommend any of the options examined, legal or regulatory authority, and no design laws. At the suggestion of the since it believes each has significant authority in terms of the EC Treaty, to set German government, the Bundestag advantages and disadvantages. Regard- standards in this area. In the absence of and Bundesrat approved the retention ing the option of no design protection, it any evidence of a restriction of cross- of design protection for vehicle notes that there are many intermedi- border trade (article 81, EEC Treaty), the parts. VDA too had advocated the main- aries between producers and final con- European Treaty does not authorise reg- tenance of the legal status quo. The sumers and that lower prices would not ulation of the workshop sector. Normally, amended law thus makes it possible to necessarily "trickle down". Also, safety Annual Report 2004 69

problems might become an issue if the implements the EU CO2 Labelling Direc- downloaded from the DAT website market were more open to non-original tive of 1999 requiring consumers to be (www.dat.de). The German energy parts. informed about fuel consumption and labelling ordinance for cars also takes

CO2 emissions. into account electronic media: the For the automotive industry, abolition showroom poster or display can be of design protection for parts would be The new ordinance contains provi- replaced by an electronic display on a a serious infringement of the basic prin- sions to ensure that consumers buying a computer screen. ciples of protection of intellectual prop- new car are informed by labelling on erty. The industry fears this could be fol- the vehicle, by posters or displays in the The motor vehicle manufacturers and lowed by a similar exception relating to showroom, by a guide and by trade already have a long tradition of original parts being made in the area of promotional literature about its fuel con- providing information about the fuel con- patents. sumption and CO2 emissions. The ener- sumption and CO2 emissions of their new gy labelling ordinance for cars comes vehicles, be it in their product brochures The undermining of protective rights into effect on October 1, 2004. or on the websites of the various brands. is in stark contrast to the EU's Lisbon The new energy labelling ordinance con- strategy adopted in 2000 of strengthen- VDA stressed the importance of cor- tains specific regulations for the various ing the competitiveness of European rect implementation of the EU CO2 information media. The motor vehicle industry. Labelling Directive of 1999. The provi- manufacturers and trade will continue sions on label design have been limited their tried-and-tested consumer informa- Automotive manufacturers and sup- to the requirements of the Directive, tion policy on the basis of these regula- pliers are dependent on fully functioning namely that it should contain data on tions and will also provide information on and comprehensive design protection the fuel consumption and CO2 emissions salient safety and environmental features legislation if they are to maintain and of the vehicle on display. of their products. develop the innovative edge of their German operations. Regulations which It was established that an emissions Public procurement benefit product pirates are not in the rating system would not serve any use- Public contracts are of major impor- interests of the consumer. Furthermore, ful purpose. It would not be intelligible tance not only in terms of volumes but the original spare parts market is not a to the consumer and it would not ade- also of image. Public contracts are many monopoly – the vehicle manufacturers' quately take into account the different companies' main source of business. share of this market is approximately types of vehicles and the operating con- The image gains for a company if its 50 per cent. Design protection for origi- ditions for which they are designed. products are used by state bodies in a nal spare parts has never so far been manner visible to the public are also shown to have any significant adverse The label will be used in dealer very considerable. effects on the intense competition showrooms and at trade fairs. Customers between the vehicle manufacturers and can also obtain from the dealership a Public contracts are worth 300 bil- the independent parts sector. poster or display containing data for all lion euros annually (2002) in Germany. models of a particular make and a guide A not insignificant proportion of such Energy labelling for cars (brochure) containing data about new contracts are awarded to the automo- In March 2004, the German govern- models of all makes. The brochure is tive industry – comprising vehicle manu- ment adopted an energy labelling produced by Deutsche Automobil facturers, body and trailer manufactur- ordinance for cars. This ordinance Treuhand (DAT) in Stuttgart and can be ers, parts manufacturers, the motor 70 Verband der Automobilindustrie GLOBAL MARKETS

vehicle trade and finance and service- sector, this could mean, for example, the contracting parties with market- providers. that wherever public procurement was based solutions is in the regulation of involved, European legislation specifying liability for defects by the official The European Directives on public particular objectives – such as compli- contracting terms for supplies. These procurement and the German "cascade" ance with certain emissions standards – allow the contracting process to be system of regulations – extending from could be overridden by legislation regu- based on the terms and conditions the Law on Restrictive Practices (GWB) lating technology and construction, with which are regularly used in the particu- Part Four and the Public Procurement adverse effects for competition. lar sector and which form the basis for Ordinance down to the official contract- market pricing, for example ing terms (for construction, supplies and At national level too, the complicat- recommended terms and conditions services) – are of particular significance ed field of public procurement law is which have been submitted to the Fed- to the automotive industry given its undergoing a review. The expert group eral Monopolies Commission. large volume of public procurement. on "streamlining of public procurement This makes it all the more important to law", working under the direction of the A critical issue in terms of competi- ensure that the updating of the legisla- Federal Economics Ministry within the tion, given the vast demand potential of tion, which is currently something of a framework of the Federal government's the state, is the formation of purchasing maze for all except experts in public "Bureaucracy Reduction Masterplan", cartels by public clients. Although the procurement law, is carried out with due for which the Federal Ministry of the Law on Restrictive Practices is used in circumspection. Interior is responsible, has presented this context, in some instances the case proposals which fail to take into account law cannot be regarded as definitive Nine years ago, the European Union the interests of industry. The formulation and there is certainly some scope for embarked on a programme to stream- of contractual conditions using the correction. For example, there is cause line the existing EU directives in this tried-and-tested public contracting for concern in the area of electronics field in the framework of a "legislative committees will be abandoned, along procurement, firstly due to the introduc- package". The main focus was originally with the cascade system described tion of reverse auctions and also due to on harmonising nomenclature. The legis- above, and the decisions will simply be the creation under the e-government lative package which eventually result- taken by official act. Although the auto- initiative of platforms which ought first ed, and which was adopted only in Feb- motive industry would welcome a con- to be discussed and synchronised jointly ruary this year, is anything but a simpli- solidation and simplification of the official with industry. fication however. For example, extrane- contracting terms, it is against changing ous aspects are introduced such as the hierarchical system of regulations At all costs it must be ensured that social and environmental considerations if the continued use of the official con- industry is not confronted with a public (product features and even production tracting terms for supplies, or some sim- contracting scenario where incompatible processes) which will have the effect of ilar solution, is thereby jeopardised. solutions become the norm. Like other creating even greater legal uncertainty industries too, the automotive sector in the area of public procurement and One example of how the "cascade" would welcome closer cooperation in review procedures. For the automotive regulatory system succeeds in providing this area. Auto TRANSPORT 72 Verband der Automobilindustrie TRANSPORT

EU Enlargement Eastwards – The Challenge Facing Transport

Mobility is the basis for The crucial role that the transport growth, employment sector plays in growth and the economy and economic integration is also proven by calculations by the Mobility is an indispensable part of Transport Science Institute at the Uni- our daily lives. Mobility broadens our versity of Cologne. These showed that choice of where we work, learn, shop economic growth in Germany between and relax. For the economy too, a wider 1960 and 1990 would have been one- radius of activity broadens the choice third lower had transport remained at its that businesses have of production and 1960 level during that period. In 1990, trade partners, suppliers and employees, gross value-added (GVA) would not as well as sales markets. The result is have stood at 1,200 billion euros, but at higher economic productivity. Transport 906 billion euros. One especially inter- is thus the basis for prosperity and eco- esting point here is that, of the total growth nomic growth, and the transport sector of 294 billion euros attributed to trans- is the most successful of all economic port, by far the largest part came from sectors. Without transport, we would all road traffic (246 billion euros), the other be much poorer. means of transport playing a minor role.

No transport growth means lower economic growth

GVA (in billions of euros)

1,100 GVA during transport growth (real) GVA during stagnating transport growth (theoretical) 900

700

500 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989

GVA = gross value added Annual Report 2004 73

Lower transport growth means higher unemployment economies of the 15 "old" EU states alone will see their economic growth No. of unemployed (in ‘000s) leap by an additional 1 per cent a year. 4,000 Germany is already by far the most important trade partner of most of the No. of unemployed during transport growth (real) new member states, and the second 3,000 No. of unemployed during stagnating most important trade partner of Estonia, transport growth (theoretical) Malta and Cyprus.

2,000 Economic growth and transport go hand 1,000 in hand Economic and transport perfor- mance have a close reciprocal relation- 0 ship. While economic growth depends 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 on mobility, it also generates a need for mobility, as more and more goods need to be transported. Demands are periodi- cally voiced that something should be done to separate the parallel growth The same applies to employment. paving the way for buoyant trade and of transport and the economy for envi- Had transport been limited between further economic growth in the new ronmental reasons. The facts show, 1960 and1990, the labour force would member states and the existing 15. however, that between 1960 and 1990, have been distributed in a less-than- However, the lifting of customs barriers the transport sector did succeed in optimum way for jobs, with the result is just the first step towards integrating halting the concomitant trend of rising that the number of employed would the new states into the EU of 15. Trade per-kilometre freight volumes and have been much lower than it was in relations will only grow if transport con- economic growth thanks to greater 1990. A transport policy that promotes ditions allow it, which is why transport rationalisation (better use of load mobility is therefore a crucial part of and transport policy are just as impor- capacity, for example). During this per- employment policy. This being the case, tant in the process of integration in an iod, measured in terms of the ratio of the government should shelve its cur- enlarged Europe as they already proved tonne kilometres to gross value-added rent efforts to cut or even abolish travel to be in the 15-member single European (GVA), transport intensity fell from allowances that employees can offset market. 0.15 tonne kilometres/unit of GVA to against tax. around 0.12 tonne kilometres/unit of Germany stands to benefit GVA. In other words, in 1960, 0.15 tonne The accession of eight Central and from enlargement kilometres had to be transported to Eastern European countries, as well as Situated on the former eastern bor- generate 1 deutschmark of gross value- Cyprus and Malta, to the European der of the EU, Germany stands to bene- added, compared with only 0.12 tonne Union on May 1, 2004, as well as the fit especially from the accession of the kilometres in 1990. Another factor was dismantlement of customs barriers as Central and Eastern European states. that, in the smaller internal market of the part of the enlargement process, are Economic experts estimate that the Federal Republic, growth in value-added 74 Verband der Automobilindustrie TRANSPORT

generated by a geographical division as the capital tied up in the merchan- more suitable than any other form of of labour slowed over time. With reunifi- dise being transported can be put into transport for most transport needs cation and the completion of the single circulation again more rapidly. today. In that year, the total volume of European market, the internal market goods transported by all the forms of was greatly expanded and potential The weak spot of rail-bound trans- transport together in Germany totalled growth in value-added resulting from a port is its low networking capability. 3.42 billion tonnes. This was 0.9 per geographical division of labour surged. Door-to-door delivery is only possible in cent down on the previous year and During the 1990s, however, this trend the rare cases in which both the sender a sign of sluggish economic growth. of lower transport growth was reversed, and the receiver have their own rail However, average distances having and growth in the tonne-per-kilometre connections. risen, freight volumes in terms of rate is now higher than economic tonne kilometres rose by 1 per cent to growth. While the ratio of transport Cost structures are another key fac- 495.1 billion tonne kilometres. Nearly growth in tonne kilometres to economic tor which determine how suitable a three-quarters of this was transported growth varied between 0.91 and 0.98 given means of transport is. While the by truck (358 billion tonne kilometres). in the 1960s, 70s and 80s, it is now costs of rail transport are more or less Compared with these figures, the other at 1.10. fixed (due to the rails), the costs of road means of transport have mere niche transport are much more variable. As a status. The railways accounted for just With the accession of the new result, the strength of the railways (and 78.5 billion tonne kilometres and the EU members, the single market will the inland waterways) as a means of inland waterways for 58.6 billion tonne again expand and the potential growth transport lies in transporting large kilometres, which corresponds to mar- in value-added through a geographi- goods over long distances, but not in ket shares of 15.9 per cent and 11.8 per cal division of labour will again surge. transporting small goods over short dis- cent respectively. tances. This is where trucks have an Road traffic forms the evident advantage. Forecasts for 2004 conducted on backbone of freight behalf of the Federal Transport Ministry transport These dissimilar profiles clearly anticipate further growth in freight vol- One major advantage of trucks show that different means of transport umes to 508.3 billion tonne kilometres, is that they have access virtually every- are suited to different tasks. The advan- of which trucks will once again have where – including right to the doorstep tages of freight trucks are best exploited the lion’s share, with 367.2 billion tonne of factories and supermarkets. This by using them to transport high-value kilometres (72.2 per cent). characteristic is described as "network- mixed goods. We have to remember ing capability". Transport by road is also here that the structure of merchandise Trucks are favourites faster than by rail. Studies by the Traffic in Germany has radically changed in with the new member Centre at Brunswick Technological Uni- recent decades. Trucks offer a much states too versity show that the average speed more efficient way of transporting high- The young market economies of of travel by freight trucks is around value mixed goods (for example, electri- Central and Eastern Europe are enjoying 50 kph, while even the most optimistic cal goods and computers) than any impressively dynamic growth of 4 per estimates put the average speed by rail other means of transport. cent a year on average. As production at no more than 10 kph. High transport there rises, so do freight volumes. In the speeds make road freight vehicles more A look at the transport market in new member states of Poland, the Czech suitable for transporting valuable goods, 2003 shows that trucks are, in fact, Republic, Hungary, Slovenia and Estonia Annual Report 2004 75

alone, freight volumes are expected to waterways fell perceptibly: by 27 per are expected to increase their perform- rise from 224 billion tonne kilometres to cent, from 123 billion tonne kilometres ance by 25 per cent, from 4 billion 312 billion tonne kilometres between to 90 billion tonne kilometres, for the tonne kilometres to 5 billion tonne kilo- 2000 and 2015, an increase of some railways; and by 25 per cent, from 4 bil- metres. 40 per cent. lion tonne kilometres to 3 billion tonne kilometres, for the inland waterways. This shift in freight volumes will At the same time, another trend is change the market share of the different becoming evident. There is an under- All available market analyses and means of transport. Between 2000 and standable backlog of demand for con- forecasts indicate that this clear trend 2015, the already solid position of the sumer goods in Eastern Europe, and these is set to continue. For example, road roads will continue to improve, their new categories of goods are being freight volumes are expected to rise by share rising from 58.5 per cent to nearly transported solely by commercial road nearly 60 per cent, from 131 billion two-thirds of the total (66.4 per cent). vehicles. Between 1991 and 2000, freight tonne kilometres to 207 billion tonne The share of the railways will fall, from volumes transported by commercial kilometres between 2000 and 2015. In 40.3 per cent in 2000 to 32.1 per cent by vehicles nearly doubled, from 77 billion contrast, rail freight is expected to rise 2015. The market share of the inland tonne kilometres to 131 billion tonne by only around 11 per cent, from 90 bil- waterways, at 1.3 per cent, was already kilometres. In contrast, the freight vol- lion tonne kilometres to 100 billion marginal in 2000 and will rise insignifi- umes attributed to rail and the inland tonne kilometres. The inland waterways cantly, to 1.5 per cent, by 2015. Forecasts beyond 2015 point to rapid growth in road freight even after this date. A study by NEA Transport Research and Training found that road Freight transport in Germany up to 2015 freight traffic in the new member states In billions of tonne kilometres would double between 2000 and 2020. 700 Inland waterways 90.0 Commercial vehicles 600 Railways will transport most of Road freight 115.0 the rise in freight in 500 Germany 58.6 66.5 485.0 The accession to the EU of the 400 76.0 78.5 Central, Eastern and South-Eastern 62.2 358.0 European states will also result in more 300 346.3 54.8 72.8 intensive trade between these countries 51.4 and Western Europe, leading in turn to a 200 61.9 235.6 48.8 64.9 further increase in freight volumes in 169.9 71.5 Europe. A large part of this additional 100 125.4 78.0 freight will be destined for Germany 0 which, as a direct neighbour of the new 1970 1980 1990 1997 20002003 2015 member states, will have the closest trade relations with them. It is therefore DIW, Germany Ministry for Transport, Construction and Housing, Prognos anticipated that, by 2015, the rise in 76 Verband der Automobilindustrie TRANSPORT

Germany’s trade with Eastern Europe Cars are the Undisputed will be much steeper (up 3 per cent per year) than that with its Western Number One Means of Transport European trading partners (up 1.5 per cent per year). Moreover, most of the transit traffic between the new member Cars – indispensable is a personal means of transport in the states and the Western EU members will part of life truest sense of the word. pass through Germany. Cars remain the undisputed number one means of passenger transport. Although the distances travelled by Freight volumes in Germany are Despite environmental tax and other car steadily fell from 1999-2002, from expected to rise to 690 billion tonne rises in the price of private motoring, 761.6 billion passenger kilometres to kilometres by 2015. This is the figure on the car is still people’s principal mobility 718.6 billion passenger kilometres, this which the German government based its provider. The car is as popular as ever drop is concomitant with a general fall forecasts for the 2003 Federal Transport because it satisfies people’s need for in passenger kilometres during this Plan, and it represents a rise of just mobility more than any other form of period (from 951.2 billion passenger under 40 per cent in freight volumes transport. Compared with public trans- kilometres to 905.7 billion passenger against 2003. 485 billion tonne kilome- port, it is viewed as more independent, kilometres); this means that cars have tres of this increase are attributed to more flexible and more convenient. Not more or less maintained their outright trucks, which means that, like today, least, it is also preferred to public trans- leadership, with 80 per cent of the mar- they will bear the principal brunt – port because of its image and identity- ket. It is assumed that the trend in the 70 per cent – of the rise in freight. This building effects ("more thrilling", "more overall number of passenger kilometres estimate already includes an assump- active", "more convivial", "suits me"). It travelled, including by car, bottomed out tion by the German government that it will succeed in shifting some freight mobils from the roads to the railways through Characteristics of cars and public transport policy measures. as assessed by population 1.0 = positive, 5.0 = negative The European Commission, in its 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 transport policy, is also anticipating growth of this order in the movement Independent Flexible of goods. Its White Paper called "Euro- Active Car pean Transport Policy for 2010 – Time Thrilling to Decide" forecast a rise in freight Pleasant Public transport volumes in the Europe of 15 from the Convenient current 1,722 billion tonne kilometres Cheap Suits me to 2,236 billion kilometres by 2010, Convivial which corresponds to a 30 per cent rise. Rapid Of this, 1,736 billion tonne kilometres of Reliable freight – 78 per cent of the total freight Trouble-free Modern volume – would be transported by road in 2010. Annual Report 2004 77

Car ownership licence ownership is that increasing as self-evident as owning a mobile by gender numbers of women and older people are phone. Belonging to the active driver exercising their right to have a personal population is felt to be a normal part of People aged over 18 means of transport. The rate of licence adulthood. 57 per cent of 16-17 year 80 ownership in the various population olds today plan to take the driving test. 74 groups is converging. While in 1976, the 66 59 percentage of women with a driving As the rate of licence ownership licence (38 per cent) was only half that steadily rises, so does car ownership, of men (73 per cent), women are now and the ownership rates of the various catching up. Today, 92 per cent of men population groups are converging. In 28 and 76 per cent of women have a driving 1976, nearly five times more men owned 14 Men licence. cars than women (66 per cent com- Women pared with 14 per cent). Today, this lead 1976 1989 2002 Licence ownership among the senior has shrunk to 21 per cent (80 per cent citizens (over 65 years) is rising rapidly. compared with 59 per cent). Kontiv 76 (West Germany only) The disproportionate rise in this popula- Kontiv 89 (West Germany only) Mobility in Germany 2002 tion group compared with others over Car ownership is also rising among the past three decades has meant that the older population groups. In the the gap in licence ownership has nearly 65-74 year-old group, car ownership has in 2003 and is expected to rise again in closed. Today, over two-thirds of all 65- almost tripled since 1976, rising from 2004 with more favourable economic 74 year olds have a driving licence, and 17 per cent to 60 per cent. Car owner- conditions. Travel by car is anticipated to nearly half of all over-74 year olds. For ship among over-74 year olds has risen rise by 1.3 per cent, to attain 716.4 bil- young people, taking the driving test is sevenfold. lion passenger kilometres (against 707.6 billion passenger kilometres in Cars: no. 1 mode of transport travel 2003). This rising trend in the number of three-quarters of all distances passenger kilometres is expected to In per cent continue over the next few years, most Buses Other of it attributable to private motor traffic. 4.0 6.2 The increase in car ownership is sure to Air have a perceptible impact here. 5.2

The all-important role of cars as a Rail means of mobility today is not restricted 9.6 Cars to specific population groups, transport 75 purposes or regions, but is identical in all spheres. Today, 84 per cent of all adults have a driving licence, far more than ever before. In 1976 and 1989, the figure was just 54 per cent and 70 per cent respec- Mobility in Germany 2002 tively. The reason for this massive rise in 78 Verband der Automobilindustrie TRANSPORT

Car ownership The unrivalled position of the car the forms of transport will benefit from increases with age as a means of passenger transport is this rise. According to the Federal Trans- reflected in the different purposes for port Plan, the number of passenger Percentage of car owners which it is used. It accounts for seven kilometres travelled by rail will rise by 80 out of every ten journeys to the work- almost one-third, to nearly 100 billion 70 1976 place or for business, the other forms passenger kilometres. Even should this 1989 60 of transport playing only a marginal role. prove to be true, the market share of the 2002 50 The car has a similar share of the total railways would still be no more than a number of journeys made for shop- modest 9 per cent. 40 ping, as well as journeys made for 30 leisure purposes, the car’s share here From 2015, the growing numbers 20 having steadily risen since 1976 to of driving licence and car owners will 10 53 per cent today. For holiday travel, be offset by a fall in Germany’s popula- 0 cars are used in two out of every three tion figures, from just under 81.4 million 18–59 60–64 65–74 75 years cases. Even for journeys to educational inhabitants to just 77.7 million by years years years and over establishments, cars take a 23 per cent 2030 and 70 million by 2050, despite Kontiv 76 (West Germany only) Kontiv 89 (West Germany only) share, making them the second most an expected annual total influx of Mobility in Germany 2002 important means of transport after local 200,000 people. Even so, a forecast by public transport (39 per cent). Polk Consult points to an increase in the number of new car registrations up to Cars are the number one means Traffic is not growing 2025, after which it will fall. We can of transport not only for all population uncontrollably therefore assume that the number of groups, but also for all types of area. Given the long-term economic and passenger kilometres will not grow any Even in densely populated conurbations, political conditions, it is likely that cars more after 2025. cars are still the principal form of trans- will remain by far the most important port, used for 50 per cent of all journeys. means of passenger transport in the With the question of falling popula- Public local transport, which is the most future too. In its forecast, Deutsche tion figures, we have to consider that suitable means of transport for urban Shell AG anticipates that the number of the smaller the population, the less effi- centres, is only used for 16 per cent of cars on the roads will rise to between cient public transport is. As population journeys. Only very short journeys are 47.9 and 51.1 million by 2015. The Feder- centres become less dense, it will made on foot or by bicycle. If we look at al Transport Plan also foresees some 50 become more difficult for public trans- the distances travelled rather than the million vehicles on the roads by 2015. port to bundle the itineraries of large number of journeys, the dominance of Based on this, it anticipates that the dis- numbers of people, resulting in lower cars is even more impressive. Cars are tances travelled by cars will rise from capacity use. In the case of railways and used for around two-thirds of the dis- 716.4 billion passenger kilometres today their fixed costs, lower capacity use will tances travelled every day in urban cen- (2004) to 873 billion passenger kilome- raise the cost of travel per head. tres. And in rural areas, cars are virtually tres by 2015. The total number of indispensable. Here, depending on passenger kilometres (all forms of trans- Cars are favourites with the urban density, virtually two-thirds of all port) will increase by over 20 per cent to new member states too journeys and up to 77 per cent of dis- 1,130 billion passenger kilometres com- The products of the German auto- tances travelled are undertaken by car. pared with today. Not just cars but all motive industry shape mobility not only Annual Report 2004 79

Passenger transport in Germany up to 2015 In the new EU member states too, cars are becoming the number one In billions of passenger kilometres means of passenger transport. Car own- 1,200 ership is soaring in these countries. A Air 73.0 study by Prognos entitled "European Railways 98.0 1,000 Public road transport Transport Report 2002" anticipates that 42.7 35.9 86.0 the Central and Eastern European states Cars 77.3 73.9 42.4 75.1 will continue to close the car ownership 800 82.6 71.2 18.4 75.9 gap with West Europe, stating that car 44.6 ownership in these states will attain 11.0 65.0 600 41.0 425 cars per 1,000 inhabitants by 2015. 6.6 74.1 39.2 400 58.4 This fact will lead to a significant increase in the number of individual 379.5 477.4 601.8 749.7 731.2 707.6 873.0 200 passenger kilometres. Starting at a low level of 5,300 passenger kilometres a year in 1991, this figure had risen by 0 1970 1980 1990 19972000 2003* 2015* nearly 20 per cent, to 6,300 passenger

*Forecast kilometres a year, by 2002. This trend is DIW, German Ministry for Transport, Construction and Housing, Prognos expected to continue steadily beyond 2015 and to approach the average num- ber of passenger kilometres in Western in Germany, but in the whole of Europe. than half as long as this again. Accord- Europe in the long term. Europe is the home market for the ing to a White Paper on European trans- German automotive industry. Personal port policy published in 2001, the Euro- Cars already had a 70 per cent share mobility is an indispensable part of pean Commission assumes that passen- in overall passenger travel (excluding everyday life for each and every Euro- ger transport in the EU of 15 will grow air) in 2000, further proof that this pean citizen. In 2000, nearly 80 per cent by 18.4 per cent, to 5,929 billion passen- increase in passenger kilometres will be – 3,789 billion passenger kilometres – ger kilometres, by 2010. primarily due to a rise in travel by car. of all passenger travel in the Europe of 15 was undertaken by car. In contrast, the contribution of the railways was only 303 billion passenger kilometres, or Infrastructure Policy 6.3 per cent, similar to that of air trans- port. Today, all the Europeans together own more than 180 million cars. Europe For transport to fulfil its function as ing progress that has been achieved in has a dense road network nearly 4 mil- a driving force of economic growth, it reducing emissions and fuel consump- lion kilometres in length. Some 50,000 needs an appropriate infrastructure. tion is not wasted through traffic jams kilometres of motorways link the centres Having the right infrastructure will also and the stop-and-go traffic flows caused of the EU countries. The network of ensure that emissions from traffic are by bottlenecks. Germany needs to lead electrified railways in Europe is more minimised, and that the vast engineer- an infrastructure policy "offensive" to 80 Verband der Automobilindustrie TRANSPORT

create the requisite infrastructure 4 million freight units for the railways. million vehicle kilometres travelled on capacities. This means that, in terms of long- autobahns. The risk of accident is much distance haulage, the performance of higher on the other types of road. The Autobahns – Germany’s the major roads is three times that of number of fatalities on German transport arteries rail. The result is the same if we autobahns in relation to the actual num- The German autobahns and trunk compare the freight volumes transport- ber of vehicle kilometres has fallen by roads play an especially important role ed by road and rail with the economic 86 per cent since 1970. On an interna- in transport – and increasingly so – value of their respective infrastructures, tional comparison basis, Germany’s given the country’s central location in that is, their net (current) fixed assets. autobahns have one of the lowest Europe. The German government’s 2003 This shows that 5.3 freight units are record of fatalities, far better even than Road Construction Report spells out transported for every euro invested in that in countries such as Austria and their importance for transport, stating the autobahns and trunk roads, while France, where a general speed limit that over half of the total distances trav- the railways transport no more than exists. elled by motor vehicles are travelled on 1.7 freight units per euro invested. The these roads (52 per cent). If we look at fact that a given number of freight units Congestion on the increase freight volumes in tonne kilometres can be transported over long distances Although the major roads are by far rather than the number of vehicle kilo- much more efficiently by road than by the most economic transport infrastruc- metres, the importance of autobahns rail needs to be taken into consideration ture, investment in them has for years and trunk roads is even more evident, in the issue of infrastructure investment, lagged behind in relation to the rising as they can be used by commercial especially at a time when public money number of kilometres travelled on them. vehicles with extremely high load is scarce. Despite greater efforts following reunifi- capacity. These roads account for some cation, investment has not kept pace. 72 per cent of the total volume of The core of Germany’s major road While the number of vehicle kilometres freight transported. They also account network is formed by the autobahns. travelled on major roads in Germany for 56 per cent of all passenger kilome- Their efficiency per kilometre of road between 1992 and 2003 rose by 9.2 per tres. and per euro is even higher than that cent, investment during the same period of the overall major road network, as remained more or less constant, between Proof that not only do Germany's traffic performance is more concentrat- 4.63 billion euros (1992) and 4.56 billion autobahns and trunk roads meet many ed there. Although the autobahns make euros (2003). transport needs but are also extremely up no more than 5 per cent of the total efficient in doing so can be seen if we length of the major road network, they The result of this chronic under- compare demand for transport to what account for more than one-third of the funding is increased congestion on the is potentially in supply, that is, length total vehicle kilometres (34 per cent) existing autobahn network, which has or fixed assets. Despite the high number travelled by motor vehicles. led in turn to ever greater traffic density of kilometres travelled on them, the on these roads. While the average daily German autobahns and trunk roads Autobahns are the safest traffic density in 1990 was 41,800 vehi- make up only 23 per cent of the total roads cles a day, this had risen by 17 per cent, road network outside towns. On The autobahns are also the safest to 48,900 vehicles a day by 2002. And average, 12.3 million units of freight are roads in Germany, and even rank among the figures are much higher than this transported over each kilometre of these the safest in the world. 0.12 accidents average on numerous sections, some of roads every year, compared with only with casualties are recorded for every which carry as many as 100,000 vehicles Annual Report 2004 81

a day (for example, Cologne autobahn in perfect condition, that is, more than anticipates a 34 per cent rise in distances ring road). 20 per cent are perceptibly uneven, travelled. have visible tracks worn in them, with One quarter of the German autobahn the risk of aquaplaning in wet condi- Of course, we have to take future network represents a bottleneck. Accord- tions, and bad to insufficient grip in improvement work on the German ing to a study by the University of some places. They thus represent a autobahns into account. However, the Cologne, 209 kilometres of autobahn are safety hazard. extra capacity provided for in the Feder- so congested that massive traffic jams al Transport Plan is far below what is occur daily. The bottleneck study conducted by needed to offset the future rise in traffic the University of Cologne also looks ahead. volumes, as the ADAC pointed out in Germany’s autobahns were long It forecasts that – even with a relatively a study on the "long-term forecasts for considered as the best in the world. moderate rise in the distances travelled transport quality on selected German Even today, many countries view by road freight vehicles from 19 to 22 per autobahns" in 2003. This compared the Germany’s autobahn coverage as exem- cent, and in the distances travelled by number of vehicle kilometres in 2020, plary. However, many stretches of auto- road passenger vehicles by 20 to 26 per as calculated on the basis of the fore- bahn are now outdated and the quality cent – the percentage of heavily congest- casts in the Federal Transport Plan, of the autobahns as a whole leaves ed roads will double, if not triple, by with the autobahn network as it will much to be desired. Less than 80 per 2015. The new Federal Transport Plan for stand in 2020. This included the cent of the autobahns are currently 2003 that was adopted last year even improvement measures that will take

Development of fatality rates on motorways in western Europe and the USA

Fatalities per billion vehicle kilometres

France -87%

United Kingdom -90%

1 Belgium -82%

Austria -58% 1970 Switzerland -67% 2002 2 USA -81%

3 Italy -59%

Germany* -86% 0 5 10 15 20 25 30 35 40 45

1 2002/1973, 2 2001/1970, 3 1997/1970, *western Germany (1970) IRTAD 82 Verband der Automobilindustrie TRANSPORT

place under the 2003 Federal Transport congested, that is, it will carry over 3,300 kilometres would have to be Plan up to 2015. 15,000 vehicles per lane of traffic per expanded to six lanes or more, and day (congestion), or over 20,000 2,400 kilometres of new road built in the The ADAC forecasts that, despite vehicles a day (severe congestion). The next 15 years to fill gaps in the network these modernisation measures, over 44 capacity expansion currently planned and give new regions access to per cent of the autobahn network will thus falls far short of needs. autobahns. be congested, that is, will be the scene of traffic jams, by 2020. Around one- On the basis of these calculations, High cost of traffic jams quarter of this percentage (10 per cent the ADAC drafted the ideal autobahn A programme of this size for mod- of the whole network) will be severely network for 2020. According to this, ernising the autobahn network might appear ambitious at first glance. Howev- er, the investment it requires is worth- German autobahn network 2020 – ADAC demands while if we bear in mind that it will avert the risk of daily traffic jams on half of the autobahn network. It would also save the economic costs of the traffic jams, which surpass the cost of invest- ment many times over.

If we include stop-and-go traffic in towns, the cost of traffic jams already amounts to 100 billion euros a year, according to a calculation by BMW AG. One in two drivers gets stuck in traffic jams at least once a week. At holiday periods, despite staggered holidays for the different länder, the cumulative length of traffic jams on peak days can add up to 1,000 kilometres. On average, each and every driver spends 65 hours a year in traffic jams. This is equivalent to The ADAC calls for: more than one and a half working A "minimum requirement" weeks. Indispensable new stretches Indispensable The cost of traffic jams expressed in expansion of the autobahns from 4 to 6 lanes monetary terms corresponds to the and from 6 to 8 lanes amount of resources that are wasted, Other requirements from ADAC perspective New priority stretches that is, lost time for work and leisure, Expansion due to signs of overloading in 2020 extra fuel consumption and avoidable damage to the environment. The time ADAC wasted in traffic jams would be best Annual Report 2004 83

in the medium to long term, all the more Minimise the use of natural spaces The Cost of Traffic Jams so in the year of EU enlargement. and landscapes, and non-renewable resources Every day, traffic jams are responsible A framework for this has existed for: since the mid-1970s, in the shape of the Reduce emissions of noise, harmful Federal Transport Plan. The 2003 Federal substances and greenhouse gases Overall costs of 250 million euros Transport Plan enshrines projected (especially CO2) development up to 2015. Losses of 30 million litres of fuel, Foster European integration resulting in additional emissions Coming 11 years after the last Plan, in 1992, the 2003 Federal Transport Plan, Prevent a situation in which political Millions of hours of lost leisure adopted by the German Cabinet on July conditions bias competition 2, 2003, is somewhat late, as it should originally have been adopted during the However, the task of developing the last parliamentary term. The 2003 Federal infrastructure as it stands in the Federal used for other purposes, whether work Transport Plan is therefore to be Transport Plan is politically biased. The or leisure. Fuel consumption per kilome- welcomed as it puts secure long-term conditions for funding merit critical tre is also higher in traffic jams than in planning back on the agenda of examination on this score. It would be free-flowing traffic. It is estimated that infrastructure policy. economic common sense to implement some 12 billion litres of fuel – around 18 projects whose overall economic benefit per cent of the total fuel consumption The automotive industry fully is proven (benefit/cost ratio > 1). This is by road vehicles – is wasted every year supports the key objectives of the 2003 not the case in the Federal Transport in Germany in traffic jams. The environ- Federal Transport Plan, which are to: Plan. Instead, the cut-off point for imple- mental benefits of reducing this waste menting projects is determined by the should not be underestimated. There is Uphold sustainable and environmen- available funding. Instead of having an plenty of potential for reducing the over- tally compatible mobility infrastructure policy based on efficiency, all social costs: without traffic jams and we have an infrastructure policy based stop-and-go traffic queues, we could Strengthen Germany’s attractiveness on the amount of cash available. On the save up to 18 per cent of the CO2 emis- for investors list of the projects with the best ratings, sions produced by road traffic – proof projects are selected for priority imple- that heavy investment in the infrastruc- Secure jobs mentation from the top of the list down- ture has to be a permanent part of wards until the cash runs out. These national climate policy. Foster sustainable urban and green- projects are bundled together in the space development "priority need" category, and under the 2003 Federal Transport legislation on developing rail and major Plan – the German Create fair and comparable competi- roads, their implementation is unrestrict- government’s long-term tive conditions for all modes of trans- ed. It is on these projects that the "sev- plan for building up the port eral-year plans", provided for in § 5 of the transport infrastructure Law on Autobahn and Trunk Road Germany needs a clear view of how Improve transport safety for transport Expansion and § 5 of the Federal its transport infrastructure is to develop users and society in general Railways Improvements Act, are based. 84 Verband der Automobilindustrie TRANSPORT

