Auto ANNUAL REPORT 2006

FOREWORD Verband der Automobilindustrie Annual Report 2006 3

a signal effect. A new export record is at our traditional German plants has evidence that its products and technol- permitted us to achieve competitive ogies are competitive on the interna- price levels in many areas. That this tional market. Readiness to accept the is “borrowed competitiveness” can be blending of up to 10 percent of bio-fuels seen from the fact that supplies from to conventional fuels represents a sig- abroad now account for 40 percent of nificant step toward gradually reducing value creation in the German automo- dependence on fossil energy sources. tive industry. We must ask ourselves, however, whether this will be sufficient Firstly: global challenges in the future. For a forward-looking call for a global strategy. strategy, we must aim for a decisive We live in an increasingly global improvement to cost-competitiveness world, with changes occurring ever within Germany itself. more rapidly. Only those who continually achieve peak performance will remain The wage settlement negotiated ahead in the long term. German manu- this spring is an important step towards facturers and parts suppliers faced up seriously overdue goals such as greater to these challenges at an early stage. flexibility and differentiated pay levels. They were at the forefront of system- Of course, a high price had to be paid, atically entering new markets and and the settlement within the metal- enlarging their production basis in working industries is not likely to act as other countries. a stimulus for the creation of new jobs in Germany. The strategy of networking their “No opportunity is ever lost. If you activities with lower-wage locations has In defiance of all economic pres- don’t take it, someone else will!” There been successful, but competitors are sures to the contrary, the German auto- could be no better way of summing up now increasingly adopting it. In Central motive industry continues to employ the competitive situation in the inter- and Eastern Europe – one might almost some 766,000 people and thus acts as national automotive industry. 2006 is say “at our back door” – new, highly a major stability factor. Painful adjust- another year that proves this. profitable and extremely flexible produc- ments to changing situations have tion capacity for more than 1.2 million sometimes been, and still are, necessary The German automotive industry passenger cars has been or is being in order to keep this industrial sector has demonstrated its determination to created, primarily in high-volume auto- competitive as a whole. The automo- seize the available opportunities. As a motive categories. These plants repre- tive industry has nonetheless proved key industry in Germany, it is fully aware sent a challenge to the industry’s ability its ability to create new jobs, even at its of its responsibility not only for national to compete in its traditional locations. German locations, if the circumstances growth and employment, but also for are favourable. For example, the propor- assuring sustainable long-term mobility. This situation gives rise to questions tion of people with academic qualifica- The high level of employment has been to which answers must be found: the tions that the industry employs has maintained. Its decisions in favour of existing cost mix from a combination been increasing for some years, espe- German production locations have had of low-wage locations and production cially in research and development. This 4 Verband der Automobilindustrie IAAFOREWORD

is the area in which one in nine of the One example is safety: road acci- successfully: German cars are signifi- automotive industry’s employees works dents have been decreasing for some cantly ahead of other makes in sales of – clear evidence that German manufac- years now, with a lower total in each cars with a diesel particulate filter. They turers and suppliers continue to regard successive year. In terms of active safety, lead the world in the “Clean Diesel” area. a leading position in technology as one in other words accident avoidance, new of their core competencies. assist systems are creating exceptional This is not to imply that the German potential. Networked systems are a major automotive industry intends to rest on Secondly: technical and step forward in achieving the vision of its laurels. High petroleum prices and qualitative leadership “accident-free driving”; electronics have political tensions in the Near East are a safeguard the ability to a key role to play in this respect. constant reminder that there are limits remain competitive to the scope of mobility based on fossil worldwide. Another example is quality: through- fuels. For this reason, the German auto- To be ahead of one’s rivals in know- out the German automotive industry, motive industry has lost no time in sys- how is a decisive precondition for the this has board-of-management status, tematically exploring an “away from oil” success of an industry that has its home with the result that our products have approach with the aim of safeguarding market in a high-wage country such improved their positions again in the sustainable mobility. as Germany. The customer will pay a most recent quality rankings. The long- premium price for premium products term quality they possess, which is one Thirdly: petroleum reserves only if they offer genuine user benefits of the factors that has helped to justify are finite – what we need and added value. Although the Ger- our worldwide image, can for instance is a sustainable strategy for man automotive industry accepts this be seen in the fact that the average age future mobility. high-tech strategy without proviso, it is of passenger cars on German roads is Before the long-term goal of a glo- obliged at the same time to work toward now higher than ever before. bal hydrogen-based economy can be improving overall conditions for the pro- realised, our sector of industry proposes duction of high-volume cars in Germany Last but not least, the environment: to concentrate on a group of promis- as well. Together with premium quality determined efforts by our industry have ing alternative propulsion systems and and competitive costs, technological led to a continuous decrease in aver- fuels. By increasing the efficiency of its leadership is the third element in the age new-car fuel consumption since the gasoline and diesel engines, as well as “three-pronged” approach that our end of the 1970s. In the past 15 years by developing alternative powertrains industry is adopting. alone, a further reduction of one quarter such as hybrid or fuel-cell vehicles or has been achieved. The voluntary com- by using gas and second-generation bio The German automotive industry mitment to reduce fuel consumption and designer fuels, our industry is send- willingly spends considerable sums of has therefore been fulfilled, and as a ing out new signals and determining money on maintaining its leading tech- result total road-vehicle CO2 emissions the direction in which future progress is nological position. More than 16 billion have passed their peak and have been likely to be made. euros are devoted annually to R&D falling for more than five years. At the activities, and with success: more than same time, pollutant emissions have German manufacturers recently 3,600 patents per year make the indus- decreased dramatically since the early announced that they would in future try the world champion in this area. 1990s, in some cases by more than design their vehicles to allow the blend- These are innovations that benefit the 90 percent. We have also tackled the ing of up to 10 percent regenerative fuel customer. question of fine particulate emissions to conventional fuels – a precondition Annual Report 2006 5

for enabling these fuels to secure an industry is well equipped for the future. a European policy on competition to increasing share of the market. Based What it lacks are general conditions be implemented that will strengthen on experience gained in Brazil, com- capable of safeguarding our location in the automotive industry as a whole and panies are now beginning to offer Flex respect of costs and the necessary flexi- prevent conflicts of objective from the Fuel vehicles in Germany as well. These bility. The domestic market is still unsta- outset. are prepared for operation on any pro- ble, despite increasing vehicle replace- portion of bio-fuel up to 100 percent. ment demand and the large number The German automotive industry Plant for the industrial-scale produc- of new, attractive models introduced is ready to accept new challenges. It tion of second-generation bio-fuels by German manufacturers. Consumers is and will remain a key industry that – biomass-to-liquid (BTL) – is being remain uncertain, however. The govern- supplies powerful stimuli for growth, constructed, and vehicle fleets powered ment has on more than one occasion employment, technological development by fuel cells or fuelled by hydrogen are stated that it intends to provide fiscal and the prosperity of other medium- undergoing widespread testing and or financial support for the installation sized companies, and which has show considerable promise. of particulate filters, but no action has increasingly close links with more and yet been taken. The planned increase in more sectors of our economy. Sustainability also calls for traffic German value added tax, scheduled for flows to be organised as efficiently as the start of 2007, represents a risk for possible. The potential lying fallow in this the domestic car market. The German area is obvious from the 12 billion litres automotive industry continues to derive of fuel that are wasted every year in traf- its strength above all from its export fic jams. The situation calls for action results, and also from satisfactory sales Prof. Dr. Bernd Gottschalk by the public authorities in the form of of commercial vehicles, which have President a demand-orientated mobility policy for once again proved to be an effective Verband der Automobilindustrie our road network. The automotive indus- economic driver. try is making its own contribution to Frankfurt am Main, July 2006 higher traffic efficiency by supplying the What we need is an end to latest telematics systems and develop- increased costs and uncertainty. We ing car-to-car and car-to-infrastructure need a greater sense of confidence. communication. By means of its tech- We need reliable government policies nological innovations, our industry once geared to long-term targets rather than again emphasises its intention of contin- short-term successes along the way uing to pioneer technical development. and compromises that make no sustainable contribution to stability. We need Conclusion: the automotive a wages policy that aims to strengthen industry is in good shape – Germany as an industrial location, a but the general conditions, transport policy that takes increas- in which it must operate, ing transport and mobility needs into could be better. account and an environmental policy The goal has been defined and the committed to sustainable mobility, with first steps in the right direction have realistic goals that can be planned been taken. The German automotive effectively. Last but not least, we need 6 Verband der AutomobilindustrieAutomobilindustrie CIAAONTENTS

FOREWORD 3

BUSINESS BACKDROP 11

On the Road to New Sustainability 12 Challenges and Opportunities for the German Automotive Industry 14 Improving Competitiveness Worldwide 20

GLOBAL MARKETS 23

The Economic Situation in the Global Automotive Industry 24 International Positioning of the German Car Industry 33 International Positioning of the German Commercial Vehicle Industry 38 The Trailer, Body and Container Industry 42 The Parts and Accessories Industry 43 Automotive Sales and Service 51

TRANSPORT 61

Road Transport leads the Way 62 European Transport Policy 66 National Transport Policy 67 Infrastructure Policy as a Key Task 70 Infrastructure Financing not in accordance with Demand 73 Infrastructure Financing should be switched to Sustainability 75 Using the Infrastructure more efficiently 84 Optimising City Traffic 87 Annual Report 2006 7

ENVIRONMENT AND TECHNOLOGY 91

Environmental Protection: A Key Goal for the Automotive Industry 92 Climate Protection 94 Emission Reduction 101 Passenger Cars and Trucks becoming increasingly Cleaner and Quieter 108 Innovative Drives and Fuels of the Future 113 End-of-Life Vehicles 122 Production-Related Environmental Protection 124 Energy 125 Occupational Safety 127

SAFETY AND TECHNOLOGY 129

Success in Road Safety Improvements 130 The Integrated Approach to Safety 132 The VDA “Impulskreis”: Safe, Intelligent Mobility 134 High-Tech Tyres, Chassis and Brakes 136 Light and Visibility 139 Pedestrian Protection and Child Safety 142 Vehicle Electronics improve Safety 144 Commercial Vehicle Safety 146 Technical Harmonisation 149 Standardisation 155 Joint Automotive Research 157 Quality Management 158 Logistics 161 , IAA – THE WORLD S LEADING MOTOR SHOW 169

FACTS AND FIGURES 175

INDEX 183 8 Verband der Automobilindustrie IAAFIGURES AND TABLES

FIGURES AND TABLES

Business Backdrop Automotive products trade balance, Germany/India 15 Employment in the German automotive industry 16 Customs duties in Asian threshold countries 22

Global Markets World automobile production in 2005 24 Sales of light vehicles in the USA in 2005 25 Light vehicle sales in Brazil in 2005 by fuel type 26 Chinese automobile industry production 27 Motor-vehicle sales in India in 2005 28 New motor-vehicle registrations on Asian markets 29 Production and sales in the new EU countries 30 Turkey: passenger-car production and exports 31 Passenger-car sales in Russia 31 New passenger-car registrations on Central and Eastern European markets 32 Registration of new cars and market shares in Western Europe 32 Share of diesels in new passenger-car registrations in Western Europe 33 Production of German corporate brands by region in 2005 – 21 percent of worldwide vehicle production 34 Production of off-road vehicles and diesel passenger cars abroad 35 Passenger-car exports according to engine type 35 New passenger-car registrations by private and business owners 37 New registrations of diesel passenger cars with particulate ﬁ lter (DPF) 38 New registrations of commercial vehicles in 2005, according to weight categories and brands 39 Commercial-vehicle exports according to weight categories and regions in 2005 40 Production of German commercial vehicles abroad in 2005 according to country 41 Domestic commercial-vehicle production according to weight categories 41 Sales and employment levels in the automotive supply industry 44 Suppliers: borrowing remains difﬁ cult 46 Vehicle leasing is gaining ground 53 Workshop preferences in Germany 58

Transport Freight transport in Germany until 2015 62 Freight transport in EU-15 countries until 2010 63 Passenger transport in Germany until 2009 64 Passenger transport in EU-15 countries until 2010 64 Annual Report 2006 9

Changes in the level of fatalities on dedicated highways in Western Europe and in the USA 71 German ‘autobahn’ highway network: the German ADAC club’s demands 72 Investment per unit kilometre travelled in 2002 74 Increasing sustainability gap in transport household 75 Use of income from speciﬁ c motor-transport levies 76 Passenger-car tolls rejected: the general public anticipates no compensation 79

Environment and Technology The three pillars of sustainability 93 Kyoto targets: debits and credits 94 Greenhouse gases: in the future, the lion’s share will come from developing countries 95 Registrations of fuel-efﬁ cient passenger cars continue to rise 98

CO2 emissions from road transport: beyond the turning point 98 Fuel demand in Germany 99

CO2 emissions: pledge made by the European automotive industry 100 Major achievements in emission reduction 102 Fine particulates – a winter phenomenon 104 Road transport: producing fewer emissions than wood ﬁ res 105 Vehicles sold with particulate ﬁ lters: German brands dominate 106 Fine particulate emissions in Germany 107 Ozone levels: peak values fall 107 Reduction in exhaust emissions from diesel passenger cars 108 Trends in diesel emissions standards 109

Development and projection of NOX emissions from road transport 110 Reduction in exhaust emissions from commercial vehicles 112 Emission reductions on commercial vehicles: comparison of strategies 112 Noise emissions from vehicles: what has been achieved? 113 The road map for drive system technology 114 Biofuels: considerable potential for mixing – The German automotive industry is prepared 115 Modern diesel engines: powerful and fuel-efﬁ cient 116 Diesel share of new passenger car registrations in Germany 117

The CO2 cycle 118 Number of natural gas vehicles in Germany 119 Hydrogen will be renewable in the future 120 Recycling quota makes weight-saving design difﬁ cult 122 Total waste generated by vehicle manufacturing plants has fallen 124 Quantities of waste water discharged from vehicle manufacturing plants are falling 124 Water consumption by vehicle manufacturing plants is falling 124 10 Verband der Automobilindustrie IAAFIGURES AND TABLES

Solvent emissions further reduced 125 Sharp rise in electricity prices for industry 126 Germany’s gas prices for industry are the highest 126 Burden of state-imposed charges on electricity prices for industry

(not including CO2) 127 Fewer and fewer occupational accidents 128

Safety and Technology Road traffi c accident trends 130 The integrated approach to safety 132 ESP installation rates in Europe 136 Run-fl at tyre system: safety reserves even with a fl at tyre 138 Advanced Frontlighting System 140 Mandatory and recommended use of headlights during the daytime in Europe 141 Luminosity advantages of xenon and LEDs 141 Prototype of an LED headlamp 142 ISOFIX mountings for child seats 144 The digital control system 147 Main requirements for standard and strengthened vehicle bodies 148 New vehicle registration documents from October 1, 2005 151 Pyrotechnic Device Deployment Tool (PDT) 156

Facts and Figures Sales volume of the German automotive industry by manufacturer groups 176 Employment figures for the German automotive industry 177 Exports of automotive products (in million euros) 178 Imports of automotive products (in million euros) 179 R&D expenditure in the German automotive industry 180 Passenger traffic 2005 180 Goods traffic 2005 180 The ten major car manufacturing countries 2005 181 Auto BUSINESS BACKDROP

Auto 12 Verband der Automobilindustrie BUSINESS BACKDROP

On the Road to New Sustainability

Global industry – global The automotive industry is respond- challenges ing to these challenges. It is coming up The automotive industry is Ger- with sustainable solutions and convert- many’s key industry. It is the research ing them into reality. Time and time engine and the manufacturer of high- again, it is the automotive industry that tech products that are much sought- sets the pace both for technological and after all over the world. Its exports are for economic progress. a major contributor to Germany’s trade surplus. In recent years, the industry has Under the motto “on the road to new systematically opened up new markets sustainability”, the German automotive and expanded its foreign production industry is striving to further improve facilities, while at the same time secur- its production capabilities and the ing employment at home in Germany. usefulness of its products, while at the same time remaining responsive to Nevertheless, the challenges have steadily increasing demands for effi- not stopped – on the contrary. Globali- ciency, resource conservation, safety sation continues apace as international and comfort. competition becomes tougher and new players enter the arena. Foreign manu- Sustainability as a goal facturers are establishing new produc- Thanks to the billions of euros that tion capacities worldwide, including have been invested in research and nearby countries in Central and Eastern development, the automotive industry Europe, and the German manufac- has achieved much in recent years. turing base is facing greater interna- Fuel consumption and exhaust emis- tional competitive pressures than ever sions have been reduced still further, before. a promising start has been made on the development of alternative fuels At the same time, safety regula- and drive systems, road safety has tions are becoming more rigorous and been considerably enhanced by the technical and environmental standards application of the latest technology, more exacting, with particular priority and quality levels have been pushed being given to emission reduction and even higher. The German automotive fuel consumption reduction. It is also industry has established milestones becoming clearer that, because our oil not only for vehicle performance, reserves are finite, new technologies are but also for resource-efficient produc- needed to secure the world’s mobility tion and the recycling of end-of-life for the future. vehicles. Annual Report 2006 13

If sustainability is to be supported, upon what we have achieved so far. The motive industry has been extremely however, there must be an appropri- German automotive industry therefore successful in developing environmen- ate political and economic framework actively embraces both high tech and tally friendly production techniques for in place. And if Germany is to maintain premium quality. Indeed, high quality is vehicles and parts. Indeed, German its position as a base for research and a common goal of German manufactur- car manufacturers are unique in the production in the medium to long term, ers and suppliers, and is considered a world in having had their production companies must enjoy conditions that major issue by the whole of the automo- plants certified in accordance with the help them stay competitive. A European tive industry. Numerous national and EU’s ecological audit. These plants policy aimed directly at supporting the international standards encourage trou- have managed to reduce the amount of competitiveness of our industry can cer- ble-free networking. “Mature products” waste material they create to just a few tainly assist here. The CARS 21 initiative and “stable processes” are prerequi- kilograms per vehicle built. No other car offers a suitable framework, and it is sites for ensuring that quality within production plants reuse their water as important that this initiative is imple- the automotive supply chain remains often, or are able to continually reduce mented. Equally important is a positive high. Continued high quality will secure the amounts of waste water and waste international environment that encour- the continued success of the German gases they produce. This positive devel- ages the free exchange of goods and automotive industry in its battle against opment continues. dismantles trade barriers. international competition. The automotive industry takes a Technology for sustainable The German automotive industry holistic view of sustainability that mobility has set itself the goal of ensuring that includes the end of the vehicle’s life, Producing safe and reliable vehicles its customers enjoy mobility in the long with the result that today’s car is is one of the German automotive indus- term. In view of the growing scarcity of designed to be recycled virtually in its try’s core competencies. The downward resources – of fossil energy in particular entirety. Because the German automo- trend in accident statistics demonstrates – tomorrow’s mobility must be based tive industry was the first in the world the successes that have been achieved on a different concept from the one we to tackle this issue, it now leads the in this field. And development goes on. employ today. The German automotive world in recycling technology. As passive safety has reached a level industry has therefore developed a time- that is difficult to improve upon, we ly concept for continued mobility. It is Sustainability is an important issue are now looking towards active safety based on increasing, over the short and for government transport policies technologies to deliver major advances. medium term, the efficiency of existing – particularly in view of globalisation The merger of accident avoidance and drive systems, which use a wide range and the expanding internal European accident minimisation systems into a of technologies, alternative fuels and market. The transport network – and single system – known as the “integrat- engines. The long-term objective is an the road network in particular – must ed approach to vehicle safety” – offers engine powered by hydrogen obtained keep pace with these developments. good prospects for further progress. from regenerative sources. However, the fact that one fifth of Ger- The goal is to get close to our “vision many’s autobahn network is now in of accident-free driving“ as quickly as In addition to its multifaceted alter- need of repair, and one quarter regu- possible. native fuel strategy, the automotive larly experiences serious traffic jams, industry is harnessing other methods gives a clear signal that this is not hap- The basic requirement for long-term in support of its endeavours to achieve pening. Every year, around 12 billion success here is to continue to improve new sustainability. The German auto- litres of fuel are wasted in traffic jams 14 Verband der Automobilindustrie BUSINESS BACKDROP

in Germany. Reducing this wastage help, together with communications nese vehicle manufacturers. The goal is will require government intervention, between vehicles and the infrastruc- to support Chinese brands (“proprietary but the automotive industry can also ture. Telematics can provide a solution brands”) in such a way that vehicles play a part in helping to prevent the to more efficient use of the roads, developed in China will account for a build-up of these traffic jams. In the which benefits road users and the minimum of 60 percent of the cars sold future, traffic control systems could environment alike. in China by 2010. In addition, ambitious vehicle fuel economy targets have been set and introduced – with far-reaching Challenges and Opportunities for the consequences – with legislative and fiscal backing. German Automotive Industry The German automotive industry supports China’s ambitious goals for Global success through the “Auto Shanghai” in April 2005 and improving the efficiency of its transport global representation the “Auto Expo” in New Delhi in early sector and actively supports the crea- The German automotive industry 2006, which was included for the first tion of a market for efficient and clean was one of the first to appreciate the time in the VDA international trade fair engines in the future. This includes the opportunities of globalisation and to programme, registered a marked rise in development of “Clean Diesel”. In spring take steps to ensure that it had a direct the participation of German suppliers. 2006, the VDA held a workshop on this presence in the markets of the world. issue in Beijing that focused on the This applied not only to vehicle manu- These two shows proved just how diesel’s potential to meet market needs facturers, who now have a presence in important the growth markets of the in China. over 140 geographical locations; it also world have become for the German applied to OEM supply companies, who automotive industry. Their markets offer The Chinese car market is growing accompanied the vehicle makers on clear sales potential for the future, and at an impressive rate, and with its entry their global expansion, extending their this makes local commitment even more into the WTO, China now recognises well-proven supply chains internation- important now. the rules of global trading. The fact that ally and at the same time winning new China’s discrimination against imported customers in the USA and in Asia. With China on the way to parts in favour of domestically pro- more than 1,900 manufacturing compa- becoming a nation of car duced parts was picked up by the EU, nies and licensees committed to doing drivers the USA and Japan as being a violation business globally, the sector’s activities China – a country whose burgeon- of the conditions of entry to the WTO are by no means limited to the high ing car market was kick-started by shows that it will not always be possible profile global players of the German German vehicle manufacturers – has for China to avoid conflict as it tries to supply industry. Medium-size automo- clearly decided to make its automo- comply with international standards. It tive companies are actively embracing tive technology expertise available for is the view of the VDA that this WTO the opportunities afforded by a global its own brands and, in future, also for conflict should be resolved quickly and presence. This was clearly demonstrated export to third countries, by creating to everyone’s satisfaction as a matter of by the substantially increased participa- the political framework for making this the highest priority. The aim should be tion of German supply companies at possible. Proposals in the 11th five-year to integrate China into the worldwide international motor shows in 2005. Both plan contain ambitious targets for Chi- network of manufacturers by persuading Annual Report 2006 15

China to renounce customs tariff pres- Automotive products trade balance, Germany/India sures in favour of local content, because In thousand euros the development of a diverse car mar- Exports to India Imports from India ket, in which models can be marketed 150,000 150,000 efficiently in smaller quantities, benefits long term from a general liberalisation 100,000 100,000 of imports. 50,000 50,000 To ensure the involvement of the German automotive manufacturers and 0 0 2002 2003 2004 2005 2002 2003 2004 2005 component suppliers, it will also be necessary to allow them maximum latitude Trade balance in the organisation of their supply chain. 50,000 There should also be much greater free- Automotive parts and accessories dom for foreign investors to participate. 0 Engines and engine components Future policies for the automotive sec- Passenger cars, new tor should be structured in such a way -50,000 that the same competitive conditions -100,000 exist for all manufacturers, irrespective 2002 2003 2004 2005 Source: VDA of the level of foreign participation. This includes structuring the legal and fiscal framework so that the same incentives exist in all market segments and so that as a centre for the production of small Conversely, German suppliers in India there is no unjustified discrimination cars for the global market. In addition have secured themselves an excellent against any manufacturer, vehicle class to the Korean and Japanese models position, which allows them to reap or technology arising from, for example, produced there, there are also Indian the rewards of partnerships with Ger- measures to protect against climate companies trying to establish them- man companies working in India such change. selves. Even today, considerably more as Skoda, DaimlerChrysler, BMW and vehicles (10,000) are being imported MAN, as well as with Indian customers. India: growth and a focus from India to Germany than the other on innovation way around (2,000). Germany’s trade The VDA encourages its members’ Alongside China, India is another balance with India in automotive prod- involvement in India by providing sup- up-and-coming competitor in the global ucts is negative, not least because India port such as information events, an automotive market. What characterises has been increasingly successful as in-depth study of the market, a confer- India, apart from its rapidly expanding a manufacturing base for OEM com- ence to be held in September 2006 in domestic market, is the combination of ponents. New Delhi on the subject of alternative competitive production costs and a res- engines and fuels, and dialogue with olute focus on innovation, particularly in The hard work undertaken in 2005 our Indian contacts on the reduction the development of electronic compo- by Indian companies in many countries, of the considerable non-tariff trade nents for the automotive industry. India including Germany, is evidence of their barriers that currently exist (vehicle is also endeavouring to position itself successful approach to global markets. homologation). 16 Verband der Automobilindustrie BUSINESS BACKDROP

Russia: oil revenues and for car production. In 2005, the figure of man manufacturers and component WTO membership boost 500,000 new registrations was exceeded suppliers. Over the past 5 years, the the market for the first time ever. German manu- German automotive industry has more The income from the sale of oil facturers who produce locally are well than doubled its local production to has improved the standard of living in placed to benefit from this growth. At over 200,000 cars, while at the same Russia, and German automotive manu- the joint South African Business Day time increasing its exports from Ger- facturers have been quick to take held on March 13, 2006 in Frankfurt, many to South Africa by 180 percent advantage of this. They have doubled and organised by the Frankfurt Cham- to 56,000 units. This has also strength- their exports in the past two years. Also, ber of Industry and Commerce and the ened the position of production plants numerous companies have been looking VDA, a large number of component in Germany. into the possibility of setting up locally. suppliers showed interest in South The background conditions for invest- Africa’s prospects. German manufacturing ment should further improve in the near base: the stabilising future when Russia joins the WTO as it In view of the exceptional situation influence of the automotive is expected to do. The structure of the in South Africa, special standards apply. industry Russian motor vehicle industry will With about 45 million inhabitants, a car The increasing pressure on Germa- change over the next few years, for as density of 97 vehicles per 1,000 inhabit- ny’s car production capacities has been the market opens up and the standard ants, and rising per capita incomes, demonstrated by a recent spate of cor- of living improves, customer expecta- South Africa offers interesting long-term porate restructuring. However, a closer tions will rise. This will offer good oppor- opportunities. South Africa is a typical look at the facts and figures will help to tunities for German manufacturers and example of a win-win situation for Ger- put the matter into perspective. component suppliers. The VDA has already supported German-Russian economic relations by running several Employment in the German automotive industry events on the Russian car market. A Figures in percent. Index 1975 = 100 study produced by the management- 150 consulting firm Roland Berger and com- Automotive industry missioned by the VDA and the Commit- 140 tee for the East-German Economy was 130 presented at a conference held during 120 IAA Cars 2005. According to this study, the number of registered vehicles in 110 Russia will rise to 2.3 million by 2014. 100 This is the equivalent of six percent 90 growth per annum, which will primarily 80 benefit international manufacturers. Manufacturing sector 70

South Africa: a typical 60 9 1 5 7 1 5 7 3 win-win situation 75 77 7 9 9 9 98 983 98 98 989 99 993 99 99 999 At 26 percent, South Africa enjoys 1 1 1 1 1 1 1 1 1 1 1 1 1 2001 200 2005 Source: Destatis,VDA one of the world’s highest growth rates Annual Report 2006 17

The industry currently has 770,000 comfort features such as air condition- ■ Germany will only remain a manufac- employees. 100,000 new jobs have ing as standard and navigation systems. turing base for the automotive indus- been created in the last ten years alone This was crucial in allowing the German try if it remains a centre of innova- (+16 percent). For the sake of compari- automotive industry – including me- tion. In the German patent statistics, son, the manufacturing sectors as dium-size companies – to generate sales seven of the top ten companies a whole have lost 3 million jobs since revenues and to increase employment applying for patents are automotive the reunification. Even restricting the levels over recent years. companies or suppliers. 16 billion comparison to the ten years since 1995, euros are directed into automotive the figures are still 8 percent, and And the third success factor: more research and development – a third almost one million jobs. This proves that than any other industry, the automotive of the entire research and develop- there are alternatives to accepting job industry has secured jobs in Germany ment budget of the whole of industry. losses in industry and that it is worth- because of its success in the premium One in nine automotive jobs is pro- while fighting for jobs in Germany. It is market. Today, every second car provided by this innovative area. Manu- therefore incumbent upon us to analyse duced in Germany is a premium model. facturers and suppliers are some of the factors that have led to the success 10 years ago, it was just 37 percent. the largest industrial “customers” of of Germany as a production location, While production levels in the volume German universities. They provide and also to correct the many wide- market have remained static, they have massive support for education, as spread misconceptions. risen by 72 percent in the premium Germany could never survive as a sector. Sales in this vehicle class have centre of innovation without a regular Firstly, if there are 100,000 more in fact doubled. influx of highly qualified newcomers. automotive jobs today than in 1995, And here, regulations such as the it is not despite the fact that German Germany’s current position as export 35-hour week will never catch on. companies created 160,000 new jobs world champion is thanks in no small at well over 300 locations in Eastern part to the nearly 90 million euro export ■ This alone is not enough, however. Europe, but as a consequence of doing surplus that this industry generated Germany must also take the lead so. Today, 40 percent of European added in 2005. Without this success in world in converting innovation in efficient value comprises purchased materials markets, economic growth would have and highly flexible production plants and services from Central and Eastern been a modest 0.9 percent, or one third into new products. German plants Europe. Although some might consider lower. Here too, premium products cur- can only remain competitive in the this to be “hidden, imported competi- rently account for 50 percent of vehicles long term if their global manufactur- tiveness”, such materials and services and 60 percent of exports. Germany ing networks enjoy the benefits of make it possible for established produc- cannot afford to do without the contri- leadership. tion plants to deliver reasonable prices bution that these products make to the in the volume segment. economy. ■ And thirdly, Germany’s automotive industry cannot be successful with- Technology is the second important Strengths of the German out safeguarding its number-one success factor. German manufacturers automotive manufacturing structural success factor, which is the have benefited in all the world’s markets base combination of internationally active from having been the first to set trends This shows where the strengths vehicle manufacturers and large, and to champion new features, from of the German manufacturing base lie broad-based OEM suppliers strongly safety technology with ABS and ESP to today in this industry. anchored in the industrial Mittelstand. 18 Verband der Automobilindustrie BUSINESS BACKDROP