Less efficient projects – though just as based on a hypothetical fait accompli, New assessment beneficial in terms of the overall econo- in which the conditions of taxation, methodology behind the my – are categorised as "additional legislation and investment which would Federal Transport Plan is a need", only to be implemented in excep- be needed to change the modal split step backwards tional circumstances. are assumed to already exist. At the According to the political objectives centre of this wishful thinking is the laid down in the coalition agreements In the coalition agreements of Octo- assumption that it will be possible to for the 15th parliamentary term, the ber 16, 2002, for the 15th parliamentary double rail freight to 148 billion tonne assessment methodology used for the term, the coalition parties laid down kilometres by 2015 compared with the Federal Transport Plan was geared to further political objectives which stand base year of 1997. The Plan never- "sustainable mobility". The cost-benefit in the way of a fair choice of projects for theless assumes that long-distance analysis part of the assessment was all modes of transport. The conditions road freight will increase by 58 per improved by adding environmental are: cent to 374 billion kilometres during aspects (for example, CO2 emissions the period covered by the Plan. The and noise outside urban areas). In earli- Investments have to be part and par- forecasts further assume that passenger er plans, exhaust emissions and noise cel of a comprehensive transport rail traffic – especially long-distance – were only considered within urban concept will succeed in growing twice as fast areas. As this will foster more accurate as private motor traffic, by 32 per cent recording of the resources used by traf- As much of the growth in road and compared with 16 per cent. However, fic, this step is to be welcomed. On the air traffic as possible is to be shifted we need to look at the starting point for other hand, VDA takes a critical view of to the railways and waterways these calculations, in which cars have the fact that two other assessment mod- an 80 per cent share, with 749.7 billion ules – an environmental risk assessment Investments in roads and railway are passenger kilometres, and railways and a regional significance analysis – to be aligned in stages a mere 8 per cent, with 73.9 billion pas- have been introduced and given equal senger kilometres. status to the cost-benefit analysis. The The results of cost-benefit analyses, regional significance analysis assesses environmental risk assessments, As calculations of the economic the projects in relation to their suitability regional significance analyses and benefits of the listed investment projects for shifting transport from roads to the financial feasibility are to be assessed are based on transport forecasts, over- railways and inland waterways. The in the light of sustainable mobility estimating the future performance of environmental risk assessment is a sep- the railways means that rail infrastruc- arate qualitative assessment in which These requirements changed the ture projects appear more beneficial the environmental risk of a project is whole thrust of the Federal Transport than they actually are. This also implicit- divided into five categories. Plan, which was originally geared to ly means that road infrastructure proj- efficiency, and transformed it into a ects appear less beneficial than they Adding a regional significance tool for moving traffic away from roads. actually are. Seven years after the analysis and an environmental risk The forecasts on which the 2003 start of the 18-year forecast period of assessment to the evaluation method Federal Transport Plan is based do not 1997-2015, we are already seeing that represent a move away from a cost- even take into account the actual the role of the railways has been over- benefit analysis based solely on the demand for transport that is coming estimated, and that of the roads under- criterion of efficiency. It opens the door from the market; instead, the Plan is estimated. to subjectivity in judging and rating Annual Report 2004 85

projects in terms of importance and billion euros up to 2015 to fund the Federal Transport Plan, more funding urgency. 2003 Federal Transport Plan. Of this: has been provided for conserving what already exists than for developing Commissioned by VDA, the Universi- 119.9 billion euros are needed for capacity. The German transport network ty of Cologne took a closer look at this autobahns and trunk roads is undeniably in poor condition in planning method and drew a highly crit- places, and the more worn roads are, ical conclusion. Its principal objections 80.2 billion euros are needed for the the more it costs to repair and maintain are: railways them. There can be no question of cut- ting maintenance costs. However, given Combining a cost-benefit analysis 11.7 billion euros are needed for the this known need, more efforts should with a regional significance analysis inland waterways have been made earlier to seek alterna- gives rise to a utility analysis concept tive funding methods, which was the in which points are attributed to proj- This does not mean that these actual objective of the government com- ects with specific objectives on a sub- needs will be met, however. Up to mission. Since development and main- jective basis. However, utility analyses 2015, only those projects that can be tenance are not two separate things, but have major shortcomings compared funded under a funding framework go hand in hand, past failure to invest is with cost-benefit analyses, precisely which is far too narrow will actually be now catching up with us. As a result, because they contain subjective implemented. This framework was laid rising volumes of traffic are having to be judgements on the basis of which all down by the German government when spread across a road infrastructure kinds of conclusions can be drawn. it adopted the 2001-2003 budgets and which has scarcely grown, leading to the medium-term financial plan for the increased traffic density in every lane Undertaking a regional significance 2003-2006 transport budgets. The result and accelerated wear and tear. analysis and an environmental risk is extremely low funding for the Federal analysis together means that effects Transport Plan of just 150 billion euros Only 66.2 billion euros of the budget that are already contained in the cost- up to 2015 – 62 billion euros, or 30 per are available for expanding road capaci- benefit study (such as atmospheric cent, short of actual needs of 212 billion ty. Yet this cash is not even earmarked

pollution, CO2 emissions, noise) are euros. This fact alone is proof that, even for new projects. A part of it is reserved considered twice, thus leading to now, the 2003 Federal Transport Plan for "non-negotiable needs", that is, proj- inconsistent results. has to be viewed as underfunded. ects with political priority and projects that were already planned under the In their conclusions, the Cologne Maintenance accounts for 1992 Federal Transport Plan and which transport scientists recommend a a major percentage of were not implemented on schedule. As return to a simple cost-benefit analy- investment these projects were efficiency assessed sis in the interests of clarity and The investment budget of 150 billion before the last Federal Transport Plan, transparency for policy-makers. euros up to 2015 also has to cover they are not being reassessed for the maintenance of the existing road current one. It would have been worth- Cost of modernising the network. In the 2003 Federal Transport while doing so, however, as numerous major road network – 212 Plan, 82.7 billion euros – more than half rail infrastructure projects, in particular, billion euros of the total budget (56 per cent) – are fall far short of the success that was The assessment procedure revealed earmarked for maintenance projects. In expected of them under the 1992 Plan. a total investment need of some 211.7 other words, for the first time in any It is precisely cost-intensive high-speed 86 Verband der Automobilindustrie TRANSPORT

rail traffic which has proven less stretches of autobahn, worth 2.2 bil- In addition to this, the railways will economically beneficial than anticipated, lion euros receive further funding for investment as only a modest 38 per cent of the in local and regional rail transport under capacity of the high-speed trains is Together with the non-negotiable the Regionalisation Law and the Local used despite their enormous cost. It is projects, the new projects constitute the Authority Transport Financing Law. By not surprising that the railways (passen- "priority needs" that are sure to be 2015, this funding will amount to some ger and goods traffic together) cover implemented. However, the new projects 14 billion euros. Added to the 63.9 bil- only 55 per cent of their costs, accord- by no means encompass all the projects lion euros under the Federal Transport ing to a study by Prognos: this means that were found to be worthwhile in the Plan, the railways thus have more than that 45 per cent of the costs are paid by cost-benefit analysis prior to the Federal 78 billion euros available for investment, the taxpayer. In contrast, traffic on the Transport Plan. As the worthwhile con- that is, the same amount as the planned autobahns more than pays for itself, and struction projects would cost far more investment in the road infrastructure by a long way. than the allocated budget, projects have (77.5 billion euros). By providing equal to be selected. The best-rated projects investment for both modes of transport, Autobahn traffic (passenger and from the new list are therefore selected the German government is enacting freight) currently covers 268 per cent of according to the budget constraints. All the system of handicaps that was the costs it incurs, that is, the state pock- the other projects are assigned to the enshrined, for ideological reasons, in the ets 2.7 times more money from tax on "additional need" category and have vir- coalition agreements of October 16, motor traffic than it spends on the auto- tually no chance of being implemented. 2002, for the 15th parliamentary term. bahns. In any case, the amount of funding left over in the 2003 Federal Transport Plan This distribution of investment does The rest of the budget is available for new projects is so small that only not reflect actual transport needs as for so-called "new" projects. Some of road projects whose benefit/cost ratio is expressed by consumers and citizens these are in fact investment projects over 5 have been assigned to the cate- through their free choice of transport on that were adopted during the last parlia- gory of projects for implementation. the market. Rather, it corresponds to the mentary term: government’s idea that it can shift The available budget for maintaining transport from the roads and air to the The 1999-2002 investment and developing the transport infrastruc- railways by means of investment. As programme (IP), worth 6.6 billion ture up to 2015 is not only insufficient but a look at the market share of the differ- euros also unfairly distributed among the dif- ent forms of transport – not only in ferent modes of transport. The 148.9 billion Germany but also in other industrial The 2001-2003 Forward Investment euros are to be distributed as follows: countries – consistently proves, only 16 Programme (ZIP), worth 2.3 billion per cent of demand for freight transport euros 77.5 billion euros are to go towards is addressed to the railways, while 72 per the autobahns and trunk roads cent is addressed to the roads. The rail- The 2003-2007 Anti-Congestion Pro- ways post market share of less than gramme (ASP), worth 2.1 billion euros 63.9 billion euros are to go towards 9 per cent for passenger transport, national railways while roads post nearly 87 per cent. This The Build Now Programme, aimed at trend is irreversible – it will not change accelerating the urgently needed 7.5 billion euros are to go towards the in the future. Even the German govern- expansion of severely congested inland waterways ment, whose integrated transport policy Annual Report 2004 87

is aimed at shifting transport from the German autobahns under the Federal to the deficit in funding for expansion roads to the railways by weighting infra- Transport Plan that was adopted in May and construction is the deficit for structure policy, assumes in its transport 2003 falls far short of needs – at a time maintenance. The existing shortfall of forecasts for the Federal Transport Plan when the state is already short of 2.5 billion euros a year is thus set to that roads will have a 70 per cent share money in all domains. Funding adds up continue. Pro Mobilität’s fears that fur- of the market by 2015 even should to 89.2 billion euros (including a contin- ther congestion on the roads is pre- the dearly-bought shift in transport gency reserve). 22.8 billion euros of this programmed under the new Transport succeed, and that the railways will com- are earmarked for new projects, which Plan will turn out to be justified if there mand at the most 17 per cent of the breaks down into some 1.5 billion euros are no changes to expenditure and market. According to the government’s a year for the planning period ending investment policy. calculations, the volume of freight trans- 2015. Thus the 2003 transport budget ported by road will grow by 126.6 billion allocation for the major road network It is therefore all the more important tonne kilometres between now and brings infrastructure investment to some that the toll revenues which will start 2015. The volume of freight transported 4.5 billion euros a year. However, it to come in from 2005 should not be by rail will grow by only 36.4 billion would take at least 7 billion euros to used to replace the general budget tonne kilometres. The Pro Mobilität develop the autobahn network accord- funding for road building, but should pressure group for the road transport ing to the precept of "sustainability". supplement it. This would allow the infrastructure rightly points out that, major roads to be modernised in line compared with the rise in demand, with needs. Unfortunately, the German expanding rail capacity costs almost government has decided to cut the twice as much as expanding road investment expenditure on roads fund- capacity. ed out of the budget by the same amount as the projected toll revenues. The ambition of the German govern- Moreover, the toll revenues will not ment to shift the thrust of transport is all be ploughed back into the roads, therefore extremely costly for the The automotive industry therefore even though the roads alone generate taxpayer. Its "equality between modes fully agrees with its partners in the them. Nearly one half will be used of transport" in reality means crass dis- Pro Mobilität pressure group for other purposes, which runs contrary crimination against road transport. The (www.promobilitaet.de) consisting to the toll concept – that is, they will fairest and most economically meaning- of the road freight industry, the automo- be used to cross-subsidise the rail- ful thing to do would be to follow the bile clubs and the construction industry, ways in contradiction of market market and make investment available that the shortfall in funding for expan- demands. in proportion to the capacity that is met sion and construction measures on the by the different modes of transport. road network – the number one trans- Investment provision in port infrastructure in Germany – for the the Federal Transport Plan Funding for autobahns and period of the Federal Transport Plan already slashed trunk roads is out of line 2001-2015, amounts to at least 17.5 bil- The volume of investment provided with needs lion euros. The Federal Transport Plan for in the Federal Transport Plan is Since infrastructure funding has even testifies to unfundable needs of already insufficient to cover the actual been allocated contrary to market 30.7 billion euros (the "additional need" needs of the transport infrastructure. It demand, the budget available for the for autobahns and trunk roads). Added is all the more shocking that, in March 88 Verband der Automobilindustrie TRANSPORT

2004, just a few months after adopting grown. Let us also bear in mind that the and consortium are currently negotiat- the Federal Transport Plan, the German German government introduced ing. government once again slashed the environmental tax back in 1999 with the already insufficient transport funding in aim of funding the pension system. The Despite this, the German its medium-term financial plan for 2004- global budget reduction is proof that government is insisting on cutting 2008. For the period 2004-2007, planned this plan has failed. Now, drivers are investment. The repercussions of this investment in the major roads was being asked to put their hands in their become plain if we remember that between 4.8 billion euros and 5.1 billion pockets twice over to fund pensions. investment in Germany’s major roads is euros a year; under the current budget With the implementation of all five steadily sinking below the level of the plan of March 2004, this has been cut to stages of environmental tax, they are year 2000 – when investment totalled between 3.9 billion euros and 4.1 billion already paying an annual 8 billion euros 4.22 billion euros, marking the lowest euros a year, a cut of all of 20 per cent. a year for pensions, and now investment point since 1993. With projected invest- This puts investment at its lowest level in road-building is being cut into the ment at these levels, there can be no since Germany’s reunification. bargain. question of launching new building projects for the major roads. Even on- The government justifies these Under the Koch/Steinbrück concept, going construction projects and necessary cuts with three arguments: first of all, subsidies are to be reduced by the maintenance work are having to be a "global budget reduction" is required same proportion in all areas of the gov- spread out over time. According to the to fund pensions; secondly, the disman- ernment budget. The German govern- Pro Mobilität transport infrastructure tlement of subsidies in line with the ment is using this as a welcome pretext pressure group, "the German Koch/Steinbrück position paper makes for cutting investment in roads – which, government is turning away from trans- spending cuts necessary, and thirdly, incidentally, has a high incidence on port infrastructure policy and planning a since toll revenues will not start coming employment – while other areas are transport collapse". The Special Confer- in until after the end of 2004, this short- virtually unaffected. However, invest- ence of German Transport Ministers fall has to be made up. ment is anything but a subsidy, as the made its position clear during its meet- Kiel Institute for Global Economy has ing on March 30. This stated that the All three arguments are absolutely made clear. Even the public objection by planned cuts were unacceptable and invalid. The "global budget reduction" – minister presidents Roland Koch and would do long-term damage to that is, cuts across the entire budget – Peer Steinbrück that their concept Germany’s economic status and thus to is necessary because the Social Minister should not be misused as a pretext to growth and employment. Ulla Schmidt failed to fill the gap in the cut investment has not changed the pension system. Once again, social con- government’s position. VDA and the Confederation of sumerism has been given preference German Industry have drawn attention to over investment in the future. Under the The government’s argument that the fact that, at a time of EU enlargement, original plans by the Transport Ministry, investment cuts are necessary to Germany is sending out the wrong sig- 244 billion euros were to taken out of offset the toll revenues that will not nals regarding transport policy. Transport the transport budget every year from start to come in until after the end of policymakers are asked to put an end to 2005 for this purpose. The new invest- 2004 does not hold water either. Much these suicidal investment cuts and to ment plans are for double this amount – of this shortfall will be made up by develop and modernise the major roads 488 billion euros a year – as the finan- the fines and damages paid by the in line with the challenges of an enlarged cial shortfall in the pension system has toll consortium which the government Europe. Annual Report 2004 89

Road Traffic: Cash Cow and Railways drip-fed by Goldmine for Financing Policy mineral oil taxpayers One principal reason why the gov- ernment is building up a budget surplus from charges on motor traffic is to be Rising burden of taxation for around 30 per cent of the total tax able to use a major part of the cash to on automobiles on this fuel. It accounts for more than subsidise the railways. Even ten years If road building is underfunded, it is one-fifth of the total tax of 66 cents after the railway reforms, the railways not because road users do not pay a litre on low-sulphur fuel. With imple- are a long way off paying for them- enough charges. Quite the contrary: mentation of the final stage of the selves. Neither has much progress been with mineral oil tax, motor vehicle tax environmental tax, on January 1, 2003, made towards eliminating the need for and VAT on fuel, motor traffic provides revenues from this tax on petrol and subsidies. Although Deutsche Bahn AG far more cash than would be necessary diesel between 1999 and 2003 added likes to point out that taxpayers pay for an adequate infrastructure policy. up to 33 billion euros. 108 billion euros less since the reforms The government uses the surplus to were introduced, this is in comparison fund services other than transport or, These figures alone show that there with a fictive situation in which the within the transport sector, to subsidise can be no question of more rises in need for subsidies rapidly grows, as in rail transport which runs at a deficit. environmental tax without the risk of 1994 before the reforms. However, if serious consequences for the economy. we look at the taxpayers’ contribution to At 53 billion euros, taxation on road The steady encroachment on drivers’ the railways today with that in 1994, traffic adds up to three times the purchasing power is putting a psycho- we can see that it is more or less equal amount that the national, länder and logical brake on the purchase of new (20.6 billion euros in 2002) to the figure local governments spend on maintain- cars and on Germany’s economy, with in the year of the reform (19.0 billion ing and developing the roads, currently drivers attempting to offset the in- euros). Of these 20.6 billion euros, 17 billion euros a year. By tightening creased cost of running a vehicle by 6.2 billion flow into the railways’ assets the mineral oil screw yet further, the putting off buying a new one as long to pay off bad debt. 14.4 billion euros go government has virtually doubled its as possible. As a result, the average towards investment in the rail network, revenues from motor traffic compared age of automobiles on German roads subsidies and the regionalisation funds, with 1990. has risen from 6.8 years to 7.4 years to enable the länder, as the local public since 1997. transport provider, to finance local rail This has made driving disproportion- transport. This "regionalisation funding" ately expensive. While the cost of living But the main impact of the environ- of 6.8 billion euros (2003) alone is paid has risen by just under 30 per cent, the mental tax has been to put Germany at for out of mineral oil tax revenues, in cost of maintaining a car has soared by the top of the European rankings for accordance with the German Regionali- 45.6 per cent. This leap has been exac- taxation on fuel, lowering its attractive- sation Law of January 1, 1994. For this erbated by the implementation of all five ness for investors in comparison with cross-subsidy alone, each and every stages of the environmental tax. Some other countries. This disadvantage is driver pays 12 cents for every litre of 70 per cent of the price of fuel is tax. especially damaging to the international fuel bought at the petrol pump. Invest- Given a tax rate of 47 cents per litre of competitiveness of the Germany road ment in the rail network, too, is paid pri- diesel, environmental tax now accounts haulage industry. marily by the taxpayer. 90 Verband der Automobilindustrie TRANSPORT

Allocation of revenues from mineral oil tax on motor traffic

In billions of euros

Environmental tax1 Regionalisation funding 2 Other purposes3

2.3 5.1 7.5 9.9 11.9

3.84.0 4.5 8.2 6.1 6.4 6.6 6.9 5.7 6.8

24.7 24.7 24.2 22.7 23.1 22.8 21.6 20.3 19.4 18.1

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 1To fund pension consolidations 2 Financial aid for local public transport 3 including financing of road infrastructure VDA statistics

Besides the money which is trans- the shift in freight transport from the railway reforms are implemented. It is ferred from other sectors, the railways roads to the railways that the govern- no coincidence that even ten years are also subsidised through tax reduc- ment hoped to attain. On the contrary, after the adoption of the reforms, DB tions. For example, the railways only pay the share of the railways in freight AG still has a near monopoly. It has a for half of the power they use. In addi- transport has fallen from 17.3 per cent 94 per cent share of all rail freight, tion, only half the VAT rate is applied to to 15.9 per cent since the reforms of and a 99 per cent share of all rail pas- local passenger transport, and the coali- 1994. The railways are still unable to senger transport. The situation is tion government intends to extend this raise their share of the transport market. scarcely better in local public transport, preferential treatment to long-distance The strategy that transport policymakers where it commands some 90 per cent passenger travel as well. have pursued for years, of subsidising of the market. the railways with money from the roads Railway reforms need in an attempt to shift transport from one However, if things go as DB AG to be continued to the other, has evidently failed. plans, the stock market flotation of the Although from 1998 onwards, trans- company in 2006 will encompass the port policy has been aimed at making If there is no legal separation of DB group – that is, including DB Netz travel by road more and more expensive the railway networks and railway opera- AG. In order to guarantee investors suf- while rail transport has been subsidised tions, there is a danger of discrimination ficient, secure returns, it intends to free to the tune of over 178 billion euros out against potential competitors of DB AG, itself of the financial burden that the rail of tax revenues since the adoption of who could be refused access to the net- network represents by pushing the the railway reforms, we have not seen works, when subsequent stages of the costs onto the taxpayer. To do so, DB Annual Report 2004 91

AG is to receive a permanent, fixed sub- national railways is coming from the subsidies. For road construction and sidy from the budget of at least 2.5 billion European Union. The EU Parliament and development measures, the com- euros, as well as subsidies covering all the EU Council of Ministers recently mission recommended that the com- the costs of developing the network. issued a communication in which they panies be granted interest-free loans or These plans on the part of DB AG were agreed to a complete opening up of the government subsidies from the various made known in March 2004. European rail networks for freight, taxes on motor traffic. The road network including cabotage, from 2007 (Second would be maintained through tolls on There can be no question of this Railway Package). National railway poli- infrastructure use, the revenues from method of privatisation. It has strictly no cy has to be integrated into this Euro- which would be earmarked for that pur- bearing on a market economy. It is in pean context, as the railways will only pose and paid to the companies. The reality a guarantee of return on invest- be able to play a role in a fast-growing commission’s recommendations were ment while shifting the investment risk European transport system in the long thus in line with a market economy- to the taxpayer. It does not even elimi- term if they function seamlessly based transport policy, as they ensured nate the principal defect in the structure throughout Europe, across the bound- that the individual modes of transport of DB AG as it currently exists, that is, aries that still exist between the national financed their own infrastructure, thus that the networks and operations are in rail networks. providing a basis for fair and efficient the hands of a single organisation with intermodal competition. the risk of potential competitors being Pällmann recommenda- shut out. tions are a benchmark Prerequisites for By adopting the law introducing a use-related toll Another reason for not giving up road-use toll on heavy-goods vehicles The automotive industry welcomed demands that the rail networks be sepa- using the autobahns, the German gov- the principle behind the Pällmann Com- rated from operations is in relation to ernment is determined to gear road mission’s proposed reforms and is open European railway policy. We have to funding more closely to road use. The to the notion of a transition from tax- continue pushing for separation, and for recommendations of the transport based to toll-based funding. It views this a flotation of the transport arm of DB infrastructure commission which, in reform concept as a means of strength- AG only. It is this form of privatisation September 2000, submitted a viable ening Germany’s competitiveness as which is most likely to trigger market proposal for a gradual transition from centre of the automotive industry. This is forces in rail transport. Since the auto- tax-based funding to a "user-pays" toll why, when formulating its core demands motive industry is a major freight cus- system, form an economic benchmark to the German government for the 15th tomer of European railways, this is in its for judging the organisation of the toll. parliamentary terms, which were best interests. Set up by former transport minister submitted to the coalition parties during Franz Münterfering and named the the coalition negotiations, the industry One key step towards opening up Pällmann commission after its chairman, pushed hard for implementation of the the railway networks will be taken with this commission basically proposed proposal. However, two basic conditions the adoption of the 3rd Amendment to creating independent infrastructure have to be met: the General Railway Act in implementa- companies to operate Germany’s auto- tion of the 1st European Railway Pack- bahn and trunk roads, railways and Toll revenues have to be earmarked age. As with the liberalisation of road waterways. These private companies for investment in the roads on which transport in the 1980s and 1990s, the would finance themselves from revenues they are levied, and not used as main impetus for deregulation of the from user charges, with additional state cross-subsidies, 92 Verband der Automobilindustrie TRANSPORT

Any additional fiscal charges have to goods vehicles with a permitted gross when it comes to harmonisation and be offset by reductions elsewhere laden weight of 12 tonnes and over. additional charges, and by this move from The toll revenues are to fund road proj- tax-based to user-pays funding. Until To guarantee fair fiscal charges, ects including twelve on severely con- assurance is given that the toll on trucks the burden of mineral oil and motor gested stretches of autobahn, totalling will be fully earmarked for the autobahns vehicle tax, for example, should be 525.5 kilometres. The tolls levied on and trunk roads, there can be no question relieved by an amount equivalent to these stretches will be paid by the of further privatisation or a toll on cars. the additional charges being imposed transport infrastructure financing com- on drivers for infrastructure use. This pany, newly established by law, to pri- Revenues used for railways would be the logical consequence of vate operators to fund the development instead of roads changing from tax-based to user-based measures. The operators will also A transition to funding from road- financing. receive additional funding from the road use tolls would only make economic construction budget (around 50 per sense if all of the revenues were reinvest- Road-use toll in Germany cent of the construction costs) to cover ed in the transport routes on which the betrays the trust of the the infrastructure costs of vehicles not toll was levied. However, the Autobahn transport industry liable to the toll (cars and light trucks). Toll Act adopted by the government is The 2003 Federal Transport Plan is In the jargon of the trade, this system worlds away from this basic principle. the first ever to include projects for the of financing is called the "A" model. It autobahns and trunk roads which are will be used to fund road construction The government bill originally provid- funded not by taxes, but by road-use projects under the Anti-Congestion ed for an average 15 cents per vehicle tolls. Five projects, covering 31.2 kilome- Programme (2003-2007). kilometre. This would have brought in tres, are concerned and will be imple- annual toll revenues of 3.4 billion euros. mented and operated by private opera- With this move, one further, albeit 621 million euros of this were to go to pay tors, a funding method known as the small, step appears to have been taken the costs of running the system (operat- "F" model. This is provided for by the away from tax-based funding to a user- ing and inspecting the toll facilities). Of Law on Private Financing of Autobahn pays system. However, the way in which the remaining 2.78 billion euros, 300 mil- and Trunk Road Expansion, under which it has been implemented is out of line lion were to be paid in compensation to private funding of road projects has been with the recommendations of the trans- the German haulage industry. For the legal since 1994, although only for con- port infrastructure financing commission moment, this is to be done by refunding structions such as bridges, tunnels or and in many ways contradicts basic an equivalent amount in mineral oil tax mountain passes. Under the "F" model, economic principles. The most serious to haulage companies to offset the com- private operators are therefore entitled to inherent defects are that the revenues petitive disadvantage they are suffering build and operate this kind of road and are not earmarked for the roads, the compared with those of other EU coun- to finance the work by levying a road toll. additional taxation is not offset else- tries (harmonisation). Another 800 mil- where and the transport infrastructure lion euros were to be paid into the gen- A far more significant means of financing company is not sufficiently eral budget to offset the loss of revenues financing is the planned satellite-assist- independent. from the Eurovignette. ed toll on heavy-goods vehicles. After several delays owing to technical prob- The confidence of drivers, the trans- This would have left a mere 1.7 billion lems, this is now to take effect on Janu- port industry and transport customers in euros – less than half – for investment in ary 1, 2005, and will apply to all heavy- transport policy has been deeply shaken the infrastructure. But not even this amount Annual Report 2004 93

is to be reserved to benefit the road vehi- kilometre. This rate will remain valid until Toll comes on top of cles on which the toll was levied. Instead, agree-ment is reached with the EU on already high fiscal charges it will be distributed between the roads, which form harmonisation is to take. Even The toll concept is defective both as railways and inland waterways. An ideo- with a lower toll rate, 2.1 billion euros still regards how the revenues should be used logical objective that consists in distribut- remain for infrastructure projects. and how much they should be; the gov- ing revenues from a road-use toll on ernment even intends to go against the trucks equally between the roads and The automotive industry welcomes basic precept of "budget neutrality" – railways is absolutely incomprehensible. the fact that this money will now at least offsetting the rise in taxation by compen- be earmarked for the transport sector. sation elsewhere. Under the ordinance The opposition parties have at least However, even if word has been given that was adopted last year fixing the rate criticised the failure to earmark toll rev- that a larger share than originally of the toll, vehicles pay between 10 and enues for the roads and have obtained planned by the government is to go to 17 cents per vehicle kilometre depending a ruling from the Bundesrat (upper house the roads, this does not alter the funda- on which of the two axle categories and of parliament) that, once the costs of mental defect in the system, that road three emissions categories vehicles fall running the system have been deducted, traffic cross-subsidises the railways and into. The average rate is thus 15 cents per the remaining revenues should be paid inland waterways. vehicle kilometre. Until agreement is into the transport budget and not into the reached with the EU Commission on what budgets of other policy sectors. They also In its transport policy, the government form harmonisation for the German got an assurance to the letter that not did not intend to use the toll revenues haulage industry – totalling 600 million half, but "the majority of" the revenues that it expected to get from January 2004 euros – is going to take, the average toll would be used for the roads and not in addition to the transport budget, as rate will be 12.4 cents per vehicle kilome- distributed equally among the different recommended by the transport infrastruc- tre.T his will raise annual toll revenues modes of transport. The Bundestag and ture financing commission. Instead, it cut of some 2.8 billion euros. In either case, Bundesrat agreed to this compromise the tax-funded investment provided for in the burden placed by this distance-relat- on May 22-23, 2003. the 2004 transport budget by the antici- ed tax on the haulage industry is much pated amount of toll revenues. When the heavier than the previous, time-related The agreement also contains one other introduction of the toll was postponed, Eurovignette. The Eurovignette "only" deviation from the government’s original the Bundestag budget committee froze amounted to a little under 500 million bill. The contribution for "harmonisation" the budget, which resulted in an invest- euros. An average toll rate of 15 cents per purposes was originally set at 300 million ment shortfall of 2.1 billion euros in the vehicle kilometre – minus the planned tax euros. The CDU-CSU-governed länder 2004 transport budget. The freeze was relief of 600 million euros for the haulage succeeded in getting this tax relief dou- only lifted when the transport minister industry – would thus mean a nearly bled in the Bundesrat to 600 million succeeded in proving that the govern- sixfold rise in tax, as would the reduced euros. Until the harmonisation method ment could take the operator consor- rate of 12.4 cents per vehicle kilometre that the transport industry would prefer – tium to arbitration and negotiate com- (2.8 billion euros instead of 0.5 billion a refund on mineral oil tax – has not been pensation of the lost revenues. Some euros). This is far from "budget neutral". inspected for conformity with EU law by hasty patching up was done to more or Coming on top of the five stages of the the European Commission, there is no less maintain investment for 2004, but environmental tax, the toll represents need to levy an additional toll to fund it. only at the cost of drastic cuts in invest- another turn of the tax screw on the Instead, the average toll rate has been ment in the subsequent years up to haulage industry and will act as a brake reduced from 15 to 12.4 cents per vehicle 2008, as it subsequently turned out. on the economy and long-term growth. 94 Verband der Automobilindustrie TRANSPORT

EU harmonisation still However, basing his assumptions lence figures. This imputes 3.4 billion outstanding on a position paper in March 2004, the euros to the heavy-goods vehicles using It is all the more important to find a German transport minister is firmly con- the autobahns in 2003 – 45.3 per cent of reliable solution for harmonisation vinced that an agreement will be found the overall costs for the entire autobahn before the introduction of the toll. How- on a viable method of harmonisation network. This is the amount that will be ever, the EU Commission is currently before the end of the year. In this paid to the government in the form of inspecting the issue of refunds on case, the toll would be introduced, as revenues from the toll on heavy-goods mineral oil tax, as it could be con- originally planned, at an average rate of vehicles. strued as an infringement of the dis- 15 cents per vehicle kilometre from crimination laws or the single European 2005. However, the question of what The average 15 per cent per kilome- market. form harmonisation will ultimately take tre cost of the roads that emerges from is still open. this calculation should not, however, Discussions are therefore going on lead us to suppose that a 15 cent toll to find alternatives, either by reducing Toll revenues much higher rate is justified. For this to be true, two vehicle tax to the minimum European than the road costs conditions have to be fulfilled: requirement, or introducing an The amount of the toll was justified innovation-fostering programme for by a road costs calculation for the auto- Firstly, the fictive operator model especiallylow-pollution vehicles in the bahn and trunk road network that was would have to be implemented and the EURO 4 and EURO 5 emission ranges. conducted under the auspices of Prog- autobahn network run by an operating This programme would encourage nos AG and submitted in spring 2002. company. Since this is not the case, and the purchase of these categories of This report is extremely important, as funding will continue to come out of the trucks by means of shorter depreciation EU Directive 1999/62/EC states that public purse, the toll should not take the times or the provision of special invest- road-use tolls have to be strictly geared cost of capital into account. With the ment aid. to road costs and allows for a scaling of nominal long-term interest rate at 4 per toll rates according to vehicle class and cent, the cost of capital (equivalent to After talks with EU transport com- the EU emission categories. 40 per cent of the overall road costs!) is missioner Loyola de Palacio in March so high that deducting it would nearly 2004, the German transport minister The calculation concludes that – halve the toll rate. Manfred Stolpe was confident that the cost of capital included – the German refund system would be implemented it autobahns cost 7.51 billion euros in Secondly, the legislators are assuming it “passed the test” of the European 2003, and will cost over 8.03 billion that road costs should be paid for solely Court of Justice. euros in 2005 and 9.3 billion euros by through the toll. This would be a complete 2010. The experts also calculated the turnaround from the former view that However, doubts have been cost of the trunk roads, which they state mineral oil tax and motor vehicle tax are expressed as to whether the procedure will rise from 7.18 billion euros in 2003 special taxes on traffic aimed at covering will set aside the EU’s objections on to 8.64 billion euros by 2010. infrastructure costs. However, according the grounds of discrimination and non- to a calculation by the Deutsches Institut conformity with the single European The toll rates for individual vehicle für Wirtschaftsforschung (DIW, German market. The EU commissioner for the categories by distance, vehicle design Institute for Economic Research), Single Market recently expressed his and cost type are calculated by means commercial vehicles travelling on auto- objections in stronger terms. of a cost allocation model using equiva- bahns already cover 217.8 per cent of Annual Report 2004 95

their costs. By way of comparison, a simi- that is, trucks and coaches – have had tolls on the Brenner autobahn to be lar calculation for Deutsche Bahn AG to be fitted with a "go box", over which discriminatory and unjustifiably high. reveals that rail freight for 1997 covered the toll, depending on vehicle weight Austria intends to maintain these at the most 20 per cent of its costs. and emissions class, is paid at an aver- "special tolls" of 1.5 euros per kilometre age rate of 28 cents per kilometre. The on specific transit stretches of auto- DIW’s findings further show how far toll rate in Austria is thus more than bahn. Whatever the case, a few weeks road cost calculations depend on the twice the planned rate in Germany. after introduction, the Austrian toll sys- parameters applied. A thesis from the Hardly surprisingly, haulage customers tem is functioning almost without a hitch. University of Giessen, published in 2003 and the haulage operators alike are Over 98 per cent of commercial vehicles and based on an expenditure-focused astonished that the EU authorities have are paying the toll correctly, which means road cost calculation method following not objected to this exorbitantly high that the number of "toll dodgers" is no a comprehensive comparison of meth- rate, especially as the European Court higher than for the autobahn vignette ods, calculated a single rate of around of Justice a few years ago judged the payable by cars. 8.6 cents per vehicle kilometre for a typ- ical articulated truck. Under the German government’s plan, 15,000 euros are Financing Strategies in imputed to an articulated truck in this category (emissions class EURO 3) trav- an Enlarged Europe elling 100,000 vehicle kilometres a year, while according to the study, a mere Transport infrastructure sultation phase, the automotive, 8.574 euros would cover the road costs financing company a construction and haulage industries actually caused by it. façade repeatedly asked that the company Unlike in Germany, revenues from should be allowed to borrow money This debate on road cost calculation the Austrian toll on commercial vehicles to ensure that there is enough and, methods clearly shows that a 15 cent are strictly reserved for developing the above all, secure funding for construc- toll on trucks, on top of all the other fis- autobahn network. They are not paid tion and expansion work. In its current cal charges, is fully unjustifiable. Even the into the general budget but directly to form, the transport infrastructure financ- reduced rate of 12.4 cents is very high. the ASFINAG autobahn operating com- ing company is no more than a sub- During talks in May 2003, VDA sug- pany and back into the roads. department of the German Transport gested to both the EU Commission and Ministry. Compared with the commis- the German länder that the rate should This is not yet the case of the sion’s recommendations, the company be reduced to a maximum 10 cents. German transport infrastructure financing is simply a façade. company. According to the act of June Austria successfully 28, 2003, establishing the company, it Trans-European networks introduces a toll on may only use the toll revenues that the expanding commercial vehicles German government makes available to With the accession of the ten Cen- Unlike Germany, Austria succeeded it – it has no title to the revenues itself. tral, Eastern and South-Eastern European in introducing an electronic distance- Moreover, the act stipulates that the countries to the EU on May 1, 2004, related toll system by the scheduled company has to be a limited liability the single European market has grown date of January 1, 2004. Since that date, company, which means that it cannot by nearly 75 million inhabitants and all commercial vehicles over 3.5 tonnes – take out private loans. During the con- 739,000 square kilometres. This will 96 Verband der Automobilindustrie TRANSPORT

Passenger transport in the EU up to 2010 date of completion for all of the projects was 2010. In billions of passenger kilometres 408 6,000 However, by 2002, it was clear that Air the EU subsidy was not enough to allow Railways 400 5,000 Public road transport 281 the projects to be completed on sched- 562 Cars ule. Of the 15 priority projects, only 303 157 three were already completed, and only 4,000 466 268 five of the other 12 projects could be 417 74 completed by 2010. Most of the delays 3,000 248 were on cross-border projects. On this 389 33 point, the EU Commission took a critical 2,000 219 view of the fact that the member states 308 were cutting their investment in trans- 1,000 1,582 2,295 3,199 3,789 4,559 port. While the member states were investing 1.5 per cent of GDP in the 0 roads as recently as the 1980s, this has 1970 1980 1990 2000 2010* since sunk to below 1 per cent. *Forecast EU Commission Given the anticipated growth in trans- port following the accession of the new member states, the European Commission cause a further leap in the geographical the "priority" projects as listed by a and European Council proposed revising distribution of labour and raise growth special work group, known as the the guidelines on the trans-European and prosperity. However, one prerequi- Christophersen Group, which was made networks and extending them to the year site for an increased geographical divi- up of state and government representa- 2020. The results were submitted by the sion of labour is a trans-European trans- tives and chaired by the former EU work group responsible in a report port network that satisfies needs. This commissioner Henning Christophersen. known as the Van Miert Report. Some will come about if the appropriate exist- of the priority projects listed in it are ing transport routes within the member On July 23, 1996, the European the, as yet uncompleted, priority projects states are linked together throughout Parliament and the European Council from the 1996 guidelines (known as the Europe, closing the gaps in the intra- adopted the common guidelines on Essen Projects), as well as 22 new proj- national and international transport developing the trans-European transport ects. The member states concerned by routes. This task calls for commitment networks which, based on the findings these projects have pledged to begin across all states at the European level. of the Christophersen Group, defined implementing 18 of these projects by 15 priority projects and the form of aid 2010 at the latest, which will ensure that To achieve this, Article 154 of the they were to receive. The aid basically they will be operational by 2020. Maastricht Treaty provides a legal consisted of a 10 per cent investment basis for mandating the EU to provide subsidy from the EU (direct subsidy). Total investment for all priority proj- aid for developing the trans-European Overall investment in these projects ects (the outstanding Essen Projects net-works. This aid was focused on was 400 billion euros and the proposed plus the 22 new ones) is 235 billion Annual Report 2004 97

euros (112 billion euros of which are currently being discussed by the Par- welcomed on principle. However, we have allocated to the Essen Projects). liament and Council of Ministers. The to bear in mind that the priority projects Parliament especially would like to see make up only one small part of the On October 1, 2003, the European numerous additional projects listed. planned network. In addition to this, the Commission submitted a proposal to the Van Miert Group defined other projects European Parliament and Council to As to the question of how the Euro- that are necessary to constitute an ade- declare the projects recommended by pean Union is to fund these priority quate trans-European network, but which the Van Miert Group as priority (includ- projects, the Parliament and Council of could not be classed as priority because ing the Galileo satellite navigation sys- Ministers agreed, after lengthy debate of restricted EU funding. These projects tem, the Danube regional development of several amended Commission are now being considered for limited aid project, the construction of high-speed proposals, to raise the subsidies for (for example, under the EU Structural or shipping channels, interoperability of cross-border itineraries and for Galileo Cohesion Fund). The required investment the transport network on the Iberian from the current 10 per cent to 20 per is 375 billion euros, which brings the peninsula, and construction of a cent. The Commission is further hoping investment need for the entire trans- Gdansk-Vienna autobahn). However, it to raise the total funding available for European network (priority and common is questionable whether the EU’s choice the trans-European networks under the interest projects) to some 600 billion of projects reflects the actual role of the EU budget for the next long-term finan- euros. various modes of transport in the trans- cial forecasts in 2006. port system of the enlarged European Despite the planned rise in EU aid, Union, as most of them are intermodal The EU’s intention to step up its the member states concerned by these projects. The final list of projects is financial commitment to the TEN is to be projects will have to provide most of the investment. Given their financial position, the need to cut spending to Freight transport in the EU 15 up to 2010 comply with the Maastricht Treaty and In billions of tonne kilometres the secondary ranking given to infrastructure policy, it is doubtful Inland waterways 167 whether the member states will be pre- 2,000 Railways Road freight 333 pared to provide this investment.

125 1.736 Infrastructure funding in 1,500 249 the new EU states 107 1.348 Preparing their transport infrastruc- 256 ture for the anticipated demand up to 1,000 105 290 974 2020 is just as urgent an issue for the 103 282 new member states as for the existing 717 500 fifteen. While the average length of the 487 autobahns in the EU of 15 was around 16 kilometres per 1,000 square kilome- 0 tres, some of the new member states 1970 1980 1990 2000 2010 have little more than 1 kilometre per EU Commission 1,000 square kilometres. The most serious 98 Verband der Automobilindustrie TRANSPORT

situation is in Poland, the country Hungary levies a time-related toll In Slovakia, a vignette (annual, fortnight- with the highest population. The Polish on the M1, M3 and M7 motorways ly or 1-day) is obligatory on certain autobahn network is just 400 kilometres (annual, monthly or weekly vignettes) stretches of road. The vehicle classes long, while Poland’s surface area is depending on vehicle class (car/motor- are the same as in the Czech Republic. some 313,000 square kilometres, cycle, small truck/caravan, truck/ making autobahn density 1.3 kilometres coach). On the M5, there is a toll for Even so, it is questionable whether per 1,000 square kilometres. Most each journey rather than a time- or not these states will be able to find freight continues to be transported over related vignette. the required infrastructure investment secondary roads, some of which are in within the deadline. If not, their very poor condition. Just 3 per cent of In the Czech Republic, a vignette is economies will not be sufficiently the Polish road network is suitable required to travel on most motorways integrated into the European economy for the EU standard axle weight of (annual, monthly, 10-day or 1-day). and the productivity-raising effects 11.5 tonnes. To attain an autobahn den- The amount depends on vehicle class of opening the borders will be limited. sity comparable with that of the EU (motorcycle/car/truck up to 3.5 tonnes, These states would be well advised average, Poland would have to construct trucks/coaches from 3.5-12 tonnes, to expand their transport capacity 5,000 new kilometres of autobahn in trucks/coaches over 12 tonnes). rapidly. the next 15-20 years.

The situation is scarcely better in the Telematics – Promoting Mobility other new member states. Except for Cyprus and Slovenia, autobahn density is far below the EU average. The invest- Urban traffic, city tolls inner-city traffic by at least 15 per cent. ment needed to build up transport and telematics In recent times, traffic density had routes that could be part of the EU- The principal issue in recent months reduced the average speed through defined trans-European network in the international debate on how to opti- London to less than 17 kilometres an amounts to 100 billion euros up to 2020 mise traffic flows through urban areas has hour. The revenues for the city were for the new member states. Added to been tolls and, more precisely, city tolls. originally estimated at around 200 million this is the investment needed for roads The basic idea behind this is that private euros. This money was to be used, in that are not classed as a priority Euro- motor traffic in densely populated urban part, to promote local public transport pean project, but are important at the centres can be restricted and shifted to to prov-ide an alternative means of national level. In order to meet these public transport by levying a toll. transport in the toll zone. needs, the states are supplementing funding from tax revenues by private The most topical example of a city Although one year after its introduc- funding. The largest states apply the toll is that of London. Since February tion, the originators of the London toll following methods: 2003, drivers have had to pay a £5-day are talking of success, the impact is in fee to enter a 21 square kilometre area reality discouraging. It is true that car In Poland, a toll is levied on a small in the centre of London. 688 video cam- traffic has been reduced, as planned, by number of motorways. These include eras monitor traffic to spot possible toll 16 per cent in the toll zone and the use part of the Frankfurt an der Oder- dodgers. The aim of the mayor of and average speed of buses has Warsaw autobahn and the A4 auto- London, Ken Livingstone, in introducing increased. The other side of the coin is bahn from Katowice to Cracow. this congestion charge was to reduce that 75 per cent of retailers in the toll Annual Report 2004 99

zone complain of lost turnover. The tions. In addition, in Germany the distri- There is more to telematics smallest retail businesses are the hard- bution of administrative responsibilities than automatic toll-levying est hit. 25 per cent of the retailers are makes it difficult to allocate responsibili- A better way of reducing traffic in even planning to move out of the toll ty for a city toll (who is responsible for towns is to improve the efficiency of zone. This fall in turnover is a sign that which task, who do the revenues go to). urban transport systems by making people do not find the city centre any Many urban roads – or at least those greater use of modern information tech- more accessible than before. Moreover, on which most traffic occurs – are trunk nology. Telematics services offer the the effect has been to shift traffic out of roads which pass through towns. The greatest potential here. Experiences of the toll zone into other areas. municipalities are therefore responsible telematics systems in conurbations have for the roads, but do not own them. shown that targeted traffic information First and foremost, however, the can substantially reduce the negative London toll has not fulfilled its financial However, one recent argument in aspects of traffic. For example, dynamic objectives. Instead of the anticipated favour of a city toll in Germany is that it car park guidance systems have had an 200 million euros a year, the revenues is necessary in order to comply with the undeniable impact on the number of for the city authority are no more than Federal Immission Protection Law, which cars searching for parking spaces in 102 million euros. In order to assure lays down that particulates (PM10) have conurbations. itself of these revenues, the city authori- to be reduced by 2005 and NOX immis- ty is now considering levying the toll on sion by 2010, in compliance with a Intermodal telematics services also other, previously toll-free vehicles. These EU standard. Demands for the intro- help network the various means of include vehicles for the disabled, highly duction of a city-centre toll were raised transport in towns. For example, the environmentally-friendly cars, taxis, in Frankfurt and Munich, for example, "Stadtinfo" ("City Info") project in motorcycles and scooters. Quite apart this spring. However, people tend to Cologne sponsored by the Federal Min- from the fact that this contradicts the overlook the fact that, according to the istry for Education and Research con- original intention of the toll, even this Umweltbundesamt (Federal Environ- sisted of electronic displays at P&R car measure would only bring in another mental Agency), air quality in Germany parks on the outskirts of the city; it pro- 60 million euros a year, so that the has steadily improved over the past vided information about how long to the revenues would still be below target. 25 years thanks to desulphurisation minute it would take to travel to the city Extension of the toll zone westwards is plants and improvements in ignition centre by car or by tram, taking into also being considered. and filter technology. It is unfair to focus account the very latest traffic situation on on road traffic in the issue of future the relevant roads, as well as current For the moment, no city toll is in air quality in towns. All the indicators waiting times to the next tram. This prospect in Germany, and quite rightly point to stagnating traffic growth. enabled transport customers to choose so. There is no good reason for intro- Traffic volumes are only growing outside the fastest means of transport at all ducing one. Firstly, there are no metro- towns. times. Similar experiences were gathered polises the size of London in Germany. in four sister projects, Wayflow Secondly, Germany’s conurbations are The idea was rejected not only by (Frankfurt), Mobinet (Munich), Intermobil spread around the country and all rep- the German Conference on Municipali- (Dresden) and Mobilist (Stuttgart), resent a broad mix of activities. More- ties, on the grounds that they did not which together made up the "Mobility in over, the legal basis for introducing a want to erect new city walls, but by all Conurbations" research project. The toll in Germany does not exist; it would the other political parties in Frankfurt as unanimous conclusion was that the require modifying the transport regula- well, except Die Grünen. future lies in real-situation information 100 Verband der Automobilindustrie TRANSPORT

systems. This technology solution is far mation about local traffic conditions avail- ing, information and communications superior to fixed, prohibitive regulations able for drivers throughout Europe in their technology. 32 million euros have been such as restricted access and tolls, respective languages. Work is already made available to fund this research. because they allow for more flexible under way in Germany to include up-to- One of the goals of these new management of city traffic. the-minute information on city-centre applications is to continue lowering traffic in this service. The introduction of the accident rate and to prevent traffic With the spread of personal infor- digital radio (DAB) is expected to bring jams from forming. For example, they mation sources such as the Internet, further improvements in the promptness are working to develop systems that PDAs and mobile phones, second-gen- of traffic news. Some automotive manu- enable cars to gather and interpret eration information services are finding facturers are therefore already starting to information about their environment, their way into cars. As the information is build DAB radios into their new models. optimise safety distances and continu- not called up over collective terminals, ously share information about the state such as display panels, but over person- The system known as "floating car of the road and traffic conditions with al terminals, people have access to data" is one key means of gathering up- other vehicles (see also the chapter information that suits their own personal to-the-minute traffic information. This on Safety and Technology). One devel- needs (itinerary, when to travel, maxi- gathers data on cars equipped with opment project of interest to trade traf- mum parking fees in multi-storey car satellite navigation systems, which are fic in conurbations is the dynamic route parks, what shops or restaurants are rather like "floating corks" in traffic planner, which bases its calculations on available at their destination, and so on). flows. The sum of this data supplies a current traffic conditions and the deliv- This is making a "tailored" use of trans- virtually instantaneous view of the traffic ery times agreed with the customer. port possible for the first time. situation at any given moment in time. The automotive industry and numerous The European equivalent of INVENT Improved traffic research bodies joined forces in another is the CARTALK research project. Here information thanks to the research initiative in 2001. Sponsored by again, the automotive and telecommuni- Traffic Message Channel the Federal Research Ministry, the INVENT cations industry and the research bod- Today, dynamic navigation systems initiative (INVENT being the German ies have joined together to develop sys- already provide drivers with a means of acronym for intelligent traffic and user- tems that will enable vehicles to share avoiding traffic jams and obstacles on friendly technology) aims to develop information. The objective is to help traf- autobahns and trunk roads. Traffic jam cutting-edge driver assistance systems by fic to organise itself more efficiently warnings are fed directly into these sys- 2005 by combining transport engineer- across the entire network. tems over the Traffic Message Channel (TMC), which take them into account in their route calculations and recommen- Buses: The Ideal Solution for dations. The automotive manufacturers, Local Public Transport and Tourism suppliers and telematics service providers are currently working to make TMC more Buses form the pillar of using private motor vehicles, only 18,435 widely available. Together with the Euro- local public transport million journeys are made using local pean radio broadcast companies, they Compared with private motor trans- public transport. But even within local have formed a TMC forum within the port, local public transport plays only a public transport, motor vehicles are European telematics association ERTICO subordinate role in the transport system. highly popular, and buses are the most- with the aim of making real-time infor- While 147 million journeys are made used means of transport of all. While the Annual Report 2004 101

total number of buses stands at By 2015, the number of schoolchildren provided almost exclusively by rail and 82,600, there are only 9,083 suburban will already have fallen by just under 17 air in Germany. There are no road-based trains and trams. Buses offer seating per cent, or 430,000. This will lower the services in this market because the Per- capacity for 6.58 million people, com- base demand for local public transport. sonenbeförderungsgesetz (PbefG, Pas- pared with capacity of only 1.17 million But the other population groups will senger Transport Act) prohibits it. §13 offered by the other means of public also fall in the long term. Studies up to Par. 2 of this Act stipulates that passen- road transport together. While suburban 2050 indicate that population figures ger transport licences are not to be trains and trams cover 620 million vehi- will steadily fall, despite immigration. granted if transport needs "are sufficient- cle kilometres, buses cover 3.18 billion Falling capacity use of local public ly covered by existing means of trans- vehicle kilometres – more than five transport will further exacerbate the lack port, especially rail". This effectively times as much. Buses transport just of cost-effectiveness of rail-bound means bans buses on routes that stand in under half of the total number of local of transport with their high fixed costs. direct competition with the railways public transport passengers (47 per In contrast, thanks to their flexible capaci- (prohibition on "parallel transport with cent). Underground railways and trams, ty use (size of vehicle, service routes), rail"). The result is that long-distance and suburban and regional railways buses will further gain in importance. bus services are prohibited virtually transport only around 31 per cent and everywhere in the country, except on 22 per cent of the total number of local Given this context, the transport pol- certain niche and marginal routes (for public transport passengers respectively. icymakers ought to start revising their example, airport shuttle services). decision to invest in expanding the capaci- Buses are vital for rural areas, as ty of rail-bound local public transport All the experiences in other proven by the fact that 601,000 of the now. Similarly, they ought to revise local countries show that deregulating long- 737,000 kilometres of bus routes in public transport subsidies. The regional- distance bus services helps make the Germany are in rural areas. Here, buses are isation laws of numerous länder stipu- railways more cost-effective and much more cost-effective than rail-bound late that most of the annual 7 billion improves the long-distance transport public transport services. Unlike rail trans- euros of regionalisation funding used offerings. For example, in Sweden, port, whose network and carriages gener- to subsidise local public transport where long-distance bus services were ate high fixed costs, buses allow transport should go to rail services. The result is deregulated in the 1990s, fares fell by as of even small numbers of passengers at that 90 per cent of this funding goes to much as 40 per cent in some cases. viable cost as well as flexible route plan- rail-bound local public transport ser- ning to meet demand. In remote areas at vices. In contrast, buses are largely In this context, it is justified to ask times of really slack demand, mobility can viable without subsidies, even though how long the German legislators can be assured by a call-bus system and taxis. they transport more passengers. continue to prohibit long-distance bus Buses thus help iron out inequalities services. There is an evident need for between regions, playing a role in regional Intermodal competition reform in this domain. The European policy and planning. should be allowed on Commission has announced a European regular long-distance initiative on this issue for early 2005. Demographic development is likely to transport routes make buses even more important in the Regular, long-distance public trans- Buses and coaches – the medium to long term. In the medium term, port services – that is, transport services best solution for tourism the number of people in education is set with defined stopping points over a dis- Coach tourism is still as popular as to fall because of falling demographics. tance of more than 100 kilometres – are ever in Germany. Tourism experts are 102 Verband der Automobilindustrie TRANSPORT

unanimous on the fact that travel and while also raising demand for short holi- art communications technology (includ- holidays are still high up on the list of days. ing GPS and plugs for laptop comput- what Germans hold dear, and the coach ers) satisfy travellers’ every wish. tour operators have every chance of In the medium to long term, the benefiting from this favourable trend. coach tour sector, which is made up Moreover, the German manufactur- mostly of small and medium-sized com- ers have once again taken a pioneering Last year, coaches once again raised panies, will benefit from holidaymakers’ role in developing new safety features their share of holiday journeys with at changing demands. This will be aided for coaches. The latest German-made least five overnight stays. More than by the rise in the authorised length of coaches have a much more rigid pas- 10 per cent of holidaymakers choose cross-border vehicles to 15 metres senger cell, safety belts, numerous elec- coaches as their means of transport. which became effective this year. VDA, tronic safety features, such as the anti- In absolute figures, the number of the bus and coach manufacturers and lock braking system (ABS) and traction coach tour customers rose by around the coach tour operators had worked for control, while electronic stability control 300,000 in 2003. Coaches are especially many years to obtain this. As a result, systems are becoming increasingly popular for travel within Germany we can expect greater efficiency and widespread. In recent years, automotive (28.5 per cent of all coach and bus lower costs, especially in long-distance engineers have also succeeded in making journeys). However, people also choose tours. buses and coaches safer than ever coaches for travelling to foreign desti- before through the use of electronically nations, some 30 per cent of all coach The special advantages of coaches controlled brakes, function monitoring, journeys having Italy and Austria as are that they enable flexible route plan- failure warnings and reverse cameras. their destination. People even choose ning and are ideal for tourism, plus the Intensive development work is continu- coaches for journeys to more distant fact that they offer a full range of servic- ing on other innovations, such as elec- countries, such as Spain, Yugoslavia and es and fulfil the highest standards of tronic stability programmes (ESP), auto- Scandinavia (8.3 per cent, 4.1 per cent safety and comfort. Whether they are matic distance regulators and infrared and 1.4 per cent respectively). used for holiday tours, study trips or city devices for seeing in the dark, and the sightseeing excursions, the coaches rate at which these features are imple- Coaches are a pillar of tourism in used now offer better comfort and serv- mented in vehicles is being stepped up. Germany and Europe: they are vital for ices than many planes and trains. towns and regions which are dependent Today’s coaches have ergonomically Even in 2003, in which a whole on tourism as a source of income. But shaped, individually adjustable luxury series of coach accidents aroused pub- they also meet the changing demands seats with arm rests, foot supports, foot lic opinion, the risk of losing your life in of holidaymakers. For example, the rests and foldaway tray tables. a coach accident was lower than for any share of family travel is tending to fall, other means of transport. For example, while that of single people is rising. On top of this, the excellent drive fatalities on the railways stood at Similarly, as a result of demographic systems, chassis and braking systems 0.56 passengers per billion passenger changes in Germany, travel by older of the modern generation of coaches kilometres, while fatalities in coaches people is increasing. There is also a ris- ensure a luxuriously smooth ride. and buses stood at 0.16 billion passen- ing trend of wellness holidays. More Electronically controlled ventilation, ger kilometres (2002). Moreover, the flexible working times and the fall in heating and air-conditioning systems, safety record is improving year after travel with children is having the effect washrooms, toilets, video and on-board year thanks to ongoing engineering of spreading travel over the whole year, kitchens right through to state-of-the- developments. In the past thirty years, Annual Report 2004 103

the accident rate for coaches in of CO2 per person on a journey of for transport infrastructure projects in Germany has virtually halved in relation 500 kilometres. By way of comparison, order to prevent the member states to the number of vehicle kilometres. emissions by trains subject to the same from using the revenues as a "stop-gap" criteria are much higher – 24 kg per in their general budgets. Indeed, there is But buses and coaches not only person. no reason why the toll paid by foreign have the best accident record. They are haulage operators should go towards also unbeatable in environmental terms. Thanks to their safety, comfort and funding the German pension system, for Thanks to their high capacity use, buses environmental friendliness, as well as example, instead of the infrastructure consume less energy per passenger their flexibility as a means of transport that they use. The same applies for than any other form of transport. This even to remote tourist destinations and German haulage operators abroad. means that they also produce less CO2 their ability to responding to changing per passenger. The Federal Environmen- demands by travellers, the future Another change proposed by the tal Agency has calculated that a coach prospects for tour coaches are looking amendment is to limit the proportion of filled to average capacity emits 16 kg bright. the toll which is calculated to cover construction costs; this is supposed to cover the costs of new infrastructure, or infrastructure less than fifteen years European Harmonisation in old. The aim is to prevent infrastructure users paying to use infrastructures the Transport Sector that are already fully paid for. Were this implemented, the resulting average toll rate per vehicle kilometre would Freight transport policy in the member states the possibility of be far lower than that of the planned an enlarged Europe levying a toll on commercial vehicles HGV toll in Germany. In addition, the The fundamental concept of the which use the autobahns. The national directive states that the overall financial single European market is to enable governments have plenty of leeway as burden on the road transport sector goods and services to be exchanged to how they implement the toll, but the should not be increased if possible, but freely between the member states and to directive states that the tolls should be redistributed by replacing the system of give all the players on the market equal used to cover the costs of constructing taxes and fixed charges by a system of opportunities – including on the new roads, extending the roads and use-related charges. The member states transport market. European transport operating the transport network. The should therefore be able to reduce policy has greatly progressed in many EU lays down upper thresholds for time- motor vehicle tax below the current EU ways as far as road freight is concerned, related tolls (vignettes). minimum threshold when they introduce more so than for the railways. However, a toll system. The automotive industry some issues remained to be settled. Last year, the EU Commission sub- views this as great progress compared mitted a proposal for an amendment to with the existing directive and on cur- EU directive on road costs this directive which was supposed to be rent infrastructure funding practice in – a wasted chance an improvement on the old directive in Germany. The Confederation of German The EU directive on the levying of economic-policy terms. One of the Industry expressed the same point of a road-use toll on heavy-goods vehicles objectives of the amendment is to oblige view on behalf of freight customers in a took effect in June 1999. This gives governments to earmark toll revenues position paper. 104 Verband der Automobilindustrie TRANSPORT

Despite this, the directive did not although the amendment calls for ear- the German haulage sector is paying get majority support at the Council marking toll revenues for transport between 4,000 and 8,000 euros a year of Transport Ministers meeting on infrastructure projects, it does not spec- more than its principal competitors. March 9, 2004. The ministers failed to ify that states have to earmark revenues reach agreement first and foremost on for the infrastructure on which users A look at the individual tax rates how far the directive should dictate how paid the toll. Finally, it is incomprehensi- corroborates this. For example, motor the revenues were used. There is also ble why the Commission wishes to vehicle tax, for which EU Directive 99/62 a basic disagreement between the extend the directive to vehicles in the sets only minimum thresholds, on a states on the edges of the EU who 3.5-12-tonne category when the direc- 40-tonne truck in the EURO II emission would like as low a toll as possible, and tive is aimed specifically at trans- category in Germany amounts to transit countries like Germany who are European traffic. 1,500 euros a year. This is the second pleading for as few restrictions as possi- highest rate in the EU after Austria and ble on toll rates in the EU legislation. After this initial failure to push considerably more than in the Nether- through the amendment, it is to be lands and France. The fact that the Council of Minis- hoped that policymakers will use the ters failed to reach a compromise also time until the next reading to take Another prime example is the miner- meant that the last chance of creating a another critical look at these points. al oil tax rate of 47 cents a litre on more economically feasible legal frame- diesel fuel, which determines running work for a toll on trucks in Europe than Harmonisation of costs, making Germany second only to the existing road-cost directive before competition still the United Kingdom. May 1, 2004 – the date of EU enlarge- outstanding ment – was thrown away. For the time One key prerequisite for a properly With the accession to the EU of being, the old directive remains valid. functioning single transport market is that the Central, Eastern and South-Eastern all the players on the market should be European states, the German road However, the amendment is still on subject to the same conditions. As long as haulage operators will be put at a fur- the table, awaiting adoption by the Par- the differences in costs between enter- ther disadvantage in relation to its liament and Council. It is to be hoped prises are "natural", that is, they reflect the neighbours. In these countries, the tax that the Council of Ministers will reach different levels of productivity between burden on road freight vehicles is less agreement in the run-up to a new read- countries, they are not a problem in than half than the average rate in the ing in the interests of much-needed terms of competition. They become a EU of 15. As a direct neighbour of the infrastructure funding – and that it will problem when the cost differences are CES states, Germany is certain to suffer tackle the remaining flaws in the Com- "artificial", that is, when they have more from this competitive disadvan- mission’s draft nothing to do with productivity but result, tage than the European states further for example, from differing fiscal burdens. west. This makes it all the more urgent Because even the draft amendment to harmonise taxation. is not entirely flawless in terms of eco- Massive, government-created cost nomic policy. For example, the Commis- differences still exist in the European EU energy directive sion plans to internalise the external haulage sector. A study by Deutsches brings no progress on costs of accidents, that is, accident Verkehrsforum (German Transport harmonisation costs that are not covered by insurance. Forum) of actual mineral oil tax, motor After many years of negotiation, the Another problematic issue is that vehicle tax and insurance tax shows that European Union adopted the EU energy Annual Report 2004 105

tax directive in 2003. The EU states had to companies from the new member states cent of German transport companies begin implementation on January 1, 2004. into the existing 15 EU states (and vice fear a price slump in cross-border Among the requirements of the directive versa) is not necessarily accepted from transport to which no transition period is a new minimum threshold for fuel May 1, 2004. The EU has pledged its old agreement exists. These were the find- taxation aimed at abolishing differences and new member states a transition ings of a survey of the German transport in the tax burden on freight operators in period of several years to protect their industry in early 2004. the different EU states. This put the economies. The transition period varies minimum tax on diesel fuel at 30.2 cents depending on the new member state. Free transit through Austria per litre from 2004 and 33 cents from For Poland, for example, agreement was long overdue 2010. For Germany, the energy directive reached on a three-year transition peri- All legal obstructions to transit by makes no difference whatsoever, as the od with the possibility of a two-year heavy-goods vehicles through Austria tax on diesel fuel, at 47 cents a litre, is extension (known as the "3+2" regula- were lifted on January 1, 2004. Up to already far higher than the EU minimum. tion). The Czech Republic has a two- that date, the Alpine transit agreement Germany thus continues to lead the year transition period which could be had been in force; this had been signed diesel tax rankings in continental Europe. extended by another two years if need between the EU and Austria after pres- be, and then by one more year if there sure by the latter to limit traffic across A parallel agreement on an upper are severe market problems ("2+2+1" the Alps. It provided for quotas on trucks threshold, or even a single tax rate, was regulation). Conversely, previous volun- travelling through Austria. All truck jour- therefore all the more crucial, at least tary, reciprocal cabotage may continue, neys through Austria counted for a cer- for commercial diesel fuel. This was pro- under a bilateral agreement, from May tain number of ecopoints in an overall posed in a European Commission initia- 1, 2004. Poland and the Czech Republic quota, lower-pollution trucks "costing" tive, but was rejected by the member have already signalled their interest in a fewer points than trucks which did not states and the European Parliament bilateral agreement with Germany and comply with modern environmental after an initial reading. As a result, the consultations are already in progress standards. The system was very bureau- only constraint imposed for the moment with Poland. However, before this early cratic and had led to frequent conflicts by the energy directive is a minimum cabotage can be authorised, the trans- between Austria and the European threshold that the EU states have to port industry and the governments of Commission. take into account when setting the tax the two countries have to give their rate for diesel fuel. No genuine harmon- unanimous consent. No consultations The European Parliament and the isation is therefore possible. have so far taken place with the Czech Council of Ministers agreed on a com- Republic. A bilateral agreement seems promise follow-on regulation on Novem- Market regulations in the unlikely in this case, as the EU Commis- ber 25, 2003, despite Austria’s votes enlarged EU sion found serious shortcomings in the against it. However, Austria refuses to As from the EU enlargement on May technical and social standards of the apply the follow-on regulation, which 1, 2004, all barriers on cross-border traf- Czech road haulage sector in its means that starting January 1, there are fic between the existing 15 European November monitoring report. no restrictions on transit through Aus- states and the new member states have tria for the time being. been dismantled and the bilateral Despite the transition regulations, authorisations by EU licence in compli- around half of the German transport However, there are fears that Austria ance with Regulation (EEC) 881/92 industry fears a massive price collapse in could make transit more difficult in abolished. However, cabotage by domestic transport. As much as 89 per other ways. It has announced that it will 106 Verband der Automobilindustrie TRANSPORT

be stepping up controls, and its attempts Driving and Rest Time the German parliament) and the to prohibit trucks from using parts of the Rules – a legislative Bundesrat (upper house). A transitional transit road network, plus the demon- mishap avoided solution was found which will run up to strations and blockades on transit routes Following reforms of the labour mar- the end of 2005 and will enable com- over the Easter public holidays, are proof ket, the German government planned to panies subject to collective bargaining that the movement of goods through the implement the decision by the European agreements to continue to deploy driv- Alps is not yet free of restrictions and Court of Justice on stand-by duty for ers and vehicles as before. By then, the obstacles. However, this unresolved doctors in hospitals in national law. The directive on working times specific to problem and the resulting disputes court had decided that the rest times driving personnel will have been imple- should not be taken out on the operators during this stand-by duty had to count mented and will take precedence over and drivers travelling through Austria. as full working hours. As the law on the requirements of the general legisla- working times of 1994 did not satisfy tion on working hours. This will ensure Let us not forget the initiative by the this stipulation, the German government that German companies have equal Tyrolean regional government to ban proposed a corresponding amendment. opportunities – at least as far as work- trucks over 7.5 tonnes carrying certain However, this was couched in such a ing hours are concerned – in the Euro- types of good, including cars, on the 45- way as to refer to all sectors of the pean road haulage and coach transport kilometre stretch of the A12 Inntal auto- economy in which rest times apply. It market. bahn between Kundel and Ampass, did not take into account the fact that from August 1, 2003. This would consti- the rest times that are to be respected Ban on Sunday driving for tute an unacceptable obstacle to cross- in the road haulage sector cannot be the time being Alpine traffic and to the free movement compared with the rest times of doctors For the past five years, the EU of goods in the EU in general. and hospital staff. Precisely because the Commission has been trying to subject circumstances in goods haulage and the Sunday ban in force in the transit This measure would be extremely coach sector are different, the EU had countries of Germany, France, Austria, detrimental to the logistics of the auto- already issued special regulations on Italy and Luxembourg to a European motive industry and to freight customers the work and stand-by times of drivers, regulation. It has so far failed owing on both sides of the Alps. In April 2003, which are currently being implemented in to opposition from the Council of Minis- VDA therefore requested the European national law by the Ministry for Transport, ters. Commission and the German Ministry for Construction and Housing. Evidently, the Transport, Construction and Housing to civil servants who were charged with If this initiative were to be accepted prevent the planned ban on the grounds implementing the European Court of by a majority vote in the Council of Min- that it was contrary to the single Euro- Justice’s decision in national law had isters, this would give the EU competen- pean market. The EU Commission overlooked this. The consequence would cy to issue regulations on this matter. acknowledged that the Tyrolean regional have been that certain private sectors of The European institutions would then government was acting contrary to EU the economy would have been affected have a say in any future modification of law and initiated an infringement by regulations completely alien to them, the Sunday ban at the national level, procedure. The European Court of first and foremost road haulage and and the European Commission would be Justice has prevented the ban from coach transport. This was brought to the able to negotiate exceptions through being imposed by a decision in summary attention of the industry unions taking majority votes in the Council of Minis- proceedings, but no decision has yet part in the joint committee procedure ters. This could pave the way towards a been given on the substance of the case. between the Bundestag (lower house of gradual undermining of the ban. Annual Report 2004 107

Fair competition in Europe suggested working towards toleration of as well as fuel consumption and CO2 through consistent vehicle a height of 4.20 metres for this type of emissions. The Dutch transport research heights load throughout Europe in order to institute NEA has calculated that using Council Directive 96/53/EC lays establish fair competition for the Euro- longer and heavier trailers would reduce down a maximum height of 4.00 metres pean freight industry. the number of truck journeys by 10 per for commercial vehicles in national and cent, the distances travelled by 14 per international traffic. However, various EU Innovative concepts for cent and CO2 emissions by 8 per cent. states exploit the possibility of allowing commercial vehicles The EU Commission confirmed these exceptions, or of tolerating higher vehi- Despite the success that has been potential savings in its report for the cles in their inspection procedures. This achieved in ensuring that the road infra- European Climate Change Programme is biasing competition in Europe, as the structure is used as efficiently as possi- (EECP) Transport Work Group in 2001. higher vehicles which are permitted in ble, road capacity in Germany is increas- This puts the reduction in CO2 emissions some countries often cross over into ingly limiting the smooth functioning of that could be achieved by raising current countries, such as Germany, where vehi- freight transport, and thus sustainable HGV weights and dimensions at some cle height is restricted to 4 metres. These economic growth. There is thus a need, 11 million tonnes a year. In addition, the road haulage companies therefore have for economic and environmental International Road Transport Union (IRU) a competitive advantage over German reasons, to create a context that will fos- has conducted a study on the "modular haulage companies, as they have ter innovative ways and means of trans- concept" of vehicles measuring 25.25 greater lading capacity at no extra cost. porting freight and to discuss ways of metres in length with a gross laden improving the road haulage system. VDA weight of 60 tonnes. The results of the Since both standard and special has tabled this issue in various official study show that the concept offers sub- load containers have to be transported bodies and work groups. It has also stantial reductions in the number of across borders as part of the supply drawn up the requirements and frame- journeys (down 32 per cent), fuel con- chains of international production net- work conditions for alternative vehicle sumption (down 15 per cent), vehicle works, these differing vehicle height concepts that would enable new ways costs (down 23 per cent) and NOX emis- regulations constitute no small obstacle and means of transporting freight to be sions (down 15 per cent). to fair competition, not least for the developed. The objective is to ensure equipment transported all over the that these vehicle concepts correspond Other types of vehicle than the 40- globe by the automotive industry. For at least to the current vehicle configura- tonne truck trailer have been in use in example, in France, the United Kingdom, tions in terms of road capacity use and numerous European countries for many Norway, Sweden and Finland, vehicle road safety (for example, vehicle design years. Notable examples are Finland, the height is unrestricted. In other countries which helps conserve the roads, active Netherlands and Sweden, where alter- (Italy, Ireland and Portugal), there are and passive vehicle safety), while at the native vehicle configurations are used. various restrictions depending on vehi- same time raising the efficiency and Sweden has many years of experience cle type, all of which are higher than the capacity of the transport system. of the modular concept. In late 2000, the permitted 4 metres in Germany. The Netherlands began road trials in which strictness of inspections also varies Increasing the dimensions and modular vehicle combinations were widely from state to state. weights of commercial vehicles would used on certain roads. These consisted significantly raise rationalisation in the of various vehicle combinations with For these reasons, in a hearing of the haulage industry. It would reduce the gross laden weights of up to 60 tonnes EU Commission on May 4-5, 2004, VDA number of vehicle kilometres travelled, and measuring 25.25 metres in length. 108 Verband der Automobilindustrie TRANSPORT

Axle load is the same as, or lower than, The permitted length of non-articulat- measures – has been to increase the that of a conventional 40-tonne truck. ed buses with two axles is 13.50 tare weights of buses in recent years, This year, the Dutch transport ministry metres, and for buses with three or despite successful efforts to optimise prolonged these road trials once again, more axles 15 metres. These limits them. Yet the statutory provisions for to November 1, 2006 include any ski or luggage containers permitted axle loads and gross weights which may be attached. have remained unchanged. The commercial vehicle and trailer manufacturers represented in VDA have The maximum length of articulated This state of affairs means that bus drawn up a paper entitled "Future buses is increased from 18 to 18.75 operators, especially in Germany, are requirements for innovative commercial metres, bringing them into line with unable to use their full seating capacity vehicle concepts". This describes meas- that of articulated trucks. Buses with and that the vehicles are no longer cost- ures aimed at improving active and pas- more than one hinged joint are effective. Yet a higher gross weight does sive vehicle safety so as to avoid the exempt: approval for vehicles of this not pose a safety risk, as modern vehicles negative effects of this type of vehicle type devolves upon the respective are designed to take higher gross weights, on road safety and wear and tear on member states. and have actually been in service in roads. The contemplated designs are to France (19 tonnes) and the Netherlands be based on the current regulations for As for the turning behaviour of 15- (21.5 tonnes) for many years. weights and dimensions laid down in metre buses and coaches, rear swing- Directive 96/53/EC. out on entering a 25-metre turning For vehicles already in service today, circle at a tangent is now 600 mm. the operators are obliged to provide a Higher authorised bus guarantee that they have taken steps to lengths Directive 2002/7/EC came into force reduce weights. Depending on the place Council Directive 96/53/EC lays in March 2002 with its publication in the and type of use of the vehicles, these down the authorised lengths and widths EU Gazette. The member states then measures include reviewing the equipment of commercial vehicles in national and had two years in which to implement on board (towbar, spare wheel) and the international traffic. Under the directive, the amendment regulation into national volumes of consumables carried on board the maximum length for buses (the defi- law. Starting in March 2004, 15-metre (fuel, water and food). For buses that are nition of which includes coaches) oper- buses may now operate across borders coming into circulation, the manufactur- ating across borders is 12 metres. Since with no limitations, except in the United ers and industry associations have already buses up to 15 metres in length can be Kingdom and Portugal where the length done much to make their customers licensed in Germany and other EU limit will apply for a further year. aware of the variations in the weights of states, such as Spain and Belgium, the standard and additional equipment. Commission proposed amending the Tolerance for bus weights Training courses are being set up for directive, following a request by the The effect of additional, mandatory sales personnel and the relevant sales European Council of Ministers in March equipment aimed at improving safety documentation is being compiled. 2000, to increase the authorised length. and protecting the environment – such After lengthy discussions, a decision by as stronger passenger cells (ECE-R-66 Any significant reduction in the tare the European Parliament in mid-January Strength of Superstructures), new pas- weights of buses, leading to an increase 2002 opened the way for the pan- senger seats with safety belts (ECE-R- in useful load, will only be achieved over European use of non-articulated buses 80), more environmentally friendly the long term and successive product of 15 metres in length: engines (EURO 3) and noise-reducing cycles. The optimisation of body shells Annual Report 2004 109

and the use of light metal (aluminium, come into circulation in the months axle buses (around 19.5 tonnes) is much magnesium) and plastics will play an ahead to continue to be used. higher than the 18 tonnes permitted at important role in the formulation of new present. The twin-axle buses made by vehicle designs. VDA and the bus operator associa- the manufacturers represented in VDA tions bdo and RDA agree in principle have the corresponding operating per- To meet the demands of the opera- with the current legislation which pro- mits (for the braking systems, for exam- tors for buses with up to 50 seats, it vides for gross weights of 18 tonnes for ple); nothing therefore actually stands in may be necessary to use twin axles for twin-axle buses, and a rear axle weight the way of all of the twin-axle buses heavily equipped vehicles. Whether or of 11.5 tonnes. However, the legislators made by German manufacturers being not additional trailing axles are required must also take sufficient account of deployed as of now, if a regulation on will depend on the vehicle’s equipment certain legal requirements that have tolerances is implemented. specification. been introduced in recent years, as well as the issue of fair national and interna- VDA, bdo and RDA are therefore At the same time, however, the leg- tional competition. doing everything they can to obtain a islators will have to provide supporting tolerance of 8 per cent for the gross measures to allow vehicles which are The theoretically possible – in en- weight of twin-axle buses for a already in service and those about to gineering terms – gross weight for twin- sufficiently long transition period.

Auto ENVIRONMENT AND TECHNOLOGY 112 Verband der Automobilindustrie ENVIRONMENT AND TECHNOLOGY

Environmental Protection - A Key Goal of the Automotive Industry

The German government has pro- Starting with the production pro- claimed 2004 the "Year of Technology", cess, the industry has increasingly under the motto "The Future, Made in moved away from classic "end of pipe" Germany". Of all the sectors of industry, cleaning technologies towards in-pro- probably none is more closely associa- cess environmental protection. In the ted with "technology" than the automo- vehicles themselves, too, the trend is in tive industry. Amongst other things this the direction of integrated environmen- technological competence is also seen tal technology rather than end-of-pipe as extending to the environmental solutions. Because emissions which are sphere. The perception is justified, since not produced in the first place require the innovative technological power of no abatement or disposal. this sector has spurred enormous envi- ronmental advances. Particularly on exhaust emissions, automobiles have now achieved such Innovative technologies are the only high environmental standards that the way of achieving significant improve- debate is now focused on issues which ments in emissions, consumption and only a few years ago would have been recycling. It is only natural, therefore, regarded as of secondary importance. that the German automotive industry Despite further increases in the vehicle and its products enjoy a position at the population and total distances travelled, head of the global market. emissions of standard air pollutants in vehicle exhaust have continued to fall. On production-related environmental And in 1999, a turnaround was also

protection too, the German automotive achieved on CO2 emissions. In the industry is a leading force – for example "Year of Technology" it is worth recalling on water recycling or the minimisation of this important contribution to environ- air, water and solid waste. Germany is mental protection, and the technological pioneering advanced painting methods improvements which made it possible. which allow air pollution to be reduced to zero, while in kilograms per vehicle, prod- German vehicles lead the field in the uction waste is now in the low double balance which they achieve between figures. Recycling rates have been signifi- environmental compatibility, safety, eco- cantly increased over the last ten years. nomic efficiency and customer benefit. And the industry has achieved all these Optimal resolution of the conflicts which improvements in the field of environmen- repeatedly emerge between these ob- tal protection despite a very high baseline. jectives remains one of the most Annual Report 2004 113

Sustainable development these different elements may differ, product-related part of the environmen- triangle depending on local circumstances in tal strategy is based on three pillars: the particular continent. Alongside the ecological and economic goals, social Reduced emissions considerations are also of great impor- Reduced fuel consumption Economy Environment tance. Sustainable development is Reduced use of resources and landfill Sustain- able amongst other things a long-term space through recycling develop- ment social project. And even though production Environmental accounts for a smaller share of the envi- Society strategy of the ronmental impact of the motor vehicle, automotive industry this has not deterred the industry from All these considerations have to be investing heavily in production-related incorporated into the environmental environmental protection. Internationally, important challenges facing the auto- strategy of the automotive industry. Life- the German motor industry's environ- motive industry. cycle analysis shows that more than 80 mental performance is second to none. per cent of the environmental impact of Not only does the industry comply with Sustainable development has a a motor vehicle is generated by vehicle the strict statutory requirements, it also prominent place in the goals of the operation, with production accounting participates voluntarily in the EU eco- automotive industry. The United Nations for approximately 10 per cent and recy- audit system or its ISO equivalent. Im- Environment Programme, UNEP, defines cling for rather less than that. In the provements are implemented on an sustainable development as "develop- light of this, the main focus of the auto- ongoing and voluntary basis. The ment that meets the needs of the pres- motive industry's environmental strategy German automotive industry has a grea- ent without compromising the ability of is on product-related environmental ter proportion of companies taking part future generations to meet their own protection. The industry has introduced in the eco-audit than any other Europe- needs and choose their own lifestyle". and implemented a whole raft of mea- an country. This chapter explains the va- sures and programmes in this area. This rious issues in more detail. Sustainable development is often regarded as comprising only an environ- mental aspect. In reality, however, it is much more broadly based, with econo- mic, ecological and social dimensions. Climate Change Policy Sustainable development is not an envi- ronmental end in itself but requires business and political leaders to adopt CO2 emissions have undertaken to reduce their emis- an integrated perspective and achieve International climate change policy sions of greenhouse gases by over 5 optimisation across a whole range of is based on the Kyoto agreement. The per cent by 2008/2012 compared with issues. Any decision taken in any one of UN-hosted World Climate Conference in 1990 levels. Some countries or groups the three dimensions must always be Kyoto set binding limits and production of countries, including the European assessed with regard to its consequen- targets for the industrialised countries Union, have agreed to make consider- ces for the other two. The weighting of on greenhouse gases. These countries ably larger reductions. 114 Verband der Automobilindustrie ENVIRONMENT AND TECHNOLOGY

The Kyoto Protocol will only enter likelihood this target will, however, emissions of greenhouse gases by at into effect if two conditions are met: be met. A reduction of approximately least 20 per cent. Thus the view of the 19 per cent has so far been achieved. scientific advisory council is clearly at 1.) It must be ratified by 55 of the appro- odds with the 40 per cent goal featured ximately 160 signatory countries. However, the German government is in the coalition agreement. already looking further ahead. The coali- 2.) These countries must account in total tion agreement states that Germany European climate for at least 55 per cent of the emis- should continue to play a proactive role change programme sions of the industrialised countries. in international climate change policy. In In 2001, the European Commission the course of the international negotia- launched the European Climate Change Although the number of ratifying tions on the second commitment period Programme (ECCP) with the aim of countries meets the first condition by a of the Kyoto Protocol, Germany would meeting the EU's commitments under wide margin, these countries still do not therefore like to see the EU agree to Kyoto. A list of measures was drawn up account for 55 per cent of the industria- reduce its greenhouse gases by 30 per to ensure that the targets set by Kyoto lised countries' emissions. The world's cent by 2020 over 1990 levels. Subject are achieved. In total the working largest emitter of greenhouse gases, the to this, Germany would then seek to groups proposed more than 40 measu- USA, has refused to ratify the Protocol. reduce its emissions by 40 per cent and res capable of reducing emissions by The Russian position is therefore now would seek to tighten the targets set by between 664 and 765 million tons of pivotal. If Russia, too, fails to ratify, the the national climate change programme. CO2 equivalent. The Commission be- second condition will not be met and the lieves that these savings could be achie- Kyoto Protocol will not enter into effect. During the previous parliament ved at a cost of less than 200 euros per The European Union has promised however, former Federal Economics ton. The measures proposed for the Russia financial assistance if it deposits Minister Werner Müller already commis- transport sector are thought to be cap- its instrument of ratification. On the 90th sioned a study to look into the econo- able of achieving a reduction in the day after that date, the Kyoto Protocol mic implications of a 40 per cent target. order of some 100 to 130 million tons, will enter into force. This study put the costs of such a policy although quantification of this potential at 500 billion euros. Such additional is extremely difficult. Irrespective of developments, the EU burdens would be a bridge too far for will continue to seek to meet the Kyoto the German economy. Furthermore, in The automotive industry believes targets, despite the doubts raised both its special report "Beyond Kyoto – that cost-efficiency must be a key con- within the Commission and by a number climate change strategies for the 21st sideration when adopting climate change of member states regarding the possibi- century", the government scientific advi- measures. A study ordered by the Com- lity of unilateral action by the EU on sory council on "Global Environmental mission within the framework of the climate policy. Change" called for a reduction in global ECCP concludes that the costs per ton

energy-related CO2 emissions of 45 to of additional reductions in CO2 emis- German climate 50 per cent over 1990 levels to be target- sions are higher for road transport than change policy ed only for 2050. The advisory council in other sectors. Therefore, according to Under the Kyoto Protocol, Germany also points out that Germany has al- the study, the best way of minimising has committed itself to a very large ready achieved the target which the in- the overall economic costs of meeting reduction – 21 per cent – in its emis- dustrialised countries have set them- the Kyoto target would be to allow CO2 sions of greenhouse gases. In all selves for the year 2020 of reducing emissions from transport to rise while Annual Report 2004 115

Distance-to-target indicators for the Kyoto Protocol (2001) for climate change policy generally, at both European and national level. In percentage points

AC10 -31.7 In the second phase of the ECCP, Latvia -56.4 which is now under way, the Commis- Lithuania -56.3 sion is taking concrete steps to imple- Estonia -51.0 ment the programme by producing a Bulgaria -46.2 series of proposals for directives. These Rumania -39.4 include the directive on emissions trad- Poland -28.9 ing, which is already in force, and the Slovakia -26.2 directive on promotion of the use of bio- Czech Rep. -18.6 fuels for transport. A draft regulation on Hungary -14.4 fluorinated gases (F-gases) is also cur- Slovenia 6.0 rently under discussion. An interim report by the Commission on climate

EUA, 2003 change policy is expected by the middle of this year.