Challenges and answers and suppliers work together to ensure options for differentiating between pay The challenges for Germany as that new technology is considered to levels and has called for negotiations an automotive manufacturing base be reliable and a genuine improvement on improving flexibility. However, we are greater today than they have ever as soon as it goes into production. The would stress that too high a price – a been. Over the past few years, sales VDA offers a host of initiatives to help, three-percent wage increase – was of Korean-built cars have increased in including, for example, initiatives for paid for these flexibility options and many countries, including Germany. So optimally integrating the quality man- that the agreement does nothing to far, these sales have not been made at agement interfaces at the various stages increase employment levels in the auto- the expense of the German brands, but of the supply chain, or at a technical motive industry. Positive signals at the rather at the expense of the European level, for coordinating communications same time from the commercial vehicle competition. However, Korean cars manu- between the different electronic systems industry, on the other hand, show that factured in Eastern Europe or Japanese in the car. success in international markets and vehicles built on our continent with parts increased market share for German from Eastern European suppliers are a Third, neither a pole position as an products do offer real opportunities much bigger challenge for the German innovator nor an excellent quality perfor increased employment at home in motor industry than imports from Asia. A formance can guarantee success unless Germany. German formula for success – a broad- costs are kept in check. If today’s vehi- based presence in the low-cost coun- cle manufacturers are paying wages and Private demand still under tries of the extended EU – is currently salaries that are well above the average pressure in Germany being adopted by the competition. for industry as a whole in Germany, and Economic growth alone is not if, at the same time, the average number enough to clear the employment thresh- If this challenge is to be met suc- of working hours in the industry is as far old in Germany. Germany’s economic cessfully, the automotive manufacturing behind the German average as Germa- growth continues to rely to a large base in Germany needs a revised busi- ny’s are behind the UK’s – not to men- degree on continued export growth. ness model capable of functioning over tion the new EU countries or the Asian With a trade surplus of almost 90 bil- the long term. It must be based on the countries – something has to happen. lion euros in 2005, the motor industry following three observations. was once again the most important Pressures on collective driver of industrial growth, making an First, leadership in innovation. This wage agreements essential contribution towards stabilis- means setting the standards for the rate With this background in mind, the ing the national economy via its direct of innovation in the automotive industry negotiating parties have a key role to role as an employment provider. The of the future, whether related to engi- play in ensuring the future viability of strong domestic demand for commercial neering performance, safety, comfort Germany as an automotive manufac- vehicles reflects the improved situation or the environment. It includes making turing base. Following the 2004 wage of industrial customers, the dynamic sure that technological innovations meet agreement and the so-called “Pforzheim investment climate and the way in a real customer need. No manufacturer escape clauses”, which introduced which replacement demand is driving can justify a premium price for options an urgent and overdue option allow- the economy. that are simply “nice to have”. ing companies to deviate from agreed union wage rates, we welcome the fact Nevertheless, the car market in Second, quality leadership is that the 2006 agreement for the Metal Germany is still marked by continued essential. It is vital that manufacturers and Electrical industry provides further uncertainty on the part of the private Annual Report 2006 19

buyer. In 2005, another slight increase manufacturing base, a dialogue about It is not critical to the automotive in the savings rate accompanied by a fundamental tax reform, particularly industry whether a dual income tax sys- marginal increase in disposable income with regard to personal income tax and tem is introduced or whether the current gave little room for budgetary manoeu- corporation tax, is necessary. And the synthetic tax system is improved. What vre. The planned 3-percent increase in results of these discussions must be counts is that the tax reform eases the value added tax from January 1, 2007, acted upon. There should be a call for burden on business. other expected tax increases, and the its speedy implementation as a properly increased burden on the private citizen recognised step in the reform. Another tax issue that will affect and on companies from the social secu- the automotive industry greatly is the rity and health system (health insurance A fundamental tax reform worthy planned increase in the rate of value contributions, healthcare surcharge) of its name must solve the questions added tax from 16 to 19 percent, which are all having a destabilising effect on of simplifying the law of taxation and, is expected to apply from January 1, demand. more importantly, effectively reduce the 2007. For an industry with a very high tax burden, which means not only the share of the consumer goods market, In the business market, there was rates of taxation but also the assess- this measure, even if it appears political- talk about limiting the applicability of ment basis. ly necessary as a means of raising taxes, the so-called “1-percent rule” to vehi- is hard to come to terms with. As well cles that are used for business more The expansion of the EU to the east as the normal replacement purchases in than 50 percent of the time, and this has requires that German business be set the private sector, many people planning ruffled feathers unnecessarily. As an up with an internationally competitive to purchase a vehicle during 2007 will alternative to this measure, which was taxation infrastructure as a prerequi- bring their purchase forward into the proposed as part of the coalition agree- site for growth and employment. It is current year. For the automotive indus- ment, there was a discussion about reasonable to assume that economic try, this production peak will be unwel- increasing the 1-percent limit to 1.2 per- growth will occur if the government come, as the extra vehicles will have to cent. Despite all of this, it has remained undertakes a thorough tax reform, while be produced in expensive special shifts. possible to avoid adopting this less at the same time making a commitment The concern is also that there will be a acceptable tax situation, which would to the issue of “subsidy reduction”. The drop in demand in 2007, the following also include vehicles used by employ- result will be a rise rather than a fall year. The impact on car sales is predict- ees. What matters in the implementation in the state’s taxation income despite able, as it occurred the last time value of this change to the law is achieving an lower tax rates and without having to added tax was increased. implementation with as little red tape as resort to any other measures to finance possible and focusing on the relevant the tax cuts. So far, the economic climate in 2006 user groups. has provided us with a most satisfac- The proposals of the Stiftung Markt- tory picture, which has led to sources of Fiscal policy: easing the wirtschaft economic policy think tank tax revenue delivering more abundantly burden on businesses offer a way around the first hurdle of a than had been expected. Against this A key part of the coalition agree- fundamental reform. With regard to the background, the automotive industry ment dated November 11, 2005 is the ambitious schedule of the business tax asks for value added tax to be increased implementation of a major reform of reforms, it ist now urgent that the pre- only to the extent that it compensates for business taxation in 2008. However, liminary work be completed during the the reduction in incidental labour costs. in the interests of securing Germany’s course of 2006. There should be no further increases. 20 Verband der Automobilindustrie BUSINESS BACKDROP

The reintroduction of declining which are linked to developments in the the additional costs of raw materi- balance depreciation at 30 percent crude oil markets. als from suppliers if price increases on January 1, 2007 does not have the affected important raw materials and support of the industry. In our experi- Here, the VDA wishes to see that if the increases were presented in a ence, investment cycles are rarely the basic principles remain in place that transparent form. Mutual transparency influenced by time-limited measures. were developed during the course of and openness on both sides are indis- Here, too, it is self-evident that such the steel price discussion in 2004/2005 pensable for preventing breakdowns measures will influence the behaviour and also agreed for plastics. Here, the within the supply chain as a result of of investors and that money will be vehicle manufacturers declared their production stoppages or curtailed spent that would have been better willingness to accept a proportion of programmes. kept and used later to reduce company taxation.

The financial burden on the Improving Competitiveness Worldwide consumer from high fuel prices Rising fuel prices have caused The competitiveness of areas of climatic protection and vehicle 7 billion euros to be diverted from other the European automotive security. The core message of the report consumer products to the petrol pump industry – CARS 21 is to harness the existing potential for (relative to the consumption level and The “CARS 21” initiative was con- emission reduction on the vehicle, par- prices of 2004). In the first quarter of cluded at the beginning of 2006, having ticularly by using those methods that 2006, this loss of purchasing power rose been started one year earlier by Com- promise worthwhile results at the low- by a further 2 billion euros. mission Vice President Verheugen in est cost (see Chapter “Environment and order to improve the competitiveness Technology”). In climate technology this Risk factor: cost of raw of the European automotive industry. would mean, for example, using more materials The Commission, as the representative regeneratively created fuels. Another At the beginning of 2005, prices for of the member states of the European device in such an integrated climate steel products reached their highest Parliament, the automotive industry and protection strategy is the use of fiscal point after the rally in prices in 2004. In civilian interest groups, has identified policy, particularly CO2, as a component the months that followed, prices for a the most important challenges for the in vehicle taxation. CARS 21 provided whole series of automotive raw materi- motor industry and prepared a schedule unequivocal support for the Commission als settled down. The fact that there of EU regulatory measures over the next draft directive on the same issue. have been renewed price increases in few years in the form of a “road map”. recent months shows that there is no Comprehensive policies have been CO2-based car tax: no “all clear” on the raw materials front. agreed to improve legislation, especially nation going it alone This is certainly the case for non-ferrous with regard to assessing the ramifica- The VDA, just like the European metals, where the explosion in prices tions of new laws and regulations on manufacturers’ association ACEA, is for aluminium, copper and zinc has led the competitiveness of industry. endeavouring to define a non-discrimi- to price increases straining the supply natory, i. e. linearly progressive, vehicle chain. There is also considerable pres- Particularly important is the agree- tax that includes a reference to CO2. As sure on prices for plastics products, ment on an “integrated approach” in the far as the German automotive industry Annual Report 2006 21

is concerned, it must follow the princi- EU Civil Code: preventing to be present in the German Civil Code ple that every additional gram of CO2 over-regulation and the German Commercial Code. The emitted attracts the same additional The EU Commission intends to cre- EU’s previous legislation practice of tax burden. This forms the basis for the ate the framework for a coherent Euro- always taking the highest level of pro- discussions that the VDA will be holding pean law of contract. The Commission tection and the strictest prohibitions as with the Federal Government about the is seeking to improve the quality of the a starting point should not be continued implementation of the coalition agree- contractual law field of community law here. ment, which retains the introduction of in order to make cross-border business a CO2 component in addition to pollut- easier and so support the internal mar- In the field of consumer protection, ant criteria. ket. In so doing, the Commission views a reasonable balance must be struck a Common Frame of Reference (CFR) between the need to protect the con- With the establishment of the prin- as an important step towards improving sumer on the one hand and the eco- ciples of consistency, linearity and free- the community’s law of contract. The nomic interests of the company on the dom from discrimination, we also ensure CFR should not describe any binding other. The tendency of new EU regula- that the current trend towards further European civil code of law, but should tions to unilaterally increase consumer fragmentation of the internal market can be a manual of the best solutions for protection is contributing towards an be stopped. As the latest fiscal initia- the European law of contract that the unreasonable strain on business. Basic tives from the Netherlands, Portugal and Commission is able to draw upon for requirements are already met by EU France show, there is a considerable new EU directives or for revising exist- legislation. There is no reason to expand risk that different systems in different ing directives. consumer protection provisions to con- EU states with different tax assessment tracts between companies as happened bases, tax scales and tax rates could An EU civil code project can only when the consumer goods directive was eventually lead to further fragmentation make sense for the automotive industry implemented in Germany. of the EU car market. if the Commission is committed to the basic principle of freedom of contract. International commercial In particular, the proposal presented This applies in all European legal sys- policy: promoting the at the end of 2005 by the French gov- tems and has ultimately encouraged opening of markets ernment for a CO2-based tax would the keen cross-border trade that exists With CARS 21, the European Com- discriminate against German brands today within the EU. Accordingly, the mission and member states, as mem- and in favour of the local competition. legal regulations to be created must bers of the WTO, have accepted their The sliding tax scale would produce be largely alterable subject to mutual responsibilities for competitive condi- massive distortions. Even a slight agreement, i. e. the parties to the con- tions in world trade. The German auto- deterioration in CO2 emissions, such tract must also be able to agree upon motive industry has a good deal at risk as results from choosing a different something else. Individual obligatory here. In theory, the current world trade transmission, body shape or equipment regulations from national legal systems round offers the opportunity of an ambi- specification, could – with the same of the member states must be coor- tious, globally applicable tariff reduction engine – lead to additional costs of dinated. A clear distinction must be formula that could ease market entry for several hundred euros per annum. The drawn on the matter of which regula- a large number of threshold countries VDA has therefore firmly rejected this tions should apply strictly to consumer important to the automotive industry arrangement and campaigned for Euro- law and which should apply to busi- ( India, Thailand, Malaysia, Indonesia, pean harmonisation. ness. This basic separation continues etc.). 22 Verband der Automobilindustrie BUSINESS BACKDROP

However, this goal is at risk as a Customs duties in Asian threshold countries result of concessions made by the Figures in percent. Customs duty rates (in part, range of duties) industrialised countries at the ministerial conferences in Cancun and Hong Kong. 100 Cars Commercial vehicles Buses Parts On the one hand, the developing countries should be given the opportunity 80 to remove some of their customs lines Tax on 60 import from a reduction already carried out in price + duty accordance with the general formula for 40 customs reduction; on the other hand, the developing countries have been per- Duty 20 mitted a less effective customs reduction coefficient than the industrialised 0 countries. Indonesia Malaysia Philippines Thailand India

Source: VDA Against this background, the VDA has petitioned both the Federal Gov- ernment and the Commission quite vigorously for a genuine improve- agrarian policy – to allow concessions effort to selectively open markets in Asia ment in market access, especially in for industrial goods that would place for their automotive manufacturers. This the important growth markets in Asia. key export industries at a clear competi- development is a clear exhortation – par- From the automotive industry’s point of tive disadvantage. ticularly if the world trade round fails – to view, it would be preferable to end the begin bilateral initiatives from the Euro- world trade round without reaching any This concern applies particularly to pean side in order to reduce the present result other than – perhaps to support the Japanese, who are currently using high customs barriers for European vehi- the protection mechanisms of the EU’s a host of bilateral trade initiatives in an cle manufacturers and their suppliers. Auto GLOBAL MARKETS

Auto 24 Verband der Automobilindustrie GLOBAL MARKETS

The Economic Situation in the Global Automotive Industry

Worldwide demand for Total sales of motor vehicles in the motor vehicles rose again regions under review rose by 3 percent in 2005 in 2005, to 61 million vehicles. The There was a further positive trend in demand for passenger cars (including the demand for motor vehicles all over light trucks in America) also rose by the world in 2005. The mature markets 3 percent, to 51.5 million units. Sales in the USA, Western Europe and Japan of commercial vehicles increased by recorded approximately the same sales 6 percent to 9.5 million units. volumes as in the previous year. Recov- ery continued in Mercosur countries. Asia and Eastern Europe The dynamic development on Asian increase their share of markets was maintained, and there was worldwide motor-vehicle again an increase in sales in Central production and Eastern Europe, with the exception Altogether, 64.9 million motor vehi- of the new EU member states. cles were produced last year through-

World automobile production in 2005 Percentage shares (previous year in brackets) Other countries India 11.1 2.5 (10.6) EU-15 (2.4) 25.5 Japan (26.9) 16.7 (16.7)

China 8.1 (7.3) New EU countries Mercosur 2.6 4.3 Eastern (2.4) (3.9) Europe Nafta 4.0 25.2 (4.0) (25.8) Source: VDA statistics Annual Report 2006 25

out the world, exceeding the previous Sales of light vehicles in the USA in 2005 year’s total by 3 percent. Worldwide passenger-car production (including Units +/- % Share Share light trucks in America) went up by 05/04 2005 2004 3 percent to 54.6 million units, and Chrysler Corp. 2,304,833 4.5 13.6 13.1 the total number of commercial vehi- Ford 3,106,874 -5.0 18.3 19.4 cles produced during the year rose by GM 4,456,809 -4.3 26.3 27.6 7 percent to 10.3 million units. Big Three 9,868,516 -2.6 58.2 60.1 Asian Brands 6,208,696 6.1 36.6 34.7 BMW 307,020 3.7 1.8 1.8 Motor-vehicle production in the Mercedes 224,083 1.1 1.3 1.3 NAFTA region totalled 16.3 million units, Porsche 31,933 1.5 0.2 0.2 1 percent above the previous year’s Audi 83,066 6.6 0.5 0.5 figure. North America accounted for VW 224,195 -12.5 1.3 1.5 25.2 percent of worldwide motor-vehicle VW in total 307,261 -8.0 1.8 2.0 German Brands 870,297 -1.5 5.1 5.2 production. In the group of fifteen existing European Union countries (EU-15), Total 16,947,509 0.5 100.0 100.0 production dropped by 2 percent to Source: Ward’s Communications 16.5 million units, representing 25.5 percent of worldwide motor-vehicle production. The new EU member states increased their production by 16 percent with strong demand for smaller vehicles (class 8), sales were 24 percent higher to 1.7 million vehicles. Production in consuming less fuel. than in the previous year, at 252,800 Eastern Europe rose by 4 percent to units. 2.6 million vehicles. The Asian countries Sales of light trucks accounted for were able to increase their production 54.8 percent of total light vehicle sales, General Motors and Ford by 8 percent to 24 million vehicles. but this was 0.7 of a percentage point lose market share – lower than in the previous year. Sales Chrysler’s sales increase USA: high fuel prices dropped noticeably in the large-engined The “Big Three” from Detroit (GM, increase passenger-car sport utility vehicle (SUV) market seg- Ford, Chrysler) together obtained a demand – continued ment in particular, whereas vans and 58.2 percent share of the market in positive trend in truck sales pickup trucks more or less maintained 2005, after reaching 60.1 percent a year In the USA, more than 16.9 million their position. The only increase was in previously. GM and Ford lost market light vehicles were sold in 2005, 0.5 per- the smaller ‘cross utility vehicle’ seg- share, the joint figure dropping below cent more than in the previous year. ment. 45 percent, 2 percentage points below Whereas light truck sales dropped the previous year’s result. Chrysler, on by 1 percent to 9.3 million units, the Sales of medium-weight and heavy the other hand, strengthened its posi- demand for passenger cars rose for trucks rose significantly again in the tion and boosted its sales by 5 percent. the first time in four years, by 2 percent USA in 2005, by 15 percent to 496,600 During the summer months, these US to 7.6 million units. Fuel prices rose sig- units. In the medium-weight truck cat- manufacturers offered cars to all poten- nificantly during the year, which led to a egory (classes 4 – 7), sales went up by tial customers at employee discount change in the US consumer’s behaviour, 7 percent; in the heavy truck category rates, which led initially to a distinct 26 Verband der Automobilindustrie GLOBAL MARKETS

improvement in sales volume. However, Sales by Korean manufacturers also German manufacturers sold 445,000 the campaign proved to be short-lived went up by 6 percent, to almost 731,000 light vehicles, 8 percent more than a in its effect, resulting in a rapid reversal vehicles. The Asian manufacturers’ year previously. of this temporary sales trend. overall market share was 36.6 percent, about two percentage points higher In Brazil, Flex Fuel vehicles are in After August, GM was unable to than a year before. By the end of the increasing demand. 867,800 vehicles achieve any further increase in sales, year, it had proved possible to reduce with engines capable of running on and Ford’s sales also declined contin- stocks of light vehicles in the USA any combination of ethanol or petrol ually from September to the end of the slightly, to 3.6 million units, 8 percent (gasoline) were sold in 2005, in other year. German manufacturers, on the below the figure at the end of the words every second new purchase in other hand, boosted their sales on the previous year. Brazil was a “Flex Car” – and the trend US market strongly toward the end of continues to rise. Total motor-vehicle the year, reaching a market share of Recovery continues in the production in Brazil and Argentina rose 6.6 percent in December, with the figure Mercosur area – Flex Fuel to 2.76 million units and thus exceeded for passenger-car sales as high as gains ground in Brazil the previous year’s figure by 12 percent. 12.9 percent. Their total sales in 2005 In the Mercosur countries Brazil and Production of medium-weight and heavy were more than 870,000 vehicles, rep- Argentina, sales of new vehicles contin- commercial vehicles, including buses resenting a slight drop of 1.5 percent. ued to recover in 2005. In Brazil, sales and coaches, went up by 13 percent Whereas sales of imported German of light vehicles went up by 10 percent compared with the previous year, and vehicles dropped by 5 percent, with to 1.6 million units; in Argentina 377,200 that of light vehicles by 12 percent the currency exchange rate as one were sold, an increase of 28 percent. to 2.6 million units. Brazil boosted its of the reasons for this, sales of Ger- In the two countries taken together, exports of motor vehicles by 26 percent man vehicles from the ‘transplants’ in North America went up by 10 percent. Increased sales were reported by Audi Light vehicle sales in Brazil in 2005 by fuel type (+7 percent), BMW (+4 percent), Mer- Percentage market shares cedes-Benz (+1 percent) and Porsche 100 (+2 percent). The changeover associat- Gasoline (petrol) Ethanol 90 ed with the introduction of new versions Flex Fuel Diesel of its most important models caused 80 VW to suffer a drop in sales. 70 60 The German manufacturers’ share of 50 the market remained stable at slightly 40 more than 5 percent. Asian manufac- 30 turers made the most progress on the 20 US market in 2005: those from Japan increased their sales by 6 percent to 10 almost 5.5 million vehicles. Toyota sold 0 Jan. 2004 July 2004 Jan. 2005 July 2005 10 percent more light vehicles and Source: ANFAVEA reported sales of 2.3 million units. Annual Report 2006 27

to 817,600 units, and Argentina by lion units. In the small-car class (660 to new total being 5.3 million vehicles. 24 percent to 181,600 units. 2,000 cc), however, sales dropped by Sales of passenger cars went up by 3 percent to 2.1 million units. 25 percent to more than 3.1 million Japan: domestic demand units, and almost 2.2 million commercial stagnates, but increased Passenger-car imports in 2005 vehicles were sold, an increase of 6 per- exports sustain production amounted to 264,700 units, equivalent cent. Government restrictions on loans levels to a 5.6 percent share of total sales. led to a drop in passenger car sales The demand for motor vehicles in German manufacturers dominated the at the beginning of the year, to which Japan remained constant in 2005 at a import market, with a share of 68 per- economy measures related to public total volume of just under 5.6 million cent. Thanks to a 2 percent increase in spending and the marked increase in vehicles. Sales of passenger cars, at exports, Japan’s production of motor the price of oil also contributed. 45.75 million units, just failed to equal vehicles rose by 3 percent, to 10.8 mil- the previous year’s total, but 2 percent lion units. As the year progressed, however, more commercial vehicles (1.1 million) sales gained momentum, aided by a were sold. Sales of low-consumption Temporary slackening of further drop in passenger-car prices, an cars with engines up to 660 cc in the Chinese motor-vehicle increasing variety of models on the mar- displacement (‘minicars’) rose by market overcome ket and the continued dynamic develop- 3 percent to 1.4 million units; in the In China, the previous year’s volume ment of the Chinese economy. Added category above 2,000 cc (standard cars), of new motor-vehicle registrations was prosperity meant that more and more the increase was 6 percent to 1.3 mil- surpassed by 16 percent in 2005, the young Chinese were able to afford an

Chinese automobile industry production Million vehicles 0.99

Buses and coaches 0.95 1.20 Trucks 1.16 Passenger cars 1.12

1.06 1.23 3.12

0.83 0.70 2.51 0.50 1.10 0.44 0.46 0.41 0.40 2.02 0.80 0.73 0.76 0.66 0.66 0.72 0.69 1.09 0.51 0.60 0.70 0.33 0.39 0.49 0.56 19951996 19971998 1999 2000 2001 2002 2003 2004 2005 Sources: CAAM, CATARC 28 Verband der Automobilindustrie GLOBAL MARKETS

automobile for the first time. This trend thousand people. At least 80 percent of India had risen to twelfth place in the is accompanied by a change in demand all the motor vehicles sold in India are world’s motor-vehicle production rank- structure: private purchasers are now either motorcycles or motor tricycles, ings by 2005. the largest market group in the People’s with only 13 percent accounted for by Republic of China. passenger cars and 4 percent by com- India’s exports of motor vehicles mercial vehicles. In 2004, passenger car rose by 10 percent last year, to 210,000 As a consequence of higher fuel sales exceeded the one million mark units. German manufacturers with prices, smaller, compact models and for the first time, and last year a further production facilities on the Indian sub- those which potential buyers from the 7 percent increase to more than 1.1 mil- continent are Mercedes-Benz in Pune young middle class could afford gained lion units was recorded. and a member of the VW Group, namely ground last year on the Chinese market. Skoda, in Aurangabad. This year, BMW Domestic manufacturers were also suc- This positive trend on the car market has begun to build a factory in Madras, cessful in this segment, with low-priced is expected to persist in the foreseeable while VW is still looking for a suitable models for first-time buyers. This led future. Average economic growth has location. Other foreign manufacturers to the fight for market share becoming now reached 8 percent, so that the producing vehicles in India are General even more intense. With approximately rapidly expanding middle class in India Motors, Honda, Toyota, Ford, Fiat and 515,000 passenger cars sold, German is now in a position to buy new passen- Mitsubishi. manufacturers were obliged to accept ger cars. In the commercial vehicle a lower sales volume. area, 330,000 vehicles were sold in Strong dynamism main- 2005, 9 percent more than in the previ- tained on South East Asian The market leader in 2005 was ous year. In view of its geographical car markets – domestic again VW (16 percent), followed by GM position and its relatively low costs, demand recovers in South (10 percent), Honda and Hyundai (both India is gaining in importance all the Korea 7 percent). Passenger-car production in time as a production location: with an The satisfying development in most China went up by 24 percent in 2005, to output of at least 1.6 million vehicles, South East Asian ‘Tiger’ countries con- 3.1 million vehicles. 2.2 million commercial vehicles were built, a 4 percent increase. This total production of volume Motor-vehicle sales in India in 2005 of 5.3 million vehicles made China the Percentage shares Passenger cars fourth most important motor-vehicle 13 Commercial production location in the world, follow- vehicles ing Germany. 4 Motorised India: the motor-vehicle three-wheelers 4 market continues to gain impetus India’s motor-vehicle market has immense potential: with a population of more than one billion, it has the low- Motorcycles 79 est level of vehicle ownership in the Source: SIAM world – only seven passenger cars per Annual Report 2006 29

tinued last year, with strong growth ducing almost 3.7 million motor volume, new car sales dropped by rates for motor-vehicle sales in Malaysia vehicles. 26 percent to 235,500 units – the lowest (+15 percent), Indonesia (+13 percent), figure since 1991. Sales of new cars in Thailand (+12 percent), the Philippines In parallel with the rise in sales vol- Poland were once again influenced by (+10 percent) and Taiwan (+6 percent). ume, the Asian countries referred to a high level of used-car imports. In the above boosted their motor-vehicle pro- past two years, some 1.7 million used Passenger-car sales in South Korea duction in 2005 by 11 percent to more passenger cars were imported into made a good recovery: after the distinct than 6.3 million vehicles, and thus in- Poland, including about 870,000 in 2005. slackening of demand in 2003 and 2004, creased their share of total worldwide Approximately 80 percent of these cars sales climbed back by 7 percent in 2005 motor-vehicle output to 9.8 percent. Tak- were more than eight years old. to 949,000 vehicles. Domestic sales of ing Japan, China and India as the main passenger cars produced in South production countries into account, 37 per- Passenger-car sales fell by 3 percent Korea rose by 6 percent to 913,500 cent of world motor-vehicle production in Hungary, by 1 percent in Slovakia and units, and sales of imported passenger in 2005 came from the Asian region. by 4 percent in Slovenia. In the Czech cars went up by 33 percent to 35,500 Republic (+1 percent) and in the Baltic units. The importers’ market share rose Negative overall situation States (+25 percent), on the other hand, by 0.8 of a percentage point to 3.7 per- on the car markets of the an increase in sales was recorded. Ger- cent. 42 percent of the imported cars new EU countries man manufacturers sold nearly 329,000 came from German manufacturers. The car markets in the new EU passenger cars in the new EU countries Production of passenger cars in South member states (except for Malta and in 2005, and thus secured a 45.2 per- Korea went up by 8 percent compared Cyprus) exhibited a negative tendency cent market share. with the previous year, to almost 3.4 mil- in 2005. Total new passenger-car sales lion units; 73 percent of all passenger- of 727,300 units were 10 percent lower Despite the renewed drop in sales cars produced were exported. In 2005, than in the previous year. In Poland, the last year, the international motor-vehicle South Korea set a new record by pro- passenger-car market with the highest industry is still focusing its efforts on the new EU states, both as a production location and in view of the anticipated recovery in passenger-car demand. New motor-vehicle registrations on Asian markets Conditions are certainly favourable, Percentage changes, 2005/2004 since these countries’ economies continue to make satisfactory progress and Japan +/-0 the demand for new vehicles to replace South Korea 4.3 Taiwan 5.7 those reaching the end of their working India 7. 1 life is considerable. Philippines 10.2 Thailand 12.4 Stimulated by ongoing economic Indonesia 12.6 dynamism and the high level of trans- Malaysia 14.5 port movements between Western and China 16.1 Eastern Europe, the commercial-vehicle market in the new EU member countries Source: VDA statistics recorded an increase in sales volume 30 Verband der Automobilindustrie GLOBAL MARKETS

Production and sales in the new EU countries the same percentage, to 301,900 units. German brands accounted for a share 2003 2004 2005 Change of approximately 48 percent in total 05/04 in % Turkish passenger-car imports. New Car production commercial-vehicle registrations rose Czech Republic 436,297 442,812 599,472 35.4 by 10 percent to 324,500 units. – German manufactures 436,279 442,796 493,463 11.4 Slovakia 186,807 171,888 176,189 2.5 Motor-vehicle production volume – German manufactures 186,807 171,888 176,189 2.5 rose by 7 percent to 879,500 vehicles. Poland 307,015 516,152 527,020 2.1 – German manufactures 77,070 179,708 214,471 19.3 Of these, 453,700 were passenger cars, a Slovenia 118,172 131,646 138,393 5.1 2 percent increase; utilisation of available Hungary 122,399 118,606 148,533 25.2 capacity remained unchanged at 58 per- – German manufactures 33,953 23,605 12,307 -47.9 cent. Production of commercial vehicles New EU countries 1,170,690 1,381,104 1,589,607 15.1 went up by 13 percent, to 425,800 units. – German manufactures 734,109 817,997 896,430 9.7 Turkish passenger-car exports last year – Share in % 62.7 59.2 56.4 amounted to 319,800 units, 5 percent more than in the previous year. In addi- Registration of new cars tion, 233,000 commercial vehicles were Czech Republic 149,546 125,768 127,376 1.3 Slovakia 57,513 57,430 56,916 -0.9 exported, a 15 percent increase. Poland 353,635 318,093 235,521 -26.0 Slovenia 59,548 62,002 59,324 -4.3 Russia: foreign brands’ Hungary 208,426 207,055 201,601 -2.6 market shares continue to Baltic States 31,876 37,185 46,598 25.3 increase New EU countries 860,544 807,533 727,336 -10.0 In Russia, sales of passenger cars – German group-owned brands 369,000 373,400 328,700 -12.0 exceeded 1.5 million in 2005, a 10 per- – Share in % 42.9 46.2 45.2 cent increase. The domestic manufac- Source: VDA statistics turers, including Lada and GAZ, lost ground noticeably again last year. In contrast, passenger-car sales by foreign in 2005. Total commercial-vehicle sales vehicle sales were also below the previ- manufacturers went up by 49 percent of almost 149,000 units were 9 percent ous year’s level. to a total of 605,000 units, equivalent to above the previous year’s figure. a market share of nearly 40 percent. Turkey: passenger-car In the Czech Republic (+28 percent) sales take a breather Russian manufacturers faced stiffer and Slovakia (+36 percent) in particular, – production and exports competition not only from imports but sales were distinctly higher than in the both increase also from the fact that foreign manu- previous year, and increased sales vol- Following the boom years in 2003 facturing groups are to an increasing ume was also reported from the Baltic and 2004, sales of passenger cars took extent building their own production States. In Poland, however, new regis- a breather in Turkey last year: 438,600 facilities in Russia or building vehicles trations dropped by 3 percent, and in units were sold, a drop of 3 percent. there under licence. In 2005, German Hungary and Slovenia commercial- Sales of imported cars went down by manufacturers accounted for some Annual Report 2006 31

Turkey: passenger-car production and exports in the previous year: approximately 14.5 million units (-0.1 percent). Higher Vehicles x1000 fuel prices and persistently unsatis- 450 Production factory macro-economic development 400 Exports with a high level of unemployment 350 were the reasons why no better result could be achieved. Among the high- 300 volume markets, France (+3 percent), 250 Germany (+2 percent) and Spain 200 (+1 percent) registered gains, whereas 150 losses in volume occurred in Italy (-1 percent) and Great Britain (-5 per- 100 cent). 50 0 In Great Britain, passenger-car 19951996 19971998 1999 2000 2001 2002 2003 2004 2005 demand was depressed by sluggish Source: OSD economic development and consumers’ distinct unwillingness to purchase since midway through the year. Despite this Passenger-car sales in Russia negative trend, 2.4 million passenger Units x1000 cars were sold, so that the actual level of sales remained relatively high. In Domestic manufacturers Foreign manufacturers Spain, passenger-car registrations reached a record level for the second 406 980 605 918 year in succession, at more than 1.5 million units. Demand for company cars grew in particular, against a background of continuing vigorous economic growth 2004 2005 in Spain. Source: ASM-Holding German manufacturers expand their leading 17 percent of sales by foreign compa- but so far only 168 passenger cars per market position nies. The ongoing strong demand for 1000 of the population. Last year, German manufactur- new vehicles is due not least to the ers again succeeded in strengthening Russian public’s increased income in Western Europe: their leading position on the markets real terms and to the increased avail- passenger-car sales of Western Europe. Total sales by Ger- ability of credit purchase facilities. The in 2005 reach previous man manufacturing groups went up by Russian motor-vehicle market undoubt- year’s level 2 percent, giving them a market share edly has scope for further expansion: In Western Europe, almost as many of almost 47 percent, an increase of one the country has 145 millions inhabitants, passenger cars were sold in 2005 as percentage point. 32 Verband der Automobilindustrie GLOBAL MARKETS