Draft EU regulation Distance-to-target indicators on F-gases for the Kyoto Protocol, EU countries In summer 2003, the Commission In percentage points presented a draft regulation for limiting EU 15 2.1 emissions of further greenhouse gases Luxembourg -28.8 covered by the Kyoto Protocol. Prior to Germany -6.8 this, in spring 2003, the German govern- Sweden -5.5 ment had already produced its own United Kingdom -5.2 France 0.4 draft regulation on substances that Finland 4.7 deplete the ozone layer or contribute to Netherlands 7.4 the greenhouse effect (climate change Greece 9.8 Belgium 10.5 ordinance on chemicals). However, the Italy 10.7 automotive industry made strong repre- 11.4 Denmark sentations that this area should not be Austria 16.8 Portugal 21.6 regulated nationally but only at a more Spain 23.8 general – at least EU-wide – level. The Ireland 23.9 government took these representations EUA, 2003 into account and decided not to proceed any further. increasing the reductions made in other to minimise economic impact. The sec- sectors. These conclusions underline the tors in which reductions are made The aim of the draft regulation pre- importance of designing climate change should be selected on a least-cost basis. sented by the EU Commission is to policies and measures in such a way as This is the way ahead for the ECCP and regulate or, in the mid-term, to ban the 116 Verband der Automobilindustrie ENVIRONMENT AND TECHNOLOGY

use of fluorinated gases (F-gases), with reducing refrigerant leakage from regulatory uniformity between member a view to reducing the projected emis- vehicle air-conditioning systems. states. Basing the regulation on the sions of fluorinated gases by approxi- environment (article 175), as was also mately 23 million tons of CO2 equivalent The EU Commission's draft regula- advocated by some, would allow mem- by 2010. It is also intended to improve tion is now calling for a further innova- ber states to adopt stricter national the tie-in with the existing Montreal tive leap. For this however, a number of rules. This, however, would involve the Protocol on substances that deplete the other factors must first be ensured. The risk of regulatory fragmentation which ozone layer. The draft regulation also most important consideration is that the would be contrary to the principles of covers vehicle air-conditioning systems. vehicle purchaser and user must acqui- the single market. re a safe, mature-design air-condition- The refrigerant R 134a is a partially ing system. Pressure from the legislator The German automotive industry is a halogenated hydrofluorocarbon (HFC) must never become so great as to lead world-leading developer of air-condition- and thus falls under the scope of the to the implementation of non-mature ing systems based on alternative refrige- Kyoto Protocol. Amongst other things, technologies. This must be taken into rants. VDA has advocated the introduc- the proposed EU regulation covers sta- account when setting deadlines. Also, tion of such refrigerants and is a leading tionary refrigeration and air-conditioning the draft regulation envisages making promoter of research in this area. For systems and appliances, but not refrige- changes to models partway through example the "VDA Alternate Refrigerant rated transport. It also largely bans the their production run, despite the fact Winter Meeting – Automotive Air Condi- use of sulphur hexafluoride as a shield that this is scarcely feasible in the case tioning and Heat Pump Systems", held at gas in magnesium casting and calls for of such a complex component as a the beginning of this year, provided a qualifications to be set for employees vehicle air-conditioning system. Regula- platform for global experience-sharing on who handle air-conditioning systems tions requiring a change of refrigerant alternative refrigerants. and appliances. should therefore always be limited to new models. The Commission is not only targeting The German automotive industry the direct emissions of vehicle air- sees itself as having an ongoing obliga- This requirement has been acknow- conditioning systems but also their indi- tion to improve air-conditioning systems ledged by the European Parliament, rect emissions, for example due to addi- in such a way as to minimise their envi- which is against introducing provisions tional fuel consumption. At the initiative ronmental impact. As early as June that would require the modification of of the Commission, a discussion is now 1992, the German industry pledged to current model series. However, the under way on changing the directives on phase out the use of ozone-depleting deadlines envisaged for the phasing out vehicle emissions and fuel consumption chlorofluorocarbons (CFCs) in vehicle of R 134a technology do not adequately to incorporate the fuel consumption of air-conditioning systems, well before the meet the industry's requirements on vehicle air conditioning systems. The deadlines required by law. The industry lead time and need to be amended automotive industry however takes the also ended the use of fully halogenated before a decision is taken by the Coun- view that it is not possible to meaningful- CFCs in the foaming of insulation plates cil of Ministers. The automotive industry ly measure the fuel consumption of vehi- for refrigerated trailers and bodies, and also believes that, as the Commission cle air conditioning systems since there replaced them with suitable alternatives. has suggested, the single market provi- are too many factors involved – for The changeover to the then new refrige- sions of the EU Treaty (article 95) should example ambient temperature, actual rant R 134a was an innovative leap provide the legal basis for the operating times. At the present time, which also had the effect of significantly regulation, as the only way of ensuring power consumption per operating hour Annual Report 2004 117

seems to be the only measurement basis policymaking. Thanks to the efforts December last year to the Federal capable of achieving comparability. If the made by the economics and transport Environmental Agency. The decision Commission continues with its initiative, ministries, this line – which VDA strictly on the allocation of emissions certifica- fuel consumption measurement would at opposed – was able to be prevented. tes is expected in the second half of least need to be based on standardised The compromise finally reached merely 2004. climate conditions, such as those of specifies an overall target for carbon Frankfurt am Main. dioxide emissions from the transport Emissions trading is a new, untested sector and private households, allowing and selective enviro-economic approach Emissions trading for flexibility in future transport and which claims to be a market-based EU Directive 2003/87/EC on the tra- infrastructure policy. instrument. It must therefore be imple- ding of greenhouse gas emissions, mented with great care in order to avoid which came into force in October 2003, The automotive industry itself is not adverse effects. It is also important to provides a further instrument for meet- covered by the emissions trading sys- ensure that it is not used in the pursuit ing the Kyoto targets. The transposition tem. However, at some of its sites it of more far-reaching political goals. of this directive into German legislation operates power stations and large boil- required the passing of various new ers for process and room heating which Emissions trading must not be allow- laws and regulations which will allow fall under the scope of the Greenhouse ed to result in an overburdening of CHP emissions trading – starting with carbon Gas Emission Trading Law (TEHG). In- facilities*), which are politically favoured dioxide – to begin in January 2005. formation about the emissions of these and promoted and which meet a large facilities for the period 2000 - 2002 was share of the energy requirements at The main instrument in this emis- passed on by the länder authorities in automotive manufacturing sites. sions trading system is the "national allocation plan" (NAP). This states the permissible greenhouse gas emissions Basic principle of the national allocation plan of a country for the relevant trading period, split between carbon dioxide German target on greenhouse gas emissions: 21% reduction emissions and other greenhouse gases. For the participating industrial sectors, allocation rules are then established Carbon dioxide Other greenhouse gases which determine the number of emis- sions certificates granted to each facili- Energy Industry T/S Transport and Households ty. The Directive does not require new climate targets to be set outside the no ET ET ET no ET no ET no ET energy-generating and industrial sector, i.e. in the sectors not included in the e.g. heat-generating facilities ET = emissions trading emissions trading system. In discussions T/S = trade and service sectors at governmental level and also in the Federal Environment Ministry, Volkswagen AG Bundestag, however, attempts were made to set a target for the transport sector as the basis for future political *) CHP = combined heat and power. Waste heat from electricity generation is used to supply industry and residential areas with hot steam and hot water. Such plants can attain an overall efficiency of over 90 per intervention and long-term environmental cent, compared with 35 - 40 per cent for conventional power stations. 118 Verband der Automobilindustrie ENVIRONMENT AND TECHNOLOGY

It must also be remembered that ing CO2 emissions in the framework of production car in the world to achieve collection and documentation of the a cost-efficient climate change policy, 100 km on three litres of fuel is a necessary data about facilities and en- that is to say a policy which seeks to German product, and even a one-litre ergy consumption involves a great deal meet climate goals at lowest overall car has already performed very well in of work. The automotive industry there- economic cost. As early as the 1970s, testing. But although these are impor- fore welcomes the German govern- the industry promised the Federal Eco- tant signals, the crucial key to reducing ment's decision that the Greenhouse nomics Minister that it would reduce the energy consumption is to reduce fuel Gas Emission Trading Law should only fuel consumption of its saloons and consumption in all categories of be applied to large furnaces. The estates sold in Germany by 15 per cent passenger car, including the top-selling administrative costs of obtaining data between 1978 and 1985. And although, mid-sized models. Here the German for all furnaces operating at an automo- for a brief period during the second half automotive industry has racked up some tive manufacturing site, as called for by of the eighties, the introduction of cata- major achievements: whereas in 1997 some parts of the EU Commission, lytic converters triggered a slight rise in it was offering only one model with a would be vast, and would not result in fuel consumption, this objective was fuel consumption of less than five litres significantly more carbon dioxide emis- met. In fact, a high level of research and per 100 km and 57 consuming less than sions being brought within the scope of development activity ensured that the six litres, its products for the 2004 European emissions trading. target was actually surpassed. model year already include two models with fuel economy of three litres, a One automotive manufacturer has 1995 saw a new voluntary agree- further two consuming less than estimated that if emissions trading were ment by the automotive industry to re- three-and-a-half litres and no fewer extended to include small facilities, the duce the average fuel consumption of than 248 models capable of achieving number of furnaces needing to be regi- newly registered saloons and estates. 6.49 litres or less. Of these, 170 models stered and monitored would increase This time the industry undertook to have a fuel consumption of less than tenfold, as would the administration and achieve a 25 per cent cut in fuel con- six litres and 48 consume less than verification costs, while the volume of sumption by 2005 over 1990 levels. five litres. Altogether, therefore, customers tradable emissions certificates would have an extensive choice of fuel-efficient increase by less than 5 per cent. The The industry is well on track to meet vehicles. automotive industry therefore advocates its target. By 2003, it had achieved a that the pragmatic approach described reduction in average fuel consumption of A vital part in the auto industry's above, namely that only large facilities approximately 21 per cent over 1990 emissions reduction strategy is played by should be included in emissions trading, levels, while the reduction in comparison diesel vehicles. The German industry should be applied in all member states to 1978 is close to 36 per cent. This im- leads the way on diesel engine develop- in order to keep the additional bureau- pressive result is attributable solely to ment. A large number of attractive diesel cracy for the industry within tolerable the industry's own research and develop- models have been brought onto the mar- bounds. ment efforts. If anything, regulatory ket in recent years. As a result, the diesel measures would have been counter-pro- share of new-car registrations in German automotive ductive. Germany has increased substantially industry fulfils its promises and is today close to 40 per cent. Never- on CO2 reduction The German automotive industry is theless, it still falls short of the share in The automotive industry is commit- leading the way in the effort to reduce some other European countries. Further ted to making its contribution to reduc- fuel consumption. The first standard- increases in the diesel share would result Annual Report 2004 119

Market-weighted fuel consumption (NEDC) of cars produced in Germany

Fuel consumption in litres/100 km

11

10

9

8 2003: 6,896

7

6

1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

VDA statistics

in further reductions in CO2 emissions. However, the intensive efforts and European automotive A basic rule of thumb is that an increase investment by the automotive industry industry on track to in the proportion of diesel-engined cars risk being squandered unless the state meet its CO2 commitment in Germany by around 10 per cent would too plays its part, by exploiting the The successful German voluntary have the effect of reducing CO2 emissions scope for reducing emissions through agreement on fuel consumption by between 2 and 3 per cent. improved everyday operating conditions. provided the model for a similar agree- Hold-ups and congestion still cause sig- ment at European level between the Innovation on the petrol engine front nificant, and unnecessary, additional European Commission and the Europe- is likewise an integral part of the auto fuel consumption. Hence strategic infra- an Automobile Manufacturers' Associa- industry's strategy. And as well as structural expansion, traffic manage- tion (ACEA). This agreement pledges making further refinements to conven- ment and information systems are a vital that the average CO2 emissions of all tional engine designs, the innovation- component of a consistent and integra- new passenger cars (M1) entering the oriented approach of the German indus- ted climate change policy in the field of EU market will be reduced by 25 per try also focuses on development of transport (see also the "Transport" cent by the year 2008 compared with alternative drive technologies, on alter- chapter). 1995 levels. This means that CO2 emis- native fuels and on features and com- sions per kilometre will be cut by 186 g ponents such as low-friction tyres, low- As well as the automotive industry, to 140 g in 2008. This target figure viscosity oils, fuel consumption indica- the state, too, must make its contribution (140 g) is equivalent to fuel consump- tors and gear displays. to reducing CO2 emissions tion of 5.3 litres per 100 km for diesel 120 Verband der Automobilindustrie ENVIRONMENT AND TECHNOLOGY

models and 5.8 litres for petrol-engined Trend in CO2 emissions models. g CO2/km

The industry also pledged that it 200 KAMA would bring to market vehicles emitting JAMA ACEA 120 g/km of CO or less, at the latest by 2 190 the year 2000. This promise has already been fulfilled. 180

In addition the European manufac- 170 turers committed themselves to an intermediate target whereby average 160 CO2 emissions would be brought within 1995 1996 1997 1998 1999 2000 2001 2002 a corridor from 165 g/km to 170 g/km by the year 2003. This target had al- EU Commission ready been achieved by the year 2000.

In its latest progress report, which and the Koreans 183 g/km. The Com- Over and beyond the current volun- relates to the year 2002, the Commission mission notes that the progress of the tary agreements, the Commission's pro- notes that the European manufacturers Koreans remains unsatisfactory and that gress report also makes reference to are on track to meet their commitment. they risk missing the intermediate target the EU target of reducing average CO2

The official figures showed average CO2 for 2004 of 165 - 170 g/km. emissions to 120 g/km by 2010 at the emissions standing at 165 g/km. The industry will be mounting an all-out effort to continue this successful trend. Voluntary agreement by the European automotive industry on CO2 emissions

The Japanese and Korean manufac- g CO2/km turers, represented by the organisations 190 JAMA and KAMA, have likewise enter- ed into an agreement with the European 180

Commission to reduce their CO2 emis- 170 sions to 140 g/km, although in their 160 case the deadline is 2009. It is difficult ACEA 2002 to understand why the European Union 150 target corridor should be stricter on the European vehi- 140 ACEA agreement cle manufacturers than on non-Europe- an manufacturers, who have been given 130 more generous deadlines. The latest 120 progress-monitoring report shows that 1994 1996 1998 2000 2002 2004 2006 2008 the Japanese manufacturers have so far ACEA achieved average emissions of 174 g/km Annual Report 2004 121

latest. It is the opinion of the automo- per vehicle, depending on vehicle size. cars but which would rather combine tive industry that such a target could Such a cost hike would have significant vehicle engineering, driving characteris- only be met at disproportionately high implications for the industry and its tics, fuel and infrastructure aspects into cost. Management consultancy firm customers. In light of these factors, it an integral whole. The EU Commission Arthur D. Little, appointed by ACEA to would be preferable to discuss an inte- should bear in mind its own studies carry out a study into the additional grated approach which would focus not which have shown CO2 abatement costs costs of meeting the 120 g target, put just on vehicle-related measures for to be significantly higher for road vehi- them at between 3,250 and 5,400 euros reducing CO2 emissions from passenger cles than in other sectors.

Emissions Reduction

Prior to the turnaround on CO2 90 per cent for carbon monoxide (CO) specific pollutants. The member states emissions, which was completed in 1999, 90 per cent for volatile hydrocarbons are required to supply the Commission the so-called "regulated emissions" (HC) by certain dates with specific informa- had already been falling since approxi- tion on air quality trends and to report mately 1980, due to improved engineer- Clearly, the efforts of the automotive in detail if certain thresholds are excee- ing and fuel quality. In some cases, industry have paid off. This is all the ded. In addition, they must list zones drastic reductions have been achieved. more noteworthy in the light of the and agglomerations particularly affected This is vividly demonstrated by calcula- Federal Environmental Agency's estima- by air pollution. Germany has completed tions using the TREMOD model, which te that two thirds of total nitrogen oxide the necessary preliminary work but has was developed by the Ifeu institute in emissions are generated by livestock not yet officially transposed the directive Heidelberg (Institute for Energy and farming. into national law. The Commission there- Environmental Research) in association fore decided to take Germany, amongst with the Federal Environmental Agency The promise which the automotive indus- other countries, to the European Court and VDA. In the current decade too, try made to the German Chancellor in of Justice. innovative technologies will result in a 1990 to reduce emissions from road further reduction in the emissions from transport to a quarter of their 1990 levels Germany has seen a drastic decline road transport. has been fulfilled. This is yet another shini- in air pollution in recent years. The Fede- ng example of a voluntary agreement ral Environmental Agency's overall envi- Despite a further increase in total made and honoured by the automotive ronmental indicator showed an index distances travelled and the total num- industry value of 50 per cent for the year 2000 ber of vehicles on the road, by the year compared with 1990 (=100 per cent). 2020 emissions will have fallen com- EU policy on clean air pared with 1990 levels by approximately: In 1996, the EU adopted a frame- Nevertheless, there are still some work directive on air quality assessment areas of Germany where certain air pol- 80 per cent for particulate matter and management. This was followed by lutants continue to exceed satisfactory

80 per cent for nitrogen oxides (NOX) daughter directives which set limits for levels. A total of three EU daughter 122 Verband der Automobilindustrie ENVIRONMENT AND TECHNOLOGY

CO emissions from transport in Germany 1990 - 2020 kt/a 7,000 Transport: 6,000 air water rail 5,000 Road transport: conventional spark-ignition cars cars with closed-loop catalytic converter 4,000 diesel cars other spark-ignition vehicles other diesel vehicles 3,000

2,000

1,000

0 1990 1995 2000 2005 2010 2015 2020 Ifeu, October 2002

HC emissions from transport in Germany 1990 - 2020 kt/a 7,000 Transport: 6,000 air water rail 5,000 Road transport: conventional spark-ignition cars cars with closed-loop catalytic converter 4,000 diesel cars other spark-ignition vehicles other diesel vehicles 3,000

2,000

1,000

0 1990 1995 2000 2005 2010 2015 2020 Ifeu, October 2002 Annual Report 2004 123

NOx emissions from transport in Germany 1990 - 2020 kt/a

1.800 Transport: air 1,500 water rail Road transport: conventional spark-ignition cars 1,200 cars with closed-loop catalytic converter diesel cars other spark-ignition vehicles 900 other diesel vehicles

600

300

0 1990 1995 2000 2005 2010 2015 2020

Ifeu, October 2002

Particulate emissions from transport in Germany 1990 - 2020 kt/a

50 Transport: air water 40 rail Road transport: diesel cars other diesel vehicles 30

20

10

0 1990 1995 2000 2005 2010 2015 2020

Ifeu, October 2002 124 Verband der Automobilindustrie ENVIRONMENT AND TECHNOLOGY

directives on air quality (a fourth direct- FEA environmental indicator: "air pollution" ive covering certain heavy metals such Per cent, 1990 = 100 as nickel, cadmium, arsenic and mer- cury is expected for 2004) have been 100 issued which set limits on pollutants and stipulate dates for compliance. For 62 more heavily affected areas, action 50 plans must be adopted and implemen- 30 ted in order to ensure attainment. Target

A study carried out for the Agency 1990 1995 2000 2010 for Ecology of the State of Lower Saxony Federal Environmental Agency shows that on a main urban traffic route: Particulates from vehicle exhaust such traffic restrictions and the impact Between 60 and 70 per cent of emissions contributed 10 - 14 per cent on supplying businesses and people in exceedances of the fine particulate Airborne road dust contributed 13 - towns and cities are so serious that (PM10*) limit which will come into 16 per cent such interventionism should only be force in 2005 were due to long-range Other sources contributed considered as a last resort. background. approximately 11 - 12 per cent Approximately 30 to 40 per cent of In the medium term the arrival of fine particulate pollution (PM 10) is These results support the automo- new commercial vehicles with further traffic-related in the broadest sense, tive industry's view that particulate fil- although only some 20 per cent of ters for diesel-engined cars make a Fine particulate pollution these traffic-related emissions are smaller contribution to combating the Sources of fine particulates (PM10) due to vehicle exhaust emissions. A fine particulate problem than regular measured on a main urban traffic route large proportion of the remaining 80 road cleaning on main traffic routes. Long-range per cent is due to airborne road dust. transported PM Exhaust In the efforts to comply with the The measures being discussed for from other sources emissions 65% 7% limits, it will therefore be necessary the EU action plans however include Other* first and foremost to examine efficient traffic rerouting, restrictions and even 9% road-cleaning methods. bans. Such measures would chiefly affect commercial goods transport, with These results have been corrobora- implications for deliveries to, and waste ted by a study commissioned by the collection from, town-centre businesses. Road wear Berlin Senate which was carried out at 19% *Tyre, clutch and brake wear, tyre pollution, a monitoring station on another main In the view of the automotive indus- wind-blown cargo particles traffic route. Here it was found that: try, the negative economic effects of Department for Ecology, Lower Saxony Some 58 - 66 per cent of PM 10 particulate matter was contributed by * PM10 (particulate matter < 10mm) denotes the fine particulate fraction of total particulate matter. long-range pollutant transport The majority of particles in this fraction have a diameter less than 10 microns. Annual Report 2004 125

improved emissions control technology Air pollution model for agglomerations and, in the short term, further improve- Percentage threshold exceedances for nitrogen oxides and fine particulates ments in fuel quality, will bring about sig- nificant improvements which make traffic 200 restrictions unnecessary. A Europe-wide 150 review shows that particularly in coun- traffic-related tries with a large old-vehicle population peak concentrations 100 there tends to be a problem meeting nitrogen oxide and fine particulate limits 50 urban background in numerous urban areas with high traffic general background density. The cause for this is often identi- 0 fied as traffic-related emissions. Volkswagen AG Ozone and summer smog The phenomenon known as summer of the so-called ozone precursors may be used to be significantly higher in the past, smog occurs due to the action of intense of natural origin. As studies show, local has been reduced due to the low emis- solar radiation on hydrocarbons (HC) and and regional peak ozone concentrations sions potential of today's vehicles.

nitrogen oxides (NOX) in the atmosphere are significantly influenced by biogenic at ground level, leading via a complex hydrocarbon emissions from forests. The absolute contribution from road chemical atmospheric process to the for- Another contributor is exhaust emissions transport has therefore decreased drasti- mation of ozone. A substantial proportion from road traffic. This fraction, which cally. Here too, the automotive industry

Number of days with ozone values exceeding 240 g/m3

25 22 20 18 17

13 12

7 7

4 4 3 2 0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Federal Environmental Agency 126 Verband der Automobilindustrie ENVIRONMENT AND TECHNOLOGY

has achieved its goal of improving envi- intensity and duration of the solar radia- numberof days recorded in the early ronmental quality by reducing emissions. tion led to increased formation of ozone. nineties. This is one of the topics referred to by The adopted course using medium the Federal Environmental Agency, The slight increases in annual mean and long-term policies to reduce emis- which attributes the increased number ozone concentrations were attributed by sions of ozone precursors is the correct of threshold exceedances in 2003 to the Federal Environmental Agency and one. The last amendment some years meteorological conditions which were others to a reduction in emissions from ago to the emissions-based vehicle tax, extremely favourable to ozone formation road transport. The nitrogen monoxide which was supported by the automotive compared with previous summers. The levels emitted by vehicles in the past industry, accelerated this process. Federal Environmental Agency also had the effect of reducing ground-level points out that if such a summer had ozone. The absence of this nitrogen Experience in recent years has vivid- occurred back in 1997, there would monoxide, while natural emissions have ly demonstrated that speed restrictions have been significantly greater ozone remained unchanged, has led to an during periods of high ozone pollution, pollution and exceedances would have increase in annual mean ozone values. as called for by many environmental occurred on more than 10 per cent As far as public health and the environ- activists, have no effect. This was also of days. The successes in improving ment are concerned however, it is the emphasised once again by the Federal air quality are clearly demonstrated by size and duration of threshold Environmental Agency's latest report, the number of days when ozone exceedances, and the size of the peak for 2003. levels exceeded 240 µg/m3. Despite ozone values, which are important, and the unusually hot and long summer of apart from the values recorded in the The past summer in Germany was 2003, the number of days with exceed- exceptional summer of 2003 these have extremely long and very hot. The ances was no more than half the been declining drastically for years.

Innovative Engine and Emissions Technology

Further decline in been reduced to just a fraction of their Further reduction in diesel passenger car emissions former levels; emissions of diesel particulate emissions Due to advances in engine and emis- vehicles too have fallen by up to 95 per Diesel technology plays a key part in sions technology, vehicle emissions have cent. And all-out efforts are being made the effort to reduce fuel consumption been declining for years, thereby ensu- to achieve further reductions. and CO2 emissions. The impressive suc- ring compliance with ever stricter Euro- cesses which have been scored in redu- pean emissions standards – in some The emissions standards for light- cing emissions – particulate emissions cases well ahead of the mandatory dead- duty vehicles contained in Directive have fallen since the beginning of the lines – and making an active contribution 70/220/EEC, version 2003/76/EC, will 1990s by 91 per cent for cars and 95 per to environmental protection. Since the come into force as EURO 4 on January cent for commercial vehicles – were introduction of catalytic converters in the 1, 2005, for new models and on January overshadowed last year by an often mid-eighties, emissions have already 1, 2006, for new registrations. heated debate concerning the alleged Annual Report 2004 127

health effects of diesel particulate mat- emissions technology, even the larger- without additional fuel consumption and ter. With absolutely no justification, envi- displacement engines are now EURO 4- with no power losses. Once again, the ronmental organisations accused the compliant. German automakers were able to German automotive industry of ignoring demonstrate their high level of environ- particulate filter technology or of stone- The sweeping criticisms levelled at mental competence. With many models, walling on the question of diesel parti- the German automotive industry also they are already offering motorists the culate emissions. ignore the fact that the industry has option of fitting a particulate filter even if actually taken a highly responsible and their vehicle is already EURO 4-compli- These sweeping criticisms overlook- proactive approach on the question of ant without it. ed the impressive results which have diesel particulate emissions – long be- already been achieved in reducing parti- fore campaigns like "Kein Diesel ohne The fact that many vehicles already culate emissions – results which, Filter", demanding particulate filters in meet EURO 4 is resulting in a steady furthermore, were achieved by tackling diesel cars, got under way. As a result, decline in exhaust emissions. The indus- diesel particulate emissions at source, German manufacturers were able to try has had to invest heavily to achieve that is to say by internal engine modifi- present filter solutions at the Frankfurt this. Only when this investment has been cations. All the German manufacturers Motor Show, in autumn 2003, which had amortised will it be possible to finance have been working in high gear to meet already been developed to commercial further technological improvements. The the EURO 4 standards scheduled for standard. No short cuts were taken. next emissions standards – EURO 5 – are 2005. Many vehicles already meet this Rather, the industry opted for extremely scheduled for 2010. The relevant techni- standard even without a particulate filter, sophisticated and customer-friendly cal committees are working jointly on and have done for quite some time. solutions which offer stable and consis- the preparation of these standards, with Thanks to advanced engine and tent long-term operating performance the involvement of all stakeholders. The

Trend in European emissions standards EURO 4 emissions Per cent standards

100 for petrol, LPG, natural gas CO HC 0.10 HC 80 NOX 0.08 HC + NOx NOx CO 1.0 60 for diesel

for diesel-NOX 0.25 40 HC + NOX 0.30 CO 0.50 20 particulates 0.025

g/km 0 1975 1985 1995 2005 (CO = carbon monoxide; HC = hydro-

Volkswagen AG carbons; NOX = nitrogen oxides) 128 Verband der Automobilindustrie ENVIRONMENT AND TECHNOLOGY

German automotive industry is amenable health effects of diesel particulate mat- Furthermore, the overall approach adop- to tax incentives for meeting these stan- ter has to do with the concerns regar- ted in the Wichmann study is erroneous, dards when the time is appropriate. First, ding the ultra-fine PM fraction. This since the observed health effects are however, the standards need to be finali- follows a recent shift in the focus of cri- attributed to only one causal factor, sed. Tax incentives tied to use of a speci- ticism away from the polycyclic aromatic namely diesel particulate matter, whereas fic technology are not helpful, and hydrocarbons (PAH) adsorbed onto the health effects are, in fact, multifactorial. discourage innovation. Legislation must surface of the particulates. The fear that The particle source attribution assumed specify objectives rather than regulating new direct-injection engines could by Professor Wichmann is likewise the particular technology used. This possibly emit a higher proportion of unsound, and he makes no comment on principle has proved successful in the ultra-fine particles has now been the extent to which results from US past and is the only way of ensuring the unequivocally refuted by wide-ranging studies can be extrapolated to Germany. necessary flexibility for continued tech- tests carried out at all the automotive Another way in which the study fails to nological improvement, in the interests manufacturers. The measurements show stand up to critical scientific examination of both man and the environment. that the sharp reduction in total particu- is the fact that it attempts to extrapolate late mass does not lead to a change in effects induced under extremely high- Tax incentives for measures which the proportions of the different size dose exposure conditions to low-level go beyond EURO 4, as planned in fractions. In other words, there is a ambient pollution from road traffic. Germany, should only be offered when reduction in the number of ultra-fine the next-stage European standards have particles too. The latest toxicological studies by con- been finalised. For reasons which in- trast indicate the existence of an expo- clude equal competition within the EU, A study carried out by Prof. Ernst Wich- sure threshold for diesel emissions unilateral national action makes little mann on behalf of the Federal Environ- below which health effects do not occur. sense. A strong message should be sent mental Agency provoked a spate of In these studies it was found that at to the politicians that a decision on tax headlines last year with its speculative low-dose concentrations, diesel incentives should only be taken when claims that diesel emissions are respon- emissions induced no biological respon- the future EURO 5 standards have been sible for 14,000 deaths per annum. ses, even using the most sensitive finalised. Nor should it be forgotten that However, the study does not stand up to measurement methods. Using the same the debate on particulate emissions is expert examination. This has been dem- methodology, it has already been pos- taking attention away from emissions onstrated by a careful analysis involving sible to establish the existence of an reductions in other important areas such prominent toxicologists, along with epi- exposure threshold for lung-penetrating as on CO2 or NOX. The auto industry's demiologists and environmental medici- fine quartz particles. development work is therefore focused ne experts. The Wichmann study takes on reducing all components of engine- no account of toxicological data or of The attempt to stigmatise diesel techno- out emissions. It is undisputed, in this the results of recent studies which sug- logy with unsubstantiated mortality esti- connection, that diesel technology gest the existence of an exposure thres- mates is an irresponsible pandering to makes an important contribution to hold for diesel particulate matter. Nor emotions and fears, and discredits cut- reducing CO2 emissions. was any attempt made to compare the ting-edge German technology which is

positive effects of a diesel particulate of key importance in cutting CO2 emis- Diesel panic not justified filter system with the negative effects in sions. Thus there is clearly a strong case Another important point to be remem- climate terms, for example due to in- for a more level-headed approach to bered in the general debate on the creased fuel consumption. environmental policy. Annual Report 2004 129

EU Commission plans European emissions standards for passenger cars even stricter emissions standards Per cent, EURO 1 = 100 The EU Commission has been EURO 1 (1992/93) EURO 2 (1996/97) EURO 3* (2000) EURO 4* (2005) called on by some member states – 100 among them Germany and Sweden, supported by the Netherlands and Austria – to act quickly to develop 75 stricter standards ("EURO 5") for light-duty vehicles, particularly with 50 regard to particulate emissions and

NOX. These countries are pressing for a Commission proposal to be present- 25 ed if possible as early as 2004. Instead of making, as originally planned, spe- cific suggestions for emission values 0 petrol diesel petrol diesel diesel based on the clean air analyses resul- NOx + HC CO particulates ting from the EU Clean Air for Europe programme (CAFE), the Commission is NOx + HC CO particulates likely to suggest new stricter petrol diesel petrol diesel diesel emissions standards over and above EURO 1 1.13 1.13 3.16 3.16 0.18 EURO 4 before the end of 2004. EURO 2 0.5 0.7 2.2 1.0 0.08 EURO 3 NOx HC 0.15 0.20 0.56 2.3* 0.64 0.05 Separately from this, in the frame- EURO 4 NOx HC work of the working group MVEG 0.08 0.10 0.30 1.0 0.50 0.025 (Motor Vehicle Emissions Group), the g/km. Commission has since September 2003 been conducting discussions on *from EURO 3 onwards, stricter measuring methods were used than under EURO 1 and EURO 2 EU, Federal Environment Ministry, State Institute for Environmental Protection Baden-Württemberg the topic of EURO 5 for light-duty vehicles in a series of workshops and working group meetings. The member member states' governments, while petrol-engined cars to 24 mg/km (-70 states have so far made no specific sug- other member states take the view that per cent) NOX and for diesel-engined gestions regarding future standards. this method is not yet sufficiently advan- cars to 75 mg/km (-70 per cent) for NOX Another question still to be resolved is ced to be adopted in legislation. and 2.5 mg/km (-90 per cent) for parti- whether it would be possible to intro- culates. duce an additional method for measuring In early 2004, the Commission circu- the particulate emissions of diesel-engi- lated a questionnaire on EURO 5, drawn These limits would then be used in ned passenger cars as early as EURO 5. up by the General Directorate Research Conformity of Production (CoP) testing The United Kingdom is in favour of in the framework of the CAFE program- and in-service monitoring. The question of adopting the particle counting method me, to all stakeholders. The questionnaire extending service life requirements from developed at the request of several contains emission reduction scenarios for 100,000 to 200,000 km was also raised. 130 Verband der Automobilindustrie ENVIRONMENT AND TECHNOLOGY

The replies received will enable the systems during off-cycle operation. For mineral oil tax and environmental tax Commission to assess the feasibility of heavy-duty commercial vehicles, US already exist in Germany – in fact fuel the scenarios and to evaluate the costs legislation has also developed the con- taxation levels in Germany are among and benefits of the technologies requir- cept of not-to-exceed limits (NTE), the highest in Europe. A new debate on ed to attain them. The closing date for which will come into effect in 2007. ways of making motoring more expen- replies was April 30, 2004. sive is the last thing needed by drivers The ECE Working Party on Pollution who are already saddled with a heavy On an initial examination, the scena- and Energy (GRPE) established by ECE- burden of tax and duty. In view of the rios contained in the complex question- WP 29 has set up an ad hoc working major achievements of the German naire show a number of implausibilities. group (OCE group) to develop OCE pro- automotive industry in reducing emis- Even in light of the EU air quality targets posals for commercial vehicle engines. sions – it is firmly on track with its pro- for 2010, a further reduction in the limits Evaluation will be based on a definition of mise to make further cuts in CO2 emis- for nitrogen oxide emissions of petrol- OCE. The ad hoc working group on glo- sions – there are no grounds for such a engined cars appears superfluous, while bal harmonisation for motorcycles set up taxation approach. the very low limit of 2.5 mg/km for parti- by ECE-GRPE has also developed propo- culate emissions mentioned in a scena- sals for two-wheelers. In the forthcoming Emissions standards for rio is close to background levels and OCE deliberations for light-duty vehicles SUVs thus to the limits of detectability. The it will need to be considered to what The Sport Utility Vehicle (SUV) seg- increased service life requirements extent use can be made of proposals ment is increasingly popular. These would not bring about an improvement developed for other vehicle categories. vehicles offer innovative engineering, in service-life emissions, given the driving enjoyment and high utility value, already existing provisions for these CO2-based motor making them attractive not only for vehicle categories regarding on-board vehicle tax private motorists but for the commercial diagnosis (OBD), which is a proven The German coalition negotiations sector as well. technology, and in-service monitoring. resulted in a decision to introduce a

CO2-based motor vehicle tax. In early In the past, however, an Some governments, including the January, media reports that this would environmental organisation, along with German government, have declared be based on a model developed by the politicians, have alleged that these vehi- their intention of widening the new Federal Environmental Agency model cles do not comply with the EURO 3 standards to include requirements and agreed with the Federal emissions standards. This statement is regarding off-cycle emissions (OCE). Environment Ministry caused consider- incorrect and misleading. SUVs are regi- The existing emissions standards for able concern, given that this model would stered as cars and type-approved in petrol-engined cars with catalytic con- have led to sweeping tax increases accordance with the provisions of the verter already contain a number of which would have made many currently relevant EU directive. Thus for off-road requirements relating to stoichiometric top-selling models vastly more expensive. vehicles too, the EURO 3 limits apply. It (lambda = 1) engine control. In the This would have been very much at is true that the relevant directive provi- USA, special regulations have been odds with the objective of designing the des for more lenient limits for vehicles developed which prohibit engine control tax changes to be "revenue-neutral". with a weight exceeding 2.5 t than for strategies from acting as "defeat "conventional" cars. However, even the devices" and significantly impairing the This initiative also ignored the fact heavier SUVs do meet the EURO 3 stan- effectiveness of the emissions control that fuel consumption-related taxes like dards. Annual Report 2004 131

In spring 2004, a public debate delays however, the proposal for the The commercial vehicle manufactu- began on the taxation of SUVs. This was amendment of Directive 88/77/EEC on rers have unanimously decided in favour sparked by the fact that the länder tax emissions standards for heavy-duty of using aqueous urea in a 32.5 per cent authorities do not have a uniform taxa- commercial vehicles was only presented solution, to be marketed under the com- tion policy for vehicles which can be by the Commission in autumn 2003. mercial name AdBlue, as the reducing used to transport both people and goods. The Commission now hopes for a swift agent for SCR. Despite repeated attempts, the tax adoption of the proposal by the Council authorities have still failed to agree on a of Ministers and the European Parlia- The minimum specifications for this common line. The allegations that SUVs ment. To speed the process, it is plan- reducing agent were regulated in draft enjoy preferential tax treatment stem ned that the requirements regarding standard DIN 70070 (issued August from a reverse inference based on sec- test procedures contained in the techni- 2003). In the meantime an application tion 23, sub-section 6a of the German cal appendices will be dealt with by the has been made to the International licensing regulations. The German auto- Committee for Adaptation to Technical Organisation for Standardisation ISO to motive industry would have no objections Progress (CATP), while the standards transpose this DIN draft standard into if the relevant passage were to be dele- themselves (emissions limits and provi- an ISO standard on AdBlue. ted from the legislation. However, this sions on OBD and in-service mon- would still not automatically lead to a itoring) will be dealt with jointly by the It had originally been planned that common line at länder level. Council and the European Parliament. several thousand commercial vehicles This delay in presenting the definitive fitted with SCR technology would be Declining emissions for standards creates significant problems operating in larger commercial vehicle heavy-duty commercial for compliance with EURO 4. It is there- fleets as early as 2003/2004. Not least vehicles too fore intended to introduce only some of due to delays in introducing the auto- Revised European emissions stan- the OBD provisions at this stage and to bahn toll however, it is now expected dards have also been drawn up for introduce the full provisions on OBD that commercial vehicles with this new heavy-duty commercial vehicles, in the only with EURO 5. aftertreatment technology will not be form of EURO 4 (scheduled for registered in larger numbers until the 2005/2006) and EURO 5 (scheduled for To ensure compliance with the strict beginning of 2005. 2007/2008). EURO 4 and EURO 5 standards, the European commercial vehicle manufac- The AdBlue demand forecast has The main challenges which these turers will supplement engine design therefore been revised in line with the standards address are a progressive measures, such as exhaust gas recircu- revised vehicle production figures. The reduction of NOX emissions to 3.5 g/kWh lation and high-pressure multiple injec- oil industry must continue its efforts to for EURO 4 and 2.0 g/kWh for EURO 5, tion, with aftertreatment in the form of set up a broad-based AdBlue and of particulate emissions to 0.02 selective catalytic reduction (SCR) using infrastructure in Europe as soon as pos- g/kWh for EURO 4 (same value for a reducing agent. The manufacturers sible. It will be crucial to ensure – in the EURO 5). will progressively – starting with EURO 4 new EU accession countries too – that and completing at the latest by EURO 5 all SCR vehicles are always operated These standards will also include – convert their entire product range correctly, that is using AdBlue. It would requirements regarding on-board diag- upwards of a permissible total vehicle also be desirable for the AdBlue infra- nosis systems (OBD), service life and in- mass of 6 tons to SCR operation using a structure to be set up quickly in other service monitoring. Due to drafting reducing agent. neighbouring European countries too, 132 Verband der Automobilindustrie ENVIRONMENT AND TECHNOLOGY

European emissions standards for trucks and buses Party on Pollution and Energy (GRPE) of ECE-WP.29 has already carried out a Per cent, EURO 0 = 100 good deal of groundwork on Euros 6:

EURO 0 (1988/90) EURO 1 (1992/93) EURO 2 (1995/96) The ECE-GRPE ad hoc working group EURO 3 (2000) EURO 4 (2005) EURO 5 (2008) on global harmonisation of test cyc- 100 les for commercial vehicles (WHDC – worldwide heavy-duty certification) has developed new commercial vehi- 75 cle test cycles – WHSC (steady-state) and WHTC (transient) – which are

50 currently undergoing validation. In the framework of WHDC, the stan- dardisation organisation ISO revised 25 the gravimetric measurement method for particulate emissions to ensure that it is able accurately to measure 0 compliance with further reduced par- NOx HC CO particulates ticulate emissions limits. NOx HC CO particulates The ECE-GRPE ad hoc group on OBD EURO 0 15.8 2.6 12.3 - (on-board diagnostics) was requested EURO 1 19.0 1.23 4.9 0.4 to develop proposals for globally har- EURO 2 17.0 1.1 4.0 0.15 monised regulations for OBD systems EURO 3 15.0 0.66 2.1 0.1 for commercial vehicle engines. Some EURO 4 13.5 0.46 1.5 0.02 elements in these proposals have EURO 5 12.0 0.46 1.5 0.02 already been taken into consideration

For particulates, where limits were not introduced until EURO 1 (1992/93), the EURO 1 limit provides the by the Commission in its revision of baseline (= 100). Table: emissions standards given in g/kWh. Measuring method for EURO 0, EURO 1 and the corresponding EC Directive EURO 2: ECE R49 13-mode test cycle. For EURO 3 onwards, the stricter ESC cycle was used. EU, Federal Environment Ministry, State Institute for Environmental Protection Baden-Württemberg 88/77/EEC to include provisions on OBDs. The ECE-GRPE ad hoc group OCE is in the process of developing propo- such as Turkey, Bulgaria, Rumania and forthcoming negotiations with the new sals for evaluating the off-cycle emis- Belarus, given the transboundary nature accession countries. sions of commercial-vehicle engines. of NOX emissions. There is little sense The first step involved defining the in SCR-equipped vehicles being opera- The EU Commission is planning on conditions for OCE evaluation. ted without AdBlue – and thus with tightening the emissions standards for increased NOX emissions – in these heavy-duty commercial vehicles once The ad hoc working group WHDC countries. The emissions legislators again, with the introduction of EURO 6. having for the time being completed must therefore press for investment in This should not, however, come into its work, the latest improvements in an AdBlue infrastructure in the force before 2012. The ECE Working commercial vehicle technology will be Annual Report 2004 133

The NOx reducing agent VDA recommendation 2025 contai- and accuracy of the test methods "AdBlue" ning the specified test methods has contained in VDA 2025. A first round been published in draft form. robin test involving 15 German, one In order to ensure timely installation of Dutch and one Austrian test labora- the AdBlue supply infrastructure, thus The relevant sub-committee of the tory was carried out in mid-2003 and making AdBlue generally available in FAKRA Motor Vehicle Standards Com- evaluated centrally. It was found that Europe from 2004 onwards, the com- mittee is also working on the following some test methods can be used mercial vehicle manufacturers approach- additional steps: without reservation while in other ed the relevant bodies as early as the cases certain details still require beginning of 2001. Amongst other Transposition of draft standard DIN modification in order to ensure things it was necessary to draw up stan- 70070 into an international standard. repeatability and comparability of test dards to ensure that uniform quality Transposition of VDA 2025 into a DIN results. The revised test methods will specifications are conformed to by all standard. be validated in a second round robin

manufacturers of the NOX reducing Translation of the test methods speci- test planned for mid-2004. agent and are made available to the fied by VDA 2025 into English and In addition, an ISO Expert Group is public. The following timetable was submission to the International working on aspects such as standardi-

drawn up: Organisation for Standardisation sed graphic symbols for the new NOX (ISO) with a view to drawing up an reducing agent, for example appropriate The draft standard DIN 70070 contai- international standard. displays and warning lights to inform the ning minimum requirements for Performance and evaluation of a driver if AdBlue levels are running low AdBlue was published in August 2003. round robin test to assess the validity or if the system is malfunctioning.

Predicted AdBlue requirements by country, 2012

Per cent other countries 17.3 Italy 14.8 GB D 23.1 other 11.7 Netherlands 17.3 5.2 NL 5.2 Germany United Kindom 23.1 F 11.7 17.5

France Spain 17.5 E I 10.4 10.4 14.8

ACEA 134 Verband der Automobilindustrie ENVIRONMENT AND TECHNOLOGY

assessed using the new test procedure. In response to these allegations, it EURO 4 and 5 standards in 2005 and The next step will then be to set the must be stated that EURO 2 and EURO 2008, any changes at this stage would limits for EURO 6. 3 engines do indeed meet the EURO 2 turn the planning on its head. As well as and EURO 3 limits. Furthermore, when causing unwarranted costs, this would Emissions performance EURO 3 was introduced, the test proce- also significantly delay the market of EURO 2 and EURO 3 dures underwent further refinement launch of new vehicles. The automotive commercial vehicles and were adapted even more closely to industry also opposes any attempt to Last year, the Federal Environment real-world requirements. The steady- introduce the next-stage emissions Ministry and the Federal Environmental state tests (ESC) were modified, a new standards (EURO 6) before 2012. Agency publicly stated that under real transient test (ETC) was introduced and operating conditions, the NOX provision was made for NOX testing in Further reduced noise emissions of EURO 2 engines exceed randomly selected operating modes. emissions those of older EURO 1 engines. It was The commercial vehicle manufacturers Vehicles are becoming quieter all also alleged that EURO 3 vehicles too made the relevant operating mode the time, bringing benefits not only for have higher NOX emissions under real information publicly available. occupant comfort but also for the envi- operating conditions than specified in ronment. A variety of measures such as the test cycle. The Federal Environmen- The automotive industry is therefore improved insulation and lower-friction tal Agency later reacted by calling for opposed to suggestions that the EURO 5 tyres have reduced noise significantly. the nitrogen oxide limits under EURO 5 provisions should be tightened. Given to be made even tighter. It is also al- that the commercial vehicle industry is Efforts are under way at European ready calling for the EURO 6 limits too currently involved in an all-out effort to level to adapt the current noise testing to be tightened. implement the already very strict procedure to real traffic conditions. The ECE Working Party on Noise (GRB) of ECE-WP.29 began work on this in the late Predicted AdBlue requirements in Western Europe nineties. Work is also under way at the kt/a International Organisation for Standardi- 3,500 sation on a revision of ISO 362 (noise test procedure for motor vehicles). A Commit- 3,000 tee Draft on this will soon be presented.

2,500 In a series of meetings, the ECE- 2,000 GRB ad hoc group on noise test procedures incorporated the ISO sug- 1,500 gestions into a proposal for modification of ECE regulation 51 on "noise test 1,000 procedures for motor vehicles". This 500 proposal has met with broad approval from the governments. 0 2005 2006 2007 2008 2009 2010 2011 2012 The European Automobile Manufac- ACEA turers' Association ACEA now intends to Annual Report 2004 135

have an independent test institute test In 2002, the ECE Working Party on large proportion of their power from the a selection of vehicles, ranging from Pollution and Energy (GRPE) was re- electric motor, as opposed to the con- cars to heavy-duty commercial vehicles, quested to prepare provisions for the ventional engine ("full hybrids") and using the proposed test procedure type approval of hybrid vehicles for vehicles which obtain a relatively small (approximately 50 to 80 vehicles). The incorporation into the relevant stan- share of their power from the electric aim of this programme is to validate the dards. The ECE-GRPE ad hoc working motor ("mild hybrids"). In the full test procedure and at the same time to group on hybrid vehicles swiftly pres- hybrid, obviously, more use can be collect and compare data using both the ented proposals for amendments made of the electric motor for driving old and the new test methods. regarding emissions, engine power, fuel the vehicle than in the mild hybrid. The

consumption and CO2 emissions in a extend to which energy can be recuper- It can be assumed that the govern- variety of ECE regulations relating to ated is limited however, since regene- ments and test organisations will con- passenger cars and commercial vehi- rative energy for charging the battery is duct similar test programmes. By cles. Some of these proposals have only produced on overrun, when the 2005/2006, it would then be possible to already been submitted to ECE-WP.29 vehicle is decelerating. Additional take a decision on incorporation of the for approval. These additional requirements have to be supplied by new noise test procedure into European provisions are designed amongst other the conventional engine. noise legislation and to develop propo- things to allow the specific characteri- sals for limits. stics of hybrid vehicles with regard to Although hybrid technology has power, emissions and fuel consumption potential advantages, it also brings The ISO 362 noise test procedure to be assessed and compared. increased complexity. Fitting two drive is already widely used around the world. systems – a conventional internal com- Both Japan and the USA are keen to The main focus is on hybrid vehicles bustion engine and an electric motor use a globally accepted test procedure. in which a conventional internal com- along with system controllers and spe- ECE-GRB has already requested appro- bustion engine is combined with an cial batteries – not only increases vehi- val for a Global Technical Regulation electric motor (electric hybrid). The cle mass but also costs. The use of bat- (GTR) on noise emissions from motor electric motor can be used as a genera- teries also results in additional operat- vehicles. tor to recuperate energy which is then ing costs. stored in the battery. Via the electric Since ISO 362 covers all categories motor, this energy is then available for The success of hybrid vehicles will of road vehicle, from motor cycles to driving the vehicle. For limited periods, depend in large part on customer heavy-duty commercial vehicles, the pros- it is possible when operating the con- acceptance. Customers will only buy if pects for global harmonisation in the ventional engine and the electric motor convinced that hybrid technology offers field of noise emissions appear bright. simultaneously to increase the overall advantages over conventional drive, amount of driving power on tap. When particularly on performance, energy Alternative drive systems running the vehicle just on the electric consumption and cost (purchase price Alongside conventional power motor, it is possible – again just for and operating costs, including mainte- sources such as petrol and diesel en- limited periods – to achieve zero-emis- nance). gines, alternative drive technologies too sion operation. are frequently in the news. Hybrid drive There have been many reports in in particular is attracting increased in- Hybrid vehicles fall into two main recent times regarding the significant terest and attention. types: vehicles which obtain a relatively fuel economy advantages of hybrid 136 Verband der Automobilindustrie ENVIRONMENT AND TECHNOLOGY

vehicles. However, fuel consumption of demonstrating impressive technological standard DIN EN 228 on minimum these vehicles is very heavily dependent prowess in this area too. specifications for petrol fuels, while on the specific operating conditions. standard DIN EN 14 214 sets minimum Regenerative energy for charging the There is still no immediate prospect specifications for biodiesel (fatty acid batteries can only be obtained when of hybrid vehicles becoming a commer- methyl esters, FAME). Thus the basis is the engine is on overrun, for example cial success in Europe. This is due to provided for the blending of biofuels when driving in town, when driving out their complex technology, the relatively with both petrol and diesel fuels. Some of town with frequent acceleration and high costs and the resulting customer oil companies have announced that deceleration, and when driving in slow- behaviour. At the same time further they already intend to offer fuels con- moving traffic. Under such conditions improvements on emissions and fuel forming to DIN EN 590 based on a the electric motor can be used to consumption can also be expected in blend of conventional diesel fuels and provide additional driving power, or the field of conventional drive technolo- up to 5 per cent (volume) FAME. At even as the sole power source. In fast, gies, namely petrol and diesel engines. special filling stations they are also constant-speed operation on the other offering pure biodiesel. Provided this hand, for example on motorways or on Future energy strategies fuel conforms to the minimum require- long uphill gradients, most of the Biogenic and synthetic fuels have a ments of DIN EN 14 214, any vehicle driving power is supplied by the con- particularly important role to play in the may be operated on such fuel, subject ventional engine. If the electric motor development of sustainable future ener- to the manufacturer's approval. This were used under these conditions, its gy strategies. The EC Directive on pro- approval is necessary in order to rule capacity would quickly be exhausted. motion of the use of biofuels and other out any risk of incompatibility between Under such operating conditions, the renewable fuels in the transport sector the fuel and materials used in the vehi- net picture is poorer for a hybrid vehicle (2003/30/EC) requires the member sta- cle's fuel system. For example there – partly due to its higher weight – than, tes to set national targets for the mini- must be no risk of plastic fuel lines say, for a vehicle fitted with a fuel- mum proportion of biofuels in the fuels swelling. efficient diesel engine. A further reason used for road transport. for this is that fuel consumption increas- In the longer term, hydrogen too es whenever the internal combustion In the framework of this directive, offers prospects as a fuel for motor engine is used to charge the batteries. Germany has exempted certain biofuels vehicles. At the invitation of the US from mineral oil tax – in some cases for Energy Minister, 15 countries (Australia, In Japan and the US, standard- limited periods. As a result it is already Brazil, China, Germany, France, the production hybrid vehicles have been possible to offer some biofuels at a United Kingdom, India, Iceland, Italy, on the market for some years and have cheaper price than conventional petro- Japan, Canada, Norway, Russia, South recently become available in Europe leum fuels, despite the higher produc- Korea and the USA) and the EU Com- too. Some European manufacturers tion costs. mission came together in Washington have presented newly developed hybrid on November 20, 2003, to form the vehicles which they have indicated will Obviously, these fuels must meet International Partnership for the go into production. German manufactu- certain minimum standards. The blen- Hydrogen Economy (IPHE). The aim is rers too have developed numerous ding of biofuels (for example alcohols) to jointly explore and accelerate the use hybrid vehicles of different types over with conventional fuel is regulated in of hydrogen as an energy store and fuel recent years, notwithstanding a limited EC Directive 93/12/EEC on fuel quality, on the energy market. Two committees response from the market, thereby version 2000/71/EC, in conjunction with have been set up: Annual Report 2004 137

A political steering committee End-of-Life Vehicles (chaired by the US Energy Minister) A technical implementation commit- tee responsible for developing the The EU End-of-Life Vehicles Directive of daily life. Furthermore, in the motor cooperation project and also for the implemented in German law in 2002 industry, metals are fully recycled at the involvement of industry (chaired joint- contains provisions on general recycling end of a vehicle's life, and thus have no ly by Germany and Iceland) rates and material recycling rates. The environmental impact. insistence by the EU on fixed recycling In parallel, with this, the Commission also rates means that a conflict of objectives In a few applications, exemptions have sent out invitations to the constituent becomes inevitable. For example there is been provided for. The list of these meeting of a Hydrogen and Fuel Cell a conflict between light-weight design ("Annex II") is regularly revised by the EU Technology Platform, held in early 2004. and a high material recycling rate. Mate- Commission. In 2005, a number of these rial recycling of lighter-weight materials exemptions will expire. Although the In order to pave the way for type-approval such as polymers, composites and rene- automotive industry is working in high of hydrogen-powered vehicles, ECE-GRPE wable materials is generally either diffi- gear on substitutes for the materials con- set up an ad hoc hydrogen/ fuel cell group cult or impossible – yet such materials cerned, in many cases these will not be to prepare draft ECE regulations for vehi- are an important requirement for making available by 2005. In late 2003, the indus- cle type approval, for safety standards vehicles more economical on fuel. try therefore submitted an official pro- for vehicles operating on liquid hydrogen posal to the Commission containing sug- and for compressed hydrogen vehicles. The obligation to comply with the recy- gestions for a revision of Annex II. The These drafts have already been submit- cling rates therefore greatly restricts the Commission was receptive to this propo- ted to the EU for adoption as separate extent to which light-weight materials sal and in spring 2004 arranged an Inter- directives. ECE-WP.29 also intends to can be used. From the environmental net consultation. The automotive manu- draw up corresponding Global Technical standpoint, the introduction of certified facturers and suppliers adopted a clear Regulations (GTR) for hydrogen-powe- recycling and disposal channels would position in favour of revising Annex II. red vehicles. Aspects to be considered be preferable to fixed recycling rates. The Commission seems to be willing to include general handling safety issues, The automotive industry believes this address these concerns and in the emissions, fuel consumption and acci- needs to be taken into account when "Advisory Committee" it has presented dent safety – for example in collisions. the provisions on recycling rates come the member states with a proposal for up for review in 2005. exempting original spare parts used to A further option to be explored alongsi- repair older vehicles. This proposal is a de biogenic fuels and hydrogen techno- Banning of materials first step in the right direction but does logy is synthetic fuels ("SynFuels"). The EU End-of-Life Vehicle Directive not yet meet all the requirements for effi- Synthetic fuels which can be produced, contains provisions banning the use of cient parts supply. For example the Com- say, from natural gas or from renewable lead, chromium VI, cadmium and mercury mission still intends to retain an unclear biomass (sun fuel) exhibit a very high in new-vehicle materials and components. definition of the term "original spare parts". standard of purity, which would bring It is difficult to understand why the use The work on revision of annex II will con- further potential benefits both for fuel of such materials should be banned or tinue at least until the end of 2004. The consumption and emissions. Pilot plants restricted in the case of automotive automotive industry fears that this could for synthetic fuel production are manufacturing while the same materials lead to problems in maintaining parts currently being set up in Germany. continue to be permitted in other areas supplies in Europe from 2005 onwards. 138 Verband der Automobilindustrie ENVIRONMENT AND TECHNOLOGY

German implementation of vantage compared with other countries. spare parts intended for use in these the ELV Directive – The German legislation provides that the vehicles) registered after July 1, 2003. infringement proceedings costs of vehicle take-back should be This view also coincides with a legal The European End-of-Life Vehicles borne solely by the automotive manu- opinion prepared by the University of Directive, published October 21, 2000, facturers and importers, despite the fact Cologne. was implemented in German law with that the Directive would have allowed a the publication of the ELV Ordinance in fairer apportionment. The EU Commission's demands would the Federal Gazette on June 21, 2002. require the destruction of large numbers Other European countries are taking of original spare parts. The cost, in bil- In 2002, the EU Commission initiated a much more flexible approach to this lions of euros, would be in double figu- infringement proceedings against the question. res. Furthermore, the destroyed parts implementation of the ELV Directive in would have to be replaced by new ones. German law. The German government In its supplementary letter, the EU Com- The enormous costs would be defrayed replied precisely and comprehensively mission accused the German over the new parts, making them – to the Commission's request for infor- government of incorrect implementation assuming that they were produced at all mation. The Commission nevertheless of the prohibition on the use of certain – several times more expensive than at sent a supplementary letter to the heavy metals. In particular the Commis- present. Also, for technical reasons, it German government, in mid-2003, sion takes the erroneous view that all would not be possible to carry out which again was answered comprehen- original spare parts sold after July 1, testing on many of these parts. If the sively and in detail. 2003, are subject to these prohibitions. Commission's view prevails, parts sup- This is at odds not only with the German plies for older vehicles would be put The Commission is still in disagreement view but also with that of the MEPs at risk. It is even possible that such with various conditions which have been involved in the consultation on the ELV vehicles would be forced off the road, set, in the German implementation of Directive. These MEPs stated that the at substantial economic cost and at the Directive, for allowing free-of- prohibitions on the use of certain mate- the price of a substantial increase in charge vehicle take-back. It thus clearly rials apply only to vehicles (and original waste. still fails to recognise the extent to which free-of-charge take-back is open to fraud and abuse, which needs to be prevented in the interests of fair Euro- Production-Related pean competition. The automotive indus- try is keen to see the existing regulations Environmental Protection on this retained and is pressing the German government to incorporate the necessary anti-fraud precautions in the Integrated Product Policy single-media, single-substance appro- other relevant road traffic-related legis- The objective of the European Com- ach. IPP forms part of the 6th Environ- lation too. It is important to remember mission's proposals on Integrated Prod- mental Action Programme of the Euro- that the way in which "mandatory free- uct Policy (IPP) is to improve the envi- pean Union. of-charge take-back" has been trans- ronmental performance of products posed into German law puts the German throughout their lifecycle. The focus is Following the Green Paper, a White motor industry at a considerable disad- on adopting an integrated, rather than a Paper on IPP had been expected. Instead, Annual Report 2004 139

in June 2003, the EU Commission After all, motor vehicles are already faced In other words, there is no area of published a Communication to the with a plethora of statutory regulations. the lifecycle which is not already Council and Parliament. This Communi- subject to regulation. All that is current- cation focuses on two main topics: In assessing the environmental ly lacking is a holistic approach which impact of private transport, it is necessary explores and assesses the interconnec- Facilitating a continuous improve- to focus not only on product features tions between the different areas. In the ment in the environmental impact of which can be influenced by the manufac- automotive industry, product develop- all products throughout their lifecycle turers but also on transport policy and ment has long been based on an inte- (production, use and disposal) user-related factors (mileage, driver grated approach to all aspects such as behaviour, traffic density). customer requirements, safety, econo- Focusing of measures on products mic considerations and the environ- which offer the biggest potential for In implementing IPP, the EU Com- ment. environmental improvements mission intends to identify products which have the "greatest potential for The policy tools and objectives The Communication describes var- environmental improvement", with a referred to in the Communication now ious policy instruments and states its view to undertaking the necessary give grounds for concern that the Com- intention to pursue further activities "actions". Not only the steady increase mission's ideas may merely impose aimed at implementing the IPP approach. in the number of statutory regulations further burdens on industry without but also initiatives undertaken by the corresponding environmental benefits. The automotive industry welcomes the automotive industry itself have led to a holistic approach of the IPP concept and significant improvement in the environ- Best available the focus on all environmental impacts of mental quality of motor vehicles over techniques the product throughout its lifecycle. IPP the past decades, which the Commis- The Directive on Integrated Pollution must keep the focus on this holistic sion expressly acknowledges. Prevention and Control (IPPC), which aspect. All existing and future regulations came into force in 1996, sets minimum must integrate the three aspects of sustain- Nonetheless, motor vehicles are standards for licensing large, environ- ability (economy, environment, society) in among the products which the mentally relevant installations. Since the every stage of the lifecycle. Commission intends to identify as late nineteen-eighties, the progressive having the "greatest potential for envi- tightening of the Technical Instruction The automotive industry is also pressing ronmental improvements". The industry, on Air Quality Control has led to a dra- for a harmonisation and simplification of however, takes the view that the stic reduction in the German limits the existing environmental regulations and existing statutory regulations are more for emissions of volatile organic com- an elimination of inconsistencies. It express- than adequate. A hundred environmen- pounds, which now stand at 35 grams ly welcomes greater cooperation between tal laws and regulations currently have per square metre of painted vehicle sur- all stakeholders from politics, industry and to be observed in the plant licensing face. society and a focus on shared responsibi- and production phases. The product lities across the product lifecycle. operation phase is also adequately Only by dint of a massive technological regulated by statutory emissions stan- step change was it possible to comply

Under no circumstances however dards and voluntary agreements on CO2 with these limits. New low-solvent or should IPP be used to simply enumerate emissions, while further standards solvent-free painting systems were individual demands on the products. regulate the recycling phase. developed for vehicle body painting. In 140 Verband der Automobilindustrie ENVIRONMENT AND TECHNOLOGY

the nineties, all German vehicle manu- Solvent emissions facturers carried out a programme of kt heavy capital investment to upgrade their painting facilities or set up new 25 ones. The additional effort and high cost involved in complying with the world's lowest emissions limits put German manufacturers at a competitive disad- vantage which it has only been possible 20 to reduce in the course of the last deca- de, by rationalised plant technology and paint production.

15 The automotive industry's large-scale investment in state-of-the-art painting facilities has made an enormous contri- bution to improving the quality of our environment. Although the numbers of 10 vehicles painted rose by some 10 per cent between 1990 and 2002, solvent 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 emissions over the same period fell by VDA statistics approximately half.

The EU Solvents Directive and the IPPC Directive now require the rest of Europe too to apply "best available techniques" Solvent emissions from EU body-painting plants in their facilities, by 2007. VOC [g/m2]

The EU has delegated the relevant tasks 120 to the Institute of Prospective Technolo- > 60 g/m2 100 gical Studies' "European Integrated Pol- > 45 g/m2 lution and Prevention Control Bureau 80 < 45 g/m2 (EIPPCB)", also known as the "Seville 60 Office" on account of its location. The limit for old plants Bureau's committees, consisting of 40 representatives of national authorities limit for new plants and industry experts, defines processes 20 and procedures which are considered to 0 represent the best available techniques 50 % of painting plants operating in Europe do not comply with the new-plant limits. for ensuring high standards of environ- 30 % will continue to exceed the old-plant limits. mental protection. ACEA, Volkswagen AG Annual Report 2004 141

Experts from the German automotive Total waste generated by vehicle manufacturing plants industry are assisting with the work on kt preparing a BAT paper on "surface treatment using organic solvents" which 500 also deals with environmental aspects of vehicle painting facilities. 400 By extensive standardisation of emissions regulations in Europe, it is intended to remove the competitive 300 anomalies which have existed during the past decades between facility ope- rators in Germany and operators in the 200 rest of Europe. The German automotive total industry has carried out important of which recycled 100 groundwork on the BAT standard. For example in 2001/2002 the German/ 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 French Environment Institute completed a preliminary study commissioned by VDA statistics the Federal Environmental Agency which was prepared with input from the German automotive industry. Water consumption of vehicle manufacturing plants m3 mill. In Germany, all painting facilities comply 80 with a limit of 35 grams per square total industrial water drinking water metre of painted surface, whereas the 70 EU Solvents Directive sets a limit of 45 grams per square metre. The German 60 automotive industry believes that the standards achieved in Germany provide a 50 role model for the whole of Europe and should therefore be prescribed as the 40 best available technologies for all mem- ber states. 30

Leading the way 20 on production-related environmental 10 protection The German automotive industry 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 leads the way not only on reducing sol- VDA statistics 142 Verband der Automobilindustrie ENVIRONMENT AND TECHNOLOGY

Waste water output of vehicle manufacturing plants 123,000 tons a year. It now amounts to just 22 kg (approximately) per vehicle. m3 mill. 55 total Water consumption is a further area cooling water where the German automotive industry other waste water is achieving what are possibly world- 45 record low values. Despite an increase in production volumes and the introduc- tion of water-based paints, there has 35 been a further decline in water consumption and thus in waste water output. Drinking water consumption has 25 declined by one third, from an already very low baseline. There was a similar decline in waste water output. These 15 figures are impressive evidence of the automotive industry's environmentally 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 responsible attitude towards natural VDA statistics resources.

vent emissions but also on preventing waste. Although vehicles have become Energy much more complex over the last decade and a half, and there has been a consid- erable increase in production volumes, Since electricity ranks as the auto- It is the automotive industry's view the volume of waste generated by the motive sector's number one energy that the scope of the exemptions from industry has remained largely stable. source, ahead of natural gas and district these regulations is too narrow and heating, the trend in industrial electricity that a strategy is required which takes Similar successes have also been prices in Germany is a particularly an integrated approach to all the recorded on the recycling of production important concern for the industry. Over relevant instruments. The political waste. In 1990 some 25 per cent of the past year, prices showed a further decision-makers have yet to come production waste was recycled and increase. The price of electricity has up with a broad-based energy some 75 per cent was disposed of. now increased by approximately 50 per strategy which is compatible with cent since 2000. ensuring an attractive business In the meantime the automotive environment in Germany. industry has succeeded in reversing In part, the price increases were due these proportions. Non-recycled waste to political policy-related factors in the The number of companies which has fallen to 25 per cent of production form of the Renewable Energy Law, the qualify under the Renewable Energy waste and has also declined drastically Law on Combined Heat and Power, the Law's "hardship clause" is far too small in absolute terms, to approximately electricity tax and the concession charges. and even for them, charges are only Annual Report 2004 143

Trend in industrial electricity prices, 2000 – 2003 capped for a maximum of one year. The automotive industry believes that Eurocents/kilowatt hour the total subsidies provided under this 6.71 law, and the burden on industry, should 5.23 5.29 be reduced. 4.38 Unilateral national legislation poses a significant threat to the competitive- ness of the German automotive industry. The manifest competitive handicaps vis-à-vis other EU countries have a 2000 2001 2002 2003 further adverse effect on Germany's attractiveness as a location for business Eurostat, Federation of German Industry and industry.

EU industrial electricity prices in comparison

Eurocents/kWh, excl. VAT

11.29 Consumption:

10.25 500 kW x 2500 h/a = 1,250,000 kWh 2500 kW x 4000 h/a = 10,000,000 kWh 9.09 9,02 8.89 8.88 8.66 4000 kW x 6000 h/a = 24,000,000 kWh 7.7 2 .34 7.3 5 7 7.3 1 7.0 5 7.0 2 6.71 6.71 6.70 6.61 6.56 6.48 6.43 6.38 6.21 6.14 6.11 6.02 6.00 5.87 5.65 5.64 5.62 5.22 5.15 5.00 4.91 4.87 4.86 4.82 4.58 4.21 4.07

Italy Spain Ireland Sweden Greece Finland France Norway Belgium Denmark Portugal Germany Luxembourg United Kingdom Federation of German Industry 144 Verband der Automobilindustrie ENVIRONMENT AND TECHNOLOGY

In 2004 too, an increase in industrial The energy law reform has also Eliminate duplication electricity costs of approximately 1.5 bil- created the basis for a liberalisation of Ensure that regulations are only lion euros can be expected. Base-load the gas market. However, to ensure issued by the health and safety insti- electricity futures pricing on the Leipzig equality of opportunity and prevent tutions if they have the effect of sup- electricity exchange rose by almost one competitive anomalies among compa- plementing and putting more detail fifth, and peak-load pricing by approxi- nies with a dominant market position, on state regulations mately one third. This suggests that effective controls must be in place to Ensure that all regulations are trans- further price increases could be on the prevent abuse. Here too there is still parent, intelligible and helpful way. work to be done. The Occupational Safety Ordinance which has now come into force is inten- ded to simplify and streamline existing regulations in the field of health and Occupational Safety safety, working equipment and the ope- ration of hazardous plant and equipment. To allow industry to contri- The automotive industry is continu- consultation process satisfactory solu- bute its specialist knowledge to the law- ing to make good progress in the field tions were found. In order to make the making process, the ordinance has also of occupational health and safety. The new regulations as simple and as rele- set up an advisory committee under the number of accidents, and the number of vant as possible to practical require- chairmanship of a representative of a working days lost, continued to fall in ments, the objective is to: VDA member company. This is the first 2003. Most of the potential for further improvement has already been exhaust- Index of notifiable industrial accidents ed. The focus is therefore now moving at German automotive manufacturers to so-called "behaviour-related" Notifiable accidents (upwards of 4 lost working days) per 1 million hours worked accidents, where intensive training is 30 being conducted to ensure that good practices are followed. As the 25 legislators, too, have recognised, occu- pational safety must be seen as a 20 management function.

Occupational Safety 15 Ordinance 10 The first drafts of the German Occu- pational Safety Ordinance would in 5 numerous instances have tightened existing provisions in such a way as to 0 subject companies to increased bureau- 1990 91 92 93 94 95 96 97 98 99 2000 01 02 03 cracy and thus a significant increase in VDA statistics costs. However, in the course of the Annual Report 2004 145

time a representative of the automotive individual plant or equipment. In future, hand, there is also provision for flexibili- industry has been appointed chairperson hazard prevention measures will be ty. The new approach applies not only to of an important advisory committee of based on rules which are closely focu- safety technology but also to inspection, the Federal Ministry of Economics and sed on the actual hazard potential. the qualifications of the inspector and to Labour. Further representatives of the documentation. automotive industry have also been The advantages of the new approach appointed to the sub-committees. are obvious: all production managers The future regulations will therefore already have to carry out hazard analyses place greater emphasis on company- The committee will be responsible for and to document the agreed measures. specific solutions. Occupational safety shaping the structure of the new techni- In future, the rules governing the alloca- has thereby shed its somewhat "dusty" cal regulations. The aim is to create tion and use of working equipment and image as a purveyor of standard scope for individually optimised solutions, the operation of hazardous plant and solutions. In future it is envisaged that to ensure user-friendliness, particularly equipment will be based on a similar the role for the industrial health and for small and medium-sized enterprises, approach. It will be possible for the safety institutions will lie particularly in and to create transparent, systematic and manager to adopt measures one-to-one advising small and medium-sized enter- consistent legal structures. from the standard rules whenever the prises, providing them with detailed, latter provide an example which corre- sector-specific support. Thus the desire At the centre of the new regulations sponds to the circumstances on the for more concise, easily understandable are rules relating to hazards. The focus ground. When the solution being opera- and transparent regulations in the field of is on overall hazards and not on ted is company-specific on the other occupational safety will soon be fulfilled.

Hazardous Substances and Chemicals Legislation (REACH)

In February 2001, the European comments submitted, the proposals evaluation and authorisation Commission presented a White Paper on were revised and in late October 2003 a requirements will also increase in pro- a "Strategy for a Future Chemicals Pol- final proposal for a revision of chemicals portion to the risk posed by the icy". The White Paper announced plans legislation (REACH = Registration, Eva- substance. The system will be managed for a comprehensive review of European luation and Authorisation of Chemicals) by a new European Chemicals Agency policy on chemical substances. was adopted. The proposals envisage a and the relevant national authorities. system for registering all substances, In spring 2003, the Commission car- including existing chemicals. It will be The automotive industry supports a ried out an Internet consultation in necessary to register all substances sensible and workable EU chemicals which it invited responses to Commis- produced in quantities of more than one policy. However, there are considerable sion proposals which would have had ton per year. The registration and evalu- doubts whether the Commission's pro- serious consequences for European ation requirements will increase in pro- posals are feasible in practice and industry. On the basis of the numerous portion to the production volumes. The whether its goals can be achieved. One 146 Verband der Automobilindustrie ENVIRONMENT AND TECHNOLOGY

of the stated goals was to improve the on occupational safety and hazardous cate that some 10 per cent of competitiveness of European industry. It substances. On the contrary they are substances are likely to disappear is doubtful however whether the propo- likely to result in further bureaucracy from the market due to the high sals provide an adequate basis for safe- for all companies, with adverse con- registration costs. Others put the guarding the competitiveness of Euro- sequences for competitiveness. figure as high as between 20 and 40 pean industry. Further revision of the proposals is per cent. At first sight economically therefore essential. The exposure sce- insignificant, some chemicals produ- The automotive industry uses over narios envisaged by REACH must be ced in small quantities are actually 10,000 chemical products in the manufac- replaced by risk-based scenarios. very important or even indispensable ture of vehicles and parts, making it one The requirements for registration and in certain applications. It must also of the principal users of chemical substan- evaluation should be risk-based, be remembered that industry uses ces. Thus a policy which might at first that is based on the risk to human chemicals not only in its finished pro- sight appear to affect only the chemical health and the environment, rather ducts. Some chemicals, although not industry in fact has significant implications than based on the innate hazardous- incorporated into the product, are for the motor industry as well. ness of the substance. important to the functioning of the production process. In this case In assessing the Commission's pro- 2) The fact that responsibility for changes may pose a safety or quality posal and its effects on the motor substance evaluation lies with the risk as far as the product itself is con- industry, it is necessary to bear in mind relevant national authorities could cerned, making it considerably more that the motor industry operates in a also potentially be a problem. There is difficult to maintain quality standards. global market environment and thus a risk of the regulations being inter- All in all, the disappearance of some adverse regulations in Europe have a preted differently in the different materials would weaken the innova- major impact on its competitiveness. countries, with possible adverse tion and development capacity of Also, its innovation and production effects for equality of competition in companies based in the European capacity is based to a large extent on the Single European Market. Union and would lead to products the many small and medium-sized being produced outside the EU, then enterprises in this industry. These com- 3) The automotive industry also believes subsequently imported. The competi- panies already barely have the resour- that substances which are already tiveness of Europe as a location for ces to adopt all the regulations on regulated under EU law should not business and industry would be occupational safety and other areas and for the time being come under the further weakened. produce all the relevant documentation. scope of REACH, in order to avoid duplicating the administrative work- 5) The automotive industry also fears that The automotive industry therefore load. In the long term, however, the the additional administrative costs sees the following problems with the automotive industry is in favour of incurred by the chemical industry and new hazardous substances and chemi- combining specific bans and restric- other suppliers could end up being cals legislation: tions into a cross-sectoral approach. passed on to these companies' custo- mers. The resulting increased costs 1) There is no evidence that the Com- 4) A reduction in the number of substan- could mean that certain substances mission's proposals would replace the ces available on the market could would no longer be attractive either to existing regulations by standardised likewise have serious consequences. produce or to purchase. Again, the and more easily manageable legislation A number of reputable studies indi- competitiveness of European industry Annual Report 2004 147

would suffer. In the paint industry industry associations, of the impact of dimensions of the automotive industry, alone, some calculations put the cost the planned new chemicals policy. It is the German manufacturers have in the of reformulating a vehicle base coat at to be welcomed that the Commission is meantime implemented global stan- approximately 15 million euros. carrying out such a review, with the dards at their plants, with the aim of involvement of industry, although it meeting all possible requirements. Thus the plans of the European would have been better still if the Commission will have a significant implications of the policy had been In the field of hazardous substances adverse effect on the competitiveness of reviewed before publication of the draft. legislation, harmonisation is particularly European industry. A study commissioned It is to be hoped that the European important and must be expedited as by the Federation of German Industry Parliament and Council of Ministers quickly as possible. Unilateral national and carried out by management consul- will await the results of these further action and special regulations for tants Arthur D. Little predicted a decline impact assessments before arriving at Germany create competitive handicaps. in gross value-added in manufacturing their final decision on the Commission's Wherever possible, European regulations industry of around 20 per cent, although proposals. must be implemented in national law on admittedly this was based on the a one-to-one basis. State/industry agree- Commission's original draft proposals. Amendment of hazardous ments should also be considered, as a Similar figures were arrived at in a substances ordinance way of increasing flexibility in the field study carried out in France by Mercer Amendment of the hazardous sub- of occupational safety without any lower- Management Consulting. Even though stances ordinance in order to implement ing of the standard of protection the proposals have been revised and EC Directive 98/24 was originally provided to employees and consumers. their economic impact has been reduced, scheduled for 2000. Here it will be possible to build on the the implications are still substantial. excellent groundwork already carried So far however only drafts have out by the automotive industry, which will The European Commission now been produced, which have not been continue to set benchmarks in terms of intends to conduct a further review, implemented. In the absence of legal a responsible approach to hazardous together with European trade and certainty, and given the international substances.

.

Auto SAFETY AND TECHNOLOGY 150 Verband der Automobilindustrie SAFETY AND TECHNOLOGY

Road Safety - A Matter of Concern to the Entire Automotive Industry

EU road safety programme Commission refers to the revised Driving with ambitious aims Licence Directive, presented at the end In June 2003, the European Com- of 2003. For some considerable time, the mission presented its new programme for automotive industry has been making road safety which confirms its objective an important contribution in these areas of halving the number of road deaths in by its initiatives on driver training and the EU by 2010. This target is undoubt- its support for the work which is being edly ambitious and will call for strenu- done on road safety. ous efforts on all sides. The programme itself quite rightly adopts a balanced As regards vehicle-related technical approach which takes account of all the measures, the Commission's objectives four supporting pillars of road safety, i.e. include the installation of seatbelt the vehicle, the driver, the infrastructure reminders, improved underrun bumpers and the emergency services. on heavy goods vehicles, greater com- patibility between vehicles and meas- A fully integrated course of action of ures for active safety. Among the most this nature is also seen as a fundamen- promising systems meriting further tally suitable concept by the automotive development, the Commission includes industry, especially as the Commission speed warning and management devices, has also agreed to respect the principle collision warning and lane keeping of subsidiarity in its programme and, in systems, alcolocks and driver fatigue turn, the responsibility of the member detectors. In connection with the use of states for road safety. The automotive systems of this type, the Commission industry accepts the aims of the Com- also considers it necessary for drivers mission and will continue to make an to be educated in the practical implica- active contribution to improving road tions of the systems, in view of the fact safety. that the driver will continue to be entire- ly responsible for his actions. From the standpoint of road users, the programme specifies, among other The automotive industry also takes things, that the implementation of road the view that the responsibility of the traffic regulations should be stepped up, driver is in no way diminished by the penalties harmonised and road safety introduction of new technologies and campaigns carried out. In addition, the that he must be able to override such Annual Report 2004 151

systems if necessary. They can only standpoint of the infrastructure provi- number of accidents in Germany has serve to support and lighten the load on sions). It would also be necessary to been declining for a number of years. the driver. They do not, however, relieve take these into account in respect of For 2003, the Federal Office of Statistics him of his responsibility for the vehicle future measures. Thus, it may be neces- has once again recorded a reduction in or his driving. sary to adapt such measures to the con- road deaths by a further 3.4 per cent to ditions in the individual countries in any 6,606, the lowest level since statistics As regards the road infrastructure, case, rather than to formulate them as were introduced in 1953. Furthermore, the Commission is endeavouring to pro- applicable to the EU as a whole. the number of injured road users fell by mote telematics (intelligent roads), har- 2.9 per cent to 462,600. monised measures to eliminate accident Fewer accidents in blackspots and EU-wide guidelines for a Germany For the automotive industry, vehicle safe infrastructure. At the same time, it Thanks to strenuous efforts in the safety is not confined exclusively to is essential, in the view of the German fields of vehicle and road safety, the protecting car occupants, but extends automotive industry, that the traditional- ly high safety standards of the German autobahns be retained and not watered Road traffic accidents and vehicle population* down by European specifications. From Total motor vehicles Fatalities the standpoint of commercial vehicles, in thousands the Commission refers to measures 60,000 20,000 such as the regulation of driving and rest times, the introduction of digital tachographs and plans for the greater 50,000 harmonisation of inspections.