New passenger-car registrations on French manufacturers were obliged Central and Eastern European markets to record a 4 percent drop in sales; their market share went down by 0.9 of a Percentage changes, 2005/2004 48.5 percentage point to 23.4 percent. Sales by Italian manufacturers fell distinctly, by 34.2 9 percent, to approximately 957,000 vehi- 25.3 cles, equivalent to a 6.6 percent market share. The winners were once again 9.9 the Asian manufacturers: the Japanese 1.3 increased their share from 13.2 to 13.5 -0.9 -4.3 -2.7 -2.8 percent and South Korean companies, -10.0 which sold a total of 551,800 passenger cars (+17 percent), were able to -26.0 increase their market share by 0.5 of a s s ia ary ublic g aria ss percentage point. Their total represent- p g Poland Turkey Ru Slovakia Slovenia Hun Romania Bul ed 3.8 percent of total new registrations Baltic State in Western Europe. Czech Re New EU countrie Source: VDA statistics Continued rise in the proportion of diesel Registration of new cars and market shares passenger cars in in Western Europe Western Europe In 2005, as in previous years, an 2002 2003 2004 2005 increasing number of new passenger- Manufacturer Units in % Units in % Units in % Units in % car purchasers in Western Europe chose German group-owned a diesel. This development was encour- brands 6,683,944 46.4 6,543,565 46.0 6,662,154 45.9 6,802,813 46.9 aged by the rise in fuel prices and the French availability of a big selection of attractive brands 3,704,987 25.7 3,611,243 25.4 3,523,506 24.3 3,390,464 23.4 diesel-engined models. The proportion Japanese of diesels in new passenger-car regis- brands 1,644,768 11.4 1,799,554 12.7 1,912,391 13.2 1,959,385 13.5 trations in Western Europe went up by Italian 1.2 percentage points to 49.5 percent. brands 1,177,183 8.2 1,056,113 7.4 1,050,050 7.2 957,293 6.6 Korean brands 391,502 2.7 469,576 3.3 472,124 3.3 551,765 3.8 Compared with the previous year, British almost 7.2 million diesel-engined pas- brands 461,960 3.2 410,095 2.9 408,774 2.8 330,871 2.3 senger cars were sold, an increase of Other 2.4 percent. Sales of petrol-engined brands 327,015 2.3 323,429 2.3 484,610 3.3 511,013 3.5 (spark-ignition) passenger cars, on the

Total 14,391,359 100 14,213,575 100 14,513,609 100 14,503,604 100 other hand, went down by 2.4 percent to 7.3 million units. German manufactur- Source: VDA statistics ers were able to profit from this ongoing Annual Report 2006 33

Share of diesels in new passenger-car fleets. In the light commercial vehicle registrations in Western Europe class up to 6 t, new registrations went up by 3 percent; in the over-6 t class, Percentage shares the increase was 7 percent. More than Sweden 9.7 252,000 heavy trucks (above 16 t) were Denmark 24.0 sold, an improvement of 8 percent. In Switzerland 28.4 the bus and coach sector, 31,400 vehi- Great Britain 36.7 cles were sold, a 2 percent increase. Norway 39.3 Germany 42.7 Thanks to a convincing range of Western Europe 49.5 products, German manufacturers were Italy 58.4 able to boost their commercial-vehicle Austria 64.9 sales in Western Europe very strongly Spain 68.4 compared with the previous year’s France 69.1 result. They increased their sales in the Belgium 72.6 light commercial-vehicle category (up Luxembourg 75.4 to 6 t) by 5 percent to a total of 731,400 Sources: VDA statistics, AAA units, equivalent to a 38.8 percent market share. In the category over 6 t, they achieved an 8 percent increase preference for diesels to an above-aver- increased business in Eastern Euro- to 134,800 units, and boosted their mar- age extent: they increased their sales of pean countries and ongoing renewals ket share by 1.7 percentage points to diesel-engined passenger cars by by transport companies of their vehicle 42.8 percent. 10 percent and reached a market share of 51 percent with them. In the national- market rankings, the leader in Western Europe is Luxembourg, with a 75.4 per- International Positioning of the cent diesel share, followed by Belgium and France. In Germany, the proportion German Car Industry of diesel-engined passenger cars in 2005 was in the region of 42.7 percent. German manufacturers 3 percent more than a year previously. Positive commercial- build more cars worldwide As a result, every sixth motor vehicle vehicle business results than ever before built anywhere in the world bore a Ger- In Western Europe, sales of com- In 2005 the German motor-vehicle man brand name. Including Chrysler, mercial vehicles went up by 3 percent industry maintained its globalisation German manufacturers increased their in 2005, to a total of 2.34 million units; strategy and was successful in obtaining output to 13.5 million vehicles in 2005, this was the second year in succession a share of the worldwide increase in the which meant that more than every fifth in which this positive trend had pre- demand for motor vehicles. It built 10.7 vehicle produced worldwide was pro- vailed. It was encouraged by the gradual million passenger cars and commercial duced in a factory operated by a Ger- economic recovery in Western Europe, vehicles in no fewer than 23 countries, man motor-vehicle group. 34 Verband der Automobilindustrie GLOBAL MARKETS

Production of German corporate brands by region in 2005 21 percent of worldwide vehicle production

3,486,400* 984,900 (+7%) (+10%)

7,401,800 (+1%) 620,100 (-11%)

2005 Domestic production: 5.8 million (+3%) 754,000 Foreign production: 4.9 million (+3%) (+12%) Combined: 10.7 million (+3%) 207,000 Chrysler: 2.8 million (+4%) (+12%) Total production: 13.5 million (+3%) = 21 percent of total worldwide production *incl. Chrysler Source: VDA statistics

Germany’s passenger-car manufac- tion volume were achieved. Although vehicles with spark-ignition engines, turers built 4.2 million vehicles outside the main foreign production emphasis there has been an increasing trend in Germany – a new record figure, despite in 2005 was still on the EU-15 coun- re cent years toward off-road vehicles and the fact that production volume did not tries, Latin America and the new EU diesel-engined passenger cars. By now, rise in all countries. In Spain, the Ger- member states gained in importance. every third German passenger car built man industry’s largest foreign location, Cost advantages and improved access abroad is powered by a diesel en gine. 8 percent fewer vehicles were produced, to local markets are factors of consid- The off-road vehicles are mainly sold on and in China, German manufacturers’ erable importance when production is the US market, but the diesel-engined vehicle output went down by as much transferred to these locations. passenger cars are supplied primarily to as a quarter. In other countries, how- Western Europe, where German vehicles ever, for example Brazil or the Czech Whereas ten years ago, German man- accounted for more than 50 percent of Republic, two-digit increases in produc- ufacturers mainly built small cars and the total diesel car market in 2005. Annual Report 2006 35

Production of off-road vehicles and 2005, to 2.5 million units – the seventh diesel passenger cars abroad successive year in which an increase had been recorded. Almost every other Units new passenger car now produced in 1,200,000 Germany has a diesel engine. Off-road vehicle 1,000,000 Diesel Model offensive boosts 800,000 exports: third successive record achieved 600,000 The success of the German manu- 400,000 facturers’ globalisation strategy can be seen, among other factors, from the pro- 200,000 portion of total output being exported: 0 last year, 70.9 percent of the passenger 5 7 3 cars built within Germany were destined 99 996 99 998 999 2005 1 1 1 1 1 2000 2001 2002 200 2004 for foreign markets. The equivalent Source: VDA statistics figure in 1995 was only 56.5 percent. Improved competitiveness has more than compensated for the burdens that Germany: new passenger- In addition, German manufacturers are still imposed by production location car production record strengthened their dominant position factors, that is to say the decision to Regardless of frequent discussions in the diesel-engined passenger-car continue producing vehicles in Germa- concerning the location of production area. Output of these vehicles rose at ny. The stable business situation on the facilities, the German motor-vehicle the above-average rate of 6 percent in world’s automobile markets and the industry achieved a new production record in 2005. 5.35 million passen - Passenger-car exports according to engine type ger cars, 3 percent more than in the Diesel exports previous year, left the production 3.5 Spark-ignition exports 42 lines within Germany – a most gratify- Diesel share ing result that is primarily due to the 3.0 36 attractive range of models offered for s 2.5 30 hare s

sale by German manufacturers, to el 2.0 24 s increased market shares in Western e die

Europe and to higher domestic-market 1.5 18 g in million unit sales. Other positive factors are that s ort 1.0 12 German manufacturers not only lead p Ex Percenta the way on the premium market but 0.5 6 also in the midsize car segment, and 0.0 0 5 7 3 have penetrated the low-price segment 99 996 99 998 999 1 1 1 1 1 2000 2001 2002 200 2004 2005 (10,000 euros and below) to an increas- Source: VDA statistics ing extent. 36 Verband der Automobilindustrie GLOBAL MARKETS

introduction of numerous new models this group of countries, but deliveries These additional sales were also enabled Germany’s automobile to Eastern Asia were also higher than achieved in a restrained overall eco- manufacturers to deliver more cars in 2004. Nonetheless, growth in exports nomic climate. Although Germany’s abroad in 2005 than ever before: to Japan, Germany’s most important gross national product rose slightly 3.8 million units, almost 4 percent car market in this region, had to be in real terms, by 0.9 percent in 2005, more than in 2004, which was also set against severe reductions in sales this trend was mainly supported by a record year. volume in China – the second most extremely dynamic external trade. Posi- important market – and elsewhere. tive growth stimuli from the domestic This most gratifying development Last year, exports to China slumped market were almost entirely limited to was primarily based on increased for- by almost a quarter, though from capital goods investment, whereas it eign demand for diesel-engined cars the summer months onward there proved impossible to overcome weak from Germany. Between January and was some evidence here too of a demand for consumer goods. Expendi- December 2005, German manufactur- recovery. ture for private consumption in 2005, in ers exported 1.7 million passenger cars the absence of any such stimulus, stag- powered by a diesel engine, an increase After a weak start to the year, pas- nated at the low level already reached of 8 percent over the previous year. By senger-car exports to America picked in the previous year. The savings ratio now, more than 45 percent of all Ger- up considerably, and by the end of reached 10.6 percent, the highest figure man passenger cars intended for export 2005 had reached 620,000 units, slightly since 1995. are diesel-powered. higher than in the previous year. Exports to the Mercosur nations went up more Private demand for passenger cars Important high-volume models significantly, by 41 percent. Despite proved unable to distance itself from such as the Audi A3, BMW 1 Series, model changes (including the VW Pas- this weak consumer demand situation. Ford Focus, Mercedes A Class and sat and Jetta) and an unfavourable cur- Between January and December 2005, Opel Astra have given further impetus rency exchange rate in the first half of new passenger-car registrations by to deliveries abroad. These five models 2005, German manufacturers were able private individuals were 1 percent lower enjoyed a growth rate of 40 percent and to reverse the downturn in their exports than the previous year’s total, the sixth accounted for one-fifth of total passen- to the USA in 2004, and increase the successive year in which such a drop ger-car exports. figure for the year slightly to 546,700 had occurred. Compared with 1999, passenger cars. private demand was in fact 27 percent Growth in Asia continues lower, despite the imaginative dis- – stable results in America Domestic market has counts and other concessions offered to In 2005, about three-quarters of all passed its low point, potential private owners by dealers and Germany’s passenger-car exports were though private demand manufacturers. Furthermore, in 2005, five to neighbouring European countries. remains unstable new models costing less than 10,000 But although this region remains the In 2004, the German passenger-car euros reached the market: the Citroën German manufacturers’ ‘home market’, market began a hesitant recovery from C1, Dacia Logan, Peugeot 107, Toyota they also achieved exceptional results in a downturn that had lasted four years. Aygo and VW Fox, with the intention of Asia, led by the OPEC countries, which In 2005 as a whole, there were 3.34 mil- appealing to the customer group with a imported one-third more German pas- lion new passenger car registrations in limited budget. During 2005, sales of senger cars than in 2004. More than Germany, 2 percent more than in the cars in this price segment did in fact 10 percent of all exports are now to previous year. rise by more than one-fifth to 296,600 Annual Report 2006 37

New passenger-car registrations by 1.07 euros per litre. As a result, mobility private and business owners became more expensive yet again. In 2005 as a whole, the cost of running a New private registrations Share of private owners New business registrations passenger car rose disproportionately, yet in the same period the average available income of private households 3.5 56 s fell slightly. 3.0 1.68 48 1.38 1.69

1.49 hare

1.25 s 2.5 1.66 For the first time in ten years, new 1.69 1.65 1.66 1.71 1.80 40 diesel-engined passenger car registra- rivate in million unit 2.0 32 p s

e tions dropped, the reasons being dis- g 1.5 24 cussion of the consequences of fine- tration s i

g particulate dust emissions, the resulting 1.0 2.06 2.12 2.04 2.05 2.12 16 1.72 1.65 1.61 1.58 1.55 1.54 Percenta suggestions that the affected vehicles 0.5 8 New re could be banned from city centres and 0.0 0 the steep increase in the price charged 5 7 3 for diesel oil. Although registrations 99 996 99 998 999 1 1 1 1 1 2000 2001 2002 200 2004 2005 totalled 1.4 million vehicles and there- Sources: VDA statistics, Federal German Motor Vehicle Office fore remained at a high level, they were almost 1 percent down from the 2004 figure. The proportion of diesels in units, giving them a market share of The demand for passenger cars was total passenger-car sales last year was approximately 9 percent. More than half stimulated by various new high-volume 42.7 percent, compared with 44.0 per- of these passenger cars bore a German models from German manufacturers; for cent in 2004. Petrol-fuelled cars, on the badge. example, total new registrations of the other hand, staged something of a Audi A4, Ford Focus, Opel Astra, VW revival: their sales volume increased in In contrast to private-owner Golf and Passat and Mercedes A Class 2005 for the first time in seven years. demand, business users generated a rose by 7 percent. 1.9 million passenger cars with a spark- more positive picture, with 5 percent ignition engine were registered for the more new passenger-car registrations Demand for cars – in first time in 2005, a 5 percent increase. than in 2004, and increased sales in particular diesels – has every area. New registrations from suffered from increased Half a million diesel cars retail car sales went up by 7 percent, mobility costs with particulate filter have those of rental cars by 5 percent and The record level reached by fuel been registered those purchased by fleets (in the nar- prices, on the other hand, has had the In 2005, almost all manufacturers rower sense) by 4 percent. German effect of depressing sales. The average greatly extended their programme of manufacturers profited from this trend price for a litre of premium (‘Super’) fuel cars equipped with a diesel particulate and were able to sell a total of 5 per- during the year was 1.22 euros, a further filter (DPF). About 200 model versions cent more vehicles to business users seven percent increase on the average with this device are already on sale. By than in 2004, giving them a market 2004 price; diesel oil, on the other hand, the end of the year, 490,300 diesel pas- share of more than 76 percent. rose in price by almost 14 percent to senger cars with DPF had been sold, 38 Verband der Automobilindustrie GLOBAL MARKETS

New registrations of diesel passenger cars ment (+11 percent), the lower midsize with particulate filter (DPF) segment (+12 percent) and in sales of vans (+11 percent). Although German 81.7% 400,800 manufacturers were able to increase

400,000 80 s their total domestic-market sales, their ale 350,000 70 s market share fell slightly from 70.1 to 300,000 60 69.6 percent. Their 76 percent share 2004: 210,000 with DPF 250,000 2005: 490,300 with DPF (+133%) 50 of the business-user market was at an hare of DPF s

2005: share s above-average level, and their share 200,000 40

Unit 163,000 of total diesel-engined car sales even 150,000 30 reached 78 percent. e market

100,000 20 g 14.7% 72,200 50,000 40,000 3.5% 10 With total sales of 103,000 units, 17,300

7,000 Percenta South Korean manufacturers sold 28 0 0 German Group brands French brands Others* percent more passenger cars in 2005 Sources: VDA statistics, information from manufacturers * partly estimated than in the previous year, and increased their market share by 0.6 percent to 3.1 percent. Both the Japanese and 133 percent more than in 2004. German cars, just under 2 percent more than in the French manufacturers maintained manufacturers increased their sales vol- 2004. They registered particularly strong their previous year’s market shares or ume in this category to an above-aver- growth in the small-car market seg- 11.6 and 10.7 percent respectively. age extent: the total of 400,800 units exceeded the previous year’s figure by 146 percent, and their share of total new registrations of cars with DPF in International Positioning of the Germany is 82 percent. The proportion of cars with a diesel particulate filter German Commercial Vehicle Industry in the importers’ total new registrations rose to 28.2 percent; for German makes, the level of filter installation had Continued upswing in excluding mobile homes etc.). This was reached 36.2 percent, and rose further commercial-vehicle sales equivalent to a 4 percent increase after to an impressive 63 percent early in The commercial-vehicle industry in adjustment to allow for the changed 2006. The proportion of DPF-equipped Germany is enjoying its second succes- statistical categories. cars in new diesel registrations would sive year of upward movement. Thanks undoubtedly have been higher if the to an improved business climate, new Renewed success for government had fulfilled its undertaking vehicle concepts and a rise in capital German manufacturers to promote their purchase by offering a goods investment, it proved possible to on the domestic market tax incentive. sell 272,800 commercial vehicles in the Although domestic-market demand past year (according to the new cat- for commercial vehicles picked up as a During 2005, German manufacturers egories laid down by the Federal Ger- whole in 2005, only German manufac- sold more than 2.3 million passenger man Motor Vehicle Office, that is to say turers reaped the benefit. They booked Annual Report 2006 39

8 percent more domestic-market orders, New registrations of commercial vehicles in 2005, whereas the importers’ order situation according to weight categories and brands deteriorated by 5 percent compared Shares as percentages, sales in units with 2004. In both the light truck category up to 6 t and in the weight catego- 100% ries above that level, the German manu- 90% 1,173 7,920 15,111 facturers performed more successfully. 62,098 80% 70% The favourable order situation 60% enjoyed by German manufacturers manifested itself as an improved market 50% 4,253 position. In 2005, their domestic-market 40% 21,442 119,789 40,990 sales of light commercial vehicles up 30% to 6 t rose by 5 percent, a better result 20% than was achieved overall by suppli- Foreign brands 10% ers to this market (+4 percent). Foreign German brands 0% manufacturers increased their sales only Up to 6 t From 6 to 16 t Over 16 tBuses and coaches by 2 percent, and Japanese manufacturers in particular lost a considerable Sources: VDA statistics, Federal German Motor Vehicle Office proportion of their sales volume. Of the commercial vehicles registered for the first time in 2005 on the German market, 66 percent bore the badge of a German cent, whereas there was a strong share meant that three out of four heavy manufacturer. (+25 percent) increase in demand for trucks registered for the first time bore a trucks in the 10- to 12-t category. New German manufacturer’s badge. Sales of Sales stimulated by new registrations in the weight category Swedish brands went down by 3 percent Euro 5 models above 16 t rose by 4 percent. The trend last year, whereupon their market share In the weight category above 6 t, toward semi-trailer outfits persisted in fell correspondingly to 10 percent. new registrations went up last year by 2005, with 32,500 vehicles in this cat- 6 percent, to 85,500 vehicles. The new, egory (+6 percent) sold in Germany, In contrast to the trend in the light dynamic market climate was attributable giving them a 38 percent share of the and heavy truck market segments, above all to new products in the 6- to overall commercial-vehicle market business activity remains difficult in the 16-t area and incipient demand for vehi- above 6 t, compared with only 30 per- bus and coach area. After five years in cles capable of complying with Euro 5 cent five years ago. which sales volume dropped, new bus emission levels. Sales of medium-weight and coach registrations stabilised in commercial vehicles rose by 8 percent The positive sales trend was 2005 at the previous year’s level, but last year. The road toll scheme intro- mainly encouraged by the good results there is still no sign of a general recov- duced for trucks led clearly to a shift achieved by the German manufacturers, ery. German manufacturers continue to in sales emphasis between the various who sold 7 percent more commercial dominate the domestic bus and coach weight categories: new registrations in vehicles above 6 t on the German mar- market with a 78 percent share, but the 12- to 14-t class dropped by 24 per- ket last year. Their 73 percent market their sales did in fact drop slightly. 40 Verband der Automobilindustrie GLOBAL MARKETS

Commercial-vehicle Commercial-vehicle exports according exports reach a new record to weight categories and regions in 2005 level Shares as percentages, sales in units A good business climate all over 100% the world has enabled the German 804 manufacturers to set up a new export 66,178 11,441 Comm. 80% record, with 285,200 commercial vehi- 10,199 veh. > 6 t: 115,800 cles delivered abroad, 11 percent more (+10%) than in 2004 and 60 percent more than 60% 16,886 2,413 7,039 ten years previously. Exports of commer- 8,600 cial vehicles above 6 t totalled 115,800 40% 21,331 units (+10 percent), the highest level 115,232 10,503 ever reached; deliveries in the weight 20% Comm. category up to 6 t amounted to 162,500 veh. < 6 t: 2,429 478 1,494 162,500 units (+12 percent). Factors contribut- 0% (+12%) ing to this most welcome development EU-15 EU-10 Rest of Western Eastern America Africa Europe Asia Asia were a recovery in capital goods invest- Source: VDA statistics ment on various important markets, the new, attractive products introduced by German manufacturers, which enabled them to strengthen their position on buses and coaches from Germany were Germany: domestic the international market, the eastward exported to Western Europe and to Asia production exceeds extension of the European Union, the (-19 percent in both cases). 400,000 units for the forthcoming introduction of the digital first time tachograph and the need to replace In the delivery van sector, Great Brit- Thanks to very strong demand from vehicles nearing the end of their work- ain was again the most important for- abroad and continuing positive results ing life. eign market, with a 20 percent share. on the domestic market, manufacturers In France, German manufacturers sold of commercial vehicles over 6 t were German commercial-vehicle manu- 18 percent more commercial vehicles in able to increase output in Germany by facturers achieved a considerable the weight category up to 6 t. Their a further 5 percent to the record figure increase in their exports in almost all exports of delivery vans to America more of 168,800 vehicles, following the previ- regions of the world. Almost 70 percent than doubled, reaching 8,600 units in ous record set up in 2004. Production went to neighbouring countries in West- this weight category. The American con- of delivery vans rose by 11 percent. Bus ern Europe, where they were able to tinent remains unimportant for exports and coach production fell to 8,800 units increase their market share significantly. of heavy trucks, since this market is still as a result of increased transfers of pro- Exports of vehicles to the Near East in largely supplied with vehicles built locally. duction to foreign locations. Buses for fact increased by one-fifth. About one- German manufacturers increased their scheduled services and overland routes sixth of export orders were taken in exports of heavy trucks (above 6 t) to in particular, in view of their lower Eastern Europe. Bus and coach exports Western Europe by 14 percent, but deliv- equipment and trim levels, are now dropped by 7 percent in 2005, due to eries to Eastern Europe only slightly being built increasingly in neighbouring the transfer of production abroad. Fewer exceeded the previous year’s level. countries where labour costs are more Annual Report 2006 41

favourable. With a total of 407,500 vehi- Production of German commercial vehicles abroad cles, the number of commercial vehicles in 2005 according to country built in Germany exceeded the 400,000 Units x1000 mark for the first time in 2005, so that the manufacturing capacities of domes- Argentina tic truck manufacturers and their suppli- Brazil ers were extremely well utilised. Japan Canada Production abroad at Mexico record level too Austria German manufacturers built more Poland Comm. veh. up to 6 t: 387, 300 (+27%) commercial vehicles abroad in 2005 Spain Comm. veh. over 6 t: 266,400 (+15%) than in any previous year. Total foreign South Africa Buses and coaches: 55,200 (+12%) production volume went up by 21 per- Turkey USA cent to 708,900 units, a trend encour- Other countries aged by a good business climate on the commercial-vehicle market all over 0204060 80 100 120 140 160180 the world, and taking into account Fuso Source: VDA statistics production in Japan since mid-2004.

Domestic commercial-vehicle production according to weight categories

Units 400,000

350,000

300,000

250,000

200,000

150,000

100,000 Buses and coaches Comm. veh. over 16 t 50,000 Comm. veh. from 6 to 16 t Comm. veh. up to 6 t 0 19951996 19971998 1999 2000 2001 2002 2003 2004 2005

Source: VDA statistics 42 Verband der Automobilindustrie GLOBAL MARKETS

In the weight category up to 6 t, increased their local production volume in its use of materials and has always 387,300 German commercial vehicles by 15 percent to 231,700 heavy com- reacted sensitively to cost increases. left the assembly lines in other countries mercial vehicles. 87 percent of total Only in very rare cases was it possible last year, 27 percent more than in 2004. foreign production took place in the for trailer and body manufacturers to Almost half of the total came from Fuso, USA, Brazil, Canada and Mexico. pass these additional costs on to their where output of commercial vehicles up customers, especially since pressure to 6 t went up by 59 percent to 189,500 Production of German buses and on the transport trade also rose dra- units. But in other countries too, for coaches in other countries rose by matically as a result of the truck tolls example Poland, strong growth was 12 percent in 2005, to 55,200 units. introduced in Germany and the diesel achieved. The principal locations in this respect oil price increases. Despite high pro- were Brazil, where 25,500 vehicles were duction and sales volumes in Germany German manufacturers increased produced, and the USA, where the and elsewhere in Europe, the higher foreign production of medium-weight total was 16,900 units. As a result of raw material and energy costs therefore and heavy trucks by 15 percent, to these activities, the proportion of imposed a burden on the German trailer 266,400 units. Those active on the German buses and coaches produced in and body industry’s earnings situation American continent reaped the ben- other countries rose last year to last year. efit of stronger demand there, and 86 percent. Vigorous domestic business – continued trend The Trailer, Body and Container toward the semi-trailer All in all, this business sector Industry enjoyed a successful year in Germany in 2005. Domestic-market sales of heavy trailers (above 6 t) totalled 42,900 units, Following an exceptionally suc- one country to another. Growth in over 4 percent higher than in the previ- cessful year for the German trailer and France and the Netherlands was strong ous year. The trend toward the semi- body industry in 2004, this business in many cases, but less marked in Italy, trailer remains strong – 26,900 of these area recorded further growth last year, Spain and some Eastern European mar- were sold, a further 5 percent increase. though at a slightly lower level. The kets. All in all, the German trailer and Almost 64 percent of the heavy (over domestic market was still generally body industry benefited from the boom 6 t) trailers sold in Germany were semi- restrained in the first half of 2005, but in demand for trucks, but although trailers. In this segment, almost all the manufacturers enjoyed a recovery in export growth rates were high toward main body types recorded higher new demand for their products in the sec- the end of last year, there was evidence registrations, with a slight drop only in ond half of the year, based on a most that this business area was about to the insulated body area due to the pre- welcome increase in the demand for stabilise at a high level. vailing weakness in private consump- transport facilities and a corresponding tion in Germany. The manufacturers of shortage of carrying capacity. Last year’s drastic increases in conventional trailers over 6 t in weight the prices charged for steel, tyres and recorded a further increase of 3 percent The European trailer markets also above all wheels, due to movements in new registrations and were thus able recorded continued overall growth, on the raw material markets, affected a to look back on a successful year at the though to an extent that differed from business sector that is highly intensive end of 2005. Annual Report 2006 43

Record turnover in this Caravan industry can look By now, almost every other mobile business sector – exports back on a record year home built in Germany is intended increasingly important for German manufacturers of these for export (2005: 48.0 percent). New manufacturers leisure vehicles produced more than domestic-market registrations of cara- For the first time in its history, the 100,000 units (+5 percent) for the first vans totalled 21,700 units and were German trailer and body industry time last year, and boosted their turno- therefore slightly higher than in the achieved a total turnover of approxi- ver by almost 11 percent to more than previous year (+1 percent), whereas mately 9 billion euros in 2005. This was 5 billion euros, the first time this figure 20,600 new mobile homes were sold, nearly 5 percent higher than in the has been exceeded. 102,900 mobile an increase of more than 6 percent. The previous year, and was derived in par- homes and caravans were delivered by trend toward the mobile home that has ticular from a strong growth in business Germany’s leisure-vehicle manufacturers been evident for some years therefore abroad, the volume of which went up in 2005 (+5.3 percent): output of mobile persisted in 2005. by 5 percent to 4.86 billion euros. Ger- homes rose by 14.4 percent to 35,300 many’s trailer and body manufacturers units, and caravan production went up The 2005 results indicate that cus- have secured a successful position on by 1.1 percent to 67,600 units. tomer demand is still shifting from used export markets, and increased their to new vehicles. Whereas sales of used market shares again last year. Their This result was due on the one hand vehicles yielded 1.41 billion euros and turnover from exports has risen steadily to a continued high level of exports, but were just under 5 percent higher than in in the past five years, and since 2004 on the other to growing domestic-mar- the previous year, new-vehicle business has in fact generated more than half of ket demand and to the fact that these expanded by 13 percent to 2.79 billion this business sector’s turnover (54 per- vehicles are now increasingly well euros. The demand for accessories also cent of the total in 2005). Last year, the equipped. Total exports rose by 7.9 per- increased strongly last year (+22 per- external trade surplus rose by more than cent to 61,900 mobile homes and cara- cent to 488 million euros). The caravan 15 percent to the record volume of vans. Whereas exports of caravans have industry takes an optimistic view of almost 1.5 billion euros. On their domes- been above the 60-percent mark for 2006: increased domestic sales are tic market too, Germany’s trailer and several decades (2005: 66.5 percent), anticipated, and export sales are also body manufacturers recorded a turnover the mobile homes have gained ground expected to grow, though rather less increase for the second year in succes- on export markets only in recent years. strongly than in previous years. sion, of almost 5 percent to 4.14 billion euros. The employment situation in the German trailer and body industry remained stable last year: the industry’s The Parts and Accessories Industry average workforce of 36,300 was at the same level as in the previous year. Sales revenues in the business, which increased substantially, For the current year, a stable supply industry continue and to the continuing trend towards domestic-market sales pattern is antici- to grow vehicles with a higher specification. In pated, and it is probable that the growth Sales revenues in the German sup- the survey period, sales revenues from in export turnover will also remain posi- ply industry continued to grow in 2005, foreign business increased by 6 percent tive, though at a slightly lower level than rising by 4 percent to over 68 billion to 29 billion euros, compared with the in previous years. euros. This was due mainly to overseas previous year, whilst domestic sales 44 Verband der Automobilindustrie GLOBAL MARKETS

Sales and employment levels in the automotive supply industry

80 329 329* 350 315 298 70 327 280 280 309 300 s 271

254 8.2 5.4 60 290 6

278 6 238 265 250

255 .8 .7

251 59.9 6 6

50 5 5

200 x1000 Turnover 51.1 40 s

Employees 45.4 42.1 .8 150 loyee 6 30 p 3 32.9 Em Turnover in billion euro Turnover .8

30.9 100 6 28.3 29.5 27.2

20 2 24.8 10 50

0 0 0 1 2 4 5 7 3 99 99 99 993 99 99 996 99 998 999 1 1 1 1 1 1 1 1 1 1 2000 2001 2002 200 2004 2005