The strategic review envisaged in 40,000 the road safety programme for 2005 will be of decisive importance to the future policy of the EU. If, in the opinion of the 30,000 10,000 Commission, it then became apparent that the objective of halving the number of road deaths by 2010 cannot be achieved, the EU could exercise the 20,000 right to impose specific statutory meas- ures which go beyond the road safety programme. In that case, however, it 10,000 would be necessary to ensure that all the said measures were in keeping with the desired objective and that consider- 0 0 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003 ation was given to the differences between conditions in the individual * Since 1994 incl. Eastern Germany Federal Office of Statistics member states (for example, from the 152 Verband der Automobilindustrie SAFETY AND TECHNOLOGY

equally to the protection of the "more Pedestrian fatalities in Germany vulnerable" party in an accident. This applies not only to the different sizes of 4,000 cars but also to accidents involving pedestrians. Here again, the favourable trend of recent years continues, with the number of pedestrian fatalities in 3,000 Germany declining by more than three- quarters between 1980 and 2002, from 3,720 to 873. 2,000

Favourable though the trend may be, it gives no reason for the automotive 1,000 industry to rest on its laurels; on the contrary, every road accident is one too many. 0 In recent times, in particular, improve- 1980 1986 1987 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 ments in passive safety, such as the intro- duction of the airbag, have achieved Federal Office of Statistics considerable success. The opportunities for mitigating the consequences of acci- dents, however, are beginning to reach their limit. On the other hand, active safety – the prevention of accidents – offers further potential. Active safety includes Accident Prevention in Focus measures which either prevent an acci- dent from happening or at least reduce its severity. As a result, the subject of Major advances through vehicles in Germany are now equipped. active safety is currently occupying the ABS and ESP According to the findings of accident foremost position in the agenda of the In recent years, much has been research, ESP can reduce the risk of automotive industry. done not only in the field of passive skidding by up to 80 per cent. Given safety but also in active safety. Since that a side-on collision with a car is At the forthcoming discussions on the beginning of the 1990s, the fitting usually preceded by a skid, the opportu- the subject of the protection of pedestri- of ABS has increased considerably, so nities for ameliorating the accident ans, due to take place in Brussels in the that a good 95 per cent of all newly statistics become clear. middle of 2004, the question will also registered cars in Germany are now arise as to appropriate measures for equipped in this way. Since the end of The combination of ESP and an assis- making the most of the potential oppor- the 90s, this has been augmented by ted braking system, which is also be- tunities. Here again, accident prevention Electronic Stability Programme (ESP) coming increasingly widespread, gives should also be given the highest priority. with which around 50 per cent of new rise to a highly efficient safety system. Annual Report 2004 153

Investigations have shown that not eye. In addition, the cars of tomorrow soon be on offer. Systems such as all car drivers are in a position to make will be able to communicate and, Adaptive Cruise Control (ACC) can be effective use of the potential of their through networking, be aware the sur- supplied with top-of-the-range vehicles vehicle's braking capabilities. A braking roundings and warn the driver of any even now. ACC allows the vehicle to effort of as little as 0.5 g is considered hazards. In this way, the foresighted maintain a constant distance from the by many drivers as severe, whereas the vehicle will combine the functions of one in front. It even reduces the speed actual maximum braking force for a car driver support and communication sys- of the vehicle independently, down to a can be as high as 1.0 g. Even in danger- tems. Other systems are also conceiv- certain level of deceleration and then ous situations, many drivers apply the able which could relieve the driver of make it accelerate again when the road brake pedal too hesitantly. Under these further tasks. As a case in point, one ahead is clear. The future will bring circumstances, assisted braking is able such function could indicate the size of systems which can also do much more, to call up the maximum braking effort a parking space to the driver and even such as brake the vehicle to a standstill. in order to shave valuable metres off park the vehicle itself. In this way, This function would typically be used the stopping distance. entirely new directions are opening up as an automatic emergency brake if for road safety, driving pleasure and the driver failed to brake or did so Not every accident, however, can be convenience alike. only inadequately through inattentive- prevented by ABS, brake assist systems ness. Even if an advanced ACC system and ESP. If, for example, the driver fails The first systems of the new genera- cannot prevent a collision in every case, to react or reacts entirely inappropriately tion are either already available or will the impact speed and thus the risk of through being overtired or inattentive, the effect of the systems will be limited. According to information supplied by the insurance industry, some 25 per Example of a lane-change warning system cent of serious accidents are caused by drowsiness, while 14 per cent of all accidents occur as a result of the driver's inattentiveness. In such cases, for example, driver support systems could help to prevent accidents from occurring or at least to reduce their severity.

Driver support systems of the future The car of tomorrow will actively support the driver. As a foresighted vehicle, it will identify impending traffic situations and make recommendations on how to deal with them. New elec- tronic aids will be capable of assisting the driver almost in the form of a third Volkswagen AG 154 Verband der Automobilindustrie SAFETY AND TECHNOLOGY

injury would at least be significantly driver has placed his foot on the pedal. USA and Japan, is seeking to obtain a reduced. In an emergency, this reduces the global licence to use a frequency in the braking distance by several invaluable 24 GHz range. Also in the course of preparation for metres. mass production is a lane-change warn- In the USA, the appropriate authority ing system which is capable of warning The advantages of the system can approved its use over two years ago, the driver or even actively supporting also be brought to bear in cases where whereas permission in Europe is still him. In this case, cameras are used to collisions are unavoidable. Thus, the awaited. Short-range radar is designa- analyse the lane markings on either side passenger safety systems can be ted by the European Commission as one and to warn the driver if he moves out brought to a state of readiness before of the key technologies of its e-safety of his lane. the impact, for example the sun roof programme in its quest to halve the can be closed or the safety belts number of road deaths by 2010. The Lane changing as a consequence of tensioned. Commission has accordingly taken on inattentiveness can also be put down to a supporting role in the matter of the over-tiredness on the part of the driver. The industry initiative entitled approval and has given a corresponding To counteract this, drowsiness warning SARA (Short Range Automotive Radar mandate to the European Communica- systems are being developed which reg- Frequency Allocation), which involves tions Authority (EEC), which should help ister and analyse the movements of the representatives from vehicle manufac- it to clear the path of any further obsta- driver's eyelids by camera. With increas- turers and suppliers from Europe, the cles, since the spectrum of 24 GHz ing drowsiness, the eyelids close with increasing frequency and duration. In such cases, technology can warn the driver of over-tiredness at an early stage Design for a drowsiness warning system and draw his attention to the need for a break.

Radar technology for the car Monitoring of the vehicle surround- ings can be performed by 24 GHz short- range radar technology. In this way, a further quantum leap in improving road safety is being brought within reach. With short-range radar, critical situa- tions can be identified at a very early stage, even before they are perceived by the driver. As a result, he gains valuable time in which to react in an appropriate manner. As a result, for example, the braking system goes into a state of Volkswagen AG readiness for use, even before the Annual Report 2004 155

Safety applications employing all-round vision with short-range radar System networking offers further potential Other far-reaching functions will

Blind spot become possible in the future through monitoring Parking assistant combinations of sensors. In this way, Rear impact the sensors of various systems or sub- Pre-crash Parking assistant systems in the vehicle will be inter- Reversing assist Distance control linked, resulting in a considerable with stop-and-go expansion in the capabilities of the Rear collision warning "seeing" car. Collision warning Lane-change Blind spot warning Thus, for example, the wheel revs monitoring Impact lessening signal from the ABS will also be used Collision warning for the speedometer or the antitheft sys- tem. Linking the coefficient of friction of SARA the ABS with the distance radar of the ACC will result in a precisely defined brak- ing of the vehicle in an emergency. Thus, external parameters and the identifica- systems also includes radio services such European Frequency Regulation Author- tion of traffic situations may be combined as telecommunications and meteorolog- ity. In addition, the industry has pre- to form new functional systems. ical research (weather and climate fore- pared a memorandum of understanding casts). whereby those vehicle manufacturers A truly "foresighted" vehicle, how- wishing to offer 24 GHz systems would ever, also needs to be in a network with In order to protect these services to give a written undertaking to comply several other road users, necessitating the utmost extent, SARA has devised a with the conditions laid down in the data exchanges between vehicles. As an package solution including the following package. example, a stationary vehicle in a dan- proposals. gerous position on the wrong side of a 24 GHz technology as an interim At a meeting held on March 8, 2004, blind bend would send appropriate infor- measure, to be sold up to 2014; the Federal Ministry of Transport, the mation to other road users. The drivers a maximum of 8.3 per cent of all Federal Ministry of Economics and of other cars would then be warned if vehicles could be equipped in this Labour, the German Meteorological the hazard was not yet in sight. In an way. Service, the German National Metrology emergency, support systems could also From 2014, conversion to 79 GHz Institute (PTB) and the SARA Consort- initiate measures automatically in technology as a permanent meas- ium agreed that 24 GHz technology advance, such as emergency braking. ure. occupied an important place in road safety and that its implementation Supporting (rather than The requisite regulations for the was necessary in order to take overtaxing) the driver package are currently being drawn up advantage of the opportunities it The increasing number of operating by the European Commission and the offered. functions, however, must not distract the 156 Verband der Automobilindustrie SAFETY AND TECHNOLOGY

driver or, worse, overtax him. The "man/ machine interface" (see box) is there- Man/machine interface - the latest research results fore gaining ever-increasing importance. In the development of new driver to develop a standardised procedure It is essential that the technical capabili- support and information systems, the whereby the attention potential of driver ties of the vehicle can be learned intui- ergonomic design of the man/machine information systems can be measured. tively or, to a certain extent, are self interface occupies a position of consid- explanatory, although without this erable importance. Furthermore, the use of support detracting from the individuality of systems which are intended not only the brand, given that the controls of At a symposium of the Association to inform the driver but also to support a car count among its distinguishing for Research in Automotive Technology him when at the wheel by actively inter- features. (FAT) and the Federal Highway Research vening is being investigated in detail by Institute (BASt) last year, the latest the scientists. As a result, by means of Even air conditioning research projects were presented, with simulation methods in the "learnability" increases road particular reference to "learnability". In laboratory, which was developed within safety this connection, emphasis was placed the framework of the "INVENT" Air conditioning systems in cars on the possibilities of optimising drivers’ research initiative of the Federal Re- not only make life pleasant for the attentiveness to traffic conditions and search Ministry, a procedure has been occupants but also contribute to the the installation of information and com- established which can be used in the efficiency of the driver and are, in turn, munication systems in vehicles. Thus, development process and which reveals of importance for road safety. This the objective of the ADAM project both learning problems and opportuni- effect has now been verified by a wide- (Advanced Driver Attention Metrics) is ties for improvement. ranging study by the Association for Research in Automotive Technology (FAT). In tests, it was found that when Effects of weather conditions on accident statistics drivers were subjected to high tempera- Increases in accidents in built-up areas with wet streets and in warm weather tures and were called on to carry out Change compared with average accident figures, per cent complex tasks, they exhibited longer 22 reaction times in consequence. In coor- 21 dination tests, moreover, some of the candidates performed significantly less well.

11 Given the weather conditions in high summer in Central Europe, temper- atures in cars without air conditioning can rapidly rise to levels above which the efficiency of many car drivers is impaired. As the FAT study clearly con- Wet streets Warm weather Hot weather firms, stressful situations of this nature can be prevented by the use of air con- Behr GmbH & Co. ditioning systems. Annual Report 2004 157

Protection of Pedestrians in WP.29 (ECE-GRSP - the UN ECE Working Group on Passive Safety) is and Car Occupants also studying the question of the protection of pedestrians. The objective of their discussions is to formulate a EU Directive gives priority terms of the requirements for the pas- Global Technical Regulation (GTR) on to passive safety sive safety of vehicles. With effect from the protection of pedestrians. A collision between a car and a pedes- October 2005, cars of a permitted gross trian is an accident involving two bodies of weight of 2500 kg will only be given Under Japanese chairmanship, the the utmost disparity, given that the differ- new type approval if they satisfy the discussions will reach a decisive stage ence in weight between them can amount regulations laid down in the first stage of by the end of 2004. It will then be up to to a factor of 70. Although the number of the Protection of Pedestrians Directive the leading negotiators to persuade the pedestrian accidents in Germany is consis- which specifies precisely defined, EU that a global regulation must take tently declining, the automotive industry standardised requirements. Thus, precedence, rather than Europe being is in no way reducing its efforts to improve among other things, it proposes tests allowed to go it alone. An accord should pedestrian safety. While the potential for for the impact of a head on the bonnet be arrived at in 2005 at the latest when, passive safety has already been largely of a car and the impact of a bumper on in all probability, the final provisions of exhausted, active safety - accident pre- the lower leg. This part of the directive phase 2 of the directive will be laid vention - affords new opportunities in continues to take account of technical down. the advancement of pedestrian safety. feasibility problems, whereas in the second phase, coming into force from Pedestrian safety – more At the European level, the EU Direc- 2010 onwards, no exceptions what- than passive safety tive on the Protection of Pedestrians soever will be allowed. In addition, Although the public debate about the was passed in 2003, to be implemented two dummy heads of different sizes and EU Directive on the Protection of Pedes- in two phases. Phase 1 will start on a so-called "upper leg" dummy are trians is almost exclusively concerned October 1, 2005, phase 2 on September proposed. with mitigating the consequences of 1, 2010. Discussions about stage 2 are accidents (passive safety), this is only focusing on the test methods and crite- The impact of a car on a pedestrian, one of a number of possible safety ria recommended by working group however, can in no way be compared measures. As in the case of protecting 17 of the European Enhanced Vehicle- with the requirements for other types car occupants, pedestrian safety must Safety Committee (EEVC). A feasibility of crash. There is, for example, no be seen and implemented as an all- study of the measures proposed for 2010 "standardised" pedestrian. Moreover, a embracing objective if the highest pos- is scheduled to start in the middle of conflict of aims will arise if the construc- sible degree of protection is to be 2004. In addition, an "equal effectiveness" tion of the front end of the vehicle is achieved. Excluding the emergency study will be carried out. In this way, sys- insufficiently strong, typically from the services, an all-embracing view includes tems could be approved as alternatives standpoint of usability. Design opportuni- measures involving the following areas: offering at least the same safety poten- ties, moreover, would be subject to tial as the measures proposed by WG 17. severe constraints. Infrastructure Mitigating the consequences of The EU Directive, in particular, In addition to these developments in accidents (passive safety) defines the protection of pedestrians in the European Union, a group of experts Prevention of accidents (active safety) 158 Verband der Automobilindustrie SAFETY AND TECHNOLOGY

In the case of the infrastructure, night vision glasses. Braking systems the buckles of safety belts, lock pedestrian crossings, crossroads and and chassis are likewise subject to into sockets at the base of the car other junctions where the paths of highly advanced development work. A seat backrest. In this way, it can be pedestrians and vehicles meet are huge, measurable gain in safety has ensured that a child's seat is securely accident blackspots for pedestrians. already been delivered by ABS. In an and reliably installed in the car in a Not infrequently, relatively simple agreement with the European Commis- straightforward manner, without the measures are sufficient to ease the sion preceding the directive, the auto- need for the user to fiddle with safety situation at these points. Safety barriers motive industry accordingly promised to straps. between the footpath and road can fit all cars coming on to the roads for keep them apart, while other measures the first time with ABS as standard from Following intensive discussions with- such as traffic control systems and the end of 2004 at the latest. The brake in the bodies of experts of the ECE, it islands can ensure that pedestrians assist system, moreover, has proved to has now been possible to complete the cross the road safely. Undoubtedly, be an effective means of increasing required regulations. The corresponding the advantage of infrastructural active safety. ECE regulations have been in force measures of this nature over technical, since the beginning of 2004. These not vehicle-related measures is their direct Car safety belts – only cover the ISOFIX system but also effectiveness. for children too the standardisation of the anchorage It goes without saying that children points in the vehicle and the requisite To a certain extent, the passive safe- should be properly protected when markings. ty of vehicles could also play a role in travelling in cars. Unfortunately, how- lessening the effect of an accident ever, the safety potential of the child As a result, cars must in future involving a pedestrian, but limits are set restraint systems available on the mar- provide for the installation of at least by the functional requirements of the ket is largely unused. As a result, chil- two ISOFIX child seats. This, in turn, vehicle. dren can be seen in cars entirely unpro- entails the provision of at least two tected by restraint systems; alternatively, "universal" ISOFIX systems (i.e. suitable As a result, the automotive industry the systems themselves are incorrectly for different makes of vehicle). This is increasingly concentrating on the installed. The driver bears a particular means that, in addition to two lower potential offered by measures to prevent responsibility for situations of this anchorage points, an additional upper accidents, namely active safety. These nature. tether (top tether) is provided on the include visibility from cars and driver child seat and on the backrest of support systems, combined with the To simplify the use of child restraint the car seat. The purpose of the top development of braking systems and systems and permit the use of child tether is to restrict the potential twisting chassis. From the standpoint of visibility, seats in different types of vehicle, a movement of the child seat in an new technologies such as bending system has been developed with stan- accident. lighting and the even more advanced dardised interfaces. This is known under Adaptive Front Lighting (AFS) constitute the designation ISOFIX, in which ISO Apart from ISOFIX systems, how- a great leap forward. In addition to stands for International Standardisation ever, other designs are permitted, these, radar and even infrared systems Organisation. such as a child seat with a supporting are undergoing development or are, to leg (semi-universal) or a special some extent, already available. These ISOFIX systems feature two version designed for a specific model will help the driver in the same way as fixed anchorage points which, like of vehicle. Annual Report 2004 159

Steering and Braking Systems selective braking (which acts on individ- ual wheels to, for example, stabilise the vehicle), the brake lights should not be Increased possibilities The new version of ECE Regulation activated. through electronic steering 79 includes definitions for the automati- systems cally commanded steering function, the It was also the general opinion of the As a result of the advent of electron- corrective steering function and the experts that, in the case of commercial ics in vehicle steering systems and autonomous steering system. vehicles, the engagement of a high per- the new design opportunities this has formance retarder (hydrodynamic retarder, opened up to vehicle manufacturers, an Autonomous steering systems, electric eddy-current brakes) should be international ECE working group under whereby the driver is no longer required indicated by brake lights but not in the German chairmanship initiated discus- to perform any functions whatsoever, are case of less effective retarders such as sions to revise and extend ECE Regula- not approved for use on public roads. exhaust throttle brakes. The ideal solution tion 79 as long ago as 2000. Automatically commanded steering sys- would be for the brake lights to come tems which control the vehicle by elec- on as a function of the rate of decelera- The subjects for discussion were tronic signals generated internally and tion. The present state of the art, how- formulated by the German vehicle and which the driver can override at any time, ever, does not permit this factor to be steering system manufacturers. The new are, by contrast, permitted up to 10 kph. determined for all types of vehicle. version of the regulation, which permits Corrective steering which is, for example, the testing and approval of electronical- engaged automatically to counteract the On the basis of a proposal by the ly controlled steering systems, was effects of sidewinds, is permitted without Japanese government, it has been passed in February 2004 and will any speed restriction. established that the brake lights should become effective in the near future. It come on when the retarder is activated, should actually have been adopted Activating brake lights if the retarder or foot brake is in a posi- sometime ago but this was delayed by Conventional braking systems of the tion to achieve a certain effect (defined crucial discussions on the subject of past made it clear when it was neces- as deceleration at 2.2 m/sec2 at 80 kph, automatic steering. Following an inten- sary for the brake lights to be activated with the vehicle empty). At the same sive debate, a compromise was reached to warn following drivers, namely when time, however, it is not certain whether whereby automatic steering (not to be the driver depressed the brake pedal. the debate about the limit for the effect confused with "autonomous steering") With new, electronically controlled brak- of the foot brake can actually be regard- is only permissible at speeds up to ing systems, this question cannot be ed as concluded since, depending on 10 kph. This will at least make it possible answered so precisely because braking load and the engagement of the output to introduce parking systems on to the is no longer initiated by the driver alone stage of the retarder, it is quite possible market which will steer a vehicle into a but also by the system itself (automat- for the brake lights to come on at low parking space automatically. Technical ic/selective braking). rates of deceleration, yet fail to do so at developments will indicate whether higher rates. restricting automatic steering to 10 kph The experts in braking systems have can continue in existence or whether it therefore come to an agreement that Global brake regulation is necessary for a renewed debate on automatic braking (automatic applica- for cars the subject, for example in respect of tion of the foot brake) must actuate the Once the framework agreement of so-called "electronic drawbars". brake lights whereas, in the case of 1998 on the global harmonisation of 160 Verband der Automobilindustrie SAFETY AND TECHNOLOGY

vehicle-related regulations had been The working group hopes to complete of the art. Ongoing discussions on this adopted by a number of contracting the draft of the global brake regulation subject are taking place among cor- parties throughout the world, it became by the middle of 2006. Although doubts responding international bodies. Cur- necessary to decide which regulations exist as to whether this ambitious dead- rently, the most important of these is the should be considered for harmonisation line can be met, the industry will play its ECE-GRRF in Geneva which, as a UNO in the agreed manner. Since the braking part in achieving this objective. organisation, is of worldwide impor- systems of cars were already subject tance as well as being influential in to a largely harmonised regulating Braking systems of light European Union regulations. The ECE mechanism (ECE Regulation 13 H), it commercial vehicles regulations are usually adopted was decided by WP.29 to establish a Recent media reports have revealed unchanged into the EU directives. working group at the ECE in Geneva that the braking systems of light com- which would draw up a global technical mercial vehicles were actually required The fact remains that modern vans regulation based on regulation 13 H. to comply with a regulation which meet standards which are far more This working group has now started its was published as long ago as 1971. demanding than the regulation currently deliberations but these are at an early This is correct, in that the braking sys- in effect, as well as offering a high stage from the standpoint of the content tem directive 71/320/EEC, applicable level of active and passive safety, for of a global regulation. throughout Europe, does date from that example through disc brakes and year. Since then, however, it has been ABS, as well as ESP which, to a large An essential initial subject for dis- amended several times to bring it into extent, is already being fitted as cussion was the question as to whether line, on each occasion, with the state standard. the applicability of a global regulation should be confined to cars or should also embrace light commercial vehicles. The USA and a number of European govern- ments, with Germany at the forefront, Lights and Visibility would like to make it applicable to com- mercial vehicles weighing up to 3.5 t in any case, whereas Japan firmly declines Vehicle lighting systems play a valu- safety system when driving in darkness to do so. The German vehicle manu- able role in road safety, serving the dual or poor weather conditions. The distri- facturers are prepared to accept more purpose of seeing and being seen. This bution of light by the AFS system stringent requirements, not only for cars being so, development engineers have follows bends in the road. There are two but also for light commercial vehicles. always been aware of the compromise known systems for this form of "imita- Both types of vehicle must satisfy the between "more light" which enables the tion", both of which employ intelligent requirements for export to the USA. driver to see better and "less light", to headlamps. In one case, multiple lamps prevent oncoming drivers from being are used which, if necessary, illuminate Another important point which the dazzled. the bend more intensely while, in the working group must clarify concerns the other, the headlamps themselves swivel. question as to the economic benefit of Turning night into day – a global regulation on brakes, since the bending light and AFS The latter system has been made latter can only be formulated if such a The Advanced Front Lighting System capable of approval by an amendment to benefit can be clearly proved. (AFS) offers the driver an additional ECE Regulation 48, (Installation of Annual Report 2004 161

Dynamic bending light LEDs generate light directly, rather than through the heat radiation of a fila- ment or gas discharge bulb. They offer further advantages in their adaptability (permitting them to fit into virtually any available space) and in their ability to deliver light in any desired colour. To permit widespread use, however, their luminosity and efficiency must be still further improved.

Almost every manufacturer is now employing LED technology in vehicle interiors. They are to be found in the form of warning lights in instrument panels, in radios and in navigation and air conditioning systems. Other applica- tions include interior and footwell light- ing and reading lights. - Automatic operation - Dipped beam traverses in accordance with the radius of the bend Today, LEDs have become a standard Hella element of brake light systems.

Lighting Equipment) and is now being Advanced Front Lighting System (AFS) offered by a number of vehicle manufac- turers. A separate ECE Regulation (AFS) will be drawn up for headlamp systems Innovative headlamps of the future consisting of multiple lamps, in order to qualify these for approval. The experts reckon on this being passed in 2004. On a bend At high speed In town

Light emitting diodes (LEDs) open up new possibilities The light emitting diode (LED) is an active, self illuminating unit. LEDs were first used in a high-level brake light in 1986. LEDs offer the advantage, among others, of lighting up 0.2 seconds faster than conventional filament lamps. They also last longer and consume less energy. Automotive Lighting 162 Verband der Automobilindustrie SAFETY AND TECHNOLOGY

Rear light cluster featuring LEDs opportunities, giving developers and designers considerably more scope than traditional lamps.

Although, in the long term, LEDs could be seen as performing all the lighting functions in vehicles, conventional filament lamps will not dis- appear from the market altogether. Depending on the requirements for technical or design characteristics, lighting systems of the future will employ filament lamps, gas discharge lamps and LEDs. Nevertheless, it can be Osram envisaged that coloured lamps on cars will be replaced by LEDs. A further development stage can be advantages are of considerable impor- seen in the use of LEDs in headlamps. tance to the effective illumination of Intelligent brake and In this case, one of their advantages is bends. According to calculations, twenty rear lights that the emitted light is highly concen- white LEDs each of 100 lumens (lm) When a vehicle is braked, the red trated and is thus particularly suitable deliver sufficient light to perform the brake lights warn following traffic accord- for the selective illumination of the road function of a headlamp. This opens up ingly. This was made a legal requirement ahead. Along with AFS systems, these entirely new technical and design in 1908 and has not been fundamentally amended since then. Even today, brake Example of a design for an LED headlamp lights merely serve to indicate to follow- ing traffic that the vehicle is slowing down. They do not, however, provide any information whatsoever as to the degree of braking effort employed.

As a result, measures are under dis- cussion in the ECE-GRE international lighting technology group with the aim of reducing the number of rear-end col- lisions. To this end, the German automo- tive industry has put forward a number of important proposals. Thus, for exam- ple, the attention of following drivers could be aroused by increasing the illu- minated area of brake lights above a Osram certain rate of deceleration (emergency Annual Report 2004 163

braking) or by making the brake lights To satisfy these new regulations, In order to bring the EU regula- flash. These proposals have been the systems employing aspherical mirrors tions continuously into line with the subject of international discussion for may be used. In the case of commercial corresponding ECE regulations, it will some time. The experts estimate that vehicles, the minimum radius of curva- now be necessary, for formal reasons, the existing law will be changed in 2004. ture for certain mirror systems will be to adapt ECE Regulation R46 (Rearview reduced so that relatively larger fields of Mirrors) to the new version of the EU A further innovation relates to intel- vision will come into view with no Directive (2003/97/EC-Indirect Visibili- ligent rear lights which automatically change in mirror dimensions. Finally, the ty/Rearview Mirrors). In the meantime, compensate for the effects of weather new directive provides for camera/video however, the automotive industry has (if the glass becomes dirty) by, for exam- systems to be capable of receiving already drawn up proposals to remedy ple, increasing the intensity of the fila- approval. the deficiencies in the EU Directive. ment lamp (IntACT-System - Intelligent These should be presented to the Automotive Actuator Control and Com- The new regulation should come appropriate ECE working group WP.29 munication Techniques). In this case, a into force for new approvals on January (GRSG) through the Federal Ministry of contamination sensor measures the 26, 2006 and for the first registration on Transport and the OICA, then transparency of the glass and automati- January 26, 2010 (vehicle categories M1 implemented at the earliest possible cally adjusts the brightness of the lights and N1, i.e. cars and light commercial date. for daylight and night-time conditions. vehicles) or from January 26, 2007 (vehicles of all other categories). At the end of 2003, the Federal Min- At present, the regulations do not istry of Transport asked the German provide for systems of this type. In the Regrettably, not all the proposals automotive industry to specify the extent light of a proposal for the variable light formulated by the automotive industry to which the new EU directive would be intensity control of brake lights, hazard- were taken into account in the new met by commercial vehicles, at the warning lights, fog lamps and rear lights, directive. Thus, a definition for aspheri- national level, ahead of time, on a vol- corresponding amendments should be cal mirrors and a description of the untary basis, and whether commercial made to the international regulating extended fields of vision they afford vehicles already in use could be retrofit- mechanisms. have been omitted. The requirements for ted in accordance with the requirements the field of vision from cars have been of the new directive. Improving the visibility formally extended by bringing the rear- from vehicles ward view of the road from 10 m to 4 m As a result, VDA put forward a cor- Following a long preparatory period, behind the driver's eyes, but given his responding proposal to the Ministry. For the new EU Directive (2003/97/EC-Indirect relatively low sitting position, this will the conversion of standard vehicles and Visibility/Rearview Mirrors) has now been not contribute to any improvement in the preparation of systems of mirrors for passed. This replaces the previous direc- visibility. In the final analysis, the new retrofitting, however, a certain lead time tive on rearview mirrors (71/127/EEC) directive does not cover the approval of will be required. As a result, it will be and provides for the enlargement of camera/video systems in sufficient necessary for the Ministry to present a fields of vision on either side for various detail. This should be expanded to practical proposal, otherwise it would categories of vehicle. On the one hand, enable other information systems to be hardly be worthwhile, either technically therefore, the so-called "blind spot" approved as well, such as those which or economically, to convert production should be reduced while, on the other, employ radar, lasers, ultrasound or facilities ahead of the statutory all round visibility should be improved. infrared radiation. deadlines. 164 Verband der Automobilindustrie SAFETY AND TECHNOLOGY

Evaluation of Vehicle Safety will put forward its own proposals if this appears advisable.

EuroNCAP passive safety procedures comply with the principles The technical working group on The passive safety of cars is tested of openness, comprehensibility and active safety of the EuroNCAP consor- and evaluated with the framework of compatibility with planning needs. A tium has set up three subsidiary work- the European New Car Assessment Pro- series of steps to improve the situation ing groups to concentrate on: gramme (EuroNCAP). The first crash have been recorded in this connection, test results from test phase 1 of the but there is still some way to go. Brakes and vehicle dynamics EuroNCAP were presented to the public Visibility and lighting systems as long ago as the beginning of 1997. So far, EuroNCAP has published a Ergonomics and driver information The test parameters were actually total of 13 testing stages for vehicles of systems derived from the EU directives on frontal wide-ranging classes and categories. and side impacts planned at the time During the period in question, some 200 The industry is represented in the but, in order to differentiate between the models of vehicle, each in at least three subsidiary working groups by the ACEA tested vehicles more clearly, for exam- crash test configurations, were tested (European manufacturers), JAMA ple, the impact speed for the frontal (pedestrian protection, frontal and side (Japanese manufacturers) and KAMA impact test was raised from 56 kph to impacts and, as an option at the manu- (Korean manufacturers) organisations. 64 kph, equivalent to an increase in the facturer's discretion, a side impact kinetic energy on impact of 30 per cent. against a post). The industry has already made an essential contribution on the subject of These more stringent requirements Since 1998, the EuroNCAP consor- brakes by putting forward the draft ultimately serve to protect the occu- tium has been an international organi- standard on "straight-line braking with pants of vehicles and are accepted by sation under Belgian law, domiciled in ABS" as a suggestion for testing brak- the industry. On the other hand, subjec- Brussels. Its members consist of the ing behaviour. This draft, developed over tive criteria formulated by the EuroNCAP governments of the EU member states a number of years by experts in chassis experts and incorporated in the assess- and consumer organisations. At present, and brakes, provides for the reproducible ment system in the form of minus points EuroNCAP has ten members. In addition, determination of braking distances as (so-called "modifiers") are not accept- the European Commission (DG TREN) accurately as possible. It also reveals the able. In some cases, these are criteria provides financial support for its work. importance of precise adherence to var- which are not confirmed by accident ious marginal conditions if there is a research. They therefore represent merely EuroNCAP active safety need to compare the braking distances a highly personal viewpoint on the part When the EuroNCAP consortium of different vehicles. of the EuroNCAP experts. announced its intention to introduce a points-based assessment procedure for In testing on different road surfaces The aim of EuroNCAP is to create active safety in addition to passive and under different weather conditions incentives so that better and safer vehicles safety, the German vehicle manufacturers alone, the comparability of the results is are developed and sold. This ambitious decided actively to support these activi- highly questionable. aim, however, is subject to the proviso ties. This means that the industry will that the formulation and application of comment on the test procedures The industry is likewise heavily the EuroNCAP assessment and weighting devised on behalf of the EuroNCAP and involved in formulating test procedures Annual Report 2004 165

for visibility and lighting systems. Corre- There are serious reservations about motorways and including crossroads sponding papers will be put forward in the measuring system developed by TRL and overtaking manoeuvres). For the the near future. for these purposes, however, in that it purpose of assessing stationary traffic, has not yet been placed at the disposal for example, a recognisable object of a The question as to how the Euro- of the laboratories and is not even minimum size, such a small child, could NCAP bodies will assess vehicle dynam- recognised as a measuring system. For be used. For the other factors, it would ics is of considerable interest. In the the moment, many questions remain be necessary to formulate specific opinion of the industry, this subject is so unanswered. requirements in each case and then to complex that it is barely possible to for- subject them to an overall assessment. mulate a reproducible procedure with In the opinion of the automotive The European manufacturers' associa- objective assessment criteria which can industry, generally recognised visibility tion (ACEA) has therefore made contact be carried out at a reasonable cost. It objectives should be defined for station- with TRL with the aim of formulating an appears doubtful whether such a diffi- ary traffic (when manoeuvring or wait- acceptable concept for the assessment cult task can be completed within the ing at traffic lights) and traffic on the of visibility within the framework of proposed timescale of a few years. move (in towns, on country roads and EuroNCAP active safety.

The German automotive industry will continue to support the EuroNCAP projects on active safety in an advisory Commercial Vehicles - capacity in the future. Transporting Goods Safely EuroNCAP visibility The visibility from motor vehicles should also be included in the assess- ESP for vehicles road safety by electronic stabilising ment of active safety. The British Road transporting dangerous systems which are marketed under the Traffic Research Institute (TRL) took on goods designations ESP for motor vehicles and this task some time ago and has formu- The safety of vehicles transporting TRSP for trailers. Demonstrations with lated a concept for the assessment of dangerous goods is particularly impor- heavy goods vehicles equipped with visibility from vehicles. According to this, tant in the context of road traffic. Legis- ESP and TRSP have evoked an enthusi- the fields of vision within the driver's lators accordingly have an interest in astic response from countless road perception would be projected from the ensuring that innovations leading to safety experts and have persuaded the vehicle onto areas at a certain distance improvements in road safety are fitted to Federal Ministry of Transport to consider from the vehicle with the aid of a meas- vehicles transporting dangerous goods the possibility of introducing stabilising uring system developed especially for as soon as possible. Thus, it was systems of this type on dangerous goods this purpose. In addition, data already decreed that vehicles of this type and transport vehicles at an early date. compiled by vehicle manufacturers on certain weight categories should be fit- the layout of different types for vehicle ted with antilock braking systems (ABS) As a result, the German government would also be consulted. These fields of as long ago as 1993. has submitted a proposal to the ECE vision, classified in accordance with the working group in Geneva dealing with size of the areas, would be used for the Since then, a further milestone has this type of vehicle (WP 15), which assessment. been reached in the advancement of envisages that dangerous goods transport 166 Verband der Automobilindustrie SAFETY AND TECHNOLOGY

Speed Limit for Vans not Justified

In recent years, the importance of At their meeting at the end of (BASt), extended to cover the distance vans to commerce and daily life has March 2004, a majority of the State travelled by vans for the first time, increased considerably. In the van Ministers of Transport rejected a speed clearly confirms that their involvement sector, particularly in respect of vehi- limit, the decisive reason being the in accidents - even on autobahns - is cles in the 2.8 to 3.5 t category, the fact that, according to all the investiga- not above average. It is also revealed commercial vehicle industry offers its tions carried out so far, this would that the average distance travelled, customer a diverse product range. not lead to any improvement in road both in total and on autobahns, is sig- There is almost no limit to the flexibil- safety. nificantly higher than that of cars. ity, versatility and adaptability of these Thus, the risk of a van being involved vehicles. They make home deliveries A critical analysis of accident in accident, measured in terms of of goods ordered on the Internet and records reveals that the number of numbers on the road, accidents and have now also become indispensable vans of 2.8-3.5 t involved in autobahn distance travelled, is lower than that of to the skilled trades. In view of their accidents has, admittedly, risen in the risks associated with cars and increasing importance, it is essential absolute numbers. A fundamental rea- heavy goods vehicles. for them to comply with the highest son for the increase, however, lies in safety standards. the marked increase in the overall Only 14 per cent of all accidents vehicle population in this segment. If involving vans occur on autobahns. For some time, the record of acci- this is taken into account in the calcu- This being so, a speed limit would only dents involving vans has been the sub- lations, the increases in autobahn acci- affect a tiny proportion of accidents in ject of a discussion between the Trans- dents prove to be significantly more any case. Since more than a third of port Ministers of the Federal States modest. In relative terms, even the fre- the German autobahn network (includ- and central Government which, among quency of accidents is revealed in a ing road works) is already subject to other things, calls for an autobahn considerably better light. It has also speed limits, the accident potential speed limit. At times, a certain amount been shown that, in recent years, the which could be affected by a speed of emotion has been allowed to creep number of vans on the roads have limit would again decline significantly. into the discussion, with the result risen to a much more marked extent In any case, a speed limit (considered that the actual facts of the situation than the number of accidents in which to be of limited effectiveness) could have frequently been inadequately they have been involved. In the last only work at all if it was constantly considered. two years, it has been observed that policed. The controlling authorities, autobahn accidents caused by vans however, have de facto no facilities for have actually declined to a marked monitoring vans in moving traffic, extent, even though their numbers which could only be accomplished at have continued to increase. an impossibly high policing cost.

Moreover, a report issued by the Numerous studies have been car- Federal Highway Research Institute ried out, investigating the numbers and Annual Report 2004 167

causes of accidents in which vans An improvement in road safety can active and passive safety of vans. were involved. According to the German therefore only be achieved with a wide- In this case, the manufacturers repre- in-depth accident study (GIDAS) of ranging package of measures, of which sented on VDA have recently been 2003, no compelling connection can a speed limit is not one. able to chalk up a series of genuine be established between a speed limit quantum leaps. The modern vehicles and a reduction in accident numbers At the 42nd German Traffic Courts of today are distinguished by exem- involving this type of vehicle. Instead, Convention, which was held at the plary roadholding and stability on bends, the study confirms that, of all the beginning of 2004, the great majority and are fitted with highly effective cases investigated, only 3 per cent of came out against a general speed limit disc brakes. In the coming years, the accidents occurred at speeds above on autobahns for vans of 2.8-3.5 t per- German manufacturers have also com- 120 kph. These correlations were mitted gross weight. To improve the mitted themselves to extending the fit- unequivocally confirmed by the results road safety vans on all types of road, the ting of power steering, ABS, drivers' of a DEKRA study. Here again, it was requisite measures must address the airbags and load security facilities as revealed that the driver is the key actual causes of accidents. Among standard on all types of vehicle in the factor in an accident and, more often other things, the committee of experts 2.8- 3.5 t category or to discontinue than not, is primarily to blame. More- favoured some form of driver training, any optional omissions which may still over, the results of other studies reveal improved vehicle safety, systems for exist. They are also working continu- that the principal causes of accidents securing loads and the Europe-wide ously on improving tyres and brakes, are: introduction of the EU tachograph for which already comply with standards vehicles from 2.8 t and upwards for the similar to those of cars. Allowing insufficient distance from purpose of monitoring prescribed driv- the vehicle in front ing and rest times.

Failing to reduce speed, particularly The results of accident analyses at road works show that the human factor is central to the reduction of accidents. In con- Driving errors when changing lanes junction with other participating and overtaking organisations, VDA has accordingly developed a van training course, Fatigue, sleepiness, etc. aimed directly at drivers and intended to point out the difference between Impaired roadholding when braking the roadholding of a car and a van and and negotiating bends as a result of to make them aware of potential haz- the vehicle being incorrectly loaded ards. The securing of loads is an addi- (overloading, incorrect axle load dis- tional focal point of this training. tribution) or Another important contributor to The load itself being inadequately the improvement of road safety lies in secured the continuous improvement of the 168 Verband der Automobilindustrie SAFETY AND TECHNOLOGY

vehicles coming on to the roads for the replace conventional tachographs within carry out the necessary trials. Only in this first time after a certain date should be a few years. way can the required tests be carried out fitted with electronic stabilising systems. within the vehicle environment. These This proposal was not discussed in After intensive preparations, the include integration tests (CAN Bus, EMC, detail by the experts in question, but completed annex 1B, with all the essen- interaction with speed limiters, and so was passed to the ECE working group tial design and testing regulations for on) and tests for durability and reliability. on vehicle construction (WP 29), with a digital tachographs, was published on These can only be carried out with pre- view to obtaining further technical August 5, 2002. With its publication, production versions to a limited extent. expertise from that source. three lead-times were simultaneously For definitive clearance, the tests must established for the introduction of the be carried out with type approved tacho- Data obtained from actual accident digital tachograph: graphs. Making their installation com- records show that a skid usually takes pulsory without prior field trials would place before a dangerous goods trans- From August 5, 2004 onwards entail an incalculable technical risk. port vehicle overturns in an accident. If (24 months' lead-time), all newly reg- this is prevented, the accident can gen- istered vehicles should have been Meanwhile, the European Commis- erally be avoided. Accordingly, a stabil- equipped with a digital tachograph. sion has now conceded that the ising system achieves considerably more From May 5, 2004 onwards (21 months' August 5, 2004 deadline, after which than mere compliance with ECE Regula- lead-time), drivers' cards should have new vehicles were to be fitted with tion 111 (Rollover Stability). Thus, if ESP been issued by all the EU memberstates. digital tachographs, need no longer be or TRSP is fitted, compliance with Regu- By August 5, 2003 (12 months' met. Instead, the Commission proposes lation 111 should be considered to have lead-time), type approval for the postponing the deadlines by nine been satisfied automatically. tachographs and chip cards should have months. It is not yet clear, however, how been issued. Failing this, the first and such a postponement should be imple- WP 29 plans to set up a working second periods would be extended. mented in law, since the Commission group to deal with this subject. The continues to reject the introduction of automotive industry will provide expert So far, however, not a single manu- a joint decision-making procedure support to these discussions. facturer has obtained the necessary type involving the participation of the Council approval for a digital tachograph or the of Ministers and the European EU Tachograph records associated chip cards. In part, this is due Parliament (as at February 2004). driving and rest times to the fact that the set deadlines for the According to an EU Ordinance, requisite tests and certifications were The European automotive industry, commercial vehicles with a permitted too optimistic. In addition, the level of however, is calling for firm conditions gross weight over 3.5 t and buses with security requirements is equivalent to on which to base its plans. These more than eight seats have had to be those for bank applications. Further- include postponing deadlines by at fitted with tachographs since 1970. more, these are constantly being least 12 months in order to permit all upgraded in the light of new knowledge the necessary tests to be carried out. To prevent records from being tam- (possibility of attacks by hackers). In addition, the introduction of a digital pered with, the existing tachograph is to tachograph will only be possible if an be replaced by a fully electronic (digital) Over and above all this, the vehicle adequate network of workshops cover- system. This will be installed in newly manufacturers obviously need tacho- ing all the member states can be autho- registered vehicles and, as a result, will graphs in good time to enable them to rised to calibrate the instruments, and Annual Report 2004 169

the necessary driver and workshop behaviour of the different brake config- initiated below a certain control pressure, cards are available. urations varies widely under severe stress both in theory and practice. conditions. Since the efficiency of drum The automotive industry approves of brakes diminishes as they warm up In discussions on brake compatibility the introduction of digital tachographs (they protect themselves, as it were), the problems, it has also been revealed but needs sufficient time to verify that disc brakes assume an ever increasing that these are not attributable to the they are secure and reliable before bring- proportion of the overall braking effort. manufacturers. Rather is it the case that ing them into service. many drivers fail to plug in the electrical Achieving the optimum degree of braking control system on the trailer. As Compatibility of tractor compatibility for all the conceivable a result, the latter functions only in the vehicle/trailer brakes combinations of tractor vehicles and emergency mode, in which neither the A particularly important subject which trailers, therefore, represents an almost ABS control nor the electronically con- has occupied the UN-ECE working group insoluble problem. Nevertheless, the trolled automatic, load-dependent brak- on brakes and chassis (GRRF) in the manufacturers of heavy goods vehicles, ing force control system functions. last two years concerns the improve- trailers and braking systems have par- Because of this, the braking system on ment of the compatibility of the brakes ticipated in joint discussions on certain the trailer becomes overstressed, a situ- between the tractor vehicle and trailer new requirements laid down in interna- ation in which potentially dangerous of heavy goods vehicles. Complaints tional braking regulations in order, as conditions could occur. It is conceivable have been raised in a number of coun- far as possible, to avoid compatibility that transferring the braking effort to tries about compatibility problems which problems in practice. The requirements the trailer is desirable in order to spare lead to overstressing and excessive wear also specify that, for type approval, any the brakes on the tractor vehicle, for or even damage to braking systems in electronic compatibility control systems example in the case of leased trailers. the tractor vehicle or trailer. The British (coupling force control) which may be government commissioned a research fitted function in accordance with the Only punitive measures and appropri- project in this connection, the results of specified parameters and that the brak- ate traffic monitoring provisions can help which played a part in discussions in ing effort on the individual axles is to prevent illegal practices of this nature. the GRRF. They were, however, of limit- ed value since the vehicles investigated were fitted with conventional com- pressed air controlled braking systems. Safety and Reliability of Electronics

Today, by contrast, electronically con- in Vehicles trolled braking systems have achieved market acceptance. With these, it is no longer possible to achieve compatibility Self-monitoring of ment with the aid of electronics. Even between the tractor unit and trailer by electronics in vehicles comfort and convenience features in a turning an adjusting screw on the trailer Electronics have become indispen- vehicle are unimaginable without them. control valve. To this must be added the sable in modern automobiles. Today, it fact that, for some considerable time, is only possible to comply with existing In order to permit the functional vehicles were fitted with combinations and future statutory requirements for efficiency of safety-related electronic of disc brakes and drum brakes. The safety and the protection of the environ- systems to be continuously monitored, 170 Verband der Automobilindustrie SAFETY AND TECHNOLOGY

they are provided with a self-diagnostic turn, not only to sporadic faults through developed which will permit the meas- function which checks the system for leakage currents in the dew, but also urement of actual volumes of water electrical faults whenever the engine is irreversible damage through electro- under different ambient conditions. By started. Plausibility tests ensure that chemical migration. means of this system, any car manufac- even non-electrical faults can be identi- turer will be in a position to conduct fied. In cases involving safety-related To prevent these problems from investigations at different locations in faults, these are indicated to the driver happening in the first place, some cir- the vehicle and under varying atmos- by warning lamps. In this case, the sys- cuit boards are given a coating of pro- pheric conditions. Once the volumes of tem also goes into a safe mode. tective varnish or are fully sealed. water have been statistically recorded, it will be possible to reproduce compara- The supervisory organisations require Sensor systems and optics, however, ble ambient conditions in the laboratory the testing of electronic systems to be cannot be varnished. The vehicle manu- more realistically. an obligatory element of major service facturers have therefore developed a inspections. pilot test which affords a systematic The second step involves investigat- understanding of the dew-forming ing possible protective measures, such as Although electronics are not subject processes in the laboratory. The test variations on housings or circuit board to wear, they can nevertheless fail from enabled the failure rates of unvarnished manufacturing processes. With an effec- time to time. It is all the more important, circuit boards to be investigated. In this tive sensor system, it will be possible to therefore, for the systems to be continu- way, it proved possible to isolate only determine the abilities of protective meas- ally monitored, i.e. each time the engine those boards which needed varnishing ures to counteract dew precipitations. is started. No service inspection can do as a protective measure. Due to the lack this. A test within the framework of reg- of a measuring method, however, it was The focal point of test strategies and ular monitoring under these circum- necessary for the parameters for the the solutions developed from them is stances would represent only the actual test to be initially determined empirically. always the customer, who expects a fully condition of the electronics at the time functioning, reliable product which will and would not, therefore, achieve the Even today, a number of questions last as long as the car itself. desired objective. have still not been adequately answered. Accordingly, the German Motor Vehicle Electronic immobilisers – Prevention of electronic Standards Committee (FAKRA) set up a symbol of success against faults caused by moisture working group to study dew formation theft Electronic components in vehicles with the aim of devising a realistic test. Regrettably, property-related offences are subject to extreme variations in The results should be incorporated in have become a permanent feature of ambient conditions. The temperature the ISO 16750 series of standards (Envi- our society. Whereas, at one time, sim- fluctuations are so extreme that the ronmental Conditions and Testing for ple antitheft measures were adequate, temperature in proximity to the printed Electrical and Electronic Equipment). they are now becoming increasingly circuit boards of electronic components complex in order to meet the demand- in vehicles frequently falls below the The first step involves determining ing requirements for antitheft systems. dew point. This causes moisture to form the actual extent of dew formation on them which, with rising levels of under actual atmospheric changes in a In recent years, a great deal has been electrical resistance and the increasing car. In conjunction with a manufacturer achieved in combating vehicle thefts by density of conductor tracks can lead, in of sensors, a dew volume sensor is being preventative measures. Of these, the Annual Report 2004 171

electronic immobiliser, has played, Results obtained so far indicate that diagnostic tools, containing data relating and continues to play, a decisive role. car thieves have a good understanding to immobilisers or other components, Whereas in 1993, 144,057 vehicles were of the data structure of immobilisers and thus facilitating theft, will now follow. stolen, the introduction of the electronic and need only change a few selected immobiliser and other antitheft systems bytes in order to deactivate them. The Biometric characteristics saw this figure decline to 57,402 in 2002. automotive industry is accordingly work- as an antitheft measure Although no final figures are yet avail- ing continuously on improving the sys- Although measures for the preven- able for 2003, the Federal Criminal Police tems so that the vulnerability of tion of car thefts have already reached a Office anticipates a further reduction by electronic immobilisers to being very high level, the automotive industry around 7 per cent. As against this, the tampered with can also be reduced. is not contenting itself with what it has unlawful use of cars is on the increase. achieved so far. Recently, the debate Even though the actual figures do not The new regulation governing distri- about the use of biometric characteris- lend themselves to being statistically bution in Europe and the repeal of the tics for immobilising purposes has recorded, the insurance industry is assum- Block Exemption Regulation (see "Glob- intensified. A number of different ing an increase of around 30 per cent. al Markets"), however, throw up new systems of this type have now reached problems in respect of protection the marketable stage. The following may Despite the pronounced success of against theft. The previously applicable be used as biometric characteristics: the immobiliser, car thefts cannot be block exemption regulation afforded a entirely prevented. The Federal Criminal certain protection in the distribution of Fingerprints Police Office, in collaboration with the repair manuals and, in turn, the use of Iris recognition automotive industry, has carried out sensitive vehicle data. As a consequence Face recognition investigations into the components of of its repeal, it is possible that the wide- Speech recognition immobilisers. spread, unchecked distribution of For use in cars, however, special requirements apply to these systems Vehicle thefts in Germany from the standpoint of reliability. In gen- eral, they must accommodate a wide temperature range and function reliably. Total number of Systems based on visual recognition, 144,057

142,113 vehicles stolen

131,329 such as the iris and face, must cope 129,652 Number of vehicles never recovered with confined spaces and poor light. 110,764 Moreover, the establishment of a 95,349

82,781 threshold for acceptance or rejection is 74,490

66,927 a relatively critical aspect of all biomet- 60,946 62,273 58,956 57,402 54,616

46,301 ric characteristics. Of these, fingerprint 42,090 39,763 36,881 34,127 32,054

30,185 identification is considered to present 28,412 fewest problems.

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 In the case of commercial vehicles, it is not uncommon for the load to be VDI stolen. The automotive industry has 172 Verband der Automobilindustrie SAFETY AND TECHNOLOGY

accordingly developed a concept which radio waves continuously. In this way, One method of simplifying and should provide guaranteed security at the location of the vehicle can be improving the reproducibility of test every stage of a transport movement. monitored continuously and at all times. results lies in virtual inspections. These For freight companies and insurance have now become a common practice in The principal feature of this is a companies alike, the success of this the conducting of checks within the navigation system which transmits concept is of particular interest. framework of certain EU directives. Thus, it would be possible for the posi- tion of the number plate, the mounting of the lighting systems and the field of Technical Harmonisation and vision to be virtually checked without the need for an actual vehicle to be pre- Standardisation sented in order to obtain type approval for these details. With computers and appropriate programs, inspections EU type approval procedure The regulations affect virtually all the would be carried out jointly with autho- Uniform technical regulations for the systems and equipment in vehicles. rised officers from the Technical approval of products constitute an Among the most stringent in the world, Services. essential element of the single European they are constantly being revised and market. The EU Directive governing the brought into line with the latest state of The automotive industry has submit- "Type Approval of Motor Vehicles and the art. ted corresponding proposals to the Fed- Trailers" replaced the respective national eral Ministry of Transport, with the par- "General Operating Permits" in 1998. To The timescale for the introduction of ticipation of the approvals committee of simplify the procedure, the Commission the EU type approval envisages that all the Federal Motor Transport Authority. temporarily restricted its application to vehicles coming on to the roads in the The paper was also submitted to the vehicle category M1 (cars). European Union for the first time must Commission in Brussels through the have received EU type approval with European Federation of Automobile In order, as far as possible, to extend effect from January 1, 2009. However, Manufacturers. the application of the type approval applications for amendments have requirement to all vehicle categories, already been tabled by the European Harmonised approval the motor manufacturing members of Parliament to put back this date to Jan- documents VDA participated decisively in formulat- uary 1, 2011 in order to take account of Uniform, harmonised approval docu- ing a development of the directive the needs of the industry. ments will be introduced in the EU which is currently going through the member states under EU Directive harmonisation procedure in the EU Virtual inspections 1999/37/EC. These will consist of two Council and Parliament. The automotive industry is constant- documents (Part I and Part II) similar to ly seeking opportunities to optimise the the existing separation of the vehicle Since January 1998, cars coming on type approval procedure. Thus, it seeks identification and registration document to the roads for the first time have had to improve the procedure with a view to in Germany. to comply with the provisions of more optimising costs while, at the same time, than 45 EU directives, followed by motor arguing that the level of safety so far The automotive industry tackled the cycles and scooters since June 1999. achieved must not be undermined. problems associated with implementing Annual Report 2004 173

New vehicle registration Mottled fibres, in some cases fluores- in national law is June 1, 2004, although document cent experts are assuming that this will be Planchettes, fluorescent put back to January 15, 2005. The cer- Security reagents to provide protec- tificates will be printed on paper. tion against chemical erasure For some time, the question of using The printing presses used to electronic chip cards as vehicle docu- produce the documents must also be ments in Germany was discussed, since provided with security features to the an amendment to the EU directive con- same end: cerned would also allow the member states to choose chip cards instead of Multi-colour guilloche base printing forms printed on paper. The Ministry of (carried out in two stages) with rain- Transport, however, then announced bow pattern and integral micro-type that chip cards would not be considered lettering on both sides for Germany since there were still too Fluorescent overprinting on the face many unanswered questions relating to side (German eagle symbol with split data protection, for example immunity to line structure), invisible (fluoresces forgery and situations involving the under UV light) inspection of vehicle documents at Text printed in dark green ink (fluo- police traffic checks, changes at licensing resces green under UV light, integra- authorities and the arrangement of bank tion of micro-type elements into the loans for the financing of vehicles. The this measure at an early stage, attempt- text on the form) question as to whether, and to what ing to resolve them at the outset in joint Variable optical elements extent, data going beyond the working groups with the Federal Min- The number which will go on the face harmonised data records should be istry of Transport, the Federal Motor side of the licence certificate I will be stored, was also discussed. In this case, Transport Authority and the licensing entered by the licensing authority the inspection organisations (carrying centres. when the form is made out, ensuring out major inspections in accordance that it is only issued once with article 29 of Federal Motor Vehicle The Ministry has now published a Safety Standards) in particular, put draft ordinance whereby the European For their part, the printers will supply forward a number of demands. In these directive will be adopted into German a declaration of security, confirming cases, however, the car drivers would be law. At the same time, the vehicle docu- their compliance with the specified placed in a situation where they were ments will be adapted to the current requirements. unable to access all the data on the state of the art from the standpoint of chip card without a card reader. their immunity to forgery. The following The new vehicle documentation will security characteristics will be incorpo- again consist of two documents, the The automotive industry has rated into the new printing paper to licence certificate part I (registration welcomed the decision of the Ministry make forgery more difficult: document) and the licence certificate of Transport to reject the chip card part II (identification document). The idea, on grounds including data protec- Water mark (stylised eagle symbol) contemplated date for implementation tion. 174 Verband der Automobilindustrie SAFETY AND TECHNOLOGY

WorldSID – standard global The latest version of EuroSID was New standard graphic dummy for side impacts only adopted into the provisions of ECE symbols At present, three different types of Regulation 95 (side impacts) in the Today, it goes without saying that dummy are used in the simulation of Autumn of 2003. The experts at ECE, indicators and switches in vehicles are accidents, each with the appropriate however, have already decided to adopt identified by graphic symbols represent- structure and instrumentation for a spe- WorldSID into the regulation as soon as ing their function or effect. The global cific impact. These are: it becomes available. The intention is car market and the considerably to present it to the experts in the corre- increased number of safety and support Hybrid III, currently the most used sponding ECE working group (WP 29) in systems have pushed up the number "victim" for head-on collisions and Geneva, for the first time in June. of graphic symbols employed. capable of representing an entire family, i.e. father, mother, child and baby. EuroSID, which is used in side impact New standard graphic symbols accidents and which throws up a variety of problems in that they can cause jarring and the dangerous Homeward route (in navigation system) Instrument lighting acceleration of the upper body. RID2, which is used for the purpose

of simulating the neck injuries associ- Fuel cap not locked Daytime running lights ated with rear-end collisions.

Due to the number of sensors required (often more than thirty per Locked Exhaust system fault dummy) and their size, it is impossible at present to use one and the same Unlocked Steep hill dummy for all types of crash test. The immediate aim is to improve the dum- mies currently in use. At present, inten- Door locking system Stability system activated sive work is being carried out worldwide (under the designation WorldSID) to improve the dummies used for side- Immobiliser Black ice impact accidents, particularly from the standpoint of their effects on the shoul- ders, spine and lower limbs. The objec- tive is to create a dummy which should Childproof locks engaged Rollover bar, extending set new standards in respect of the requirements for physical authenticity. Childproof locks disengaged ACC (distance control) At the same time, however, it is also intended that the test tools employed be harmonised throughout the world. ISO 2575 Annual Report 2004 175

The great advantage of graphic which specify the principal characteristics several years previously. It would be symbols is that they are able to convey of the diagnostic system plug connector, technically and economically unrealistic important information or instructions to data transfer protocols, diagnostic services, to expect a uniform global standard to the driver in a neutral, easily understood the coding of faults (Diagnostic Trouble be arrived at in the short term. visual form, independently of the written Code – DTC), the minimum requirements word, and concentrating on essentials. for standard test equipment and the At the suggestion of the ad hoc security of data transfer. group (which consists of ISO experts The symbols found in millions of vehi- and SAE representatives from the com- cles were harmonised for international While the European and American mercial vehicle sector) the legislators in use by a group of experts in the Interna- legislators had approved a number of the USA and Europe have agreed that, tional Organisation for Standardisation variants (SAE or ISO) for diagnostic proto- for the proposed law (in the EU, this (ISO) and were published in the form of cols in cars by around the year 2000, the consists of a proposal to expand Direc- ISO Standard 2575. This comprises a lexi- ISO working group, collaborating closely tive 88/77, for example), the two concepts con containing over 240 car-related sym- with the SAE, succeeded in combining – namely the ISO and SAE versions – bols. The group is still active, developing the two standards so that, with effect may be implemented as alternatives. new symbols when required. The illus- from 2008, only the ISO standards, appli- tration above depicts a selection of new cable to all cars throughout the world, This notwithstanding, the idea that an symbols from the standard in question. will be found in the legal texts. OBD system could be designed in accor- dance with the same technical specifi- On-board diagnostics OBD legislation governing commer- cations and employ interchangeable (OBD) and standardisation cial vehicles, which came into force in instruments for use throughout the world Since the beginning of the nineties Europe and the USA at a later date, was not dropped by the legislators. The at the latest, when California led the should benefit from the results of the standardisation experts at the ISO have way in establishing exhaust limits and ISO working group. Both the EU Com- already been asked on numerous occa- introduced corresponding regulations mission and the Geneva-based sions to draw up concepts for harmoni- for the first time, on-board diagnostics ECE/WP29 (World Forum for Harmoni- sation to take effect from 2008 or 2010. (OBD) have become synonymous sation of Vehicle Regulations) have throughout the world with the officially asked the ISO to adapt the existing From now on, the ad hoc group will permitted exhaust limits for cars and standards for OBD systems to the concentrate on a standard which, in commercial vehicles and their testing. requirements of commercial vehicles. accordance with the present concept, will consist of four parts and propose two At around the same time, the Soci- It appears, however, that global har- alternatives for data transfer, one of which ety of Automotive Engineers (SAE), rep- monisation will not be achieved within the employs a cable link while the other is resenting the USA, and the standardisa- next 6-8 years, since the successful earlier wireless, the latter having been instigat- tion committee ISO/TC22/SC3/WG1, collaboration between the ISO and the ed by the legislators. It is envisaged that representing Europe and Japan, started SAE proved ineffectual in this instance. corresponding applications for a standard to formulate regional and international The reason for this is that different SAE will be introduced by the ISO in late standards for the electronic transmission committees are responsible for cars and 2004 or early 2005, that a draft standard of data from OBD systems to external commercial vehicles and the commer- will be published in 2005/2006 and that test equipment. These were then incor- cial vehicle group had already intro- the definitive international standard will porated as mandatory in the legal texts duced its own SAE standard (SAEJ 1939) be completed in 2006/2007. 176 Verband der Automobilindustrie SAFETY AND TECHNOLOGY

Joint Vehicle-Related Research resulting in joint definitions and financ- ing for research projects. Collaborating organisations include the Federal High- way Research Institute, the Federation Research and development in the of the entire industry. Companies from of Industrial Cooperative Research automotive industry are at their highest different points on the value chain, Associations, the Federal Ministry for level ever. They have long since gone moreover, are involved in defining sub- Education and Research and the beyond the technically optimised design jects for research at an early stage. Not Forschungsvereinigung der Arbeitsge- of the product. Now, the over-riding least, the FAT offers a platform for addi- meinschaft der Eisen- und Metallverar- objective is to achieve lasting improve- tional development partnerships. beitenden Industrie - AVIF (Research ments in the entire road transport system. Organisation of the Association of Iron- The research objectives of the FAT and Metal-Working Industries). The Association for Research in are rapidly adapting to the changing Automotive Technology (FAT) is a con- requirements of the market and its sortium of 51 major German manufac- members. Subjects such as electronics, VDA Research turers of cars and commercial vehicles efficient transport and the social effects Conference and their suppliers. Its purpose is to of mobility have been added in recent carry out pre-competitive joint research years. The current focal points for FAT The VDA Research Conference is into road vehicles. For 33 years, the FAT, research are efficient transport, active scheduled to take place in Stuttgart in its capacity as an organisation repre- and passive safety, the environment, on July 13, 2004. With several hundred senting all the interested companies in comfort and convenience, electronics, participants from the automotive the automotive industry, has conducted computing and simulation methods and industry, politics, universities, research round-table conferences with the objec- material and production technologies. institutes and the press, VDA aims to tive of carrying out important research give the public an insight into the projects, based on cooperation and An efficient committee structure mobility of the future and map out the exchanges of ideas. Today, the fact that made up of working groups and an broad direction of future innovations. three-quarters of the members of the advisory research council ensures that association are suppliers underlines the wishes of member companies on Well-known personalities from the their importance to the close interlink- the subject of research policies soon world of industry, science and politics ing of all those participating in the pro- find their way into FAT operations. Every will be involved in a panel discussion duction and supply chain. member is given an opportunity to sug- on a whole range of topics involving gest subjects for research which are the capabilities of Germany as a loca- Thanks to its independent coopera- then selected if they are of interest to a tion for innovation. Top names from tion in mutually beneficial projects, the sufficient number of other members and the automotive industry will provide FAT is able to offer a number of advan- are approved by the council. The princi- a technical outlook in automotive tages. The availability of combined pal results of these research activities research. The "Innovation Engine" financial resources enables it to carry are published in a series of FAT journals. exhibition will also provide participants out wide-ranging projects with a high with significant findings from content of pure research. Thus, for In addition, the FAT has developed automakers, suppliers and research example, comprehensive investigations successful associations with a number institutes. into road traffic call for the cooperation of well known joint-venture partners, Annual Report 2004 177

Logistics instructions for ordered goods to be picked up from a supplier, usually by a freight company. Published in August 2003, VDA recommendation As a result of globalisation and to achieving this end. The work in this 5004 offers a guide to organising changes in the depth of net added connection was concluded by the pick-up procedures covering the flow value, logistics are having to face up working group concerned and pub- of materials, information and values to new challenges, giving rise, in turn, lished as revised VDA recommen- for mass production purposes and to a demand for standardised solutions. dation 5000 under the title "Proposals replacement parts. In the VDA Logistics Department, for Organising Logistics Procedures" VDA committees are collaborating in October 2003. Product identification: In order to closely with manufacturers, suppliers permit containers and/or individual and ITA companies (Information Tech- Unique partner identification key: products to be traced along the entire nology for the Automotive Industry) in At present, a variety of key codes are supply chain, there is a need for at order to achieve success through har- used to identify business partners. As least a minimum definition of the monisation and common standards. a result, each company is forced to identifying characteristics necessary Their efforts are concentrating on shap- employ different proprietary codes. for this purpose (for example, suppli- ing logistics processes and procedures, These, moreover, are not unambigu- er reference number, serial number, electronic business, packaging logistics ous, making it impossible to identify vendor/manufacturer ID). Forward and CAD/CAM. different companies with the same and backward tracing are important code. Furthermore, the data identified in this context. The draft recommen- Logistics processes with the code is often out of date in dation drawn up by the product iden- Industry parks: In the automotive that, having been assigned as part of tification working group is currently industry, the trend towards individual- a single business transaction, it is not with Odette (www.odette.org) for ly specified products has given rise to subsequently updated. In addition, it adaptation to the European level, so it an increased number of variants. As is not standardised throughout the can be anticipated that a recommen- a result, car manufacturers have gone world. Published in October 2003, dation applicable on a Europe-wide from producing standard models to VDA recommendation 5006, by basis will be published this year. making cars to individual customer contrast, ensures a standardised, orders, leading in turn to cost uniform, clear method of identifying Supply chain management increases, a significant proportion of all the companies, sites and factories (SCM): As a result of the increasing which are attributable to logistics. involved in the automotive industry division of labour and the reduction In order to minimise costs across the and its suppliers. The use of a system in vertical integration between manu- whole supply chain common to sub- of this nature would permit reductions factures and suppliers, cooperation contractors, suppliers and automakers, in transaction costs and the avoidance between the respective contributors it is essential for the flow of materials of errors, as well as offering an to the value chain is intensifying. and information to be comprehensively improved basis for the use of existing SCM represents a focal point in the synchronised. Depending on local internal data. work of the VDA Logistics Department. conditions, concepts such as the The principles of supply chain man- "modular factory", industry parks and Pick-up procedures: These are agement are far superior to the con- external supply centres can contribute procedures whereby a company gives ventional approach of simply string- 178 Verband der Automobilindustrie SAFETY AND TECHNOLOGY

ing together series of processes umbrella and with the collaboration of VDA small load container: With the carried out sequentially. This applies VDA in the field of extended markup new, redesigned VDA small load con- not only to the execution of standard language (XML). Work was begun on a tainer (a space-saving design by processes but also to the speed at VDA glossary which explains the techni- comparison with its earlier develop- which new ideas and concepts are cal terms contained in VDA/Odette rec- ment), transported volumes and, in implemented in the startup phase. ommendations. This is intended to replace turn, heavy goods vehicle journeys the old VDA recommendation 5002. have been significantly reduced. Quality of logistics: The early identi- Another focal point of the work lay in a To ensure the consistent quality of the fication and subsequent avoidance of global messaging system, developed small load container, the licensing errors are gaining ever increasing jointly with Odette, AIAG and JAMA/ procedure and quality management, importance in the field of logistics. JAPIA. This includes the global DESADV complying with VDA recommendation Accordingly, the use of different (containing the structures of the delivery 4500, were also extended to the methods to determine, prevent and and shipment data for data interchange redesigned model, made of recycled rectify errors in the logistics process relating to both packaging and products) materials. Thus a unique concept was serving the automotive supply chain and the global INVOIC for invoice and imple-mented for the use of recycled led to the commissioning of a project credit memo advice data. materials for the production of on the quality of logistics, at the redesigned VDA small load containers. beginning of 2003, to be undertaken The Web-EDI solution (e-forms, ver- by a newly established working group sion 2) was formulated with Odette. Based Container management: In the field consisting of representatives from six on two recommendations, namely VDA of container management, the VDA OEMs and twelve supply companies. 4936 and Odette e-forms version 1, this Logistics Department set itself the Their task is to formulate a VDA rec- permits the definition of forecast and JIT objective of establishing the basis for ommendation that defines the quality delivery schedules, delivery and shipment standardising existing and future of logistics. This is to include a cata- data and invoice and credit memo advice container management systems. This logue of faults, an escalation path, a data. recommendation is intended to serve list of the basic data for logistics as an orientation aid in the formula- quality and standard parameters for Container standardisation tion and further development of con- its objective evaluation. The benefits Fewer packaging materials mean tainer management and, in this way, of the future recommendation will lie that loads take up less space and, in to represent a guide for organising in simplifying communications (and turn, are less demanding on transporta- container management systems in improving their objectivity) if process- tion. Packaging logistics, therefore, have respect of the flow of materials, infor- es fail to run smoothly and also a direct effect on the development of mation and values for mass produc- enabling the cause of problems to be traffic and, in this way, make an essen- tion purposes and replacement parts. eliminated faster and in the long term. tial contribution to the protection of the It is anticipated that the project will environment. An effective container be completed this year. Electronic business management system also has an envi- Last year, the working group for ronmental component in addition to that CAD/CAM electronic commerce completed and offered by logistics. The smaller the dis- CAFM: The objective of the comput- published a number of recommen- tance covered by empty transport con- er-aided facility management (CAFM) dations. The Odette Automotive Plan tainers, the more beneficial it is to the working group is to promote the for- was completed under the Odette environment. mulation and use of 3D CAD data for Annual Report 2004 179

integrated, effective, computer-aided Electronic data interchange (EDI): well known firms and implemented in factory planning, documentation and The aim of the group working on EDI their production operations. The work management. The group has and CAx data exchange is to standard- was thus successfully completed and transferred the STEP-based exchange ise global data exchange processes the working group has now been dis- format (STEP-CDS) to other CAD sys- through the use of international stan- solved. tems and applications and, in this dards such as ANX/ENX (secure net- way, has established the format as an works in the automotive industry), PDM data exchange: The working interface between factory planning ENGDAT (Electronic Delivery Note for group assigned to PDM data exchange and management systems and for Engineering Data) and ENGPART (product data management and com- use in managing long-term archives. (Data Format for Automated Partner munications in the OEMs/suppliers In addition, planning software has Data Management, VDA 4951). It is network) develops methods and stan- been initiated for conveying and plat- expected that the future ENGDAT, dards for this increasingly important form systems and material version 3 (XMTD), which will be valid form of documentation. Within the movements in automotive industry throughout the world, will be framework of SASIG (Strategic Auto- factories. published at the end of 2004. motive Product Data Standards Industry Group), the working group Data quality: The working group on Electrical/electronic systems: The consists of representatives of the data quality set itself the objective of objective of this working group is to automotive industries of Australia preventing possible losses of data by improve processes for developing car (FCAI), Germany (VDA), France improving data quality. Its activities electrical systems and their integra- (GALIA), Japan (JAMA, JAPIA), Sweden include the improvement of data tion into adjoining processes and sys- (Odette Sweden) and the USA quality test programs, as well as tems (for example, bodywork). In the (AIAG). The working group complet- actively encouraging CAD system past, the working group also devel- ed the international recommendation suppliers to improve their programs oped a data model for listing cable on PDM data exchange, which has for the production and exchange of harnesses and mapped it to the been in existence as VDA recommen- CAD data. The results can be seen in neutral product data format STEP (AP dation 4956 since the beginning of savings in the costs of correcting and 212). As a result, STEP AP 212 was 2004. The work is thus concluded and reformulating CAD data. The working brought up to practical status and this working group has now also group has also made important con- became established in industrial use. been dissolved. tributions to the global SASIG recom- mendation (Product Data Quality Product documentation without Project – long-term archiving: The Guideline), version 2, which was drawings in car manufacture: The objective of the long-term archiving approved at the beginning of 2004 objective of this working group is to project is the development and imple- and will serve as the basis for VDA reduce 2D and 3D product descrip- mentation of common methods for recommendation 4955 (Scope and tions, which today are still frequently the archiving of 3D CAD product data Quality of CAD/CAM data, version 4). duplicated, to 3D versions alone, in order, for example, to satisfy legal In 2003, the working group actively while facilitating the exchange and requirements for product liability and continued the initiation and conform- archiving of complete, binding prod- the furnishing of proof over the long ity testing of test programmes in uct documentation. Stage 2 of VDA term, and to ensure the reproducibility order to make data quality "visible" recommendation 4953 was taken of the archiving procedure, for exam- and "uniform". beyond pilot status by a number of ple for original spare parts records. 180 Verband der Automobilindustrie SAFETY AND TECHNOLOGY

By collaborating closely with ProSTEP, knowledge of the business processes of The ITA committee also takes account the experience of other industries the automotive industry and are in a of advancing internationalisation and (particularly the aerospace industry) position to fulfil the latter's special IT globalisation in the automotive industry. Its is being used. As a first step, official requirements or to provide support in an successful collaboration with the Ameri- and legal requirements have been advisory capacity. With around 325,000 can Open Applications Group (OAGi) obtained to provide the basis for cor- employees, they achieved a business ensures regular exchanges of informa- responding recommendations. volume in 2003 of around 48 billion tion and permits continuous coordina- euros. tion. The committee can refer to existing Project – engineering change international standards at any time, as management (ECM): The objective Acting jointly with the automotive well as participating in developing new of this project is to reduce the times manufacturing and supply companies standards. As a case in point, a transat- required to process changes while, at represented in VDA, ITA concerns itself lantic project team was set up for the the same time, increasing processing with topics and initiatives such as logis- Supply Chain Interoperability Project. In reliability, particularly in the case of tics strategies, electronic business (EDI, addition, the ITA committee collaborates changes affecting a whole or more WebEDI, ASP), enterprise application with other international committees and than one company. The joint project integration (EAI), manufacturing data working groups (for example, ODETTE group, consisting of representatives exchange (MDX), extended markup lan- and AIAG). This permits know-how and of VDA and ProSTEP, was set up at the guage (XML), radio frequency identifi- expertise to be transferred, national and end of 2003 and has therefore only cation (RFID), supply chain monitoring European interests taken into account completed the concept phase. It is (SCMo), supply chain interoperability and computer-assisted processes in the envisaged that a VDA recommenda- (SCInt), vendor-managed inventory automotive industry made generally tion will be formulated in 2004, the (VMI) and other specialised subjects. more open and effective. concepts of which will first be put to the test within the framework of pilot projects.

ITA – Information Technology for Quality Management in the Automotive Industry In order to improve the flow of infor- the Automotive Industry mation between automakers and suppli- ers, on the one hand, and IT companies on the other, the ITA (Information Tech- Significance of quality The existence of a quality manage- nology for the Automotive Industry) management ment system is an important element in committee was set up in the mid-March As a key interdisciplinary function, a company's capability to produce qual- 2000. Its principal task is to analyse the quality management (QM) is a control- ity. At the same time, a QM certificate is logistics of supply chains. Today, more ling instrument within a business an important instrument of information than seventy well known companies in process chain to enable all involved to and communication in every customer/ the IT industry, with a variety of core work effectively together. As such, it supplier relationship. In the supply chain, capabilities in ITA, are already also affects the financial results of a which calls for a comparable methodol- represented. They have a detailed company to a decisive extent. ogy at every level, a uniform quality Annual Report 2004 181

management system forms the basis for companies under IATF contracts to Summit meeting of comparable processes and globally VDA-QMC to 18. Operating on a global manufacturers and competitive products. scale, these companies had already suppliers on quality issued a total of 1,753 certificates to the Due to the increasing functions of Through the requirements for global automotive industry under the new sys- supply companies, the manufacturers harmonisation, which result from the tem by the end of 2003. Altogether, and suppliers represented on the VDA QM regulating mechanisms applicable 3,621 ISO/TS 16949:2002 certificates QM committee agree that the transfer of to the industry (ISO/TS 16949, VDA 6.1, have been issued on behalf of the IATF. both responsibility and expertise should VDA 6.2, VDA 6.4), a basis has been correspond to this trend. Another com- established for a standardised proced- A further increase in the number of pelling consequence is the synchronisa- ure which contributes to the minimising certificates is expected in 2004, since tion of quality-related processes along of risks and the improvement of many organisations are being required the different stages of the supply chain. sequences of events. to convert from the ISO/TS 16949:1999 standard to the new system by Decem- Against this background, the VDA- QM systems and ber 2004 at the latest. In addition, more QMC organised a summit meeting on certification and more organisations which, at pres- quality between leading representatives After ISO/TS 16949:1999 became ent, apply the VDA 6.1 standard, are of OEMs, supply companies and the invalid on December 14, 2003, that entire choosing to adopt the new standard as world of politics in November 2003. At year became subject to the new QM stan- the basis for certification. The forecast the meeting, the need was established dard ISO/TS 16949:2002. In the same year, for 2004 is based on the trend anticipat- to review and adjust the requirements of the VDA Quality Management Center ed by the certification companies and is manufacturers and suppliers as well as (VDA-QMC), as one of the five IATF (In- supported by declining numbers of VDA the interfaces between them, including ternational Automotive Task Force) offices, 6.1 supplementary certificates, issued those areas where responsibility starts licensed twelve further companies to issue worldwide (from around 3,400 at the and ends. Product quality can only be certificates under this regulating mech- beginning of 2002 to about 1,600 at the further improved on a joint basis. Manu- anism, thereby increasing the number of beginning of 2004). facturers and suppliers will continue their dialogue, pointing the way ahead, at another summit meeting this year.