* adjusted to eliminate statistical effect Source: VDA statistics

reported a 3 percent increase to 39 bil- tion activities being pursued by compa- proximity to markets and customers lion euros. Overseas business, therefore, nies at the same time. This trend could are important factors when consider- continued to be the greater stimulus, not be continued in 2005. However, sta- ing manufacturing locations – from a with exports accounting for around tistical effects are the main cause of strategy point of view, production costs 43 percent of total sales revenues, a this, in that 5000 jobs previously catego- take the highest priority in the selection new record figure up from 42 percent rised as supply industry jobs have now process. in 2004. been re-assigned to the vehicle manufacturing sector. If these statistical Increased risk to profit Employment stabilised at effects are disregarded, employment margins… high level levels on average remained stable in Whilst the supply market saw above- Over the past ten years, the growth 2005, compared with 2004. average growth on the whole in 2004, in jobs in the German automotive indus- the business dynamic slowed down try has been primarily due to employ- However, the fact cannot be ignored considerably in 2005. Though specifical- ment expansion in the supply industry. that labour costs in Germany have been ly-targeted rationalisation measures and Since 1994, the number of people rising since 2004. The gap between the optimisation of business processes, employed in this sector has grown Germany and competitor countries has combined with the growth in sales rev- continually, with over 90,000 jobs being not closed. This is significant, since enues, meant that expense ratios, for created during this period, despite the costs play the most important role in example for personnel and financing, general stagnation of the labour market location selection. Though employee could be reduced, the pressure on profit in Germany and the intensive globalisa- qualifications and flexibility and close margins for the most part remained. The Annual Report 2006 45

cost pressure on both vehicle manufac- chain and in discussions with the indus- turers and suppliers has continued to tries manufacturing raw materials to see increase. The manufacturers’ local pro- if the parties involved can come to a fair duction safeguard contracts reinforce arrangement. The objective is to main- trends towards insourcing and exert tain the efficiency of the automotive Quality additional pressure on the financial and added-value chain so that the industry Foundation for Joint Success operating results of the suppliers. is able to survive in the long-term, even Agreement between car manufacturers ans suppliers in the face of international suppliers. on the Managing Board of the German Association of the Automotive Industry (VDA) …due to increased raw on assuring quality in German automotive industry material costs Product quality: the It is above all the persistently high common goal of costs of raw materials and the resulting manufacturers and increase in pre-material costs that have suppliers increased the pressure on suppliers. The safeguarding of product quality June 2005 Though the raw materials markets in is a task for which both parties – the the metal processing industry did settle manufacturer and the supplier – have down, costs in the plastics industry con- joint responsibility. In order to estab- tinued to increase. lish a long-term common basis in this respect, an agreement was reached in sibility for his product, its interfaces Primarily affected are the small sup- 2005 between manufacturers and sup- and its integration into the vehicle. Fast pliers, who, because of their greater pliers, under the umbrella of the VDA, to provision of information and transpar- added-value depth, correspondingly safeguard quality in the German auto- ency throughout the entire product life procure more raw materials, and also motive industry – a milestone on the cycle, especially in the event of changes the system suppliers who purchase road to ever higher product quality. This to materials and technology, will play a parts and components from the small is necessary because, in order to cope particularly important role in this regard. 3rd tier manufacturers in large quanti- with the increasing complexity of vehi- ties. The cumulative cost increases cles, new forms of cooperation have to The quality document is available along the supply chain increase the be found. The ever longer and increas- in German and English and can be pressure on the manufacturers who are ingly global supply chains also have to downloaded from the VDA website already affected by the rise in prices of be taken into account. (www.vda.de, Service, Other publica- the raw materials they purchase directly. tions). Innovation and premium quality are Because the manufacturer/sup- the essential requirements for ensuring Financing issues becoming plier relationships vary widely within the success of the German automotive increasingly important the added-value chain, individual industry in the long-term as well. Con- In addition to dealing with the approaches to solving the problem must sequently, the paper set out the joint changes within the added-value chain be adopted. All parties involved need to responsibility of the manufacturers and – the increasing demands on suppli- show a willingness to open discussions. suppliers for quality and defined the ers to be innovative, the pressure to As a representative of the interests of fundamental principles of cooperation. internationalise, the cost reduction vehicle manufacturers and suppliers, the These were signed by all VDA board programmes being implemented by VDA is involved within the added-value members. Each partner has respon- the OEMs, the added responsibility for 46 Verband der Automobilindustrie GLOBAL MARKETS

research, development and production Suppliers: Opportunity through – suppliers are, as before, also pre- borrowing remains improved finance occupied with the question of how to difficult communication finance all these challenges. Companies are often dissatisfied Survey of VDA member-companies in 2005: tendency is towards obtaining with the amount of information provided The framework conditions for lend- credit more easily by banks relating to alternative forms ing, which were revised as a result of of financing. But often creditors are not 60.3% the Basle II rulings, make it more dif- happy with the information policies of ficult for most companies to obtain suf- Easier the companies either. Frequently, noth- ficient capital on favourable terms. This No change ing more than the balance sheet and the often affects the already strained liquid- More difficult profit and loss accounts are given. Good ity situation, manifesting in the increas- financial communication is indisputably ing use of supplier loan credit and the one of the essential factors for success, 26.2% deterioration of payment ethics. As a particularly for small and medium-sized result, many suppliers are at greater risk enterprises, as the study ‘Finanzkommu- of defaulting on debts and ultimately of 13.5 % nikation im Mittelstand’ (Financial com- insolvency. Even healthy companies can munication in SMEs) by Euler Hermes slip into a subsistence existence in this Versicherungs-AG demonstrates. The way and threaten the very survival of the study also maintains that the relation- added-value chain. Source: KfW ship between creditors and companies will become even more important in According to a survey carried out the future. This is because, as (interna- by the KfW banking group, in which tional) competition becomes tougher, the VDA and its member companies alternative financing instruments such only those companies who have secured also participated in 2005, 26 percent as private equity or mezzanine capital themselves long-term access to opti- of processing companies active in and the future significance of such mum methods of financing with favour- the vehicle supply industry admitted tools is underestimated. This particularly able terms will be able to survive. that borrowing had become notice- applies to smaller suppliers. As com- ably worse. Though initial consolidation pany size increases, so the perspective As much as it can, the VDA sup- trends are now evident, too (just under changes. ports an aggressive information policy 14 percent of the companies report that where financial matters are concerned. their situation has improved), compared Credit institutions and companies Its ‘Mittelstandskreis’ has already organ- with previous years, the financing prob- are adapting their behaviour to the new ised a second workshop on the subject lems being experienced by companies conditions. Companies need to revise of finance, which was held in Frankfurt have not yet eased to any great extent. their thinking so as not to squander any in June 2006. The main topic of the crucial strategic disadvantage amongst all-day event, which was free to VDA Consequently, there is still a need the competition. As the number of alter- members, was new forms of financing for action here. Despite many compa- native forms of financing increases, so for SMEs. Various banks presented their nies changing their philosophy, tradi- does the companies’ need for informa- models on this topic. The subjects of tional financing instruments still domi- tion and the banks are challenged to do financing development and tool costs nate. Companies are hesitant to accept more to inform. and experiences with private equity Annual Report 2006 47

companies were also discussed in detail consolidation. According to experts, the business has increasingly become the in parallel workshops. expectations for private equity funds are main growth promoter in the German correspondingly high, with returns of up supply sector. In addition, more and Private equity as alternative to 25 percent anticipated. more small and medium-sized enter- funds shapes mergers and prises are keen to, and indeed are acquisitions Manufacturing location having to, operate on an international According to a study carried out by discussions intensify level to conquer new markets and meet PricewaterhouseCoopers on behalf of The cost pressures placed on suppli- customer requirements in terms of the German Private Equity and Venture ers by their customers – both on an proximity and optimisation of business Capital Association e.V., venture capital OEM and tier 1 level – remain extremely processes. Furthermore, international companies are involved in more than high. Cost reduction programmes put a sourcing as a means of optimising 5,500 companies in German industry. considerable strain on manufacturer/ the cost structure plays a key role for These companies, employing a total of supplier relations and challenge the German suppliers. 638,000 people and with a combined VDA, through its activities in various turnover of more than 114 billion euros committees, and with political institu- In view of these key reasons for – or 5.2 percent of the gross domestic tions, to achieve a noticeable improve- shifting manufacturing location, the product – have become an important ment in the manufacturing location East European countries and China economic factor. If these companies conditions within the industry. The are considered particularly attractive were to be joined together to form one neighbouring new EU member states location options. Consequently, it is homogenous group, they would be the have, for a long time, been attractive expected that, in the near future, more biggest employer in Germany, larger locations, as have other East European than 50 percent of all German suppliers even than the local authorities. regions and locations in Asia, for exam- will have production plants in Eastern ple, with their low production costs, tax Europe and/or China. And this shift will In 2004, more than 50 percent of advantages and investment incentives. not exclude development facilities either. transactions in the vehicle supply indus- In Eastern Europe, the number of pro- One in three suppliers has already try were, for the first time, effected by duction plants owned by German suppli- invested in or is planning to have devel- private equity organisations. Though this ers has already doubled over the last opment capacities abroad. Without is mainly due to the increasing number decade. Influenced by the investments doubt, therefore, there is a need to sub- of so-called secondaries, i.e. purchases made by vehicle manufacturers, further stantially improve Germany’s status as within the private equity segment, for undertakings, including outside Europe, a manufacturing base – particularly for suppliers, private equity is nevertheless will follow. As the growth in turnover the predominantly small and medium- becoming more important, particu- shrinks and profits decline, due in par- sized suppliers. larly because of the attractive financing ticular to the rising cost of materials, this instruments. In these companies, there is is bound to have consequences for the Location management normally a substantial amount of liquid- employment situation in Germany. as a challenge ity, which creates pressure to invest this Over the past ten to fifteen years, money as well. The main driving forces International markets the vehicle supply industry has expe- behind the activities are the growth in become increasingly rienced far-reaching changes due to the vehicle supply sector, outsourcing important globalisation. This is manifested in par- operations, which are expected to con- As the domestic economy has weak- ticular in the sharp rise in the number tinue to increase, and the trend towards ened over the last few years, overseas of production plants which suppliers 48 Verband der Automobilindustrie GLOBAL MARKETS

operate today. A good number of large embrace a number of different divisions cussions on the state of Germany as a suppliers already have networks of 100 and departments within the company. manufacturing location and the move to to 200 production locations. Companies are certainly well advised specific foreign markets. to start with this level of organisational With this comes the obligation for a complexity for location projects. Future- The VDA ‘Mittelstandskreis’ was company to adapt its location network oriented location management will be founded in August 2000 to address the more and more quickly and flexibly to focussed on giving more attention to specific interests of its small and medi- the changing market and competitive location flexibility, the early detection of um-sized companies. It has become the conditions. According to a study enti- location problems and the systematic common mouthpiece for these compa- tled ‘Globales Standortmanagement in and prompt planning of exit strate- nies when addressing the outside world der Automobilzulieferindustrie’ (Global gies. For this purpose, it is essential and has also enabled the interests of location management in the vehicle that the various disciplines are closely the small and medium-sized companies supply industry) carried out by consult- networked and, on the whole, are more within the automotive industry to be ants KPMG, there are indications that tightly integrated and institutionalised. more efficiently represented within the the ‘lifetime’ of production locations is added-value chain. Amongst its mem- decreasing more and more. A number VDA ‘Mittelstandskreis’ bers are those companies who associate of production or assembly plants have turns its attentions to the themselves with the SME sector and a lifetime of just five to ten years. The manufacturing location have an interest in the particular issues reasons for this include the on-going issue… concerning it. location migration from one low-wage Operating a business abroad brings country to another and the fact that new with it additional requirements com- …and offers assistance production plants are being tailored to pared with conducting business opera- with alliances the product life cycle of vehicle models, tions at home. Cultural differences and One of the major activities of the which on the whole is becoming shorter language problems play just as impor- ‘Mittelstandskreis’ is the further devel- and shorter. These conditions place high tant a role in international business opment of the VDA cooperation portal demands on companies which they are activities as technical or legal issues. (www.vda-kooperationsportal.de). only able to cope with by having a glo- Companies looking to set up operations Here, the user can call up a wide range bal location management system. abroad – particularly for the first time (so far unique in this form) of informa- – are faced with a host of questions that tion and functions on the subject of The study showed that the com- need to be carefully clarified so that the cooperation. The portal provides access panies questioned each year invest on success of the venture is not jeopard- to extensive databases of a wide vari- average between one and five percent ised from the very beginning. ety of organisations, with facilities for of their turnover in new locations. Con- searching by company, product and sequently, new production locations are Here, too, the VDA is able to provide region. Also available are documents regarded to a large extent as being criti- its member companies with support. and literature for downloading, cur- cal to success. If location management One focal point of the VDA ‘Mittelstands- rent news and events on the subject is understood to be the tasks relating kreis’ is the issue of globalisation. In of cooperation, plus links to service to the formulation and optimisation of a particular, the annual VDA Mittelstands- providers specialising in such alliances. company’s manufacturing location net- tag (conference for small and medium- One of the portal’s key functions is an work, it will typically cover several disci- sized companies) looks at information electronic market place where a variety plines and, as such, will clearly have to transfer issues and holds practical dis- of company alliances can be initiated. Annual Report 2006 49

New Federal states: strengthening manufacturing locations through networks

The automotive industry is of con- manufacturing industry, 112,000 are Economic Affairs and Labour) on July siderable importance to Germany as employed by suppliers. Benefi ting abo- 11 and 12, 2005 in Dresden, clearly a business location. This applies to a ve all are the southern regions of Saxo- brought home the contributions made particular extent to the new Federal ny, with 45,000 employees, and Thurin- by the German automotive industry to states where the East German car- gia with 32,000. The study also shows the economic development of the new manufacturing tradition has been suc- that foreign investors in the East Ger- Federal states and provided the stimu- cessfully utilised. Today, the automotive man supply industry are also compara- lus for the expansion of the economic industry is probably the most success- tively important. Though only 15 per- recovery process. One outstanding ful example of how the East German cent of the 900 or more supply compa- example are the regional cooperative processing industry can be developed. nies in the new states have foreign arrangements between manufacturers, roots, they employ almost a quarter of suppliers, service providers and re- Important historical core car-manu- the employees in the supply sector. search and training institutions, which, facturing regions, particularly Saxony as part of the ‘Automotive Cluster East and Thuringia and the Greater Berlin Employees of suppliers are noted Germany (ACO)’ initiative supported by area, are once again centres of pro- for being highly qualifi ed and fl exible. the economic ministries of the states, duction in the new Federal states. This factor, combined with the extre- has led to the formation of a cross- Here, manufacturers and suppliers mely active clusters, which ensure regional and cross-state network. have established an extremely compe- a well-developed network of supply tent added-value community. The main companies with centres which seem to role of the suppliers in the new Ger- extend right out to the peripheries, has man states is clear, particularly if one created a real competitive advantage examines employment fi gures. A study over competing locations, even in Eas- entitled ‘Die Automobilindustrie in den tern Europe. The geographical location Die Automobilindustrie in den neuen Bundesländern

Institut für Wirtschaftsforschung Halle neuen Bundesländern’ (The automotive – between a strong West German Max-Planck-Institut zur Erforschung von Wirtschaftssystemen industry in the new Federal states), industry and a growing East European carried out by the Institut für Wirt- industry – has also created excellent schaftsforschung Halle (Halle Institute conditions for future growth and emp- for Economic Research) and the Max- loyment. Planck-Institut zur Erforschung von Wirtschaftssystemen (Max Planck The Automobiltag Ostdeutschland Institute for Research into Economic (the East German Automotive Industry Systems), published last year by the Conference), organised jointly by the VDA, concluded that, of the nearly VDA and the Bundesministerium für 140,000 people employed in the car- Wirtschaft und Arbeit (the Ministry for 50 Verband der Automobilindustrie GLOBAL MARKETS

when preparing the proof of creditworthiness, the CD-ROM contains an instruction leaflet.

The VDA has sent the new version of the tool free-of-charge to its member companies in the supply sector. These companies can order additional software licences (CD-ROMs), at a special price of 300 euros for the balance sheet rating and 1,100 euros for the complete rating tool, from the vehicle parts and accessories (Kfz-Teile und - Zubehör) department at the VDA, e-mail: [email protected]. Compa- nies that are not members of the VDA may purchase the tool for 500 euros and 1,300 euros respectively. Here, companies can place requests for Two workshops – in January 2003 and or offers of cooperation anonymously. May 2006 – have already taken place, Other activities in the SME These are then compared electronically the first of which provided the impetus sector and companies with similar cooperation for the development of the VDA rating In September 2005, the VDA contin- requests and offers are matched up, tool. Originally, the tool was designed ued its activities in the SME sector by initially without naming the companies to prepare companies for external holding a workshop entitled ‘Corporate concerned. Once matched up, it is then assessments. However, German vehicle Governance Code for Family-Owned up to the companies to either reveal manufacturers and suppliers have now Companies’. The objective of the work- their identity or initiate business con- agreed to recognise the results of quan- shop was to provide participants with tacts through a neutral service provider. titative self-assessments prepared with the rating tool as proof of their suppli- Linked with the cooperation portal ers’ creditworthiness. The VDA rating is the VDA manufacturers’ platform, tool has consequently become a stand- www.auto-world.org, which, through ard tool for the automotive sector. its work with supply industry initiatives implemented in various Federal states, The rating tool was updated in has evolved into the supplier database spring 2006. In terms of contents, this in Germany. new version is identical, but includes some necessary technical software Financing assistance: the changes. In addition, operation of the VDA rating tool tool has been simplified and specimen Financing is another focal point texts make data entry more straight- of the work of the ‘Mittelstandskreis’. forward. To prevent misunderstandings Annual Report 2006 51

information on topics such as responsi- d’Automobiles (ACEA) (Association of In 2005, the VDA attended AUTO ble employers, transparency in corpo- European Automobile Manufacturers) SHANGHAI, where 60 German suppliers rate structures, the safeguarding of a in Brussels, the Comité de Liaison de exhibited under a common flag, the SAE qualified management team and suc- la Construction des Carrosseries et de World Congress & Exhibition in Detroit, cessive management teams and meas- Remorque (CLCCR) (Liaison Commit- AUTOMEC in Sao Paulo and the Tokyo ures to keep the company in family tee of the Body and Trailer Building Motor Show. In 2006, the list of VDA ownership. Industry), in Frankfurt, the Comité de activities includes the Detroit Motor Liaison de la Construction d’Equipment Show, AUTO EXPO in New Delhi, India, In addition to the activities covered et de Pièces d’Automobiles (CLEPA) with more than 40 German suppliers here, the ‘Mittelstandskreis’ also organ- (European Association of Automotive – 20 of which will be at the German ises discussions with representatives Suppliers) in Brussels and the Organisa- pavilion managed by the VDA – Interauto from vehicle manufacturers and mega tion Internationale des Constructeurs in Moscow, the Beijing Motor Show and, suppliers at its annual ‘Mittelstandstag’, d’Automobiles (OICA) (International once again, the SAE World Congress & the annual conference for small and Organisation of Motor Vehicle Manufac- Exhibition in Detroit. In 2007, the VDA medium-sized companies in the VDA. turers) in Paris. will be present at AUTO SHANGHAI, This central SME sector forum brings AUTOMEC in Sao Paulo, the Tokyo Motor together top executives from the entire The VDA international trade Show, the Seoul Motor Show, the SAE in automotive industry and high-rank- fair programme Detroit and at Interauto in Moscow. ing figures from politics and industry; The VDA supports the international the ‘Mittelstandstag’ has consequently activities of its member companies in a In addition, the VDA organises become the ideal platform for the variety of ways. For example, companies numerous conferences, discussion exchange of information and the discus- in the vehicle and supply industry can forums and delegate tours for its mem- sion of matters relating to small and rent space at attractive rates in the Ger- ber companies and supplies information medium-sized companies. man pavilion at foreign exhibitions. This material on foreign markets. provides smaller companies in particular VDA’s international with the opportunity to exhibit their Information about the international presence products to foreign markets cost-effec- trade fair programme can be obtained As a result of globalisation, the tively and with relatively low administra- by e-mailing the VDA at the following VDA is facing new challenges and is tive overheads. address: [email protected]. adapting its organisational structure accordingly. The VDA has consequently increased the number of personnel at its offices in Berlin and Brussels and Automotive Sales and Service has opened offices in Japan and Brazil – thus ensuring a presence in important automotive industry regions. In addi- Distribution policy: still presupposes that the entire added-value tion, the VDA represents its member no lasting success for the chain is managed successfully, starting companies through cooperation with new Block Exemption with individual model planning and con- and membership of numerous interna- Regulation tinuing through the actual sales proc- tional organisations, including the Asso- Successful sales of such a highly ess to market observation following the ciation des Constructeurs Européens complex product as a motor vehicle model launch. These individual facets of 52 Verband der Automobilindustrie GLOBAL MARKETS

an integrated marketing system must be has not been achieved by the Block known as ‘downtown shops’ or ‘auto- regarded as inter-dependent if market Exemption Regulation either. Vehicle mals’, or of the sales subsidiaries that success is to be the aim. manufacturers are themselves pursu- are now possible. The lower margins in ing this objective actively, and it is also vehicle trading caused by tougher com- The distribution system in Europe being encouraged by the single cur- petition evidently prevent the investment has undergone fundamental changes in rency, which makes costs directly com- of any significant sums in this area. In recent years. The legal basis for this, the parable. But despite this, tax charges contrast to this, independent car deal- new Block Exemption Regulation that for purchasing and registering vehicles ers in particular are erecting larger new came into force in 2002 (German: Kfz- are still being imposed at vastly different buildings, above all in urban centres. GVO 1400/02), has if anything tended to levels on the various national markets, impose administrative burdens and and can add up to 200 percent to the Automotive banks reduce the efficiency of the sales system. cost. In other words, totally harmonised – financial services for The positive effects anticipated by the prices for new vehicles in the EU are a mobile society European Commission have so far not still impossible, and at the moment The first bank to be opened by an materialised to any great extent. Margins no specific harmonisation measures automobile manufacturer in Germany and growth rates are low, whereas the throughout the EU are in sight. The was established 80 years ago. Today, opposite is true of administrative costs. motor-vehicle Block Exemption Regula- these banks and leasing companies are The considerable increase in the number tion is certainly not a suitable substitute among the manufacturers’ most suc- of multi-franchise dealers aimed for by tool to achieve any further degree of cessful subsidiaries and market leaders the Commission has not yet occurred: price harmonisation. for financial services connected with there has been some growth on the part the automobile in Germany. ‘Car banks’, of the larger dealer groups, but competi- Nor are there very many signs of the as they have become known, are a link tion is becoming worse for medium-size development of new business models and a central factor in the automotive and smaller companies. in the car sales area, which the Block added-value chain comprising manufac- Exemption Regulation was intended turer, trade outlet and customer. Significant increases in distribution to promote. It seems obvious that the costs are reported from all sides. The independent dealer for new cars, used Automotive banks enable customers new motor-vehicle Block Exemption cars and vehicle-related products to finance vehicles with specifications Regulation, however, has not stream- and services (in particular after-sales tailored to their individual needs. The lined the processes involved and has service) cannot be dispensed with. In services they offer range from ‘classic’ certainly not resulted in any increase in view of its ability to provide both private automobile financing, with many addi- the efficiency of sales organisations. It and business customers with a regional tional services for the private customer has above all led to the introduction of base, the dealership is the motor-vehi- including insurance, to complete fleet new standards. For all those involved in cle manufacturer’s natural partner. management for large companies. both industry and trade, implementing Non-franchised vehicle dealers and Manufacturers gain access to a further these has occasioned significant addi- workshops that do not handle a specific sales channel by way of their bank tional expense that is not being offset by make can only perform this function in subsidiaries, and dealers benefit from increased earnings. market niches, and are unable to guar- the increased rate of vehicle turnover antee full geographical coverage. Nor is that financing/leasing makes possible, The Commission’s wish for new-car there any evidence of the appearance, as well as from closer links with cus- prices to be aligned throughout the EU to any increasing extent, of what are tomers. Annual Report 2006 53

Even at times when the automobile independent motor-vehicle finance remain with their brand when business is sluggish, the manufacturers’ companies remains unchallenged, purchasing their next car. banks, known to the trade as ‘captives’, despite increased efforts on the part achieve significant growth rates: the of the latter group. More than 70 per- ■ Sales promotion: More and more German manufacturers’ and importers’ cent of turnover from financial services car buyers resort to some form of automotive banks and leasing compa- is generated by manufacturer-linked financing model. Three new cars out nies have more than doubled their bal- banks, and of this 85 percent comes of four are now purchased on credit ance-sheet totals in the past ten years, from leasing agreements alone. The terms or leased. Four new cars out to nearly 80 billion euros. Manufactur- continued growth in vehicle leasing is of ten are financed by automotive ers’ banks make an important contribu- borne out by the figures: whereas the banks. The financial services offered tion to the results. The balance-sheet total number of newly financed and by these banks promote the trend totals of the five German automotive leased vehicles remained more or less toward better-equipped cars: when banks and leasing companies alone at the 2004 level, the number of leased choosing a car and specifying its exceeded 63 billion euros in 2004. They vehicles went up significantly. equipment, seven out of ten auto- occupy the leading positions in the list motive-bank customers allow them- of 12 automotive banks operating in In addition, the ‘captives’ create selves to be influenced by the scope Germany. The strong position of the additional employment in a sector asso- of the financial services offered to manufacturers’ banks compared with ciated with the motor vehicle: to the them. 770,000 people employed directly by manufacturers and suppliers must be ■ Profit contribution: The automotive Vehicle leasing is added approximately 18,000 who are banks earn a significant proportion gaining ground employed by their financial subsidiaries, of the parent groups’ annual income. including 11,000 at the manufacturers’ During a vehicle’s life-cycle, about In units x1000 (leasing and credit purchase) banks and leasing companies. 20 percent of the profit it generates New-car leasing derives solely from the associated New-car credit purchase Automotive banks: financial services. In contrast to 1,312 1,305 partnership with the the rather volatile character of the manufacturer automobile business, these services Motor-vehicle financial services are represent a stable earnings factor. a central element in the manufacturers’ 711 760 customer portfolio. In addition, the auto- Partnership with dealers motive banks fulfil their parent compa- The common link with the brand +6.9% nies’ strategic objectives: creates a close partnership between the automobile dealer and the automo- ■ Links with the customer: Motor- tive bank. The business relationship vehicle financial services promote between bank and dealership is notable 601 -9.3% 545 the customer’s brand loyalty. Those for its fairness, transparency and plan- who are customers of the manufac- ning security. For the automotive trade, turer’s ‘car bank’ decide distinctly having its own ‘car bank’ has become 2004 2005 more often than customers of other an important economic factor: it has Source: AKA banks or those who pay cash to been established that customers who 54 Verband der Automobilindustrie GLOBAL MARKETS

wish to make use of financial services chase of a new car, maintenance and equipped to cope with it. They are fac- more often remain with their existing servicing work and used-car financing. ing up to future challenges by develop- dealer when purchasing their next car. ‘Classic’ financing, option financing and ing innovative products that satisfy the Greater customer loyalty also increases private or business leasing enable the customer’s wish for a comprehensive utilisation of the dealer’s workshop, and various brands to respond accurately range of mobility services. at the same time the automotive banks’ to the differing needs of individual cus- professional customer-link management tomers. Additional services such as car Vehicle financing: new puts the dealer in a position to make insurance, residual debt insurance or bureaucratic obstacles specific offers to customers at the most gap insurance, with or without extended must be avoided appropriate moments. warranty cover are an opportunity for In October 2005, the European Com- customers to convert the various forms mission submitted an amended proposal In the refinancing area too, the man- of finance into flexible, individually con- for an EU consumer credit directive. ufacturers’ banks fully justify their role figured mobility packages. Customers The automobile industry supports as partner to the dealership. By offering welcome business dealings with the efforts to harmonise consumer credit favourable purchase financing terms, manufacturers’ banks because of the law throughout Europe, but the draft they relieve the cost burden on the clarity of the offers available from them. directive cannot, in its present form, be dealer. Surveys have also established regarded as practicable for the industry, that car dealers are able to increase Automobile financial even when compared with the initial their yield on turnover by between 0.1 services – a market with draft of 2004, which pursued the aim of and 0.4 percent with the aid of finance a future maximum harmonisation. and leasing offers. Since the automotive The importance of financial services, trade’s average yield on turnover is only which is already high, will increase The draft directive would also create in the region of one percent, financial further. More than 40 percent of all new new bureaucratic obstacles in the credit services represent an important source cars sold in Germany are already being brokerage area. The automobile indus- of income and make a worthwhile con- financed or leased by the automotive try’s view, however, is that the negotia- tribution to safeguarding the future of banks. Market surveys indicate that it tion of credit terms at the dealer’s cre- the automotive trade as the European should be possible to increase this fig- ates no problems and therefore needs market becomes increasingly integrated. ure to more than 60 percent in coming no further regulation, since the products years. About two-thirds of Germany’s concerned are normally standardised in Customer benefit car owners intend to finance the pur- character and do not call for scrutiny in Customers profit from the partner- chase of their next car or lease it. About accordance with trade law. Before the ship between manufacturer, bank and 30 percent of those who planned to Commission’s proposal can be regarded dealership, which enables the automo- purchase a car by the end of 2006 but as practicable, it therefore needs to be tive banks to offer financial services that were not yet customers of an automo- revised again. are precisely geared to the customer’s tive bank were intending to make use mobility needs. Fair business conditions, of the services of such a bank. Credit brokerage in the automobile flexible forms of finance and overall trade is notable for the high degree ownership costs that can be clearly cal- Along the entire added-value of technical advisory work relating to culated are features of the automotive chain, competition on the car market the vehicle that the customer intends banks’ financial products. They cover is becoming increasingly severe, but to purchase. Negotiation of the actual the car’s entire life-cycle, including pur- Germany’s financial subsidiaries are well financial conditions, on the other hand, Annual Report 2006 55

is based on standardised products. In period during which the customer can There is much to be said in favour any case, the bank involved in the nego- object to the contract is to begin only of making the customer a motor-vehi- tiations is covered by the EU directive, after the bank has approved the loan. cle insurance offer when the vehicle is so that the bureaucratic effort would This could delay delivery of the vehicle being purchased: the salesperson is the be duplicated. The need to protect the unnecessarily, and it would not be in the first to have the opportunity to establish consumer is already satisfied by the customer’s interest to have to wait until not only the intention to purchase but civil-law liability of the bank involved in the objection period had expired. The also the possible need for insurance, the transaction, so that the activity of a automobile industry therefore consid- and to draw up a direct, tailor-made broker does not deprive the customer of ers it more appropriate for the objection offer. The emphasis here is on the any potential protection. period to start as soon as the contract customer’s wish to obtain all the neces- has been signed. sary services associated with his or her The Commission also proposes that vehicle from a single source (one-stop member states should set up an official The existing draft EU directive also shopping). Although car dealers have supervisory body. Supervision automati- conflicts with specific national civil law. already concluded about two million cally presupposes that registration will If there is no unified ruling, the direc- insurance agreements, they have by no be called for. With more than 10,000 tive should at least enable national means exhausted this potential as yet, car dealers in Germany alone, immense legislators to draw up their own provi- compared with the more than 12 million bureaucratic effort would be needed to sions, with scope for them to be mutu- transactions that take place every year register such a large number of busi- ally accepted. In addition, consumers on the German motor-vehicle insurance nesses as brokers and supervise them. in some EU countries can waive their market as a whole. These include If only for this reason, the proposal is objection in the event of immediate almost three million new-car and about impracticable. delivery, and this should accordingly be six million used-car sales. A further made an option in all national legislation. three to four million transactions result Furthermore, the volume of standard from a change from one insurer to information called for in the draft Motor-vehicle insurance another. directive when negotiating the credit – an important contributor purchase of an automobile goes far to business volume In this respect, the automotive trade beyond what is in fact offered in the Among the various automotive serv- has an opportunity to develop integrated credit terms after individual assessment ices, the role of motor-vehicle insurance products that group together workshop- of the customer’s creditworthiness. is often under-estimated. Although on related services with the insurance Automobile dealers’ advertising for the the one hand the insurers represent an product. Assistance services or mobility purchase of their vehicles on credit integrated business model for the brand guarantees are further potential open- terms should therefore only contain in the automotive trade, they are none- ings. In all cases, the customer can information that will be understood by theless subject to different market con- choose between standard and premium the potential customer. Extensive exam- ditions from those applicable in vehicle products. In addition to moderately ples would be more likely to confuse financing. Insurance brokerage can, priced standard insurance products, the customer than provide additional however, offer the dealer an additional some brands for instance offer car information. source of income and even generate repairs and full acceptance of costs by further turnover, either directly or indian authorised workshop, using original A further bureaucratic obstacle rectly, for example by way of accident replacement parts, as an addition to a derives from the fact that the 14-day damage processing or servicing work. comprehensive insurance policy. 56 Verband der Automobilindustrie GLOBAL MARKETS