The VDA Quality Management Cen- No. of No. of No. of ter can be found on the Internet at companies ISO/TS 16949:2002 ISO/TS 16949:1999* www.vda-qmc.de. with IATF licence certificates certificates Quality training – From VDA-QMC 18 1,753 2,087 the Institute for Quality Despite a generally declining demand From other for training courses, the Institute for IATF offices 32 1,868 1,451 Quality (VDA-InQ) of the Quality Man- agement Center succeeded in expand- * Regulating mechanism invalid since 14.12.2003 ing its activities in 2003. Whereas just under seventy courses with 590 182 Verband der Automobilindustrie SAFETY AND TECHNOLOGY

participants took place in 2002, one accounting for 300 participant-days and in the new field of providing quality hundred courses with at least 1,000 a variety of collaborations in the form of management consultancy and training participants were run in 2003. Given the global licences. services for the automotive sector. rise in the number of longer seminars, the equivalent number of participant-days The majority of seminars are devot- Contact: almost doubled. In 2003, participant-days ed to the training of first-, second- and InQ-Institute for Quality in their own training facilities in Ober- third-party auditors. The range of servic- An den Drei Hasen 31 ursel numbered 2100, while external InQ es offered by the InQ, however, is being D-61440 Oberursel courses at home and abroad accounted continuously expanded, typically Tel: +49 (0) 6171 91 22 23 for just under 750 participant-days. embracing such subjects as "Basel II for Fax: +49 (0) 6171 91 22 14 To these must be added just under 40 small and medium-sized businesses" inq@vda-qmc-de internal VDA seminars in the InQ and "six Sigma". The InQ is also active www.vda-qmc.de/inq Auto IAA 184 Verband der Automobilindustrie IAA

The IAA

60th IAA for Awaiting visitors are world were trade visitors, one in four coming Commercial Vehicles: premiere vehicles, the whole spectrum from outside Germany. The IAA for A Mobile Future of modern transport technology and Commercial Vehicles is also a trade The IAA for Commercial Vehicles a vast secondary programme of events. show for decision-makers – a good – which complements the IAA for Cars – The exhibition covers both light and two-thirds of the trade visitors have is the world’s leading transport trade heavy commercial vehicles, special decision-making responsibility within show. The show’s seventh edition as an vehicles, buses, trailers and bodies, their companies. independent entity will be held in and automotive parts and accessories, Hanover from September 23-30, 2004, as well as products and services for Over 2,200 journalists from 47 coun- this year under the title "Commercial transport logistics and information tries were on the spot to report on the Vehicles: A Mobile Future". More than technology. Also on show will be traffic IAA. The Internet also proved a more 1,000 exhibitors from over 40 different guidance and information systems, precious source of information than countries are expected to attend, show- loading and unloading systems and ever before, attracting over six million ing their latest products on 200,000 vehicles for internal transport, as well visitors. Virtually half of the exhibitors – square metres of exhibition space. as combined traffic systems and prod- almost 700 – were suppliers. This high ucts for vehicle repair, care and mainte- percentage is one of the trademarks of nance. the IAA; no other international trade show for commercial vehicles boasts In addition to this, numerous such a large presence by the supply trade events, workshops and panel industry. discussions will form a platform for debate on solutions for the transport Nearly 160 products had their first needs of the future. The complete public showing at the IAA, impressively IAA 2004 programme, a map of the demonstrating the innovativeness of grounds and press and visitor informa- manufacturers and suppliers, and of tion are available on the Internet at the industry’s service sector as a whole. www.iaa.de. The International Motor Show bore witness to the huge progress which The last IAA for Commercial Vehicles, has been made by the commercial in 2002, was a resounding success vehicle industry in matters of safety, despite a difficult market situation and cost-efficiency, comfort and environ- once again proved its power of attrac- mental compatibility. This is not to men- tion by drawing some 237,000 visitors tion the broad range of service offerings from 34 nations. The IAA’s ranking for commercial vehicles, including elec- as the peak international event for tronics and sensory technology, as well the industry was confirmed by the as telematics technology, helping to fact that 90 per cent of the visitors make the road a safer place.

186 Verband der Automobilindustrie IAA

Record visitor numbers try. Their exhibits included innovative at the 60th IAA for solutions for common rail direct diesel Cars 2003 injection, second-generation intelligent The 60th International Motor Show diesel particulate traps, tyre pressure (IAA) for Cars broke all previous records control systems, adaptive driver assis- for visitor numbers, with nearly a million tance systems, new headlamp tech- car lovers present in Frankfurt. This nology and much more, bearing wit- makes it the most visited IAA since ness once more to the performance 1991, the year of the first separate of the supplier companies, as well to International Motor Show for Cars, the high-tech thrust of the IAA. Bring- which was strongly influenced by the ing automotive manufacturers and their boom following reunification. Up by suppliers under a single roof once again 23 per cent on 2001, the visitors flocked proved a successful formula; it is one to see products displayed by some of the hallmarks of the International 1,000 exhibitors from 42 nations on a Motor Show, which remains unrivalled total of 215,000 square metres of exhi- in scope. bition space. Not only car manufacturers and Visitors got a chance to experience companies supplying automotive parts the "pure fascination" of cars, as the and accessories were present: also show’s title ran, first hand. 125 world showing their latest innovations were premieres – 60 of them from automotive vendors of vehicle tuning products and manufacturers and a record in itself – accessories, telematics companies, thrilled not only the visitors but also the workshop fitters and publishers of 15,000 journalists from 88 countries. specialised books and magazines. Com- This fascination is evidently felt most pleting the picture were the industry’s strongly by young people: 40 per cent representative organisations and associ- of visitors to the International Motor ations, as well as manufacturers of Show are under 30 years of age, and model vehicles. nearly one in every five is a school pupil or student. One-third of the visitors As in previous years, the 2003 show are trade visitors, one in eight of them included numerous special shows and coming from outside Germany. The other action features, such as a test exhibitors reported that visitors were area for off-the-road vehicles, a road- extremely well briefed on the products safety action area, training courses in on show. fuel-saving and the chance to test-drive the vehicle models on show at the IAA. However, the biggest draw for trade and non-trade visitors alike The 61st IAA for Cars were the new products shown by the will be held in Frankfurt 500 exhibitors from the supplier indus- from September 15-25, 2005.

Auto FACTS AND FIGURES 190 Verband der Automobilindustrie FACTS AND FIGURES

Facts and Figures

Sales volume of its sales on the domestic market by automotive industry 5 per cent to 85.1 billion euros. The increased further high euro, on the other hand, had a In spite of the unfavourable state of negative impact on German automotive- the world economy and stiffer competi- industry exports. As a result, foreign tion, the German automotive industry sales were just slightly above that of was able to increase its sales volume in 2002, reaching 123.5 billion euros. 2003 yet again, thus continuing its suc- Compared to 2002, domestic sales cess story for the tenth year in a row. enjoyed a slight upswing, accounting Reaching 208.6 billion euros, sales were for 40.8 per cent of total sales (1993: 2 per cent up on 2002. The continued 53.8 per cent). trend towards cars with diesel engines and a better standard of equipment In 2003, motor vehicle and engine contributed to this success. Consolidat- manufacturers enjoyed a sales volume ing operations in Germany enabled the of 141.7 billion euros, 1 per cent higher German automotive industry to increase than in 2002. There was an above-

Sales volume of German automotive industry by manufacturer group in 2003

Changes in per cent

Total sales Domestic sales 7.8 Foreign sales 6.3 6.0 5.8 4.8 4.8

2.2 0.6 0.8 0.7

-1.0

-4.9 Automotive Manufacturers Manufacturers Manufacturers industry of vehicles of trailers of parts and total and engines and bodies accessories Federal Office of Statistics Annual Report 2004 191

average rise in sales on the domestic Level of equipment in new cars in Germany market (by 5 per cent to a record level In per cent of 46.1 billion euros) during this period as a result of the increased value of 1990 1995 2000 2001 2003 98 97 95 the vehicles purchased. Due to the 93 92 81 exchange rate, sales on foreign markets 73 were marginally unable to reach the level of the previous year, falling by 54 1 per cent to 95.5 billion euros. The percentage of total sales accounted for 18 by domestic sales therefore expanded by 1.1 per cent to 32.6 per cent.

ABS ESP A more pronounced globalisation strategy enabled manufacturers of steering Side airbag Driver airbag bodies and trailers to increase their Power-assisted Central locking Air-conditioning Passenger airbag foreign sales by 8 per cent to 3.2 billion Navigation system euros, the best result they have ever Deutsche Automobil Treuhand achieved. Compared to 1995, foreign sales have more than doubled. Domes- tic sales, however, tailed off for the third year in a row. At 3.6 billion euros, this figure was 5 per cent lower than in 2002. Nonetheless, unlike in the motor manufacturing group, domestic sales in Workforce in the German automotive industry this manufacturer group accounted for In thousands the greater share, 52.8 per cent. 800

The trend towards cars with diesel 700 engines, a better standard of equipment 600 and vehicles with more electronics Manufacture of vehicles and engines 500 Manufacture of bodies and trailers enabled the German supply industry to Manufacture of parts and accessories achieve records sales of 60.1 billion 400 euros in 2003. Compared to 1995, sales 300 have almost doubled (+94 per cent). Compared to 2002, domestic sales 200 were 6 per cent up to 35.4 billion euros, 100 while foreign sales were also up 6 per cent to 24.7 billion euros. 58.9 per cent 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 of total sales in 2003 were therefore Federal Office of Statistics achieved on the domestic market. 192 Verband der Automobilindustrie FACTS AND FIGURES

Growth in sales Exports of automotive products creates jobs (in million euros) *) In spite of continued recession, the

German automotive industry was able to Country of destination 2003 Share in per cent 03/02 in per cent create 9,700 new jobs in 2003, employ- France 11,829 8.4 3.3 ing a workforce of 773.200. These new Belgium 7,775 5.5 -8.6 jobs were, however, in supply com- Netherlands 4,410 3.1 3.2 panies only. Employing 327,300 people, Italy 11,381 8.1 2.7 the supply industry employed some UK 16,324 11.6 9.7 Ireland 646 0.5 -8.8 12,400 more people that a year ago Denmark 1,166 0.8 -2.0 (+4 per cent). While automakers were Greece 985 0.7 35.1 almost able to maintain the workforce Luxembourg 387 0.3 1.8 level of 2002 (employing around Portugal 1,180 0.8 -12.1 Spain 9,135 6.5 14.1 409,700 people), the body and container Sweden 3,137 2.2 14.6 industry reduced their workforce by Finland 1,289 0.9 5.9 over 4 per cent to 36,000. Austria 5,195 3.7 5.4 EU countries 74,840 53.2 4.8 On the whole, the number of jobs Western Europe together 78,818 56.0 4.2 Eastern Europe together 16,458 11.7 8.0 in the German automotive industry has Europe together 95,276 67.84.8 risen over the last nine years by over Africa 2,893 2.1 8.8 130,000, with more and more of these USA 22,124 15.7 -4.9 being permanent contracts. In 2003, Canada 1,241 0.9 8.0 only 1.3 per cent of employment con- Latin America 2,568 1.8 -12.2 America together 25,933 18.4 -5.2 tracts were for a fixed term. In 1998, Of which: NAFTA 24,808 17.6 -4.7 this figure was still as high as 4.2 per Asia 15,269 10.9 11.4 cent. Of which: Japan 3,477 2.5 -7.0 Australia, Oceania 1,225 0.9 31.6 German automotive Countries not known 30 0.0 -63.4 industry – engine of the Total 140,627 100.0 3.7 German economy *) preliminary result The German automotive industry has Federal Office of Statistics made a significant departure from gen- eral economic trends. While the number of jobs in the whole of German industry has declined by 1 per cent, the number cent. The German automotive industry once again able to expand its lead. has increased by the same figure in the therefore has once again proven itself In 2003, it accounted for over 18 per automotive industry. The number of jobs to be one of the largest and most cent of the total sales volume gener- in the German automotive industry as a secure employers in the country. ated by German industry. Ten years percentage of those in industry as a ago, it accounted for just under 12 per whole has increased continually over In terms of sales volume too, the cent. The German automotive industry, the past ten years from 9.5 to 12.9 per German automotive industry was therefore, is proving more now than Annual Report 2004 193

Imports of automotive products German automotive industry remains geared (in million euros) *) towards the future Country of manufacture 2003 Share in per cent 03/02 in per cent To ensure that this positive trend continues, the German automotive France 9,335 14.9 8.8 Belgium 4,182 6.7 -18.9 industry continually invests in the Netherlands 1,678 2.7 0.1 future. Over the last five years, this Italy 4,699 7.5 6.7 sector of industry has invested a total UK 4,835 7.7 -7.2 of 55 billion euros in its industrial sites Ireland 45 0.1 -10.0 in Germany. In 2003, the German auto- Denmark 424 0.7 23.3 Greece 10 0.0 25.0 motive industry invested a further 6 per Luxembourg 95 0.2 11.8 cent, with investments totalling 13 billion Portugal 982 1.6 -2.3 euros. The automotive industry was Spain 5,023 8.0 10.8 therefore responsible for some 26 per Sweden 757 1.2 6.8 Finland 60 0.1 -1.6 cent of total investments made by Austria 4,356 6.9 -5.8 industry in Germany. This year too, EU countries 36,479 58.1 0.1 the German automotive industry intends Western Europe together 37,221 59.3 -0.1 to maintain its high level of investment. Eastern Europe together 14,940 23.8 18.2 Over the last ten years, the German Europe together 52,161 83.1 4.6 Africa 368 0.6 -44.5 automotive industry has invested some USA 3,851 6.1 10.1 110 billion euros in research and Canada 52 0,1 -16.1 development. In 2003 alone, this figure Latin America 1,073 1.7 35.1 amounted to some 14.5 billion euros – America together 4,977 7.9 14.3 a third of the total R&D expenditure of Of which: NAFTA 4,624 7.4 15.3 Asia 5,248 8.4 31.6 the whole of German industry. As a Of which: Japan 3,320 5.3 36.6 result of this high level of R&D activity, Australia, Oceania 10 0.0 0.0 the automotive sector tops the league Countries not known 3 0.0 0.0 of patent registrations in Germany, Total 62,767 100.0 6.6 holding some 3,300. This is striking *) preliminary result evidence of the innovative strength of the German automotive industry and Federal Office of Statistics its significance as one of the country's key sectors of industry. ever before that it is the most signifi- 63 billion euros. The foreign trade Germany remains third cant sector in the whole of German surplus in the automotive sector there- largest manufacturing industry. In the year under review, it fore increased to 78 billion euros. The nation exported products valuing almost automotive industry accounted, there- In the USA in 2003, the number of 141 billion euros, while automotive fore, for over 80 per cent of the total vehicles manufactured dropped by just products were imported over the German foreign trade surplus (95 billion under 2 per cent to 12.1 million. In spite same period to the value of just under euros). of this, the US remained the world's 194 Verband der Automobilindustrie FACTS AND FIGURES

Gross capital investment by the automotive industry

14,000 28 Gross capital investment 26 12,000 Share of gross capital investment of industry in per cent 24 10,000 22

8,000 20

6,000 18 16 4,000 of industry in per cent 14

2,000 capital investment of gross Share 12 Gross capital investment in million euros capital investment Gross 0 10 1990 1991 1992 1993 1994 1995 19961998 1997 1999 2000 2001 2002 2003 ifo Institute largest automobile-manufacturing units, Germany reinforced its position place (3.6 million). South Korea (3.2 mil- nation. In second place, Japan manu- as the third largest automobile- lion) and Spain (3.0 million) followed in factured a total of 10.3 million units, just manufacturing country ahead of China, sixth and seventh place. as many passenger cars and commer- which manufactured 4.4 million units cial vehicles as in 2002. With 5.5 million and thus pushed France down to fifth Despite downward economic trends in the USA, General Motors remained The 10 Largest Automobile-Manufacturing Countries in 2003 the world's largest manufacturer of auto- mobiles, selling over 8 million vehicles. In million units Ford lost its second place to the Toyota 12.1 group. Renault/Nissan, the Volkswagen 10.3 group and DaimlerChrysler followed in fourth to sixth place. German manufac- turers were thus able to secure their excellent positions among the world's 5.5 4.4 leading automobile manufacturers. Their 3.6 3.2 3.0 products are sought after the world over, 2.5 1.8 1.7 with the increasing diversification of their offerings allowing them to meet the entire spectrum of automotive demand.

USA UK Japan China Spain anada Brazil France C Germany Tax burden at record levels South Korea Motorists are increasingly becoming VDA statistics the ministry of finance's "cash cow". In Annual Report 2004 195

2003, the treasury collected some economic indicators, such as consumer due to the marked decline (by 5 per 125 billion euros in taxation on the reticence and the further increase in cent) in the number of cars decommis- development, distribution and use of fuel prices. With a share of 82.8 per cent sioned (3.1 million). This development motor vehicles. That amounts to almost of overall distances travelled, the car has been heavily impacted by a slow- one in every four euros of taxpayers' remained the number one mode of down in the number of used cars being money. The volume of taxation raised transport. Public road transport was up sold to Eastern Europe. on mineral oil alone (including the slightly by 1 per cent to 8.7 per cent, value-added tax on this) increased last while rail stagnated at 8.3 per cent. In the commercial vehicle sector, year by over 2 per cent to over 43 billion the vehicle population in German fell euros, even though fuel consumption In the freight transport sector, by once again to 3.54 million. At 43 com- fell by 3.6 per cent, in part due to the contrast, distances travelled in 2003 mercial vehicles per 1,000 inhabitants, increased efficiency of the engines. increased over 2002. However, not all commercial-vehicle density level- This increase is due to a considerable modes of transport benefited from this pegged with 2002. extent to yet another rise in environ- increase. The largest share of goods mental tax. Between April 1999 when transported, at 70.1 per cent, was once the tax was first introduced and the again taken by road transport – primar- Passenger transport in 2003 end of 2003, the treasury raised some ily as a result of its distribution capabil- Distances travelled, share in per cent 22 billion euros in this punitive tax ity. Although total volumes of goods alone. The percentage of tax making transported actually declined by over Public road transport up the price of petrol thus rose to 1 per cent, overall distances travelled Rail 8.9 8.3 approximately 75 per cent. Last year, increased by just under 2 per cent (the motorists also paid 7.3 billion euros in goods being transported greater Car motor vehicle tax and almost a half a distances). 70.9 per cent of goods were 82.8 billion euros in road-use charges. Over transported by German carriers (2002: the last four years, motor vehicle tax 71.6 per cent). While the railways trans- has gone up by 30 per cent, while the ported 4 per cent more goods than in prognos price of a new car has only increased 2002, there was a 7 per cent slump in by 5 per cent. The treasury is becoming the volume of goods carried by inland more and more of a major cost factor waterways. Rail was thus able to expand Freight transport in 2003 pushing up the cost of motoring. its share to 15.4 per cent. Distances travelled, share in per cent Inland Passenger and freight Vehicle population up waterways Other 3.0 transport continue to rely slightly Rail 11.5 on the automobile While the vehicle population in 15.4 Following a poorer year in 2002, 2002 only rose marginally, 2003 saw a overall demand for passenger transport greater increase. In the car sector, the continued to decline in 2003. The main vehicle population grew to over 45 mil- Road – Road – reason for this is the fall in the dis- lion units, 1 per cent more than in 2002. foreign domestic carriers carriers tances travelled by car, which were just Car density increased to 545 cars per 20.4 49.7 under 2 per cent below the 2002 figure. 1,000 inhabitants. The relatively high prognos This figure was influenced by general increase in the level of car ownership is

Auto INDEX 198 Verband der Automobilindustrie INDEX

24 GHz systems 155 Autobahns 80-82, 85-87, 91, 92, 94, 97, Cabotage 91, 105 3D CAD data 178 100, 103, 151, 166, 167 CAD/CAM 177-179 79 GHz technology 155 Automatic steering 159 CAFE – Clean Air for Europe 129 Automotive banks 66 Canada 28, 31, 32, 55, 136, 192, 193, ABS 102, 152, 153, 155, 158, 160, 164, Autonomous steering 159 194 165, 166, 167, 169, 191 Average age of automobiles 89 Captives 66 ACC 153, 155, 174 Avoiding waste 142 Car density 20, 195 Accident frequency of buses 102, 103 Car emissions 126 Accidents involving vans 166 Baltic states 36, 37 Car production 28, 32, 34, 35, 36, 37, 41, ACEA 119, 120, 121, 133, 134, 164 Ban on Sunday driving 106 42, 44, 45 Active safety 58, 150, 152, 157, 158, 164, Banning of materials 137 Car registration tax 22, 23 165 Basle II 61, 62 Car servicing 67 Adaptive Cruise Control (ACC) 153 Belgium 18, 23, 38, 40-42, 47, 53-55, 81, Caravan sector 56 Adaptive Front Lighting 158 108, 115, 143, 192, 193 Carbon dioxide emissions

AdBlue 131-134 Bending light 158, 160, 161 See CO2 emissions After-sales business 68 Best available techniques 139, 140 Carbon dioxide

Air quality 99, 121, 124, 126, 130, 139 Biodiesel (fatty acid methyl esters, See CO2 Airbags 167 FAME) 136 Cars searching for parking spaces 99 Air-conditioning systems 116 Biogenic fuels 137 CARTALK 100 Alcolocks 150 Biometric characteristics 171 Cascade 70 Alternative drive systems 135 Block exemption regulation 48, 64, 65, Catalysts, Catalytic Converters 12, 118, 126 Alternative financing 61 67, 171 Central and Eastern Europe 17, 19, 28, Alternative vehicle concepts 107 Brake assist 153, 158 34, 36, 37, 56, 57, 73, 74, 79 Anti-congestion program 86 Brake compatibility 169 Change management 180 Anti-lock braking system (ABS) See ABS Brake light activation 162, 163 Chemicals legislation 145, 146 Antitheft system 155, 170, 171 Brake lights 159, 162, 163 Child restraint systems 158 Argentina 32, 33, 55 Brake regulation for cars, global 159, Child seats 158 ASFINAG autobahn operating company 160 China 13-15, 18, 34-36, 42, 43, 47, 57, 95 Brakes 102, 159, 160, 164, 167, 169 136, 194 Asia 28, 34, 35, 36, 43, 47, 53, 54, 192, Braking systems 58, 102, 109, 158, 159, CIS 17, 36 193 160, 165, 169 City toll 98, 99 Association for Research in Brand exclusiveness 65 City traffic 98, 100 Automotive Technology (FAT) 156, 176 Brand management 65 Clean air 121, 129 Austria 38, 40, 41, 42, 53, 55, 80, 81, 95, Brazil 18, 32, 33, 55, 136, 194 Climate change 107, 113, 114, 115, 118, 119 102, 104, 105, 115, 129, 192, 193 Build now programme 86 Climate change ordinance on chemicals Autobahn accidents 80, 166 Bulgaria 16, 115, 132 115 Autobahn and Trunk Road Expansion 83, 92 Burden of taxation on automobiles 89 Climate change policy 113, 114, 115, Autobahn and trunk roads 91 Bus lengths 108 118, 119

Autobahn density 98 Bus operators 108 CO2 23, 69, 83, 84, 85, 103, 107, 112, 113, Autobahn network 80-82, 87, 94, 95, 98, Buses 32, 33, 40, 51, 54, 77, 98, 100, 101, 114, 116, 118, 119, 120, 121, 126, 128, 166 102, 103, 108, 109, 132, 168 130, 135, 139 Annual Report 2004 199

CO2 emissions 23, 69, 113, 114, 118, 119, Design protection 68, 69 EEVC working group 17 (WG 17) 157 120, 121, 130, 135 Design protection for parts 68, 69 E-government 70

CO2 Labelling Directive 69 Design rights 68 Electricity prices 142, 143

CO2 reduction pledge 118 Deutsche Automobil Treuhand (DAT) 69 Electronic business 177, 178, 180

CO2 savings 113-115, 118-121 Diesel cars 23, 24, 38, 40, 43, 44, 45, 49, Electronic chip card 173 Coach sector 106 56, 122, 123, 127 Electronic data interchange (EDI) 179 Colombia 15 Diesel fuel 23, 24, 105 Electronic Stability Programme Combined heat and power 117, 142 Diesel share 40, 118 (ESP) 102, 152 Commercial vehicle business 50 Diesel tax 23, 105 Electronic steering systems 159 Commercial vehicles 21, 28, 29, 30, 32, Digital radio (DAB) 100 Electronics 20, 59, 70, 159, 169, 170, 176, 33, 34, 35, 36, 38, 40, 41, 42, 50, 51, Dimensions and weights of 184, 191 52, 53, 54, 54, 55, 75, 80, 94, 95, 103, commercial vehicles 107 Emission values 129 107, 108, 124, 126, 131, 132, 134, 160, Directive on air quality 121 Emissions 12, 21, 23, 24, 69, 70, 79, 83, 163, 165, 168, 175, 176, 184, 194, 195 Directive on working times specific 84, 85, 93, 95, 103, 107, 112-142 Competition law 64, 67 to driving personnel 106 Emissions certificates 117, 118 Competitiveness 14, 21, 22, 24, 61, 69, Discounts 29, 30, 65 Emissions of greenhouse gases 24, 113, 89, 91, 143, 146, 147 Distance control 155, 174 114 Computer-aided facility management Distances travelled by car 76, 78, 195 Emissions reduction 118, 121, 128 178 Distribution efficiency 65 Emissions trading 115, 117, 118 Confederation of German Industry Doha round 15 Employment 13, 14, 15, 24, 39, 44, 56, 57, (BDI) 103 Domestic production 34, 44, 45, 54 72, 73, 88, 192 Congestion 80, 82, 86, 87, 92, 98, 119 Domestic sales 55, 56, 190, 191 End-of-life vehicles 137, 138 Congestion charge 98 Driver assistance 58, 100, 186 Energy labelling for cars 69 Consumption 12, 22, 35, 64, 69, 79, 82, 83, Driver fatigue detectors 150 Energy labelling ordinance 69 107, 112, 113, 116, 117, 118, 119, 126, 127, Driving and Rest Time Rules 106 Energy tax directive 22-24 128, 130, 135, 137, 141, 142, 143, 195 Driving licence 77, 78, 150 Engine and emissions technology 126, Container management 178 Dummy for side impacts 174 127 Container standardisation 178 Engineering change management 180 Corrective steering 159 Eastern Europe 13, 17, 18, 19, 20, 28, 29, Environmental impact assessment 180, Cost of traffic jams 82, 83 34, 36, 37, 43, 53, 56, 57, 59, 68, 73-76, 116, 137, 139 Council of transport ministers 104 79, 95, 104, 192, 193, 195 Environmental protection 112, 113, 126, Cross-subsidies 91 Eastern Germany 57 129, 132, 138, 140 Customer service 67 ECE Regulation 111 Environmental strategy of the Customs duties 15 (Rollover Stability) 168 automotive industry 113 Cyprus 16, 73, 98 ECE Regulation 13 H 160 Environmental tax 47, 76, 88, 89, 130 Czech Republic 16-20, 36, 37, 54-56, 74, ECE Regulation 79 159 Equal effectiveness study 157 98, 105 Eco-audit 113 Errors in the logistics process 178 Economic and tax policy 24 ERTICO 100 Data quality 179 Economic growth in Germany 72 e-safety programme 154 Dealers 64, 65 Economic situation in the global ESP for vehicles transporting Denmark 38-41, 64, 115, 143, 192, 193 automotive industry 28-37 dangerous goods 165 200 Verband der Automobilindustrie INDEX

Estonia 16, 73, 74, 115 Exhaust emissions 84, 112, 124, 125, 127 Future Automotive Industry Structure EU passim Exhaust gas recirculation 131 (FAST) 57, 59 EU 15 41, 43, 46, 53, 54, 55, 97, 115 Export record 44 Future requirements for innovative EU accession 36, 37, 46, 131 Export results 46 commercial vehicle concepts 108 EU accession countries 131 Exports 13, 14, 17, 34, 35, 38, 44-48, 51, EU Commission 23, 64, 68, 93, 94, 95, 53-56, 190, 192 Galileo 97 96, 97, 103, 105-107, 115, 116, 118, German in-depth accident study 120, 121, 129, 132, 136-139, 175 FAKRA 133 (GIDAS) 167 EU Council of Ministers 24, 91 FAT 156, 176 German Traffic Courts Convention 167 EU countries 29, 37, 38, 47, 92, 115, 143, Federal Environmental Agency 99, 103, German Transport Forum 104 192, 193 121, 124, 125, 126, 128, 130, 134, 141 German transport ministry 95 EU Directive on the Protection of Federal Highway Research Institute 156, Greece 40, 41, 64, 115, 143, 192, 193 Pedestrians 157 166 Greenhouse gases 24, 83, 113, 114, 115, EU enlargement 17, 37, 72, 83, 88, 10, 105 Federal Motor Transport Authority 117 EU parliament 22, 23, 83, 84, 86, 91, 93, (KBA) 52, 173 GRRF 160, 169 96-97, 104-106, 108, 114, 116, 131, Federal transport plan 76, 78, 81-88, 92 GVO 139, 147, 168, 172 Federation of Industrial Cooperative See Block exemption regulation EU Road Costs Directive 103,104 Research Associations 176 EU road safety programme 150 F-gases 115, 116 Harmonisation of taxation in the EU 22 EU Solvents Directive 140, 141 Financial services 65, 66 Haulage sector 24, 104-106 EU tachograph 167, 168 Financing 16, 25, 61, 62, 66, 67, 86, 89, Hazardous substances and chemicals EU type approval procedure 172 90, 92, 93, 95, 173, 176 legislation (REACH) 145, 146 EURO 3 95, 108, 129, 130, 132, 134 Fine particulate (PM10) 124, 125, 128 Head-up displays 58 EURO 4 94, 126-134 Finland 41, 42, 107, 115, 143, 192, 193 Height regulations 107 EURO 5 21, 94, 127-134 Fluorinated gases 115, 116 Holiday travel 78 EURO 6 132, 134 Foreign production 17, 43, 54, 55 Hungary 16-20, 36, 37, 54, 56, 74, 98, EuroNCAP 164, 165 Foreign sales 14, 34, 44, 56, 190, 191 115 Europe passim Foreign trade 13, 16, 17, 193 Hybrid III 174 European Climate Change Programme Foreign trade surplus 13, 193 Hybrid vehicles 135, 136 (ECCP) 107, 114 Forward Investment Hydrocarbons (HC) 121, 125 European Commission Programme 2001-2003 86 Hydrofluorocarbon (HFC) 116 See EU Commission France 13, 22, 23, 24, 38, 39, 40, 41, 42, Hydrogen 136, 137 European Council 96, 108 47, 53, 64, 80-81, 104, 106-108, 115, European Court of Justice 94, 106, 121 133, 136, 143, 147, 179, 192-194 IAA for Cars 184, 186 European New Car Assessment Free trade agreement 16 IAA for Commercial Vehicles 184 Programme (EuroNCAP) 164 Freight transport policy 103 Iceland 136, 137 European Union Fuel cells 137 Immobiliser171, 174 See EU Fuel consumption 12, 22, 69, 79, 82, 83, Impact assessment 21, 147 EuroSID 174 107, 113, 116-119, 126-128, 130, 135- Import duties 35, 36 Eurovignette 92, 93 137, 195 Importers 15, 33, 39, 48, 49, 65, 138 Evaluation of vehicle safety 164 Fuel prices 40, 47 Income per capita 20 Annual Report 2004 201

India 14, 35, 36, 136 Joint ventures 59, 60 Mercosur 17, 28, 32, 55 Indonesia 35, 55 Mexico 28, 32, 55 Industrial policy 21 KAMA 120, 164 Mineral oil 23, 24, 89, 90, 92, 93, 94, Industry parks 177 Kyoto protocol 114-116 104, 130, 136, 195 Information Technology for the Mineral oil tax 23, 24, 89, 90, 92, 93, 94, Automotive Industry 177, 180 Labour costs 13, 19, 20, 24 104, 130, 136 Infrared devices for seeing in the dark 102 Lane keeping systems 150 Ministry of Education and Research 99, Infrared systems 158 Latvia 16, 115 176 Infrastructural expansion 119 Law on Combined Heat and Power 142 mobilist (Stuttgart) 99 Infrastructure financing 92, 93, 95 Law on Private Financing of Autobahn Mobility in Conurbations 99 Infrastructure policy 79, 83, 87, 88, 89, and Trunk Road Expansion 92 Mobinet (Munich) 99 97, 117 Lead-time 21, 168 Modal split 84 Infrastructure policy “offensive” 79 Leasing 39, 48, 61, 66, 67 Modular concept 107 Inland waterways 74, 75, 84, 85, 86, 93, Legislative package 70 Montreal protocol 116 97, 195 Leisure vehicles 56 Motor vehicle distribution under Innovations 12, 58, 165, 186 Level of car ownership 20, 195 the new Block Exemption InQ-Institute for Quality 181, 182 Level of investment 61, 193 Regulation 64 Insurance tax 104 Licence certificate 173 Motor vehicle tax 23, 24, 89, 92, 94, 103, Integrated product policy 138 Light emitting diodes (LEDs) 161 104, 130, 195 Intermobil (Dresden) 99 Lithuania 16, 115 Multi-branding 65 International Organisation for Local public transport 78, 89, 90, 98, Standardisation (ISO) 131, 134, 175 100, 101 NAFTA 28, 29, 30, 32, 54, 55, 192, 193 International Road Transport Union Location clause 64 National allocation plan NAP 117 (IRU) 107 Logistics 23, 106, 177, 178, 180, 184 Navigation systems 58, 100 INVENT initiative 100 Logistics processes 177 Netherlands 23, 38, 41, 42, 47, 53, 104, Investment programme 1999-2002 86 Logistics quality 178 107, 108, 115, 129, 133, 192, 193 Investments 18, 19, 25, 84, 193 London 98, 99 Networking capability 74 Iran 52 Long-distance haulage 84, 90, 101-102 Niche vehicles 12, 43, 44, 46, 49 Ireland 41, 107, 115, 143, 192, 193 Long-term archiving 179 Night vision glasses 158

ISOFIX systems 158 Lower leg 157 Nitrogen oxides (NOX) 121, 125 Italy 23, 38, 40, 41, 42, 47, 53, 81, 102, Low-friction tyres 119 Noise emissions 134, 135 103, 107, 115, 133, 136, 143, 192, 193 Low-viscosity oil 119 North America 24, 28, 31, 34, 59

Luxembourg 41, 47, 53, 106, 115, 143, NOX emissions 123, 132, 134

JAMA 34, 120, 164, 178, 179 192, 193 NOX reducing agent 133 Japan 12, 13, 18, 21, 24, 18, 29-31, 33- 34, 36, 39-40, 47, 49, 51-52, 120, 135- Maastricht Treaty 96, 97 OBD 130, 131, 132, 175 136, 154, 157, 159-160, 164, 175, 179, Malaysia 35, 36 OBD systems 132, 175 192-194 Malta 16, 73 Occupational safety 144-147 Jobs 13, 14, 73, 83, 192 Man/machine interface 156 Occupational Safety Ordinance 144 Joint research 176 Manufacturer banks 66, 67 ODETTE 177-180 Joint stands 16 Manufacturer/supplier relations 62 Off-road vehicles 43, 44, 46, 48, 49, 65, 130 202 Verband der Automobilindustrie INDEX

On-board diagnostics (OBD) 175 Purchasing cartels 70 149-158, 160, 162, 164-170, 172-174, Operating company 94, 95 176, 178, 180, 182, 184, 186 Orders 14, 47, 50, 51, 53, 56, 98, 107, Quality management 180-182 Sales 13, 14, 15, 17, 19, 23, 28-42, 44, 46- 108, 177 Quality management center 51, 53, 55-57, 64-68, 72, 108, 190-192 Ozone 115, 116, 125, 126 (VDA-QMC) 181 Saudi Arabia 54 Securing of loads 167 Painting methods 112 Radar 154, 155, 158, 163 Selective catalytic reduction (SCR) 131 Painting plants 140 Rail freight 75, 84, 95 Self-cleaning paint 58 Pällmann commission 91 Railway reform 89, 90 Semitrailers over 6 t 55 Particulate emissions 123, 126-132 Railways 74-85 Service network density 14, 68 Particulate trap 126-128, 186 Rating tool 62 Service networks 14 Parts and accessories industry 56 Ratings 61-63 Servicing 64, 65, 67, 68 Passive safety 12, 58, 152, 157, 158, 160, Recycling 112, 113, 137, 139, 142 Seville office 140 164, 167, 176 Refrigerant R 134a 116 Short Range Automotive Radar Patent registrations 193 Regional significance analysis 84, 85 Frequency Allocation (SARA) 154 Patent statistics 12, 13 Reimports 48 Shortage of skilled labour 56 PDM data exchange 179 Renewable energy law 142 Short-term registrations 49 Pedestrian fatalities 152 Renewable fuels 136 Slovakia 16-20, 36, 37, 46, 98, 115 Personal mobility 79 Research and development 12, 14, 60, Slovenia 16, 18, 20, 36, 37, 74, 98, 115 Personal transport 76 61, 118, 176 Small and medium-sized Philippines 35 Research and development businesses 16, 17, 60, 61, 62, 63, 102, Pick-up procedures 177 expenditure 12, 14, 21, 60, 61, 118, 145, 146, 182 Poland 16, 17, 18, 20, 36, 37, 46, 48, 53, 176, 193 Society of Automotive Engineers 54, 55, 74, 98, 105, 115 Reversing assist 155 (SAE) 175 Portugal 38, 39, 41, 42, 107, 108, 115, Reversing cameras 58 South America 28 192, 193 Road costs 94, 95, 103 South Korea 13, 34, 35, 36, 136, 194 Price of new cars 22 Road Costs Directive 103 South-East Asia 35 Price of petrol 195 Road freight 74, 75, 81, 84, 87, 97, 103, 104 Spain 17, 38, 40, 41, 42, 43, 47, 53, 54, Private financing 92 Road haulage industry 23, 89 55, 102, 108, 115, 133, 143, 192-194 Pro Mobilität 87, 88 Road infrastructure 84-86, 90, 107, 151 Speed limit 80, 166, 167, 168 Product data management 179 Road safety 107, 108, 150, 151, 153, 154, Speed warning and management Product documentation without 155, 156, 160, 165, 166, 167 devices 150 drawings in car manufacture 179 Road transport 55, 74, 79, 87, 91, 96, 101, Standard graphic symbols 174 Production 13-21, 29-38, 41-47, 54, 55, 103, 107, 114, 121-126, 136, 176, 195 Standardisation 133, 158, 172, 175, 178 57-60, 70, 72, 74, 107, 112, 113, 116, Road-use charge 195 Steering 58, 137, 159, 167, 191 118, 129, 131, 136-142, 145, 146, 154, Rumania 16, 115, 132 Steering and braking systems 58, 159 163, 168, 176-179 Russia 15, 18, 36, 37, 114, 136 Stop-and-go traffic 79, 82, 83 Protection of pedestrians and car Russian Federation 36, 37 Strength of the euro 44 occupants 157, 158 Suppliers 12, 14, 15, 17, 18, 56, 57-63, 72, Public contracts 69 Safety 12, 21, 58, 69, 81, 83, 100, 102- 100, 137, 146, 154, 176-177, 179-181, Public road transport 79, 96, 101, 195 103, 107-108, 112, 137, 139, 144-147, 184, 186 Annual Report 2004 203

Supply chain management (SCM) 177 101, 103, 139 Vignette 93, 95, 98 Supply industry 15, 56, 57, 58, 117, 184, Travel allowances 73 Virtual inspection 172 191, 192 TREMOD 121 Vision from cars 163 Sustainable development 133 Turkey 36, 54, 55, 132 Voluntary agreement 118-121, 139 Sweden 38, 40, 41, 42, 101, 107, 115, 129, 143, 179, 192, 193 UK 15, 18, 22, 37, 38, 40, 41, 42, 47, 53, Wage costs 14, 19 Switzerland 38, 40, 41, 81 192, 193, 194 Waste 10, 79, 82, 83, 103, 112, 117, 124, Synthetic fuels 136, 137 Ukraine 37 138, 141, 142 Unique partner identification key (UPIK) Waste avoidance 142 Taiwan 35 177 Waste water 142 Tax burden 23, 24, 64, 104, 105, 194 United Kingdom See UK Water consumption 141, 142 Tax laws 24 US manufacturers 29-31 Waterways 74, 75, 84-86, 91, 93, 97, 195 Tax policy in Germany 24 US market 29, 30, 47 Wayflow (Frankfurt) 99 Tax reform 24, 25 USA 13, 21, 28, 29, 30, 31, 32, 34, 35, 47, Western Europe 20, 28, 34, 38-41, 53, TEHG 117 54, 55, 81, 114, 128, 130, 131, 135, 54, 75, 76, 79, 81, 134, 192, 193 Telematics 98, 99, 100, 151, 184, 186 136, 151, 154, 157, 160, 175, 179, 191- World climate conference 113 Telematics services 99 194 World premieres 186 Thailand 14, 35, 36 Used commercial vehicles 51, 53 WorldSID 174 Thin capitalisation 24 User-based financing 92 WTO 15 Three-way financing 66 Tiger states 35 Value chain 61, 62, 65, 177 Year of Technology 112 TMC Forum 100 Value of exports 46 Toll concept 87, 93 Value-added 13, 57, 58, 59, 60, 61, 63, Toll on trucks 55, 92, 93, 95, 104 72, 73, 74, 147, 195 Toll revenue 87, 88, 91-95, 103, 104 Value-added structures 57, 59, 63 Tolls 91, 92, 94, 95, 98, 103 Value-added tax 195 Tourism 100-102 Van training course 167 Trade barriers 15, 16 Vans 29, 43, 44, 46, 48, 49, 53, 54, 56, Traffic density 80, 85, 98, 125, 139 160, 166, 167 Traffic growth 99 VDA committee for small and Traffic message channel 100 medium-sized companies Trailer, body and container industry 55, 56 See VDA Mittelstandskreis Trans-European networks 95-97 VDA cooperation portal 60 Transit routes 106 VDA Mittelstandskreis 62 Transit through Austria 105 VDA Research Conference 176 Transit traffic 76 VDA small-load containers 178 Transport budget 85, 87, 88, 93 Vehicle population 68, 112, 125, 166, 195 Transport infrastructure financing Vehicle repair market 67 company 92, 93, 95 Vehicle safety 12, 58, 107, 108, 151, 164, Transport needs 74, 80, 86, 101, 104 167, 173 Transport policy 73, 76, 79, 86, 88, 90-93, Vehicle thefts 170, 171