The ability to offer insurance pack- ing a stock of spare parts and training ing design protection for spare parts. In ages has advantages for the customer workshop staff. 2004, the German government passed and the dealer alike – not only in terms its Registered Design Reform Act, which of the sale itself, but also through closer It is nevertheless true to say that as confirms design protection for parts links with customers and an increase the vehicle becomes older, less use is without any change. German law has in the volume of servicing and repair made of this offer. This fact is borne out thus identified the need for spare parts work. Furthermore, car insurance and by the statistical records of the official as well to be entitled to this important additional warranty cover are capable of vehicle inspection organisations. The protection right. For German vehicle stabilising used-car values and residu- number of vehicles refused a general manufacturers and suppliers, the aboli- als if repairs have been carried out by inspection or emissions test sticker has tion of design protection for parts would authorised workshops and original parts risen noticeably in recent years. It great- be an unreasonable step and one that used in all cases, and these costs have ly reduces the cost and time burden conflicts with the objective laid down been fully covered by the policy. There is on customers if they are able to have by the European Commission in Lisbon a tendency among the owners of older these inspections and tests carried out in 2000, namely to make industry more vehicles to have repairs performed out- together with voluntary vehicle main- competitive. side the brand’s network, but the con- tenance in the workshop, all the more clusion of extended warranty insurance so since in most cases the vehicle does The VDA is therefore of the opinion enables the brand dealer’s workshop not have to be taken to the technical that design protection for spare parts to retain this business. The customer inspection service’s premises again for a should not be abolished. Even if the benefits from professional standards repeat inspection. European Commission has the inten- of maintenance and from the vehicle’s tion of entirely harmonising design law higher residual value. The motor-vehicle trade is taking on the single market, this must not be a more optimistic view of its business achieved at the expense of industry. After-sales service prospects for the current year (2006) The abolition of design protection is As a high-tech product, the auto- than it has done in previous years. In unnecessary: it creates no additional mobile has always occupied a special the recent past, its earnings have hov- consumer benefits, nor does it promote position on the consumer-goods market. ered around the zero mark, but pros- competition within the industry. Early last century, manufacturers began pects of achieving a distinctly higher to build up their own service organisa- earnings level in 2006 have risen. This No advantages for the tions. Today, customers have nationwide estimate is based on two factors: antici- customer after-sales service systems at their dis- pated economic growth this year and In 2003, the European Commission posal. Since motor vehicles need regular an increase in vehicle sales preceding arranged for the Technopolis company maintenance and upkeep, their own- the rise in value added tax from 16 to to undertake a study of the effects of ers rightly assume that there will be a 19 percent that has been announced possible changes to the design protec- workshop specialising in their particular for 2007. tion rulings for parts, both in respect of brand in their neighbourhood. ‘Special- possible loss of quality and also of price ising’ means here that the workshop is Design protection for parts: reductions in the parts trade, which able to make a systematic offer of work, abolition threatens ability were not expected to occur. every aspect of which is supported by to compete the vehicle manufacturer, for example by The European Commission intends Based on various sources and on compiling workshop manuals, maintain- to issue an amended directive abolish- insurers’ and vehicle manufacturers’ Annual Report 2006 57

investigations, Technopolis established the European Union, this would lead with many other EU initiatives aimed that the quality of aftermarket parts to a significant drop in the vehicle at improving the degree of protection does not match that of original parts industry’s market share and income afforded to intellectual property rights. and therefore leads to greater effort and and would affect its employment levels. expense when repairs are carried out. The Technopolis study forecasts a loss Among these is the recently A study conducted by the Allianz insur- of profits between 1.1 and 1.8 billion approved directive for the exercise of ance company reached the conclusion euros annually in the EU. Even this is commercial protection rights, which that even if aftermarket parts have a an extremely conservative estimate: the would be undermined by the new price advantage, their dimensional inac- actual adverse effects could be very design protection proposal. The conse- curacy led to an increase in assembly much more severe. quences would be especially problem- and processing effort of up to 47 per- atic for the automotive industry, since cent, which cancelled out any price The abolition of design protection product piracy is a significant problem advantage. The Allianz report also cast for parts would mainly benefit parts in this business sector both within and doubt on the safety of aftermarket parts manufacturers outside the European outside the EU. In WTO negotiations, and advised against using them for Union, who would in this way gain the EU endeavours to ensure that other accident repairs. access to EU markets. The Technopolis countries also establish an equally study confirms that pirate production is effective commercial protection rights Nor did the Technopolis study find mainly taking place in countries such system. This is particularly relevant in any evidence that part prices or insur- as Turkey, Taiwan, China, Brazil and countries such as China, where vehicle ance premiums would drop if design Argentina, and also concludes that manufacturers and suppliers are cur- protection were to be abolished. It automotive-industry suppliers would be rently confronted with massive cases of established that on markets such as confronted with growing competition product piracy. the USA or Great Britain, the prices for from outside the EU, in particular from spare parts were not noticeably lower, Southeast Asia and Latin America. Whoever questions the need for even though the insurers there required design protection to apply to parts must aftermarket parts to be used. The study Compared with the legal situation therefore explain how manufacturers did not expect any price advantage in Japan and the USA, the abolition are to protect themselves in the future possessed by non-franchised parts sup- of design protection for parts would against copies of parts manufactured pliers to be passed on to its full extent particularly disadvantage European in China if even the EU does not regard to the end-user. It therefore concluded manufacturers when competing on their their intellectual property as being wor- that the end-user would not necessarily domestic markets. The only beneficiaries thy of protection. enjoy any benefit from lower prices if would be importers and traders within design protection were to be discontin- and outside Europe. Product pirates distort ued. competition Conflict with the EU The vehicle manufacturers and their The European automobile policy of strengthening suppliers bear the entire risk and cost of industry would be intellectual property rights development, engineering, safety tests, weakened as a result The proposal to abolish design build-up of an EU-wide sales network If the production of aftermarket protection for parts not only damages and maintenance of spare part stocks parts based on design-protected parts the European automotive industry’s for more than ten years after a new were to be generally permitted within competitiveness, but is also in conflict product has been launched. Product 58 Verband der Automobilindustrie GLOBAL MARKETS

pirates and companies manufactur- Workshop preferences in Germany ing copies of these parts, on the other Percentage preferences for maintenance and inspection work hand, have no such costs to bear. They can select the most profitable parts with Market segments according Overall market to year of manufacture rapid turnover and reproduce them by simple ‘reverse engineering’ methods. 60% 28% In addition to the manufacturers of the 34 31 original parts, it is the customers who 43 55 suffer in the long run, since product pirates only sell their parts for as long 79 12% 96 as a profit can be obtained. 42 44 The automotive aftermarket 42 34 For both automobile manufacturers Independent workshop and the supply industry, the automotive 27 Do-it-yourself 16 22 27 aftermarket is becoming increasingly 11 15 5 important. It comprises the complete 2002- 1999-1996-1993-1990- before 2004 2001 1998 199519921990 service and spare parts business areas, Source: MAA, 2004 as well as vehicle diagnostics and technical information within the automobile industry. factors, can be established with great metres ten years ago, a high-quality The dynamic character of this after- accuracy for the vehicle’s entire life- spark plug is today designed to last for market and the various levels at which cycle. 100,000 kilometres. it operates make it difficult to assess its exact size and structure. However, since It can be generally stated that the Regardless of this, the decisive detailed market knowledge is the key to positive trend of recent years has been factor influencing the positive trend in satisfying customers’ wishes and thus maintained in the parts business. This is aftermarket business is still the increase to market success, leading companies due to more and more complete vehi- in average vehicle age – from 6.8 years within the supply industry created a cle equipment specifications and the in 1995 to 8.1 years in January 2006. European-scale market observation sys- increasing complexity of components, Drivers are investing in the upkeep of tem in 2003, the ‘Market Analysis Auto- together with their individual value in their vehicles for an increasingly long motive Aftermarket’ (MAA). Interviews many cases. These factors have more period. However, fault statistics kept by were conducted with drivers and work- than outweighed a partial drop in abso- the inspecting organisations also dem- shops, for instance in order to obtain lute volume resulting from continual onstrate that owners are increasingly a picture of spare part and accessory quality improvements, reduced wear saving money on maintenance and purchasing patterns and reach conclu- and extended replacement intervals. repairs, with negative effects on their sions concerning product-specific rates The customer benefits in full from these vehicles’ road safety. One positive ele- of change or workshop preferences. For increases in operating life: whereas ment in this situation, however, is that example, any change in preference for spark plugs, for example, had to be the German Association for Motor a specific workshop, as well as other replaced on average after 20,000 kilo- Trades and Repairs (ZDK) recorded a Annual Report 2006 59

gradual decrease in the backlog of business sector. Cooperation between piracy on the automotive aftermarket. repairs in 2005. companies that are VDA members Although precise global quantification has an important role to play in this is extremely difficult, this problem must Motorists’ increasing sensitivity to respect. not be under-estimated. Installing cop- price has to be contrasted with the ies of safety-relevant spare parts can increasing demands that have to be Supply chain management has a have severe consequences, quite apart satisfied, for example in fault diagnosis considerable influence on aftermarket from the considerable drop in sales and repair or in logistics. Every element cost and service factors. The ‘Aftermar- income and possible image loss suf- in the service chain – vehicle and parts ket’ committee has been formed jointly fered by the original manufacturer. With manufacturers, parts wholesalers and by the supply and vehicle manufacturing this in mind, the Aftermarket Committee either franchised or independent work- industries to look into this topic. Project set up a separate workgroup in June shop networks – have no option but to groups consisting of equal numbers of 2005. As a basis for concerted opposi- invest specifically in the latest technical members from each of these areas of tion to product pirates, an efficient equipment, in thorough training of their industry are developing standards both network of companies is being built staff and in the optimisation of their for optimal communication along the up, so that relevant information can processes. As a means of confront- supply chain and for a reduction in the be exchanged without delay. Another ing this challenge, parts and vehicle number of storage stages with a view to important aspect of this project is manufacturers are not only localising cutting costs. for the topic of product piracy to be potential in their own companies but brought more strongly to the attention also stepping up the search for synergy Synergy effects are also being of public authorities, politicians and the effects with partner-companies in this obtained in the fight against brand general public.

Auto TRANSPORT

Auto 62 Verband der Automobilindustrie TRANSPORT

Road Transport leads the Way

The truck promotes growth of road freight transport by 12.4 euro- and employment cents per vehicle kilometre, they had The truck remains the principal no effect on the proportions of freight factor in Germany’s freight transport. In handled by the individual modes of 2005, road freight transport in Germany transport. handled 394 million tonne-kilometres, 2.7 percent more than in the previous In 2006, road freight transport is year, and continued to supply a domi- expected to grow at the even greater nant, 72-percent proportion of freight rate of 3.0 percent; the equivalent values transport by road, rail and water. The for rail and inland waterways will rail system handled 89 million tonne- probably be only 2.7 and 1.9 percent kilometres, a share of almost 16 percent; respectively. The above-average growth the volume moved by the inland water- in road freight transport, according to ways was 66 billion tonne-kilometres the Federal German Transport Ministry’s or just under 12 percent. Although the medium-term forecast covering the truck toll charges introduced at the period up to 2009, will persist until then, beginning of 2005 increased the cost which means that road freight transport

Freight transport in Germany until 2015 In billion tonne-kilometres

Inland waterways 90.0 600 Rail 70.1 Road freight 115.0 500 65.7 98.1 66.5 89.3 485.0 62.2 400 77.5 436.7 73.9 394.0 300 346.3 54.8 301.8 51.4 200 61.9 48.8 64.9 71.5 169.9 100 125.4 78.0 0 1970 1980 1990 19972000 2005 2009* 2015* *Forecast Sources: DIW, BMVBW, BVU/DLR/ISL Annual Report 2006 63

Freight transport in EU-15 countries until 2010 capital tied up in the load can be freed without delay. Furthermore, the truck In billion tonne-kilometres can be used to move smaller loads Inland waterways 167 or individual batches of goods eco- 2,000 Rail nomically, whereas rail and waterborne Road freight 333 modes of transport only perform well 125 1,736 when moving bulk materials and large 1,500 249 volumes of goods over long distances. The differences in these performance 107 1,348 256 profiles clearly indicate the different 105 1,000 roles of the various modes of transport 290 974 103 and impose clear limits from the start 282 717 on any attempt to shift freight transport 500 away from the roads. 487

However, the major importance of 0 1970 1980 1990 2000 2010 the truck for freight transport calls for Source: EU Commission vehicle manufacturers and the road hauliers to make every possible effort to minimise its negative consequences. The significant reduction in truck emis- will increase its share of the total to successfully than other transport modes. sions and the improvement in fuel con- more than 72 percent. It can be operated flexibly and is not sumption in recent decades, achieved tied to a fixed timetable. Another major by avoiding unladen journeys and A similar development is anticipated advantage is that it can reach almost making greater use of the trucks’ load in the other countries of the European any destination – from one factory to capacities, are evidence that industry Union. In the EU-15 group of nations, another, into our city centres and all and hauliers have long since begun to road transport already accounts for the way to our supermarkets. This is face up successfully to their responsi- approximately 78 percent of total freight assured by the truck’s high network- bilities. movement. It is also the main mode of ing capability. Transport speeds on the freight transport in the new EU coun- road are also higher than when freight Cars are indispensable for tries, where the truck accounts for is moved by rail. According to a study the mobility of citizens about two-thirds of total freight move- conducted by the Transport Centre of If the truck occupies a dominant ments. Forecasts expect the figure to Braunschweig Technical University, the position in freight transport, the position rise by 2010 to about 70 percent. system speed of modern truck transport of the passenger car is equally domi- is currently in the region of 50 km/h, nant in the personal mobility area. In The truck – a system with whereas the most optimistic estimate 2005, 891 billion person-kilometres were advantages of rail freight system speed does not driven on Germany’s roads, representing The technological advantages of the exceed 10 km/h. This high speed of 81 percent of all passenger transport. truck enable it to master the transport movement speaks in favour of moving This figure, like those for all surface demands of the modern economy more high-value goods by truck, so that the transport modes, grew only moderately 64 Verband der Automobilindustrie TRANSPORT

Passenger transport in Germany until 2009 in the new member nations is also a In billion passenger-kilometres factor in this growth. The populations of these countries still have much ground 1,200 Air travel to make good in the private mobility Rail 51.8 59.5 area. Whereas there are 546 passenger Public road transport 75.7 1,000 42.7 74.5 cars per 1,000 of the population in Car travel 35.8 75.4 81.4 72.4 79.5 Germany, the figure in these countries 77.3 76.2 has so far only reached 330 cars. 800 18.4 44.6 Moderate growth in 11.0 65.0 600 41.0 passenger transport 6.6 74.1 39.2 expected 400 58.4 In Germany, the growth in motorised passenger transport in the coming years 379.5 477.4 601.8 833.4 849.6 891.3 902.2 200 will be only moderate. Reasons for this are that population growth has come to a halt and will be reversed in the me- 0 1970 1980 1990 1997 2000 2005 2009* dium term, and that the level of motori- sation is already extremely high and *Forecast Sources: DIW, BMVBW, BVU/DLR/ISL shows increasing signs of approaching

(by 0.2 percent compared with 2004). Passenger transport in the EU-15 until 2010 If one bears in mind, however, that the In billion passenger-kilometres 408 consumption of German households Air travel actually fell by 0.3 percent last year, it Rail 400 is evident that consumers have re-allo- 5,000 Public road transport 281 562 cated part of their incomes to use of Car travel 157 303 their cars and thus to the maintenance 4,000 466 268 of their personal mobility. 417 74 3,000 Elsewhere in Europe too, the pas- 248 389 senger car forms the backbone of pas- 33 2,000 219 senger transport. In the EU, it accounts 308 for 4,400 billion person-kilometres or more than three-quarters of passenger 1,000 1,582 2,295 3,199 3,789 4,559 transport performance. By 2020, the EU Commission estimates the figure to have 0 1970 19801990 2000 2010* grown by approximately 1.5 percent *Forecast Source: EU Commission annually. Previously unsatisfied demand Annual Report 2006 65

saturation point. The Federal German times more than to do so by bus. In becoming more and more popular with Transport Ministry’s medium-term fore- periods of economy in public spending, the public. Nor should one forget that cast therefore assumes that individual the bus therefore has particularly good more than 100 million people undertake transport will not grow by more than prospects for further success. privately organised coach journeys every approximately 0.3 percent annually by year – day trips, short tours and other 2009. According to an estimate com- Public authorities are therefore outings. All in all, the German coach piled by the German ADAC automobile called upon to make greater use of the travel market undertakes at least 120 club, transport volume will already begin opportunities offered by the bus for million tours and other journeys an- to stagnate by 2010, despite the growth comfortable, efficient and economic nually – with a rising tendency and in new passenger-car registrations, and local public transport. At the moment, considerable economic potential. will decrease by 2015, not least because most of the funds being made available even now many cars are being bought for local public transport are devoted Buses and coaches are thus an as second or third cars and are not to the rail network – a disproportionate indispensable partner for the tourist driven as much as the household’s situation that should be corrected. trade. In 2005, turnover from coach first car. tours increased again by 2 percent. The coach offers considerable A study undertaken by the Munich- Regardless of this, the passenger potential for the travel industry. 2005 based Ifo Institute indicates that higher- car will remain by far the most signifi- was by and large a satisfactory year value coach tours in particular have cant form of passenger transport; the for the coach tour trade in Germany. increased in popularity. With this as fall in the population will have a more The latest results from the 2006 jour- a background, the trade expects this severe structural effect on public trans- ney analysis indicate that the share business area to grow again in the cur- port than on individual transport, since of holiday journeys involving a stay of rent year, and continues to regard coach the former is dependent on journey five nights or longer accounted for by tours as an area with great potential for routes being grouped together, a task coach travel rose to ten percent in 2005, future development, the more so since it which becomes increasingly difficult as half a percentage point higher than the offers advantages that no other form of residential density declines. previous year’s figure. This result is all travel can match. These include flexible the more impressive for having been door-to-door transport with no luggage Buses: essential for local achieved despite the dumping-price problems and exceptionally high stand- public transport and the strategies pursued by low-cost airlines ards of journey comfort and safety. The tourist trade and exceptionally low-priced rail ticket coaches used today for holiday journeys, The bus is the key element in Ger- offers. The trend for the future is a study tours or visits to cities all exhibit a many’s local public transport. Almost positive one: by 2015, coach travel is standard of comfort and service that is every other passenger, of those who expected to increase its market share to much higher than what air or rail travel undertake some 5.2 billion local jour- between 12 and 15 percent. The coach can provide. In 2005, as in previous neys annually, does so by bus. In towns tour trade sees particular prospects of years, the coach traveller’s risk of suffer- of medium size, on the fringes of large success in the increasing intensity of ing a fatal accident was lower than for cities and in particular in rural areas, travel by older people aged 60 or above, any other mode of transport. Related to the bus is for many people an indispen- and the greater number of second or the distances covered by the vehicles, sable mobility factor and, furthermore, third holidays being taken. In addition to the bus and coach accident frequency an extremely economical one. To carry classic coach holidays, shorter tours and in Germany has fallen almost by half 100 passengers by rail costs many visits lasting only two to four days are since the early 1970s. 66 Verband der Automobilindustrie TRANSPORT

Coach tours therefore continue to most popular destinations and making further. The task of the EU Commission provide safe, flexible and environmen- individual guests’ dreams come true. is thus to work systematically towards tally acceptable mobility, free from the The ideal vehicles are available for the transposition of these directives in constraints of the rail network or fixed every occasion – for brief city tours, all member states. The motor-vehicle timetables. Coaches suitable for every luxury study tours or journeys under- industry, which makes use of rail links group size carry tourists and holiday- taken by clubs, societies or groups of in its own transport chains and is one of makers from door to door, serving the friends. the largest rail freight clients, is keenly interested in the ongoing improvement of cross-border rail freight transport in European Transport Policy particular.

Making road transport Midterm review of the this does not imply a lack of equilibrium artificially more expensive EU White Paper that needs to be corrected on the politi- is the wrong approach This year, EU transport policy has cal level, but is simply the outcome of If the start that has now been to be viewed in the light of the White the standard of performance offered by made on opening up the rail transport Paper submitted in 2001 having reached road transport, and tells us that private sector to greater competition leads its half-way mark. The aims stated on its individuals and business users regard to an increase in its efficiency, and in appearance were for the shares of the it as more capable than other modes of particular if it can fully utilise its long- overall market held by individual modes transport of satisfying society’s transport distance freight transport potential and of transport in 1998 to be stipulated as and mobility needs. in this way increase its overall market binding for the future and for the trend share, this would be the outcome of for road transport to increase its share Revision as an opportunity a market process and would optimise to be halted. for re-alignment the entire transport system. On the Political re-allocation of transport other hand, attempts to make road The situation laid down in this way volumes is therefore undesirable. On the transport artificially more expensive needs to be critically examined. The pro- contrary, the authorities should concen- as a means of increasing the relative portions of the overall market secured trate on creating overall conditions that appeal of rail transport represent an by individual modes of transport are the enable each mode of transport to make incorrect approach. They have already result of journey, mobility and logistical full use of its potential and pave the way proven unhelpful, and will only lead decisions taken by Europe’s citizens and for optimum integration of them all into to an increase in logistical costs in its business enterprises, and are based the linked transport and logistical chain. Europe and, since they conflict with the on the relevant market processes. There To effect a further improvement in the objectives of the Lisbon strategy for can be no doubt that citizens and busi- efficiency of the transport system, all more growth and employment, reduce nesses know which modes of transport modes of transport should be incorpo- Europe’s ability to remain competitive. are best suited to specific transport rated systematically into the competitive tasks. Taken together, these individual process. The opening up of the market, Flaws in the new decisions determine the market shares initiated by the EU railway packages Infrastructure Charging held by each of these modes. If road and based on positive experience with Directive transport happens to dominate both the the opening up of the road transport In view of this background situation, passenger and freight transport sectors, market, should therefore be pursued it is gratifying to note that the new Annual Report 2006 67

version of the EU Infrastructure Charg- effects on the environment attributable traffic. Since light commercial vehicles, ing Directive proposes retaining the link to road transport. like passenger cars, cause very little between toll charges and the cost of wear to our dedicated highways (for building and maintaining the road infra- Regrettably, the Council of Ministers instance the German ‘autobahns’), the structure initially. A surcharge of up to and the EU Parliament were unable to imposition of a toll as a means of allo- 25 percent is permissible only for infra- agree on the road toll revenue being cating road costs would not be justified structure in mountain regions, subject devoted strictly to road infrastructure, as for this reason either. to certain conditions. However, the new would have been desirable. As a result, directive calls upon the Commission to European legislation does not impose the Midterm road safety review submit within two years a generally valid necessary limits on the use of revenue In addition to examination of the EU model for the monetarisation of what from roads transport to cross-finance or White Paper, the Commission undertook are referred to as ‘external costs’, such subsidise other modes of transport or a midterm review of the EU road safety as costs incurred for environmental and even general governmental tasks. strategy this year, and confirmed the noise reasons, so that these can be EU’s target of halving the 2001 figure used as a basis for calculating future Following intervention by the Federal for road fatalities by 2010. By 2005, infrastructure charges. The model is also German government, member states will a reduction of almost 18 percent had to be accompanied by proposals for still be able to restrict road toll liability been achieved, with Germany above the revision of the directive, if appropriate. to trucks weighing more than 12 t in average at 23 percent. Further efforts the future. The VDA joined the Federal are nonetheless needed, particularly in One should, however, be wary of German government in Brussels in the new EU nations, where the accident overburdening road transport with road resisting the compulsory introduction figures are still rising in some cases, but user charges for reasons of environ- of road tolls for vehicles weighing also in the EU as a whole. The automo- mental protection policy that are already upwards of 3.5 t. If the EU had included bile industry is in favour of an integrated covered by emission-oriented motor- such vehicles, which are primarily used approach that devotes equal atten- vehicle taxes or energy taxes. Road tolls for local delivery and transport work, tion to the vehicle, the driver and the are only one possible tool for covering this would have resulted in more traffic infrastructure. This will permit further infrastructure costs, as was established diverting to minor roads and urban road improvements to be made more cost- in Germany by the Pällmann Commis- networks, with adverse effects on road effectively than if one of these factors is sion on the future of infrastructure safety, the environment and the flow of considered in isolation. financing. Against the background of heated dispute regarding the methods to be used when determining possible ‘external costs’, there is a threat of National Transport Policy gratuitous political costs being imposed on road transport; in view of the severe burden already represented by vehicle The automobile industry’s of mobility and for it to be given higher and mineral oil taxes in particular, this key demands status. This would entail making greater would not be justified. Nor should it be In its key demands for the 16th Fed- efforts to extend and maintain the road forgotten that technological improve- eral German legislation period, the Ger- infrastructure, but above all to make ments in vehicle technology have led man automobile industry called for poli- mobility affordable once again. With this to a steady reduction in the negative ticians to make a clear stance in favour in mind, the automobile industry urged 68 Verband der Automobilindustrie TRANSPORT

politicians in the new legislation period must now be to breathe life into this value added tax on January 1, 2007 and not to tighten the screw still further in principle when the annual budget thus to the cost of fuel will alone with- terms of the taxes and charges payable discussions take place. draw purchasing power to the order by road users. This rules out from the of several billions of euros from the start a road toll on private motorists or In addition, the coalition government transport sector. An additional 1 million any extension to the range of trucks for proposes to extend the range of tasks euros, for example, will be collected which a toll is currently payable. performed by the Transport Infrastruc- as value added tax on the mineral oil ture Financing Company (VIFG) and tax. Irrespective of this, the coalition Coalition government examine its credit-issuing capacity. The agreement does not include a clear acknowledges importance latter is to be determined in concrete rejection of road tolls on passenger of the infrastructure form. The desirable conversion of the cars. In her government policy statement, VIFG into a ‘Federal German Main Road the Federal German Chancellor, refer- Company’ and the equally necessary Intended strengthening of ring to the demand for greater efforts direct transfer of revenue from truck Germany as a logistical to be made in the infrastructure area, tolls were not referred to in the coali- location emphasised: “As a modern industrial tion agreement specifically, so that for Positive emphasis must be given country, a service-providing society and the moment at least no unequivocal to the coalition government’s desire to a scientific community, we will be un- evidence of willingness to make the extend Germany’s position as a logistical able to maintain our position unless we VIFG independent of the government’s location. Approximately 2.7 million jobs also have a modern infrastructure. This budget was provided. already exist in this area. An undertak- also relates to our transport networks. ing has been made to secure overall In the next four years we shall be It is pleasing that the legislation operating conditions that are interna- spending 4.3 billion euros more on envisaged in the coalition agreement tionally competitive for Germany and transport infrastructure projects.” The for acceleration of the planning process to promote active marketing both at coalition agreement also set a positive takes into account a further demand put home and abroad. In cooperation with signal in terms of investment in infra- forward by the automobile industry in the transport industry and cargo han- structure by undertaking to raise and the infrastructure area. dling industries and with scientific aid, stabilise considerably the investments a master plan for freight transport earmarked for Federal German transport Mobility costs should and logistics is to be compiled, with routes. remain socially tolerable the specific aim of increasing the effi- The coalition government’s clear ciency of the entire transport system It is gratifying to note that the acknowledgement of the fact that for freight movement purposes and coalition government has abandoned mobility costs must be kept socially making better use of the available the previous ideologically based invest- acceptable is to be welcomed. It also traffic routes. ment key of 50:50 for road and rail, intends to make full use of the scope and declared itself to be in favour of for harmonisation available in Germany From the automobile industry’s a requirement-oriented application of as a means of reducing the burden on standpoint, care will have to be taken funds, which are intended above all the transport industry. Nonetheless, the that the logistical decisions of the to be allocated to areas in which there burden on road transport imposed by cargo handling industry can still be is an urgent need for action and the taxation will increase still further. The taken within a market framework. The elimination of bottlenecks. The aim three percentage points to be added to master plan must not be misused as a Annual Report 2006 69

government modal-split requirement. modes has shown that this aim is term, the experts recommend the com- On the contrary, the political task must most easily realised if they are made plete separation of the rail network and be to create suitable overall conditions competitive. Both the expertise commis- the operation of rail services. They feel for the country as a logistical location, sioned by the German parliament and that an integrated stock exchange including, for example, re-alignment a study undertaken for the BDI (Fed- launch, on the other hand, would intro- of infrastructure planning with special eration of German Industry) and the duce risks. Firstly, despite the planned consideration of the interests of freight DIHK (German Chamber of Trade and agreement on services and financing transport, the promotion of innovative Industry) reach the conclusion that between the Federal government and commercial-vehicle concepts so that the no such competitive alignment can be DB AG, the latter might reduce the capacity of the existing infrastructure achieved if the stock exchange place- extent and quality of the rail network is better utilised or the examination of ment includes the rail network. They when compelled to do so in order to further means of optimising combined indicate that, in the rail freight transport maintain its earnings level, and observ- transport methods. area in particular, the degree of com- ance of the agreed quality standards petitiveness and the quality of the would be difficult for government Rail policy must be aimed service offered increase to the extent authorities to confirm. Secondly, DB AG at strengthening the rail that the rail network is separated from would have long-term control over system transport activities. access to the rail network, which would The coalition agreement does not give it an advantage over other opera- examine how reform of the rail system In view of this situation, the auto- tors that could not even be entirely is to proceed and what strategy should mobile industry and other branches of eliminated by the Federal Network be adopted to launch it on the stock industry are of the opinion that the rail Agency. It assumed responsibility for the exchange. These decisions have been operating company DB AG should be supervision of competition on the rail postponed until the expertise submit- launched on the stock exchange without network on January 1, 2006. ted to the German parliament has been the associated rail network. This is assessed. In addition to capital-market regarded as the only way to bring the The coalition government, which is considerations, the aim is also to take rail reform begun in 1994 to a sensible expected to announce its decision as transport, financial, budgetary, macro- conclusion. In the study commissioned to the form that the stock exchange economic and planning aspects into by the BDI and DIHK, the transport launch should take in autumn 2006, account. experts warn against launching the would therefore be well advised to heed ‘Deutsche Bahn’ on the stock exchange the advice of the transport experts and As a major user of rail freight as an integral corporation and propose not to undertake a stock exchange services, the automobile industry is that the first step should be for this launch including the rail network – strongly interested in rail transport launch to be undertaken according to above all because network privatisation efficiency. Important steps in this what is referred to as the ‘ownership would then be irreversible or high costs direction could be taken in this legisla- model’. This envisages the rail network would be incurred if it had to be repur- tive period by continuing the rail reform remaining the property of the Federal chased, even if network privatisation with the aim of realising the planned government and for only the DB AG proved subsequently to be a major error. stock exchange placement. The latter transport company to be launched on A stock exchange launch according should be tackled in a manner that adds the stock exchange, though the latter to the ‘ownership model’, on the other to the overall strength of rail as a mode company would initially continue to hand, would offer scope for further of transport. Experience with other operate the rail network. In the longer development, that is to say it would in 70 Verband der Automobilindustrie TRANSPORT

the long term permit further separation area. On no account should the stock Each kilometre of main road carries an of the rail network in the form of a exchange launch decision depend on annual average of 13.8 million transport complete vertical division in the rail purely fiscal considerations. performance units, whereas the rail network only achieves a figure of 3.9 million units per kilometre. For long-dis- Infrastructure Policy as a Key Task tance transport, the performance of the road network is thus 3.5 times higher than that of the rail network. Demand-related infra- demand must be the network of main structure is essential for roads and dedicated highways. In view The key element in the main road economic sustainability of its central position in Europe, Ger- network is the Federal German ‘auto- Demand-related infrastructure is a many has an extremely important role bahn’ system of dedicated highways. critical precondition for growth, prosper- to play in transport movement, and one Its performance per kilometre is even ity and employment. Without it, efficient that is growing all the time. The Federal higher than that of the German main transport processes are impossible. In German government’s road construction road network as a whole. Although the passenger transport area, they add report for 2005 draws specific attention the ‘autobahn’ network only accounts to the choice available to us when shop- to the high significance of these trunk for 5 percent of the total length of the ping, in education and in our leisure roads for transport movement; they country’s extra-urban road system, it activities and working lives. The ability account for more than 47 percent, in handles more than a third of all motor- to choose and reach our places of work other words almost half, of all annual vehicle movements. helps to distribute labour resources motor-vehicle movements. If transport more uniformly in accordance with spe- handling capacity rather than the dis- ‘Autobahns’ – the safest cific qualifications, and thus promotes tances driven is taken as a yardstick, roads growth in the productivity, income and the importance of the trunk roads Germany’s dedicated ‘autobahn’ employment areas. Freight transport becomes even more obvious, since they highways are its safest roads, and permits a high level of international divi- are capable of being used by vehicles indeed among the safest anywhere in sion of labour, which in itself is a basis carrying high payloads. Their share of the world. Only 0.01 of an accident with for prosperity and growth. But if the road freight transport is accordingly personal injury is recorded on them available infrastructure is not matched more than 70 percent. for every million kilometres of distance to the transport requirement, it acts as covered. The accident risk is higher on a bottleneck to economic development. If we relate transport demand to all other types of road. Furthermore, In the long term, the national economy the potential available from the German the accident rate is continuously falling then pursues a lower growth pattern, main road network, that is to say its for all Germany’s roads, including the and the potential living standard of total length, we find that it not only ‘autobahns’. The number of fatalities on future generations is lost for ever. satisfies a high-volume transport ‘autobahns’ in 2005 fell to a new record demand but also does so in a highly low of under 670, an improvement of The ‘autobahn’ highways efficient manner. Despite the high almost 5 percent compared with the – Germany’s main traffic proportion of total transport demand previous year. The level of fatalities arteries which it satisfies, the German main road related to actual vehicle kilometres on The foremost element in a German network accounts for less than a quar- German ‘autobahns’ is 88 percent lower infrastructure policy based on satisfying ter of the country’s extra-urban roads. than it was in 1970. This puts Germany Annual Report 2006 71

among the leaders in this respect, well needs. Funds are simply insufficient to being subjected to increasing burdens. ahead of countries such as Austria or arrest damage. Traffic densities on the ‘autobahns’ have the USA in which a general road speed risen continually as the years go by. The limit applies. In view of Germany’s high Although the main roads are easily average traffic density on these high- standard of road safety based on inter- the best-performing transport channels, ways was 41,800 vehicles daily in 1990, national comparisons, the facts clearly investment expenditure on them has but had risen by 18 percent to 49,400 fail to justify demands for an overall for decades failed to match the growth vehicles per day in 2004, with this aver- speed limit. in the transport performance that they age figure easily exceeded on many handle, despite increased efforts follow- individual sections, some of which (for Backlog in maintenance ing Germany’s reunification. Whereas example on the ‘autobahn’ ring around and repair work the volume of traffic on Germany’s the city of Cologne) are being forced to Bearing in mind that road infrastruc- main roads increased by more than handle more than 100,000 vehicles per ture must be regarded as a decisive 30 percent between 1992 and 2004, day. According to a study undertaken strategic tool and must not stray too far investment outlay in the same period by the Transport Science Institute of from the central aim of German politics, remained almost constant at just under Cologne University, the proportion of namely a return to more growth and 5 billion euros. ‘autobahn’ sections that rank as severely employment, the country’s road infra- burdened has risen from 5.2 percent in structure has been neglected for far too As a consequence of this discrep- 1980 to more than one quarter. In plain long and is lagging well behind actual ancy, the existing ‘autobahn’ network is terms, this means:

Changes in the level of fatalities on dedicated highways in Western Europe and in the USA Per billion vehicle-kilometres

France -92%

Great Britain -92%

1 Belgium -82%

Austria -61% 1970 Switzerland -78% 2004 2 USA -81%

3 Italy -59%

Germany* -88% 0 5 10 15 20 25 30 354045

1 2002/1973, 2 2001/1970, 3 1997/1970, *Previous States of Germany (1970) Source: IRTAD 72 Verband der Automobilindustrie TRANSPORT

One quarter of the German German ‘autobahn’ highway network: ‘autobahn’ network is today to be the German ADAC club’s demands regarded as hindering the flow of traffic. According to the Cologne University study, 209 kilometres are so severely burdened that they cause lengthy traffic jams every day.

Many people regard Germany’s ‘ autobahns’ as the best in the world. In many countries, their condition is still seen as exemplary. But numerous sections of the network are now showing their age, and at a number of points, the quality of the ‘autobahns’ could be see for better. At the moment, under 80 percent details of the ‘autobahns’ are in a fully usable condition, in other words more than 20 percent suffer from noticeable to very severe surface irregularities, worn longitudinal areas that represent an aquaplaning risk in wet weather and areas with poor to inadequate surface The ADACÕs demands: “Minimum standard” grip. All these shortcomings constitute New construction projects as inalienable minimum standard road safety risks. The condition of the Widening from 4 to 6 lanes or from 6 to 8 lanes as bridges is also a cause for concern. Of inalienable minimum standard Further requirements as seen by the ADAC: the 37,110 pre-stressed concrete bridges New construction projects with preferential on the ‘autobahn’ and main road net- infrastructural effect Widening and similar measures to avoid work, 12.6 percent are in a ‘critical’ and overloading by 2020 2.4 percent in an ‘unsatisfactory’ condition, that is to say they must be repaired Source: ADAC or renewed without delay. This illustrates the efforts that will have to be made in coming years if the road network is to be satisfactorily maintained. wegeplan) will be nowhere near enough this study, the motor-vehicle journey to absorb the anticipated increase in volume determined for 2020 on the As far as the capacity of the German demand, particularly in cross-border basis of the Federal Plan was applied to ‘autobahn’ network is concerned, it freight traffic. The German ADAC auto- the ‘autobahn’ network envisaged in should be noted that the additional mobile club established this in a ‘Long- that plan. Despite the modernisation capacities scheduled in the Federal term forecast of journey quality on measures that it envisages, the forecast German Transport Plan (Bundesverkehrs- selected Federal German ‘autobahns’’. In showed that more than 44 percent of Annual Report 2006 73

the ‘autobahn’ sections would be over- In this connection, a study con- expenditure on resources which they loaded and suffer from traffic jams. Of ducted by the BMW company in cause, that is to say working and leisure these sections, about one quarter (in 1994 indicated that jams and stop- time lost, fuel consumption and adverse other words 10 percent of all the sec- and-go traffic, including those on effects on the environment that would tions concerned) will in fact be con- urban roads, were giving rise to otherwise have been avoided. Since stantly overloaded. These sections will costs of 100 billion euros annually. traffic jams have become considerably have a daily traffic volume of more than worse in the past twelve years, it seems 15,000 vehicles per lane (overloading) The sum of money that traffic jams reasonable to assume that the resulting or even more than 20,000 vehicles are estimated to cost represents the costs have by now almost doubled. per lane (severe overloading). The additional capacities in current planning are therefore far from representing Infrastructure Financing not in the degree of capacity enlargement needed to cope with the anticipated accordance with Demand demand.

Based on these calculations, the The 2003 transport plan of the existing substance than to the ADAC has drawn up a demand-related sends out the wrong expansion of capacities. This approach ‘autobahn’ network for 2020. It shows message takes into account the fact that Ger- that no fewer than 3,300 kilometres The framework for long-term infra- many’s transport networks are ageing must be enlarged to six or more lanes, structure planning in Germany is pro- somewhat, and in some cases have and that 2,400 additional kilometres vided by the Federal German Transport incurred severe wear, which is also a should be built in the next 15 years as Plan, which was last revised in 2003 and consequence of investment having been a means of closing gaps in the network encompasses construction projects up neglected in the past. The outcome is and providing access to areas not yet to 2015. The overall budget allocated that a growing volume of traffic has served by the network. for this work is almost 150 billion euros. to be distributed over a road network This is a figure arrived at politically that is scarcely expanding at all, with High cost of traffic jams and based more on the funds available increasing traffic-lane density and thus Although an extension programme than on actual needs. On the contrary, increasing wear and tear to the existing of this nature may seem ambitious at when the 2003 plan was being drawn substance. first glance, the investments that it up, an actual requirement of 212 billion entails are undoubtedly worthwhile if euros was arrived at, so that construc- The 2003 Federal German Transport one reflects that they would eliminate tion-work planning can be seen to lag Plan thus remains below the level that the threat of daily traffic jams on half behind actual needs. would satisfy demands for an infrastruc- of Germany’s ‘autobahn’ network. This tural policy geared to actual needs, not would relieve the burden on the general Of this sum of nearly 150 billion only in terms of those needs and the public and would prevent macro-eco- euros, more than half (82.7 billion euros) actual volume they necessitate, but for nomic costs to an extent that would is intended for maintenance measures. a second reason as well: the planned be many times higher than investment This is accordingly the first time that overall volume is not used efficiently, costs and would offset these several a Federal German Transport Plan has since distribution among the individual times over. allocated more funds to maintenance modes of transport is geared less to 74 Verband der Automobilindustrie TRANSPORT

actual needs and overall economic roads. The Federal German government Funds intended for trunk significance than to political decision- was evidently seeking to use infra- roads not allocated making. structure policy as a means of transfer- according to demand ring traffic from road to rail. However, Limitation of Federal German trans- Of the total sum of 148.9 billion the traffic forecast for the Federal Ger- port planning to the predetermined euros, it is planned to allocate man Transport Plan assumes that, in financial framework and the prioritisa- 2015, the roads will still handle more tion of investments in the rail system ■ 77.5 billion euros to main roads in than 17 percent of freight traffic and mean that the funds intended for Ger- the Federal Republic of Germany, that rail is unlikely to account for more many’s trunk roads are far from ad- than 17 percent. This represents a equate. Instead of the planned 5.2 billion ■ 63.9 billion euros to Germany’s rail growth in road freight transport over euros annually, at least 7 billion euros network and the full planning period until 2015 of will be needed to develop the trunk 124.1 billion tkm, whereas the increase road network in accordance with sus- ■ 7.5 billion euros to inland waterways. in rail transport volume is not expected tainable principles. The automobile to be more than a bare third of this. industry is thus entirely in agreement In addition, the rail system is entitled The increase in rail-system capacity in with its partners in the Pro Mobility to receive further investment funds relation to the additional demand for infrastructure initiative from the motor- under the Regionalisation Act and the transport services thus costs almost vehicle trade, the automobile clubs, the Local Community Transport Financing three times as much as it would for construction industry and the road Act for investment in the local regional road transport. It is a welcome develop- freight hauliers in declaring that the and rail transport networks. For this ment that the new Federal German leading provider of transport services in purpose the Federal German Transport government wishes to make an attempt Germany, namely the roads, faces a Plan is allocating approximately 14 bil- to correct, at least partially, this distorted shortfall of at least 17.5 billion euros if lion euros by 2015, which means that relationship between road and rail only for new sections of road and total funds for the rail system reach investments. modernisation of existing ones during the same level as for Germany’s main the period covered by the Federal roads. This results from the previous German Transport Plan. This plan German government’s political objective Investment per unit even acknowledges that there is a of equalising expenditure of the rail kilometre travelled deficit of 30.7 billion euros (“additional and road systems without taking into in 2002 requirement” for Germany’s trunk account the distinct difference in Cent per unit kilometre travelled (tonne- roads) that cannot be financed. Many their shares of the overall transport kilometre/passenger-kilometre) people will therefore see their worst market. This approach makes neutral fears confirmed, namely that even the project selection independent of the 3.0 mode of transport difficult within the context of the Federal German Trans- port Plan. 0.7 Funds per kilometre of distance Rail Road covered are thus about four times A transport infrastructure initiative Source: German Bundestag higher for the rail system than for the Annual Report 2006 75

current Federal German Transport Plan Increasing sustainability gap in transport household will lead to persistent road traffic con- Investment required to satisfy demand (7 billion euros/year) gestion unless there is a change in expenditure and investment policy. 7

"Sustainability gap" The trunk road budget 6 is a long way from s sustainability 5 Even the sum of 5.2 billion euros 4.87 annually allocated in the Federal Ger- 4.59 in billion euro 4 4.51 4.51 man Transport Plan is well below the s 7 billion euros that would need to tment be invested in order to satisfy actual s 3 requirements. Nor should one forget that even this inadequate sum is no 2 more than a declaration of intent, in Planned inve accordance with the plan’s character as 1 a purely general framework for intended investments. Actual investments are 0 determined by the annual budget deci- 2006 2007 2008 2009 sions and by medium-term financial Source: Federal German Government, VDA planning. On February 22, 2006 the Federal German government submitted, together with the 2006 budget, a new medium-term financial planning draft. This envisages an investment volume for Infrastructure Financing should be the country’s trunk roads of 4.87 billion euros in 2006, 4.59 billion euros in 2007, switched to Sustainability 4.51 billion euros in 2008 and this latter figure again in 2009. In other words, despite welcome efforts to increase the High incomes from demand. The authorities use the surplus funds made available for trunk roads road traffic to finance government activities that above the existing medium-term plan- The fact that road construction in have no connection with the transport ning level, the actual figure will not Germany is under-financed is not due to budget, or within this to subsidise the even reach the investment of 5.2 billion road users contributing too little money. rail system’s deficit. At 53 billion euros, euros allowed for in the Federal German On the contrary, by way of mineral oil tax income is three times higher than Transport Plan. By 2009, the ‘sustain- tax, vehicle tax and value added tax on expenditure by the central government, ability gap’ compared with the demand- fuel, road transport supplies the gov- German states and local authorities related requirement of 7.0 billion euros ernment’s coffers with far more funds on the maintenance and extension of will in fact have increased to 2.49 billion than would be needed to implement an the road system, for which the annual euros. infrastructure policy in accordance with total is currently some 17.5 billion euros. 76 Verband der Automobilindustrie TRANSPORT

Despite this, the central government Eco-tax leads to including the associated value added has continued to tighten the mineral oil cross-border refuelling tax, of 3.1 billion euros per year. The tax screw and in this way has almost The ‘ eco-tax’ has not arrested the Federal German government itself even doubled its income from road transport increase in ancillary wage costs, but conceded, in its ecological tax reform compared with 1990. has led to Germany’s fuel tax now assessment report of October 2004, that being among the highest in Europe. It cross-border refuelling, or ‘tank tour- In a period in which the living cost therefore comes as no surprise that the ism’ as it is called in Germany, is being index has risen by 35 percent, the cost German Institute for Economic Research encouraged by the eco-tax burden and of running a car has shot up rapidly has arrived at the conclusion that a is therefore leading to a loss of mineral by 56 percent. This increase has been significant proportion of domestic fuel oil tax for the German exchequer. rendered even more severe by the five consumption is now being satisfied by stages of ‘eco-tax’, as a result of which drivers refuelling their vehicles in other Car drivers are obliged to 66 percent of the price of fuel currently countries, where fuel is cheaper. Of the co-finance the railways consists of tax, despite the fact that 36 billion litres of petrol consumed in A far from inconsiderable proportion mineral oil prices themselves have also Germany in 2003, only approximately of mineral oil tax revenue is currently risen steeply. If petrol sells at 124 euro- 34 billion litres were bought in Germany, devoted to financing rail transport. The cents per litre, 83 eurocents are taken and for the 32.5 billion litres of diesel 7.1 billion euros (the 2005 figure) of by the government. ‘Eco-tax’ alone oil consumed in Germany, the corre- income used annually by the providers accounts for nearly 12 percent of the sponding figure is 30 billion litres. This of local public passenger services to price of petrol. represents a mineral oil tax shortfall, finance those that operate at a loss are,

Use of income from specific motor-transport levies In million euros

Surplus 50,000 Expenditure on roads

40,000

30,000

20,000

10,000

0 1990199119921993 199419951996 19971998 1999 2000 2001 2002 2003 2004 2005

Source: VDA statistics Annual Report 2006 77

in accordance with the 1994 Region- was recommended to the Federal Ger- Initial fears that ‘autobahn’ toll alisation Act, taken exclusively from man government in 2000 by the Trans- charges could lead to massive diver- mineral oil tax income. For this purpose port Infrastructure Financing Commis- sions of truck traffic onto ordinary main alone, the car owner pays 12 eurocents sion, also known as the ‘Pällmann Com- roads have, according to investigations for each litre of the price charged for mission’, and by others too. If these con- carried out on behalf of the Federal fuel. Only ten percent of this tax income, ditions were adhered to in the course of German Transport Ministry, proved to however, is used for local public road a changeover to user-charge financing, be unjustified. The concluding report of transport, in other words for bus ser- this would be a step forward compared the combined Federal and State work- vices. 90 percent is allocated to local with the current method of financing ing group on ‘Traffic relocations due to public rail transport, which, in 2004, for Germany’s trunk roads. However, ex- truck tolls’, published in January 2006, example, received no less than 18.7 bil- perience with truck tolls now gives rise concludes that “in the vast majority of lion euros from the public purse. Of this to doubts as to whether extension of cases, diversions to avoid toll charges sum, nearly 6 billion euros were devoted user-charge financing to passenger cars lead to only slight changes in the traffic to servicing Federal German rail assets, might not merely be misused to extract burden on the subsidiary road network 2.5 billion euros to the settlement of old even more revenue from road users and heavier traffic concentrations only debts and more than 10 billion euros without any significant improvement in occur in part”. The average growth in to rail-system investments and ticket the quality of the main road network. average daily traffic density on German subsidies. The politicians responsible for transport main roads following the introduction of have forfeited the motorist’s trust in this tolls (in other words not as a result of Discussion of extended respect. general long-term trends or due to the financing by user charges eastward enlargement of the European The fact that too little money is A year of truck tolls Union) is 6.6 percent, but differs greatly being devoted to Germany’s trunk roads Truck tolls have been levied in Ger- from one section of road to another. is frequently used today as an argument many for a year, and have evidently in favour of converting the process of been successful, at least in technical Furthermore, the results of the traf- financing them from a tax-based to a and fiscal terms. Automatic booking fic census in the second quarter of user charge-based system. It is claimed by means of an on-board unit (OBU), 2005 are, as the report expressly states, that an increase in investment in the a device that is now being used for 86 not based on a ‘settled situation’, since German trunk road network to a level percent of all journeys, has operated many truck operators experimented first that takes actual requirements into flawlessly. The changeover to ‘OBU of all with re-routing onto traditional account can only be achieved if the II’ software at the beginning of 2006, main roads before returning to the income has the character of a fee and which permits changes in the fees to ‘autobahns’ later. This background casts is therefore protected against misap- be communicated by mobile telephone additional doubt on the accuracy of the propriation, and also that raising user link, also took place without problems. 6.6 percent traffic-volume transfer. charges of this kind would be neutral in The Federal German Transport Ministry terms of the burden it imposed if fully quotes the proportion of toll avoiders Based on this situation, the Federal compensated for by reducing mineral oil as 2 percent. At the end of 2005, toll German states can, if they feel that a tax at the same time. income totalled 2.86 billion euros, which need has been identified, request the means that the government’s target Federal German Transport Ministry to A change to financing by user income of 3.0 billion euros was only include specific roads in the truck toll charges with these conditions applicable missed by a small margin. system. There is increasing evidence, 78 Verband der Automobilindustrie TRANSPORT

however, that the State authorities is still not a realistic alternative for most against the tolls. This measure would prefer to apply the amended § 45 StVO companies on account of its high cost partly compensate for mineral oil taxes (German Road Traffic Order), which and limited performance potential. that are higher in Germany than in permits through-traffic weighing more other countries, and provide the trade than 12 tonnes to be prohibited if the Introduction of a fourth with some 600 million euros of tax appropriate new road signs are erected. truck toll category relief. However, the EU Commission has Of the 16 Federal German states, 9 have According to the coalition agree- rejected the concept of offsetting toll refrained entirely from proposing new ment, it is intended to raise the toll charges against mineral oil tax as unfair main roads for inclusion in the truck toll charges for heavy trucks with high- competition. The road freight and haul- system. emission engines and lower them for age trade in Germany does not accept those with low-emission engines. The this verdict. Nervertheless, because In overall economic terms, it is VDA’s recommendation in this connec- proceedings against the Commission’s evident that the truck toll imposes a tion is for a fourth toll-charge rate to be decision before the European Court of burden on Germany’s industry and added to the toll charge directive. Fail- Justice would take about two years to has led to a further deterioration in its ing this, Euro 3 and Euro 4 trucks would complete, the Federal German Minister ability to compete on price internation- pay the same tolls from October 1, 2006 of Transport has come an agreement ally. According to a study published onwards, despite a considerable differ- with the trade regarding the examination on October 7, 2005 by the German ence in their emission levels. This would of alternative measures. Materials Management, Purchasing and contradict the principle of different Logistics Association, 60 percent of the tolls for different pollution categories. The VDA also is urging the govern- toll charges have to be borne by the Until the beginning of the next decade, ment to implement alternative measures. shippers themselves. Almost 39 per- the population of trucks liable to pay Alternatives include a reduction in road cent of the companies bear the entire motorway tolls would include vehicles in tax for vehicles liable to pay road tolls toll charge. The difficulty encountered four exhaust emission categories. Now to the minimum level charged in Europe in passing on the toll charges can be that the truck toll system has survived (which would provide 125 million euros seen by the fact that two thirds of the its baptism of fire, a fourth toll-charge of relief) and a programme to encour- companies interviewed had been unable category should in any case feature in age investment in new, exceptionally to raise the price of their products after its further development on a revenue- low-emission trucks (Euro 5). These the imposition of toll charges. This neutral basis. two measures at least should now be additional cost burden on the freight implemented as quickly as possible as a handling trade is thus a factor with an Harmonisation not yet first step. adverse effect on Germany as a produc- achieved tion location. The harmonisation measures prom- Truck toll scheme with ised by the Federal German government procedural defects As far as the toll-induced transfer of when truck tolls were introduced, with In addition to the unresolved ques- traffic expected by the ‘interventionists’ the aim of improving the German road tion of harmonisation, the procedural is concerned, an initial investigation by freight industry’s ability to compete shortcomings of the truck toll scheme the Federal German Freight Transport internationally, have not yet acquired have attracted the greatest criticism. Office indicates that the introduction concrete form. The government’s con- A changeover to user-charge financ- of truck tolls has not resulted in any cept envisaged some of the mineral ing would only be unobjectionable in transfer from road to rail. Rail transport oil tax paid in Germany being credited regulatory policy if linked to an increase Annual Report 2006 79

in the funds available for investment, truck ‘vignette’. The overall burden fore be to convert the VIFG into a ‘Ger- if non-specific use of the toll incomes is therefore 2.5 billion euros higher man Main Roads Company to which the were prevented and if the burden on than it was before truck tolls were toll incomes would be allocated directly road users remained unaffected. These introduced. and reserved solely for investment in conditions are not satisfied by the truck trunk road construction. toll scheme. Transport infrastructure financing company needs It is gratifying to note that the Fed- ■ There has been no increase in the further development eral German government has begun to funds available for investment in By establishing a transport infra- imply in its statements that it is pre- Germany’s main roads. When truck structure financing company (the ‘VIFG’), pared at least in part to tackle such a tolls were introduced, the tax financ- the Federal German government took re-alignment of the VIFG. ing of investment in trunk roads was an initial step towards the institutional reduced by precisely the amount reorganisation of road construction Passenger-car tolls are collected by the toll scheme, so that financing. However, the current char- misconceived the overall level of investment in the acter of this company is ineffective to Having seen that the introduction of roads remained the same before implement an ideal picture of user- truck tolls can contribute an additional and after the scheme’s introduction related financing. The company’s activ- 3 billion euros annually to the govern- and has not changed to the present ities are not in fact limited to Germany’s ment’s otherwise empty coffers, it was day. trunk roads, but also encompass the of course not long before some politi- rail and waterway networks. In addition, cians began to call for the toll principle ■ Initially, the Federal government did it does not receive the money collected to be extended to passenger cars as not envisage any earmarking of toll as truck tolls directly, but only by way well. Experience with the truck tolls sug- revenue, but pressure from the sec- of the government’s budget. A correct gests, however, that the government ond chamber (the ‘Bundesrat’) led to procedure for the future would there- would once again override the principles this money being restricted at least to general expenditure on transport Passenger-car tolls rejected: routes, though not specifically on the general public anticipates no compensation roads. Cross-subsidising the railways Percentages and waterways using part of the No income from truck tolls is laid down Yes 22 70 by law and has remained customary to this day.

■ Instead of the burden remaining neutral, the truck tolls represent an additional ‘on top’ tax to be paid by those concerned. Against the annual No verdict charges amounting to 3.0 billion 8 euros, the only saving that has resulted amounts to some 500 mil- ÒIfp assenger-car tolls are introduced, will there be any compensation? (Allensbach opinion poll, 2005) Sources: Allensbach Demoscopic Institute/VDA lion euros from the abolition of the 80 Verband der Automobilindustrie TRANSPORT

of orderly procedure when introducing a available for consumption from the billions that would be better invest- passenger-car toll scheme. economic cycle, and further weaken ed in the trunk road network than in an already subdued national econo- a system devoted solely to collecting The majority of the population is my. money for its use. undoubtedly opposed to passenger- car tolls. Even if the vehicle tax were to ■ Socio-political shifts would also ■ In much the same way as with the be abolished at the same time, almost occur as a consequence of truck toll scheme, there is a risk that half of the German public still consid- increased expenditure on mobility. a passenger-car toll scheme would ers passenger-car tolls to be a bad The relative burden on people with not increase the financial resources idea. This has been established by a lower incomes would be worse than available for road construction, since survey conducted for the VDA by the on those earning more. This would there would be a corresponding Allensbach Demoscopic Institute. The tend to encourage the creation of reduction in tax-funded investment. result also shows the realistic picture a two-class society consisting of a that the country’s citizens have of the group capable of affording personal ■ Last but not least, the automatic government’s current financial position mobility and a second group no collection of tolls from 45 million and the risks involved in changes to longer able to do so. passenger cars introduces data taxation policy. Seven out of ten of those security risks if it then enables the interviewed did not believe that any ■ Since passenger-car journeys movements of individual citizens to compensation would materialise if pas- are subject to distinctly less time be traced. senger-car tolls were to be introduced. pressure than truck journeys, passenger-car tolls are likely to lead to The ‘vignette’ is no Public rejection of passenger-car a massive shift in passenger-car alternative tolls is clearly borne out by scientific traffic to minor roads, where the Quite apart from these problems, investigations into the consequences of accident risk is distinctly higher even those who are in favour of pas- introducing them. A study entitled “Pas- than on the ‘autobahns’. Noise and senger-car tolls admit that extending senger-car Tolls for Germany? A Critical environmental pollution would the electronic toll collection system to Analysis”, commissioned by the VDA in increase where these roads pass handle up to 45 million cars is simply 2005 from Cologne University’s Institute through inner urban areas. For the not feasible at the moment on account for Transport Science, has established smoothest possible handling of of technical capacity problems. This that passenger-car tolls would have rush-hour traffic in particular, how- has inspired certain politicians to urge considerable negative effects. The study ever, it is essential for the largest the introduction of ‘vignettes’ (in the expressed the following doubts as to the possible volume to use the ‘auto- form of windscreen stickers) for specific suitability of such tolls: bahns’ as a means of reducing the road-usage periods. This would, how- burden on inner-urban roads. ever, be the worst of all the alternative ■ Motoring would become more means of obtaining financial resources. expensive, since it would not be ■ A passenger-car toll scheme would It would not even be in accordance with possible to compensate in full for unavoidably incur high system costs. the equivalence principle that calls for the toll charges by reducing taxes. Equipping 45 million passenger cars those who drive the longest distances with on-board units, the cost of to pay the most, and those who drive for ■ Increased expenditure on mobil- operating these and the scheme’s only short distances to pay correspond- ity would withdraw sums currently administrative costs would eat up ingly less. Those who use the roads Annual Report 2006 81

most would be rewarded, and in certain Quite apart from the fact that this would Looking for other forms of circumstances the fixed cost of the necessitate an amendment to the Ger- private involvement ‘vignette’ could act as an incentive for man constitution, the state would then Stronger private involvement is additional journeys to be undertaken. be unable to fulfil its existential public nonetheless possible within the cur- obligations. rent institutional framework of Federal The clear stance of the Federal Ger- German trunk road administration. man Minister of Transport, namely that If the ‘autobahns’ were to be pri- Efficiency potentials could certainly be the introduction of neither passenger- vately owned, there would be a risk of accessed in this way, and increased car tolls nor a ‘vignette’ is envisaged, is network planning not taking overall investment obtained with the same therefore most welcome. economic considerations but only purely means. For instance, private providers entrepreneurial factors into account, could participate more closely in the Tolls for light trucks with the result that the ‘autobahn’ infra- processing of plans or in operation of would fail to achieve structure would no longer adequately the roads (for instance cleaning or win- their objective perform certain important functions ter services). Irrespective of passenger-car tolls, such as area planning, the integration of there are calls from certain quarters for economic zones and the equalisation of ‘F models’ remain isolated the truck tolls to be extended to trucks living standards. Furthermore, a private cases weighing less than 12 tonnes. This would monopoly would arise, with the associ- Regardless of this, it is already in particular affect the local delivery and ated risk of excessive charges for use of possible today for individual trunk road distribution work in urban areas that the network and earnings based on the projects in Germany to be privately is carried out by light trucks weighing monopoly situation. financed. According to what is referred 3.5 tonnes or more. Here again, it is to to in Germany as the ‘F model’, which is be expected that the traffic concerned In view of these risks and prob- based on private trunk-road financing would disperse into minor roads, with lems, there have only been isolated legislation dating from 1994, bridges, all the associated drawbacks in terms of calls for the ‘autobahn’ network to be tunnels and mountain passes can be road safety and environmental protec- sold off. The network and the transport privately built, financed and operated. tion. For these reasons, the Federal Ger- route planning process should most For refinancing purposes, the investor man Ministry of Transport has correctly certainly remain in the hands of the is permitted to charge distance-related decided not to include trucks under 12 t public authorities. In the course of the usage fees for a certain period. Two in the road toll scheme, all the more discussion, both the automobile industry ‘F model’ projects have already been so because the cost of collecting these and the automobile clubs have made realised: the Warnow tunnel in Rostock tolls would be out of proportion to the this extremely clear, the more so since (opened in 2003) and the Herren tunnel income actually obtained. privatisation would of course amount to in Lübeck (opened in 2005). Apart from the introduction of passenger-car tolls the fact that this model is unlikely to be Privatisation of the ‘through the back door’. It must also be appropriate for more than a few sec- ‘autobahn’ network – back- stated that road users have already paid tions of road and has not so far proved door introduction of tolls? for the ‘autobahns’ several times over to be especially attractive to investors, Not only the imposition of road tolls with their mineral oil tax, road tax and considerable problems are also involved. on additional vehicle categories but also truck tolls, so that privatisation would If this tool is applied more widely, there the sale of the entire German ‘autobahn’ be taking money out of their pockets a is a risk of the network developing into network has already been proposed. second time. a ‘patchwork quilt’ of toll roads, as well 82 Verband der Automobilindustrie TRANSPORT

as the problem of private monopolies on The aim in each case must now be pose. Although those who favour the certain routes. Furthermore, experience to accumulate practical experience with solution involving tolls cast doubt on to date has shown that the availability of this model, but it will be necessary to the suitability of mineral oil tax, which alternative routes has led to the traffic check most carefully the extent to which they regard intrinsically as a compulsory volume being seriously over-estimated, cost-savings can actually be achieved charge with no entitlement to the proviso that re-financing problems can and the advantages of more efficient sion of a corresponding service, this arise. private methods outweigh the higher view is not tenable, as the study ‘Pas- financing costs of private investors com- senger-car tolls for Germany? A Critical ‘A models’ about to be pared with those incurred by the public Analysis’ conducted by the Institute of introduced authorities. Transport Science at Cologne University The ‘A model’ is of greater sig- has shown. In this study, we read: nificance. A private investor extends A draft model for sections of ‘autobahn’ to six lanes and sustainable infrastructure This view conflicts with the legal also maintains and operates them. financing principles and historical development For financing purposes, the investor Current financing practice for Ger- of mineral oil tax and with the idea receives income from truck tolls on the many’s trunk roads flagrantly disregards of equivalent or contributory taxes, section concerned, and an initial sum the need for sustainability. Every year according to which this tax was always of up to 50 percent to compensate for the tax authorities collect in the form of regarded as a road infrastructure use of the road by passenger cars. mineral oil and vehicle taxes alone many financing tool. A legal link between the 12 projects with a total length of times the income that would suffice for mineral oil tax and its use for road trans- 525 kilometres were originally selected demand-oriented financing of the entire port still exists. Article 1 of the German for extension and operation according road infrastructure. Despite this, the Road Construction Financing Act of 1960 to the ‘A model’. Five of them are now to funds that the authorities make avail- states that income from that part of the be realised as a matter of priority. The able for road construction have for many mineral oil tax derived from road vehicles sections concerned are years been well below the level actually is to be devoted to the roads. From 1965 needed to satisfy requirements. onward, this link was defined as appli- ■ The A8 from Munich to Augsburg in cable to 50 percent of the relevant Bavaria Against this, it must be pointed out income. It was not until the early 1970s that a change to financing sourced fully that the compulsory link began to be ■ The A4 from Waltershausen to from user charges would in itself be declared invalid year by year, and mineral Herleshausen – the ‘Hörselberge no guarantee that adequate funds for oil tax income allocated to other budget- Bypass’ in Thuringia investment would be made available, as ary purposes. In financial studies the min- experience with truck tolls has shown. eral oil tax is not interpreted as a general ■ The A1/A4 from Düren to Kerpen in tax but as an equivalence charge for North Rhine-Westphalia For this reason, a different infra- road transport, for which a compulsory structure financing concept is needed, link is justified. The public authorities ■ The A5 from Baden-Baden to Offen- with renewed awareness of the func- incur road maintenance costs as a result burg in Baden-Württemberg tion of mineral oil tax as a source of of vehicular traffic, and are therefore income that could be regarded as an entitled to impose a specific charge on ■ The A1 from Buchholz to the Bremer equivalent to use of the infrastructure road users as an equivalent for this public Kreuz junction in Lower Saxony. and therefore applicable for this pur- service activity. To this extent, it is Annual Report 2006 83

entirely justifiable to impose tight restrictions on the use of mineral oil tax income.

Viewed in this light, financing from mineral oil tax income is user financing par excellence, and does not need to Herbert Baum be converted to a user-charge system. It permits pre-determination for specific purposes and takes equivalence into Pkw-Maut für Deutschland? consideration, that is to say the principle — Eine kritische Analyse — that those who drive more should pay more. It provides an incentive for protection of the environment by rewarding the purchase of low-consumption vehicles and the adoption of an economical driving style. It is geared to traffic density and helps to avoid local periods and areas of congestion (traffic jams being an expensive matter for the vehicle owner since they increase fuel consumption). But the greatest advantage of all is that the collection of mineral oil tax only involves minimal costs.

A central element in sustainable infrastructure financing should be at least the partial allocation of mineral Schriftenreihe des Verbandes der Automobilindustrie (VDA) oil tax income for this specific purpose. 99 With this in mind, the ADAC automobile club compiled a “Cars finance Roads” The publication ‘Pkw-Maut can be ordered online financing model in 2005. It calls for the für Deutschland?’ (‘Passenger- from the VDA at VIFG to be developed into a ‘Federal car Tolls for Germany?’) [email protected] Germany Main Roads Company with responsibility for the financing of road construction. It would receive a propor- truck tolls and 4.8 billion euros from oil tax income (some 39 billion euros or tion of mineral oil tax income as laid mineral oil tax). The proportion derived 89 percent of income from mineral oil down by law, and all income from truck from tax would have to be laid down by tax including the value added tax levied tolls. This would assure a volume for law so that it could not be successively on it) would pass to the general public road construction financing purposes misappropriated by governments short purse as before, which would enable by of 7 billion euros (2.2 billion euros from of funds. The remainder of the mineral far the largest proportion of the mineral 84 Verband der Automobilindustrie TRANSPORT

oil tax to be used for the financing of has initially reverted to a bill drafted by These are installed at fixed locations on general government expenditure. the previous government, but regards the road network and can therefore only additions to it as necessary. By means assess the traffic situation at certain Planning needs urgently of specific administrative measures, points. Almost complete assessment to be speeded up the draft aims to shorten the planning only becomes possible if data is col- In addition to financing according to period by two years. lected not only by the infrastructure but demand, a further element in sustain- also by the vehicles themselves. Using able infrastructure policy is efficient In parallel with this, the Federal the ‘floating car data’ (FCD) method, traffic-route planning without delays. German state of Hesse has taken vehicles in the midst of the traffic flow The allocation of funds for investment what has become known as the that are equipped with GPS-based posi- in accordance with requirements would ‘Koch/Posch Initiative’ and placed its tion identification systems can – more serve no useful purpose if, as is cur- own, more extensive bill before the or less as a subsidiary activity – supply rently the case, planning legislation second chamber of the German par- current data on the traffic flow continu- necessitates periods of 10 years or more liament (the ‘Bundesrat’). Its proposals ously to a data centre, which combines for the planning of new projects and also include the abolition of the time- the incoming information with further modernisations. Another good reason consuming area planning procedure, items supplied by the infrastructure data for reducing planning costs is to make the integration of planning procedures sources, and in this way puts together more money available for the actual that deviate from regional plans into the a geographically accurate, real-time construction work. planning decision stage and the omis- picture of the current traffic situation. sion of environmental compatibility This is already state-of-the-art in tech- With regard to a revision of planning examinations for projects below certain nological terms, but coverage with data legislation, the coalition government thresholds. obtained in this way is still limited by the small number of vehicles with FCD capability, that is to say vehicles with Using the Infrastructure more GPS position determination and equipment for automatic data recording and efficiently transmission. However, some automobile manufacturers are already supplying traffic data collected in the form of FCD Optimising traffic parking space in towns. However, this to existing traffic information services. management calls for a well-integrated data network In addition to modernisation of that is, so to speak, superimposed in This is the approach adopted by the the road network to suit actual needs, virtual form on top of the actual road DIANA pilot project which was under- efforts must also be made to utilise the network and complements it. The tech- taken early in 2005 by the government existing infrastructure more efficiently, nical constituents of this network are of Hesse as part of its initiative ‘Hesse for instance by improving traffic man- data generating installations, transmis- free from traffic jams in 2015’. Among agement. Traffic flows are optimised sion media and receivers. other measures, a fleet of FCD-com- if, for example, vehicles are fitted with patible vehicles is being systematically dynamic navigation systems that can The data generating installations built up to collect information on traffic guide their drivers around congested may, for example, take the form of events on the roads in Hesse and the areas or lead them directly to a free inductive loops or infra-red detectors. adjacent state of Rhineland Palatinate. Annual Report 2006 85

By the end of 2005, 200 vehicles had Pushing ahead with DAB This will permit urban traffic to be incor- been equipped with GPS-capable Data generation, reception and porated on a broad basis into the traffic mobile telephones. With the aid of the display are of course worthless without warning and information service, which permanent position identification made a suitable transmission medium. Until has so far been largely limited to trunk possible by this equipment, an average now, the RDS/TMC (Radio Data Sys- roads. The most suitable medium for this traffic-flow speed can be calculated for tem/Traffic Message Channel) transmis- new development is DAB (Digital Audio the section of road being investigated. sion standard has been used with great Broadcasting), which was introduced in The collection of information from all the success. It is a radio channel capable Germany in 2000. It covers large areas of mobile phones enables a precise picture of transmitting analogue traffic infor- the country and has adequate transmis- of the traffic situation on the state’s mation, which is broadcast in parallel sion capacity and freedom from interfer- roads to be built up. with the regular VHF radio programmes ence even at high main-road speeds. but cannot be heard. The information There is provision for RDS/TMC to be Another element in the initiative is picked up by receiving equipment integrated and an Internet link provided is the DIAMANT project, in which the (car radios, navigation systems) with via GSM/UMTS, and the principle has automobile industry is participating. RDS/TMC capability. When required, the already been introduced and tested in Vehicles transmit safety-relevant data driver can call up information that is in many countries of the world. from their built-in sensors to the Hesse the local language and is filtered so that traffic control centre, for example if the it relates only to the relevant sections of DAB is a quantum leap forward in electronic stability programme is activat- road. Navigation systems equipped to terms of the quality of traffic information ed on account of ice or oil on the road. receive RDS/TMC signals process the supplied to drivers. Since its transmis- The control centre transmits this road- information themselves in relation to the sion capacity is a hundred times higher condition information to the overhead destination that the driver has selected than TMC, information can be provided signs, for example, so that other drivers and take the current traffic situation into on a larger number of roads and to a can be warned. account when planning the route. This higher standard of accuracy. Geo-ref- transmission standard has been avail- erencing, that is to say determination The information is both collected able since 1996, and about 3 million of the geographical limits of traffic and displayed by, for instance, elec- cars in Germany already have navigation information such as congestion or acci- tronic signs along the road or individual systems with TMC reception. dent risks, is much more detailed than devices such as mobile phones, PDS with RDS/TMC. In conjunction with a units or either mobile or fixed naviga- However, this transmission standard GPS navigation system that pinpoints tion systems. After a lengthy period soon reaches its capacity limits when the vehicle’s actual position to within of hesitation on the part of buyers, large volumes of data have to be han- a few metres at any given moment, it demand for personal navigation systems dled, which is frequently the case with is for example possible to supply the has been booming since 2005. In the traffic information on dense urban road driver with accurate information on first six months of that year, sales of networks. In such cases, the current VHF accident risks (such as obstructions on mobile navigation systems in Europe radio networks are unable for technical the road, tailbacks that cannot be seen almost trebled compared with the same reasons to handle the amount of incom- by approaching vehicles or damage period of the previous year, and reached ing information. The automobile industry to the road surface) on the section of 2.5 million units. The German market is therefore working on a developed ver- road just ahead. Communicating such accounted for a 37 percent share of this sion using a novel form of transmission specific information at precisely the total. standard with increased performance. right moment also keeps the overall 86 Verband der Automobilindustrie TRANSPORT

volume of information to a minimum, optimal use of the existing infrastructure Institute (BASt) to look into the loads on so that the driver is not distracted by a and accessing additional potential for roads and bridges that could result from continual flood of unnecessary details. It rationalisation in road freight transport. operating 25.25-metre truck and trailer also becomes possible to take forecasts For many years, vehicle configurations outfits with gross weights of up to 60 t of traffic volume into account for the different from the 40-t truck and trailer in Germany, an investigation that is cur- navigation system, to incorporate infor- outfits with an overall length of 18.75 m, rently in progress. mation on changes of transport mode as permitted in Germany and based on (parking, boarding public transport etc.) the existing dimensional and weight As a country located centrally in and facts of general interest (for exam- directive 96/53/EC, have been operated. Europe, Germany is obliged to cope ple weather conditions, the location of In Scandinavia in particular, positive with a particularly dynamic increase in filling stations and emergency services results have been obtained for some road freight transport. Studies estimate information), to offer general market years from the “modular concept”, as it that there will be a 40 percent rise in services to the public or specific target is known, that is to say 60-t outfits with transport volume by 2015. In the opinion groups or brand-specific information or an overall length of 25.25 m. This com- of the commercial-vehicle and trailer parameters for customers. In actual fact bination of vehicles achieves a signifi- manufacturers represented in the VDA, there are now very few limits to the type cant rationalisation effect in road freight it will be increasingly important in the and extent of the information that can transport, since a given transport task future for logistics providers in Germany be made available to the driver. can be completed with fewer vehicles to be able to coordinate load volume covering a lower overall distance. The and payload, together with low costs, Numerous radio stations already results of this are a distinct reduction in in an optimum manner. With this in broadcast their programmes on DAB, fuel consumption, CO2 and NOX emis- view, Germany as a transit country will in some cases in parallel with the con- sions and road-area occupation on the in the medium term be unable to avoid ventional VHF transmission system. With one hand, and an increase in payload increasing commercial vehicles’ size and a view to promoting DAB broadcasting and load volume on the other. weight limits if road freight transport in more widely, the VDA inaugurated a Germany and Europe as a whole is to be ‘DAB platform’ in April 2005, with par- The Netherlands will also be com- optimised economically and ecologically, ticipation by automobile and equipment pleting what is already a second field and Germany’s status as a logistical manufacturers, state media offices, test in the autumn of this year, aimed location strengthened. private and public broadcasting ser- at assessing the use of innovative vices and the Federal German Ministry vehicle combinations (known as ‘Eco For the German commercial-vehicle of Economic Affairs. This platform is Combis’, and with a length of 25.25 m industry, innovative vehicle concepts encouraging the more comprehensive and a gross weight limit of 60 t). It is that are already commonplace in Scan- use of DAB in Germany not least by its entirely possible that these vehicles will dinavia and are being trialled in other efforts to increase the performance of in future become a common sight on countries have for a long time repre- DAB transmission locations to enable the Dutch road network, and that other sented a means of increasing transport them to cover the entire country. countries will also participate in com- efficiency. At an early stage, the VDA parable large-scale tests. With this in initiated a discussion within various Enhancing efficiency with mind, the German commercial-vehicle bodies and working groups on increas- new vehicle concepts industry welcomes the Federal German ing permissible commercial-vehicle Innovative commercial-vehicle con- Transport Minister’s decision to com- dimensions and weights, and has also cepts are another means of making mission the Federal Highway Research drawn up requirements and overall con- Annual Report 2006 87

ditions for innovative vehicle combina- The time has now come for joint able progress that has already been tions. The aim is for the weight of such open discussion with politicians and made in reducing vehicle emissions and vehicle combinations to be distributed the transport trade in Germany as well noise, but also to disregard the contri- between the axles in such a way as to regarding an increase in commer- bution that the car makes in providing prevent the road network from having cial-vehicle weights and dimensions, vehicular access to our towns and cities to absorb any additional loads. Further- without any such proposals to increase and promoting their economic and cul- more, these vehicle concepts must at transport efficiency and cope with the tural development. Millions of people least equal the high standard of current forecast increases in road transport who live in both urban and rural areas configurations with regard to manoeu- volumes in this way being dismissed remain dependent on their car, not least vrability and road safety (for instance with a priori arguments. Not least with a because the cities are growing at their compliance with the ‘BO circle of forces’, view to safeguarding Germany’s future peripheries rather than their centres, so active and passive vehicle safety), as a logistical location, the potential that the ability of local passenger trans- and at the same time increase the increases in efficiency associated with port services to concentrate their trans- efficiency and capacity of the transport these concepts should be treated with port routes is limited. system. the necessary priority. Attractive towns as a guiding principle Our towns and cities have always Optimising City Traffic exerted their appeal primarily on account of their importance as centres of trade, services and culture, as meeting-places Taking decisions locally charges for traffic in ecologically sensi- and points of exchange. For this reason, At the beginning of this year, the tive urban areas, or establish low-emis- their image cannot be governed by the European Commission presented a sion areas subject to traffic restrictions, single dimension of ecology alone. Ra- thematic strategy for the urban environ- without however justifying the need for ther, they must possess a multi-dimen- ment with a view to stimulating activi- these questions to be tackled at EU sional, integral appeal in which ecological, ties at EU level aimed at improving the level. If the EU is considered as hav- economic and socio-cultural needs are quality of the environment in our cities. ing any part to play in this situation, it embedded. If this is accepted, the car However, the Commission readily agrees would be to promote the exchange of remains an essential element in urban that the first line of action must come ‘good practice’ between European towns transport. Even in high-density agglom- from the local authorities. Differences and cities, though here again any such erations, almost 40 percent of the resi- in heritage, geography, climate and the exchange would be restricted by differ- dents rate their ability to reach destina- legal and administrative situations call ences in local conditions. tions by local public transport as “medio- for tailor-made solutions, so that further cre” or worse. In contrast to this, the car unified rulings by the EU are ruled out Finally, a special problem is that the as a means of reaching these destina- from the start. The subsidiarity princi- Commission, in its thematic strategy tions is rated “good” or “excellent” by ple also conflicts with any proposals as indeed in its transport-policy White almost 90 percent of town and city dwell- for additional community statutes in Paper of 2001, regards urban traffic and ers. Political moves to suppress mobility this area. The Commission feels itself in particular individual motorised trans- by car are therefore doomed to failure entitled to consider how it can call for port in our cities purely as a problem. and would strike a death-blow to the the imposition of a staggered range of This is not only to ignore the consider- appeal exerted by our towns and cities. 88 Verband der Automobilindustrie TRANSPORT

Avoiding overall driving off the road. More rapid rejuvenation of through truck traffic. This patchwork bans of the vehicle population in this way even goes beyond the German empire’s New air pollution limits based on the is a more effective environmental pro- particularism in previous centuries, and 22nd Federal German Immission Protec- tection programme for our cities than makes… any vision of a single European tion Order came into force at the begin- restrictions on individual mobility. There market… nothing more than ludicrous. ning of the year. They are the national should also be an adequate fiscal incen- Nor should a long-term solution be for statutes by means of which Germany tive for existing vehicles to be retrofitted us to apply bans, strangulation of the implements the general EU Ambient with particulate filters. traffic flow, barriers, restrictions or time Air Quality Directive and daughter- limits to motor traffic in various parts of directives as national law. The plans Arbitrary blanket driving bans would, our cities in order to avoid exceeding of action drawn up as a result by the on the other hand, severely hamper the the clean air limits as frequently as is Federal states and local authorities to functioning of towns and local com- now the case.” reduce pollution envisage among other munities and, without genuinely improv- measures restrictions on traffic move- ing the quality of the air, would work Driving bans and the closure of ments, for example driving bans or the against a sustainable mobility concept certain areas of the road network fur- closure of certain areas. In some cities, for the future. Schools and workplaces thermore generate a risk of traffic for example Frankfurt and Berlin, trucks would be less easy or in some cases diverting into residential areas, and have already been banned from certain impossible to reach, and industry, the journeys through towns taking longer to streets. craft trades and retailers would find it complete. In the same way as a toll more difficult to carry out their work. charge on city roads, such traffic restric- The Federal German government Trade associations, but also local com- tions and bans could lead to further has now suggested that a vehicle iden- munities themselves, have drawn atten- urbanisation of the countryside. If the tification order be passed, according to tion repeatedly to this situation and inner urban areas are made too difficult which passenger cars and commercial emphasised that interference with traffic or too expensive for commuters, shop- vehicles would be required to carry movements is something to be avoided. pers and delivery vehicles to reach, labels or stickers indicating their emis- many activities will be relocated outside sion category. This would at least give Speaking in March 2006 at the town, and the trend toward the con- local authorities a practicable tool for VDA’s Technical Congress, the Presi- struction of ‘green field’ company sub- partial restrictions on the use of older dent of the German Cities’ Conference, sidiaries and shopping centres will be vehicles with high emission levels, with- Munich’s Lord Mayor Christian Ude, encouraged still further. Retail traders out affecting the mobility of the remain- confirmed his view that general traf- are already complaining that many ing vehicles. Doubts remain as to the fic bans were no solution: “The clean shops and stores in town and city practical value of traffic restrictions in air limits that now apply compel local centres are standing empty. According helping to prevent the fine-particulate authorities to stitch together a patch- to the German Retail Trades Federation, dust limits from being exceeded, in view work quilt in the traffic-policy area that the figure has reached almost 10 per- of the low overall proportion of these could hardly consist of more individual cent in the main city-centre shopping dust particles that are actually emit- bits and pieces. Not only is every city areas, and the Federation points out that ted as exhaust from motor vehicles. beginning to apply a solution of its new locations outside of town have led Nonetheless, this approach could be of own, but in each of these cities there in the past ten years to an annual loss assistance as an incentive to take older are zones with different weight limits of turnover of approximately 1.5 billion vehicles with relatively high emissions and restrictions on various categories euros, and a drop of more than 25 per- Annual Report 2006 89

cent in customer frequency. In many Potholes and patches cause dust that space. Among the systems under this cases too, relocation to extra-urban adversely affects the quality of the air in heading are automatic traffic-light sites would make journeys longer and urban areas. Lack of funds is also the circuits that respond to traffic density, increase pollutant emissions elsewhere, reason why many local bypasses are not but above all the supply of traffic and thus negating the original intentions of being built despite an urgent demand parking information to drivers by means the EU directive. for them, so that long-distance traffic of electronic displays, car radios or is forced to pass through town and navigation systems. This area in par- Instead of discussing restrictions city centres. The German Institute for ticular offers considerable potential for on motorised personal transport with Urbanistics recently calculated the avoiding pollutant emissions from contra-productive effects in terms of outstanding sum needed for investment motor vehicles, a significant proportion traffic patterns, with vague ecological in communal road infrastructure as of which comes from searching for a objectives and with no understanding 6.4 billion euros annually, whereas in parking space in city centres. This is of their necessity among road users, it actual fact only some 5 billion euros are estimated to account for between 7 and would be better to consider the poten- being invested. As a result, the local 22 percent of total motorised traffic in tial for improving the quality of the air authorities are pushing an increasingly city centres, the actual figure depend- that could be achieved by providing high investment deficit ahead of them ing on the day of the week and the a demand-oriented urban road infra- from one year to the next. time of day. Experience has shown structure. in all cases that dynamic parking guid- High potential for improved ance systems with electronic signs to Neglect of the traffic management display the number of parking spaces infra structure is Another requirement is for the still free achieve a dramatic reduction contra-productive telematics infrastructure to be expand- (in Cologne, for example, almost 30 per- This includes, among other faced, that is to say the technical equip- cent) in the volume of traffic searching tors, improvements to the quality of the ment and facilities that collect and for somewhere to park. Despite this, infrastructure. In many regions, local process information on the current two-thirds of all German medium-sized authorities lack the funds to invest in traffic situation and use it to keep towns and cities have still not begun to maintenance work, so that the road traffic flowing more freely and avoid operate a dynamic parking guidance surfaces are in a disastrous condition. unnecessary searching for parking system.

Auto ENVIRONMENT AND TECHNOLOGY

Auto 92 Verband der Automobilindustrie ENVIRONMENT AND TECHNOLOGY

Environmental Protection: A Key Goal for the Automotive Industry

The innovative power of the German ensure that future mobility, which must automotive industry has benefited envi- meet the demands of the globalised ronmental protection tremendously. New economy as well as the very individual technologies have facilitated substantial needs of each person, is both environ- improvements in vehicle emissions, fuel mentally friendly and affordable. consumption, vehicle manufacturing and the environmentally-friendly recovery of All these advances can only be end-of-life vehicles by recycling. Thanks achieved at a cost. No other industry to the technical know-how of vehicle in Germany is investing more money in manufacturers and suppliers, the Ger- research and development. But thanks man automotive industry is the leader in to these considerable efforts, it has all fields. Discriminating customers are been possible to reduce the fuel con- offered vehicles that optimally fulfil their sumption of new vehicles since the end demands for safety, economy and added of the 70s to date by around 40 percent. customer value as well as environmental This has been achieved by the industry’s compatibility. To continue to maintain a voluntary commitment and underlines balance between these goals remains its impressive technological expertise. an important challenge. Regulations are therefore not necessary.

The largest task facing the German Modern cars are clean. This is automotive industry is the systematic acknowledged by the Federal Environ- reduction of the dependence on fossil ment Agency, which has for years been fuels. The road that has been taken is certifying modern petrol engines as one that leads “away from oil”. The Ger- being highly environmentally compat- man automotive industry is paving the ible. The same is true for diesels: with way where alternative fuels and drives Euro 5, particulate emissions will again are concerned. It was the first industry be reduced. “Clean Diesel” combines in the world to take the initiative and the emissions advantages of the petrol do the necessary vehicle engineer- engine with the fuel economy of the ing groundwork that will enable more diesel. biodiesel to be added to conventional diesel and more ethanol to petrol, the In addition to the product itself, the proportion aimed for being 10 percent. German automotive industry is also This is just the first step. The automo- leading the way in environmental pro- tive industry intends to do its share to tection relating to production facilities. Annual Report 2006 93

This is the result of a paradigm shift. In Rather, sustainability – a forestry term is serving the concept of sustainable the past, “end-of-pipe technology” did that has been around for about three development. not remove unwanted residues until hundred years – is more than that and the end of the process chain. Today, embraces a well-balanced examination The Draft Declaration on Guiding the emphasis has shifted to “integrated of ecological, economical and social Principles for Sustainable Development, processes”, whereby such residues are aspects. This is something that the tabled by the European Commission kept to a minimum in the first place. United Nations Environment Programme in the middle of last year, picks up on This way, the total amount of waste per (UNEP) made clear way back in 1980 these aspects. The European Union vehicle resulting from the manufac- with its definition of sustainable devel- too, it seems, is placing importance on turing process amounts to just a few opment as “development that meets the environmental protection, social equity kilograms. Nowhere else in the world in needs of the present without compro- and cohesion and economic prosperity, vehicle production operations is water mising the ability of future generations and has declared its intention to fulfil its being re-used more frequently and to meet their own needs”. As a globally international responsibilities – principles waste water and emissions being cut active automotive industry, this principle by which the German automotive indus- more and more. Similarly, in no other is a commitment – not just in Germany try has been living for some time. The major automotive industry is the use of but also worldwide. High environmental industry therefore welcomes the Euro- modern paintshops so widespread as in and occupational safety standards, pean Commission’s initiative, for strate- the German industry. technological expertise and manage- gic action for sustainable development ment know-how are also applied in is vital. The merging of the EU competi- The automotive industry considers foreign manufacturing locations. This tion strategy (“Lisbon Agenda”) with a itself committed to a holistic approach way, the German automotive industry sustainable development strategy would when it comes to product responsibility. This also includes the end of a vehicle’s life. Thanks to new concepts, it is The three pillars of sustainability possible to recycle virtually the entire car. Here, too, the German automotive industry is a technology leader. The achievements in this field have been made not least because of the innova- Sustainability tions and processes first used by the German automotive industry.

The examples demonstrate the closed-loop environmental strategy of the German automotive industry. It is this strategy which creates the all- Social Economic Ecological important conditions that will pave the way to new sustainability.

Sustainability should not be restricted to just an ecological definition. 94 Verband der Automobilindustrie ENVIRONMENT AND TECHNOLOGY

be a sensible move, because conflicts leaves a gaping hole, for one of the climate protection. In the Germanwatch between the two can arise. Since it was three pillars of sustainable development ranking, Germany is placed 5th behind first issued in 2001, the sustainability remains disregarded. However, sustaina- Iceland, Latvia, the United Kingdom and strategy has for the most part excluded ble development is only possible if there Lithuania. It is acknowledged that Ger- any notion of competitiveness. This is a balance between all three factors. many is the only industrialised country that has been able to reduce transport emissions; likewise, the country is also Climate Protection given recognition for the substantial growth in renewable energies. Without its power stations and buildings, which

CO2 emissions reduced Kyoto Protocol are so far failing to meet have caused it to slip a good way down further the goals that have been set. the rankings, Germany would have been The protocol adopted in the Japa- well ahead. nese city of Kyoto came into force Germany – national climate last year. At the United Nations World protection policy One instrument aimed at further Climate Conference held in the city, At present, Germany has reduced improving the climate protection situa- the industrialised nations came to a its CO2 emissions by just under 20 per- tion is the national climate change strat- binding agreement to reduce their col- cent. Over the last year, CO2 emissions egy that was adopted by the then gov- lective greenhouse gases emissions fell by a further 2 percent to 872 million ernment in the summer of last year. As by at least 5 percent over 1990 levels. tonnes. This makes Germany the world the coalition agreement demonstrates, it

This goal is to be achieved during the leader where reducing CO2 emissions is likely that this strategy will be contin- 2008 to 2012 commitment period. Whilst is concerned. Even organisations that ued. According to the strategy, if the EU, most industrialised nations are working are normally critical of industry, such within the framework of international towards a 5 percent reduction, some as “Germanwatch”, place our country climate change negotiations, undertakes have declared they are ready to shoul- among the top few when it comes to to reduce its greenhouse gas emissions der greater burdens. Japan is planning to reduce its greenhouse gas emissions by 6 percent, the European Union by Kyoto targets: debits and credits as much as 8 percent. Germany is far Comparison of the change in CO2 emissions of selected countries exceeding these pledges, with a prom- Actual change up to 2003 Kyoto Protocol commitment ise of a 21 percent reduction. There is -38.5 virtually no other major industrialised Russia 0 nation that has set itself such a chal- -18.2 Germany -21 lenging goal as this. The exceptional UK -13.0 burden this will place on the German -12.5 economy compared to competitors on -1.4 EU -8 the world market should not be over- +12.8 looked, particularly since the USA and Japan -6 other industrialised nations are not +24.2 Canada -6 signed up to the Kyoto process. But Source: UNFCCC even countries which have ratified the Annual Report 2006 95

by a total of 30 percent over 1990 levels the economic effects of a 40 percent ble measures and calculated a savings by the year 2020, Germany will strive to reduction target. The study put the costs potential of up to 765 million tonnes of

achieve a much higher reduction in its of such a policy at an estimated 500 equivalent CO2 emissions. According emissions. This matches almost word billion euros. It is not likely that the Ger- to the Commission, these savings can for word the 2005 Climate Protection man economy, facing global competi- be achieved at a cost of less than 20 Programme which, in just such a case, tion, will be able shoulder the burden of euros per tonne. In the transport sector, pledges to reduce German emissions such a sum. In addition, consideration savings of between 100 and 140 million by 40 percent. The German government needs to be given to the fact that the tonnes were considered possible. also acknowledges that, by the year worldwide reduction in greenhouse 2050, greenhouse gas emissions will gases by the industrialised nations will On this basis, the Commission has have to be reduced by 60 to 80 percent be more than compensated for by the proposed a series of statutory instru- over 1990 figures. Alongside the long- future rise in emissions in the developments. These include the directives on term tasks, assurance is given that the ing countries. emissions trading and on the promotion promised 21 percent reduction by 2012 of the use of biofuels for transport, the will indeed be achieved on time. In this European Climate Change recently adopted regulation on fluorinat- connection, the German government Programme ed gases and the associated directive sees the transport emissions budget The European Climate Change Pro- on vehicle air conditioning systems. as a challenging 171 million tonnes of gramme (ECCP) was commenced in

equivalent CO2. June 2000. The aim of the programme Meanwhile, in the autumn of 2005, was to implement the Kyoto commit- the Commission commenced the second The German government is failing to ments. In the first phase, several work- Climate Change Programme. The first recognise the burden that the planned ing groups were set up to investigate stage involves several working groups long-term objectives will have on the possible reduction measures and the giving recommendations for further German economy. A study for the Fed- potential for reductions in the individual action to the Commission. One working eral Environmental Agency investigated sectors. The study identified 42 possi- group is also concerned with the EU’s future climate protection strategy with regard to road transport. Based on the recommendations of this working group, the Commission is expected to issue THG = Greenhouse gases a communication in this regard in the course of the year. Industrialised countries Developing countries

1990 2010 (estimated) When selecting measures for further action in the second climate protec- 61% 40% tion programme, it is the view of the automotive industry that cost efficiency 39% 60% should be the focal point of attention. Savings must be made above all in 30.5 bn. t THG those areas where they can be achieved 51.1 bn. THG at the lowest cost. This should be the Source: Luhmann et al. main guiding principle in the further 96 Verband der Automobilindustrie ENVIRONMENT AND TECHNOLOGY

development of the ECCP and the cli- with a GWP (Global Warming Potential) an air conditioning system is governed mate protection policy, both on a Euro- of less than 150. From January 1, 2017, by many parameters. At present, a con- pean and on a national level. As part this will apply to all new vehicles. If sys- sumption figure per operating hour will, of the first ECCP, the EU Commission tems with conventional refrigerant are at best, be able to establish a level of commissioned an investigation which still being used by this date, they must comparability. This should be normalised concluded that it costs the transport be fitted with a special seal. to the climatic conditions of Frankfurt/ sector considerably more than other Main. sectors to save one tonne of CO2. The The EU regulations represent a EU Commission is called upon to heed particular challenge for the automotive Implementation of the the findings of this study, since it is industry, although it is one of the pace European Emissions imperative that the measures taken setters when it comes to introducing Trading Directive should be at the lowest possible cost new alternative refrigerants. In this con- In view of the negative experiences to the economy. nection, it should be recognised that of the companies concerned during an isolated solution for Europe will put the implementation of the first phase Draft EU regulation on our industry, which is competing on a of emissions trading (2005 – 2007) – a fluorinated gases global scale, at a considerable disad- considerable number of the allocation In the summer of 2003, the Commis- vantage. The main markets in the triad decisions for emissions rights were sion tabled a draft regulation for limit- must be included as well, otherwise legally disputed – the German governing the emissions of other greenhouse the development of two different types ment is planning, as part of the National gases covered by the Kyoto Protocol. of vehicle air conditioning – one using Allocation Plan (NAP), to drastically The draft regulation focused on regulat- alternative refrigerant, the other con- simplify the allocation rules for the peri- ing or prohibiting in the medium term ventional refrigerant – will be unavoid- od 2008 to 2012. Amongst other things, the use of fluorinated gases, with the able. The automotive industry therefore the numerous special and exceptional aim of reducing projected emissions of expects the European Commission rulings will be replaced by a simpli- fluorinated gases by around 23 million to lend active political support to the fied differentiation between the energy tonnes of equivalent CO2 by 2010. In worldwide introduction of alternative industry on the one side and industry the course of consultative discussions, it refrigerants. on the other. The energy industry is to was found that vehicle air conditioning make a substantially bigger contribution systems fundamentally differ from other However, the EU Commission does to the reduction in CO2 emissions than air conditioning systems. For this rea- not just have the reduction of direct industrial companies. son, it was decided to regulate the use emissions from vehicle air condition- of fluorinated gases in vehicle air condi- ing systems in its sights, but also the The automotive industry, through tioning systems in a separate Directive. reduction of indirect emissions caused the presence of vehicle manufactur- This Directive is based on Article 95 of by higher fuel consumption. Discus- ers and individual suppliers in virtually the EU Treaty: the article covering sin- sions about the Commission’s proposal all major manufacturing locations, is gle market provisions which guarantees to amend the Directive relating to the directly affected. In addition, the NAP regulatory uniformity within the EU. The emissions and fuel consumption of cars defines the political targets for house- Directive now in force stipulates that all have been on-going for some time. holds and the transport sector. Com- new vehicle models introduced to the The automotive industry is convinced pared with the previous limits, these market from January 1, 2011 onwards that this sort of regulation would not have now been tightened to the tune will only be permitted to use refrigerant achieve its aim, as the consumption of of 15 million tonnes. The reasons for Annual Report 2006 97

this are the substantial reductions German automotive nent aims and is a significant competi- achieved in the transport sector (in industry’s consumption tive parameter. Though the potential for

2005, CO2 emissions from the transport pledge is successful further reduction is decreasing all the sector were already 5 million tonnes Over the past few years, the auto- time and reductions are consequently below the 2012 target of 171 million motive industry has continually reduced more difficult to achieve, the first pro- tonnes, which was set in 2004) and the fuel consumption of new vehicles duction car with a fuel consumption of the emissions reductions expected and is also prepared, as part of the 3 litres per 100 km was a German prod- from buildings as a result of additional “integrated approach”, to do its share uct, and just such a car is now on the measures. to aid reduction. market. One German manufacturer has even developed a car which emits just

In addition to the current reform of For nearly 40 years, this industry 100g of CO2 per kilometre. the existing system, the British proposal has achieved impressive results with that air transport should also be includ- its pledges to reduce fuel consumption. Such technical highpoints are ed has opened up the debate as to how The first commitment was made to the important for innovation. The real key the system should be expanded. The then economics minister at the begin- to energy saving, however, lies in the technical requirements for and the eco- ning of the 1970s, and was a pledge to reduction of fuel consumption across all nomic consequences of an expansion reduce the fuel consumption of pas- vehicle classes. As a result of successful to include air transport companies are senger cars and estate vehicles sold in voluntary commitments, new German currently being analysed. Whilst the Brit- Germany by 15 percent between 1978 cars today use on average 2 litres per ish government has also proposed that and 1985. Though the introduction of 100 km less fuel than they did in 1990. the Commission looks at the option of catalytic converters increased fuel con- One in two passenger cars currently expanding the system further to include sumption slightly in the second half of registered in Germany uses fewer than road transport, the German government the 1980s, the pledge was not only ful- 6.5 litres of fuel per 100 kilometres –five is being extremely hesitant on this mat- filled but also surpassed. times more vehicles than ten years ago. ter. The VDA, too, rejects any notion of Customers can today choose from more expanding emissions trading, believing Another commitment, made in 1995, than 250 models from German brands, it will be an “add on” to the hefty tax to reduce the fuel consumption of all all of which consume fewer than 6.5 burdens which already exist (mineral oil newly registered passenger cars and litres per 100 km. Just under 50 of them and vehicle tax). Unlike in air transport, estates in Germany by a quarter over even use fewer than 5 litres. Without emissions trading in the road transport 1990 levels by 2005 has been fulfilled, this wide range of fuel-efficient models, sector will not represent an alternative even though emissions legislation and the entire vehicle population in Germany to additional cost burdens; instead, it indeed vehicle noise regulations have would use around 21 billion litres more is clear that it will merely make mobil- been tightened and vehicle safety has petrol and diesel than it did at the end ity more costly. In addition, the VDA been further improved. of the 1970s. In monetary terms, this emphatically warns that any emissions corresponds to more than 25 billion trading on a vehicle manufacturer level This means that the process of fuel euros, which, thanks to the innovative will systematically penalise Germany’s saving, which has had a considerable power of the automotive industry, now leading role in the premium segment. dynamic for 40 years, is not concluded stays in the customer’s pocket. The Instead, the VDA supports an increase but on the contrary is continuing. customer can clearly feel this increase in efficiency in all vehicle classes and Reducing fuel consumption is one of the in efficiency: whilst in 1978, one litre of segments. automobile manufacturers’ most promi- fuel would take you 9 kilometres, today 98 Verband der Automobilindustrie ENVIRONMENT AND TECHNOLOGY

Registrations of fuel-efficient passenger cars continue to rise to run 6 million passenger cars non- stop for a year. Share of registrations in % Diesel: an indispensable 2003 1995 30 tool for climate protection A vital component of the climate protection strategy is the diesel engine. Here, the German automotive industry is 20 the world leader. Last year saw the start of the “Clean Diesel” initiative, which combines the low fuel consumption of the diesel engine with the emissions 10 advantages of the petrol engine.

The diesel engine is a cornerstone in 0 the German climate protection strategy, <120 121-140 141-160161-180181-200 201-250 251-300 301-350 >350 because without the fuel consumption

CO2 categories (g/km) advantages offered by the diesel engine, Source: ACEA it would not be possible to achieve any

substantial further reductions in CO2. it will take you 15 kilometres – two least 15 million tonnes; in addition, the There is one general rule of thumb thirds further. amount of fuel saved would be enough which illustrates this: every 10 percent

Another major success has been achieved in the last few years thanks to CO2 emissions from road transport: increasingly fuel-efficient vehicles: CO2 beyond the turning point emissions from road transport peaked kt/y at the end of the 90s. Despite increas- 180,000 ing mileage, emissions are falling. CO2 emissions from road transport fell in Germany by 15 million tonnes between 160,000 1999 and 2004. Transport was thereby the sector which achieved the great- 140,000 est reduction in CO2 during this period and has consequently played a huge part in helping Germany to achieve its 120,000

CO2 savings target. If the entire population of passenger cars complying with 100,000 Euro 3 and lower were to be replaced 1990 1995 2000 2005 2010 2015 2020 2025 2030 by modern Euro 4 vehicles, this would Source: Ifeu 2005 bring an additional CO2 saving of at Annual Report 2006 99

increase in the proportion of diesel vehi- this reason, the new five-year plan has includes the development of alternative cles corresponds to a CO 2 saving of 2 to registered the diesel as the propulsion propulsion systems and alternative fuels. 3 percent. In Germany, each percentage system of the future. At the same time, the proportion of low- increase in the diesel passenger car friction oils and tyres and fuel consump- population saves approximately 90 mil- The petrol engine has undergone tion and gearshift indicators in the fleet lion litres of fuel, or 210,000 tonnes of further development alongside the die- will be increased.

CO2. This quantity of fuel is theoretically sel engine. The modern petrol engine enough to run 100,000 passenger cars is part of the automotive industry’s The automotive industry has done non-stop for a year. strategy for sustainable future mobil- its homework. As part of an “integrated ity. In addition to optimising conven- approach”, however, the public authori- The extent of the saving potential tional engine concepts, or even further ties are also obliged to play their part in is demonstrated by calculations made developments such as direct injection order to utilise the reduction potential in by the US Environmental Protection combined with forced aspiration and everyday vehicle operation. Traffic jams, Agency (EPA). According to their esti- the downsizing of petrol engines, the slow-moving and stop-and-go traffic mates, if one third of the light vehicle innovation-orientated approach also unnecessarily increase fuel consumption population in the USA were replaced by diesel vehicles, the country could do without its entire volume of oil imports Fuel demand in Germany from Saudi Arabia. If the market share Use of major fuels in road transport in kt of diesels were 50 percent – roughly Biodiesel 60,000 equal to the current market penetration Diesel Petrol in Western Europe – the USA’s potential savings on crude oil would be as much 50,000 as 837 million barrels per year.

Japan is 99.7 percent dependent on 40,000 crude oil imports. Every year, Japan con- sumes approximately 655 million barrels of oil – around 104 billion litres of petrol. 30,000 If only diesel engines were used instead of petrol engines, Japan’s consumption would drop by 26 billion litres of fuel. 20,000 The quantity of fuel saved each year would be equivalent to more than 100 supertanker loads (250,000 tonnes). 10,000

For China, the Chinese state research institute has calculated that, if 0 the proportion of diesel vehicles were 199419951996 19971998 1999 2000 2001 2002 2003 2004 to increase to 30 percent, oil consump- Source: AG Energiebilanzen tion would drop by 10 percent. For 100 Verband der Automobilindustrie ENVIRONMENT AND TECHNOLOGY

to a considerable degree. Therefore, it senger cars (M1 vehicles) reaching the Although our industry’s efforts are is vital that the state makes its con- road for the first time in the European evidently being crowned with success, it tribution to the transport measures of Union. This target value is equivalent to should not be forgotten that a series of a holistic climate protection policy by an average fuel consumption reduction opposing effects have to be overcome, expanding the infrastructure to meet of 25 percent. such as ongoing improvements to road demand, e. g. third lanes on motorways, safety and increasingly stringent emis- as well as by introducing sensible traffic As indicated by EU monitoring, the sions legislation; were it not for these, management and comprehensive infor- European automobile industry is well on we would already be much closer to our mation systems. the way to complying with this under- goal. taking. European automotive Integrated approach as the industry on course to fulfil In this connection, it must be pointed ideal way its CO 2 reduction pledge out that the Commission places greater Discussions in the EU’s CARS 21 The success of Germany’s voluntary demands on its own vehicle manufac- process have led to the conclusion that, commitments has served as an example turers than it does on importers. Con- in the case of further CO2 reduction for a similar campaign by the European sequently, Japanese and Korean manu- procedures, it will not be sufficient to Motor Vehicle Association ACEA. It has facturers (represented by the JAMA and concentrate only on lowering emissions notified the European Commission that KAMA organisations), though commit- from the vehicles alone; rather, the aim it will voluntarily reduce CO 2 emissions ted to reducing CO2 emissions to 140 in future must be to adopt an integrated per vehicle-kilometre to a distinctly grams, do not have to achieve this until approach that utilises all the improve- ambitious level by 2008 for all pas- 2009, i. e. one year later. ment potentials still available. The EU

Commission has in its sights a CO2 emissions target of an average of 120 g/km for the year 2010. This target can only be achieved at exceptionally high CO2 emissions: pledge made by the European automotive industry cost. In this respect, it is imperative that the “integrated approach” comes into g CO2/km effect. 190 To ensure that climate protection 180 is successful, all those involved must 170 contribute in an appropriate way to such 160 an integrated approach. This applies, for ACEA 2004 example, to extending the infrastructure 150 Target corridor to meet demand so that slow-moving 140 ACEA pledge traffic and jams, with resulting increases in fuel consumption and emissions, are 130 avoided (see the “Transport” chapter). 120 Equally, the use of modern traffic man- 19941996 1998 2000 2002 2004 2006 2008 agement systems to optimise traffic flow Source: ACEA needs to be increased. The develop- Annual Report 2006 101

ment and market launch of alternative in fuel-efficient driving. Into this overall air pollution control measures – some fuels that will reduce CO2 emissions context are added the efforts of the will be listed as an example on the fol- must also be part of such an integrated automotive industry to optimise vehicle lowing pages. This strategy is based strategy, as must the training of drivers fuel consumption. on the EU‘s 6th environmental action programme, which aims to attain, by 2020, “levels of air quality that do not give rise to significant negative impacts Emission Reduction on, and risks to, human health and the environment”. In the strategy, interim objectives for air pollution in the EU are Success in emission model calculates that, by 2020, emis- established and appropriate measures reduction sions reductions over 1990 figures will for achieving them are proposed. The reduction in oxides of nitrogen, amount to: hydrocarbon and carbon monoxide The need to ensure that the popu- emissions has been one of the goals ■ 94 percent for volatile hydrocarbons lation’s health is protected is the reason of environmental policy for some time. (HC), the Commission gave for the new ver- Despite ever increasing mileages, the sion and identified fine particulates automotive industry succeeded in stop- ■ 90 percent for carbon monoxide (PM2.5) and ozone as being the main ping the rise in exhaust emissions in the (CO), and areas of concern in this regard. The aim mid-80s thanks to emissions legislation, is for the strategy as a whole to reduce which is now much more advanced. ■ 73 percent for oxides of nitrogen the theoretical figure of 370,000 prema-

Indeed, in the second half of the last (NOX). ture deaths to 230,000. In this regard, decade, emissions have even been sub- the EU has overlooked the fact that the stantially reduced. The model indicates that emissions issue of “premature deaths” is extremely of particulates will fall by 85 percent. controversial and can in no way be The successes achieved so far are Since the model does not yet take into reduced to individual factors. The instru- due in particular to the introduction of account the announcement made by ment used is unsuitable for this. the catalytic converter, the reduction the German vehicle manufacturers that, of refuelling emissions, the particulate from 2009, all diesel vehicles will be The EU Commission has calcu- filter on diesel passenger cars, the SCR offered with diesel particulate filters lated various scenarios, each differing systems on trucks and improvements in – and indeed work is already underway in the level of air quality improvement engine technology. Modern passenger to achieve this – it is probable that the achieved, and has calculated the costs cars and trucks are clean and are only reduction in particulates will be even for each. The industry notes that, for a marginal burden on the environment. greater. only a slight change in air pollution Tremod, a computer model developed levels, achieved by implementing vari- by the Ifeu Institute (Institute for Energy EU policy on air pollution ous measures, there is a risk of an up and Environmental Research) in Hei- control to eight-fold increase in the costs of delberg and commissioned jointly by Last autumn, the European Com- air pollution control measures. Conse- the Federal Environmental Agency and mission submitted a thematic strategy quently, the costs and benefits need to the VDA, has provided impressive fig- on air pollution, which is intended to be weighed up against each other very ures to substantiate this success. The bring together all the Commission’s closely. 102 Verband der Automobilindustrie ENVIRONMENT AND TECHNOLOGY

Major achievements in emission reduction Values in kt/y Conventional spark-ignition-engined cars Other spark-ignition-engined vehicles Cars with closed-loop catalytic converter Other diesel-engined vehicles Diesel-engined cars

HC emissions from road transport NOx emissions from road transport 1.600 1.600

1.400 1.400

1.200 1.200

1.000 1.000 - 73 %

800 800 - 94 % 600 600

400 400

200 200

0 0 19901995 2000 2005 2010 2015 2020 19901995 2000 2005 2010 2015 2020

CO emissions from road transport Particulate emissions from road transport 7.000 50

45 6.000 40

5.000 35

30 4.000 - 85 % - 90 % 25 3.000 20

2.000 15 10 1.000 5

0 0 19901995 2000 2005 2010 2015 2020 19901995 2000 2005 2010 2015 2020

Source: Ifeu, 2005 Annual Report 2006 103

Moreover, the EU Commission European transport policy, an improve- “zones”, one with specific characteris- should take into account the enormous ment in vehicle transport quality. One tics, one without. In the first type, the achievements in air pollution control. important issue for the EU is the promo- daily limit, which cannot be exceeded Current pollution is only a fraction of tion of renewable raw materials and the more than 35 times in the year, will be what was still the norm 15 years ago. use of alternative fuels. Passenger car raised, as will the annual limit. However, The variant that the Commission intends emissions are to be regulated by the assurance must be given that the gen- to implement is comparatively expen- Euro 5 values contained in the proposal erally applicable daily and annual limits sive for very little gain. The automotive of December 21, 2005. In addition, a can be reliably adhered to by December industry therefore calls upon the EU tightening of the emissions regulations 31, 2009. In the “other” zones, there are Commission to define attainable targets, for trucks has also been announced. no real changes from the current situ- view emission and immission regula- The focus is now not just on traffic but ation. tions together and give a comprehensive rather on all other areas. In particular, estimate of the consequences of this the Commission remains aware of the In addition, limits and targets for legislation. high emissions of ammonia from agri- fine particulates (PM2.5) are to be set for culture. Its “Thematic Strategy on Air the first time. This makes sense. In order

In its “Thematic Strategy”, the EU Pollution” is to be re-examined in 2010. to avoid double regulation, PM10 values Commission makes provision for vari- Early this year, as a further thematic will then be omitted. An annual limit ous measures and stricter environmen- strategy, the Commission tabled a strat- of 25 µg per cubic metre for PM2.5 is tal regulations. Amongst other things, egy on the urban environment, which will envisaged. This is quite tight for indus- there are plans to simplify air quality also have implications for ambient air. trial areas. The Commission is also plan- regulations and modernise monitoring ning to reduce the three annual aver- and reporting procedures. The national At the same time as its thematic ages for 2008/09/10 by 20 percent by emissions ceilings Directive (NEC Direc- strategy on air pollution, the Com- 2018/19/20, a plan which must be tive) for specific pollutants will also be mission published the new version of viewed with some criticism. As the sec- revised. The CAFE programme (Clean the air quality directive. The directive ond chamber of the German parliament Air For Europe) will be continued along- is mainly a summary of the previous (the ‘Bundesrat’) has already stated, side the “Thematic Strategy on Air Pol- framework directive and daughter direc- those countries which will benefit from lution”. tives and consequently contains only this will be precisely those who so far a few changes to the substance of the have done little in the way of air pollu- The Commission believes that the directive. The originally planned tighten- tion control. This less than satisfying air quality targets should be taken into ing of the permitted exceedances of the solution has also been criticised by the account in other policy areas too, and daily limits for fine particulates (PM10) European Council of Ministers and the that the achievement of these targets has been dropped because of practical European Parliament. should be promoted. Areas mentioned considerations. One new stipulation is in particular are the more efficient use that, in the future, suspended particu- National air pollution of energy and the better use of natural lates resulting from road-gritting opera- control resources, the inspection of smaller tions can, in certain specified areas, be On January 1, 2005, the European combustion plants, the reduction of discounted to an even greater extent limits for fine particulates (PM10) came VOC emissions (volatile hydrocarbons) than “natural sources” such as sea salt into force with the 22nd Federal Ger- at filling stations and, in keeping with have been up till now. By December man Immission Protection Order. These the commitments of the White Paper on 31, 2009, there are to be two different limits regulate dusts with a maximum 104 Verband der Automobilindustrie ENVIRONMENT AND TECHNOLOGY

particulate diameter of 10 mµ (= one Lower Saxony, Rheinland-Palatinate and ter months. As a rule, exceedances can hundredth of a millimetre). The mean Brandenburg and one each in Saxony- be observed simultaneously over large daily value for these particulates (PM10) Anhalt and Thuringia. No exceedances areas. This goes hand-in-hand with should not exceed 50 µm per cubic of the 35-day limit were reported in high-pressure or inversion weather pat- metre of air. In accordance with the EU Saarland, Mecklenburg-Western Pomer- terns. This has been confirmed by the Directive, this value can be exceeded ania and Schleswig-Holstein. German Government, which has stated 35 times in a calendar year. In addition that 70 percent of the exceedances to the daily value, there is also a mean In 2005, the temporary measuring were reported during weather patterns annual value of not more than 40 µg per station at Stuttgart-Neckartor recorded with poor airflow. However, vehicle traf- cubic metre of air. Target values for NO2 the most exceedances of the mean daily fic is there all the time. Furthermore, of 50 µg per cubic metre have also been value – a total of 181 – followed by high immissions can be measured dur- introduced. Leipzig-Mitte and Munich-Landshuter ing periods of no precipitation since the Allee. Even the North Sea island of Nor- precipitation itself and the duration of In 2005, a total of 34 municipali- derney reported eighteen such exceed- the precipitation have a considerable ties, including the city states of Berlin, ances. influence. In Dresden-Nord, between Bremen and Hamburg, reported more 2001 and 2002, for example, particulate than 35 exceedances of the mean daily After one year’s experience with the concentrations in the air were measured value. Of the remaining towns, six were new values, the enormous influence of during dry periods and during precipita- in Saxony, five in Bavaria and Baden- meteorological factors is becoming ever tion. When there was no precipitation, Württemberg, four in North-Rhine clearer. Exceedances of the mean daily values of more than 35 µg per cubic Westphalia, three in Hesse, two each in value usually only occur during the win- metre were attained. When there was

Fine particulates – a winter phenomenon

2004 20 2005

2006 15

0 Jan Feb March April May June July Aug Sept Oct Nov Dec

Exceedances of the mean daily value for PM10 in Frankfurt am Main, Friedberger Landstraße

Source: Hessian regional office for the environment and geology, own calculations Annual Report 2006 105

precipitation, they fell to 12 µg per weekends. It is quite obvious that vehi- Road transport: cubic metre. The Fraunhofer Institute in cle traffic cannot be contributing signifi- producing fewer Dresden (IVI) states that the proportion cantly to these exceedances. Anteileemi in ssProzentions than wood fires of PM attributable to transport is rela- 10 Kt/a in Germany tively constant and is normally less than Similar figures were reported in 25.4 8 µg per cubic metre at street measur- Switzerland. When air pollution 24.0 ing stations. increased, the Swiss authorities low- 22.7 22.7 ered the speed limit on motorways from Having exceeded the average 120 to 80 kilometres per hour. As the daily values, many German cities have Swiss measuring institutes found, this already decided to introduce air pol- measure succeeded in reducing the lution control plans or even adopted proportion of fine particulates meas- some of the measures they involve. The ured at street level by 10 percent. At Bavarian Administrative Court of Appeal the same time, however, road traffic recently reached a verdict stating that volume fell by around 15 percent. In 2002 2003 2002 2003 the authorities must draw up plans of addition, the Swiss also noted that Wood fuels Road transport campaign within a reasonable time to emissions from domestic open fires Source: Federal Environment Agency lower fine dust levels if these have been were contributing just as much to fine exceeded. However, it is not compulsory particulate levels as road traffic did as for such plans to ensure that the limit a whole. values are reached, and the authorities Rhine/Main area, during the visit of US have a free choice of the tools they can In Germany, like in Switzerland, fine President George W. Bush. On this day, adopt. In this verdict the Court accepts particulate emissions from house fires the centre of Mainz and the southern scientific knowledge to the effect that are more significant than engine emis- suburbs of Wiesbaden were practically measures limited to small areas have sions from road transport. The Federal traffic-free. Though the levels recorded no significant effect on the PM10 level. Environment Agency states in its current for the Rhine/Main region were lower Frankfurt am Main is one such exam- background paper that in the one year, on that day, this was due to the general ple. Here one trunk road was closed off from 2002 to 2003, fine particulate emis- weather situation. This reduction was to commercial vehicle through-traffic, sions from vehicle engines fell by more observed in the whole of the southwest gateway traffic lights were installed and than 10 percent and in 2003 totalled just region, in other words in regions not measures to improve traffic flow were 22.7 kt. This figure will fall even more, affected by the traffic restrictions. Con- implemented. Despite the much lower and on a continual basis, as more and sequently, when taking a year’s experi- volume of traffic during the holiday peri- more diesel particulate filters are intro- ence into account, it can be seen that od around New Year, by the beginning duced. This figure of 22.7 kt from engine closing off roads and other such traffic of January the mean daily value was emissions contrasts with the 24 kt attrib- restrictions do not have any significant already being exceeded at the measur- uted to small wood fires. Consequently, effect on the levels of fine particulates ing point; the New Year fireworks alone wood fires are emitting more than all the in the air. in the early hours of January 1 caused engines from road transport. peaks of 350 µg per cubic metre. Fur- Thanks to air pollution control meas- ther peaks of up to 200 µg per cubic What was tantamount to a large- ures, dust and fine particulate pollution metre and more were recorded at the scale trial took place last year in the has been falling sharply and continually 106 Verband der Automobilindustrie ENVIRONMENT AND TECHNOLOGY

No ﬁ ne particulates from catalytic converters

Catalytic converters have, quite that PGM losses from modern, is hardly detectable (just a few pico- wrongly, been drawn into the fine par- well-maintained vehicles were low. grams per cubic metre). Consequently, ticulates discussion. The claim that the According to the study’s findings, if platinum abrasion makes hardly any platinum group metals (PGM) of pla- losses did occur, they were related to contribution to fine particulate emissi- tinum, rhodium and palladium found mechanical damage to the catalytic ons. This even applies in heavily used in catalytic converters pose a threat to converter. In Germany, thanks to the road tunnels. Moreover, an investiga- the environment is completely without regular obligatory exhaust emissions tion by the Brandenburg environment foundation. This has been proven in tests (AU), any defect in the catalytic agency demonstrated back in 2002 investigations carried out by scienti- converter is identified. that palladium emissions are insigni- fic bodies, industry and environment ficant for fine particulate concentrati- agencies. Scientific bodies and regional envi- ons. When fine particulate concentra- ronment agencies have also closely tions were measured, it was found that In an investigation carried out by examined the immissions concentra- palladium only made up 1 millionth of the Federal Ministry for Research tions of platinum group elements. The the immissions. The catalytic conver- and Technology and the Institute immission concentration of platinum ter is therefore not a significant factor for Applied Ecology, it was found from catalytic converters, for example, for fine particulates.

for a number of years. In Switzerland, by 2008/09, they would offer a diesel cent share, and the rest of the market for example, levels fell by around a third particulate filter on all vehicles sold in share was held by Asian and other between 1999 and 2000. This downward Germany. This goal will be achieved European suppliers. trend is continuing. considerably earlier. Vehicles sold with The German automotive Around two years have passed since particulate filters: industry – leading the way the Stuttgart Declaration on the intro- AnteileGerman in Prozent brands dominate with diesel particulate duction of diesel particulate filters, so it Shares in percent filters is a good time to assess the effect of Over the past few years, soot emis- the declaration. And the results can be French Other brands 2 German sions from diesel vehicles have already clearly seen. More than 60 percent of 14 brands 84 been reduced significantly. The filters newly registered diesel passenger cars available today lead to an almost hun- in Germany are now fitted with particu- dred-percent reduction in particulates late filters, three times more than just in exhaust gases. In 2004, German car one year before. There will soon be 250 manufacturers issued a clear signal in models available with particulate filters. favour of the installation of soot filters At the beginning of 2006, the market with the worldwide unique “Stuttgart share of German brands was 84 per- Source: VDA statistics Declaration”. In it, they announced that, cent, while French brands had a 14 per- Annual Report 2006 107

Fine particulate The German automotive industry feasible levels. If wood fires contribute emissions in Germany offers retrofit filters for any existing more to fine particulate pollution than diesel vehicles. However, it is becoming road transport as a whole, it is clear that Proportions in percentages increasingly evident that customers will this area needs to be looked at. Road Bulk not opt for retrofit kits in any great num- traffic materials Other 20 5 traffic bers unless the kits are also promoted Ozone and summer smog 11 by means of tax incentives. Although So-called “summer smog” (ozone) House- the government has often spoken of arises in instances of intense sunlight as holds such a promotion, up till now there has a result of a complex chemical process 18 been no implementation. It is not yet involving hydrocarbons (HC) and oxides clear whether this will take place during of nitrogen (NO ) as pre-cursor pollut- Industry Power stations X 35 11 2006 and begin to exert an effect before ants. A high proportion of these pre- the end of the year. The automobile cursor pollutants can occur naturally. Source: Federal German Environment Ministry industry fears that promotional models Since emissions of hydrocarbons and may be considered that could lead to an nitrogen oxides have been substantially Retrofit programmes are underway increased burden on the car owner. reduced over the last few years, but the as well. At the end of 2005, the second quantities of hydrocarbons which are chamber (the ‘Bundesrat’) adopted the The German automotive industry will released naturally from forests have technical regulations for retrofitting par- continue to play an active part in the remained the same, the relative propor- ticulate reduction systems. This estab- reduction of emissions. It should not be tion of naturally occurring hydrocarbon lishes the basic pre-conditions for any forgotten, however, that other sectors emissions has increased substantially promotion of diesel particulate systems are also obliged to reduce their emis- and today has a significant effect on the through tax incentives. sions to technically and economically formation of ozone.

Ozone levels: peak values fall Exceedances of the 240 µg/m3 in percent, 1990 = 100%

100 99 84

38 31 19 14 6 4 1 0 3 4 0 1 * 0 1 2 4 5 7 3 99 99 99 993 99 99 1 1 1 1 199 1 1996 1 1998 1999 2000 2001 2002 200 2004 2005

* 2003 extremely hot summer Source: UBA 108 Verband der Automobilindustrie ENVIRONMENT AND TECHNOLOGY

Through consistent emissions Passenger Cars and Trucks becoming reduction, the automotive industry has also achieved its goal of helping to increasingly Cleaner and Quieter improve the environment. This underlines the fact that the medium and long- term measures taken to help improve air The Euro 4 emissions The German automotive industry quality have been the right routes standard is in force was well-prepared for the Euro 4 stand- to take. At the beginning of January 2005, ard. German manufacturers were offer- the new Euro 4 emissions standard for ing a number of Euro 4 vehicles way The experiences of the last few passenger cars and light commercial before the limits became binding. On years have gone to show that impos- vehicles came into force. It has been the diesel engine in particular, this has ing speed limits during periods of high binding for all new registrations since been made possible by optimising com- ozone levels, as demanded by some January 1, 2006. Compared with the bustion, the use of high-pressure injec- environmental activists, is ineffective. Euro 3 standard, this new standard tors and optimised catalytic converters. Even the Federal Environment Agency halves the limits again. This means considers short-term actions to be that, since 1990, an emissions reduc- Because Euro 4 vehicles were intro- unsuccessful. tion of up to 98 percent has been duced early, large numbers of them achieved. are already in the vehicle population. The mean annual ozone concentration values have been increasing slightly for a few years. The Federal Reduction in exhaust emissions from diesel passenger cars Environment Agency puts this down 100 to the reduction in vehicle emissions. 80 Before, vehicles had emitted larger 60 100 quantities of nitrogen monoxide which 40 -98% CO [%] Reduction in helps to reduce ozone near the earth’s 20 emissions from surface. Since this source of nitrogen 0 13 5 3 2 diesel passenger is absent nowadays, but emissions 100 cars is considerable. from natural sources have remained 80 the same, the mean annual value has 60 100 risen slightly. However, it remains well 40 -91% PM [%] 73 outside the range that would be 20 30 19 relevant for either man or the environ- 0 9 Reduction has ment. What is important in terms of 100 been up to 98% since 1990. health precautions and environmental 80 protection is the amount and duration 60 of limit exceedances and the peak 100 40 -95% values. With the exception of the HC+NOx [%] 20 unusually hot summer of 2003, these 23 0 12 10 5 values have been decreasing signifi- Euro 0 Euro 1 Euro 2 Euro 3 Euro 4 Source: VDA cantly. Annual Report 2006 109

Twenty percent of petrol vehicles and Trends in diesel emissions standards 11 percent of diesels in the vehicle pop- Euro 1 since 1993 Euro 2 since 1996 ulation are Euro 4 vehicles, the overall NOx average being 18 percent. Because of (g/km) Euro 3 since 2000 Euro 4 since 2005 Euro 5 (currently under discussion) their low pollutant emissions, they are only responsible for 4.4 percent of the 1.2 total soot emissions from passenger 1.0 cars – proof once more that a quick and as comprehensive as possible renewal 0.8 of the vehicle population would help 0.6 enormously to reduce environmental pollution. 0.4

0.2 Euro 5 in preparation PM At the end of November 2005, the 0.02 0.04 0.06 0.08 0.10 0.12 0.14 0.16 0.18 0.20 (g/km) European Commission tabled a proposal for a Euro 5 emissions standard for Source: VDA passenger cars and light commercial vehicles. The proposed limit of 5 mg places the focus of attention of this that a particulate counting procedure Surprisingly, however, the European draft standard on the introduction of the can bring any added benefit. The costs Commission is also proposing a tighten- particulate filter. The German manufac- incurred as a result of this new measuring of the NOX limit for petrol engines turers are the best prepared for this. In ing procedure would be huge – both at to 60 mg/km and a reduction of the HC addition, the European Commission’s the development and the type approval limit to 75 mg/km, which in no way can proposal aims to reduce the NO X limit stages – and are therefore not justified. be justified on the basis of the impact for diesels by 25 percent to 200 mg/km, assessment carried out. Furthermore, a value which – though challenging Where the NO X limit is concerned, since its only effect will be increased – should be achievable primarily by car- the German automotive industry sup- costs, this measure has caused much rying out internal engine modifications. ports the German government, which head shaking amongst all the manu- To this end, the European Commission’s favours the limit of 200 milligrams per facturers and has been unanimously proposal is going in the right direction. kilometre proposed by the Commission. rejected. This represents a 20 percent improve- By contrast, the introduction of a ment over Euro 4 and presents a huge As a report (the CAFE Baseline particulate counting procedure is cate- enough technical challenge for the Report) carried out on behalf of the gorically rejected, if no facts exist which industry. A further reduction in Europe EU Commission itself sets out, pas- justify such a procedure. There are is not feasible at present, as NOX after- senger cars with petrol engines will be plenty of tests which demonstrate a cor- treatment systems will not be sufficiently responsible for just 4 percent of the relation between mass and particulate developed for volume production use total NOX emissions by 2020, thanks to number. The gravimetric procedure is in Europe until around 2010; the first Euro 4. Because current exhaust gas a tried and tested and reliable method. systems are likely to be launched on the aftertreatment is highly effective, a fur-

So far, no evidence has been produced European market in 2008. ther reduction in NOX and HC emissions 110 Verband der Automobilindustrie ENVIRONMENT AND TECHNOLOGY

Development and projection at their disposal in the event of non- compliance, are already effective meas- of NOX emissions from road transport ures of guaranteeing durability. More Values in kt/a Other spark-ignition-engined cars stringent requirements are therefore not 700 Other diesel-engined cars necessary. Having to prove a durability Conventional spark-ignition-engined cars of 160,000 kilometres is also an unrea- 600 Cars with closed-loop catalytic converter sonably high hurdle to have to over- Diesel-engined cars come at the type approval stage. Assumption: future distribution of 500 spark-ignition-/diesel-engined cars = 50:50 The European Commission intends to include access to repair informa- 400 tion, which is currently governed by the Group Exemption Order, in the Euro 5 300 regulations. This involves competition law in particular, rather than vehicle type 200 approval regulations, and should therefore be deleted from the current draft. 100 The German vehicle manufacturers are the largest producers of diesel 0 6 8 9 3 6 8 9 passenger cars in the world. The VDA 2005 200 2007 200 200 2010 2011 2012 201 2014 2015 201 2017 201 201 2020 therefore considers it vital that this

Values refer to exhaust limit value stages up to and including Euro 4. drive concept remains an attractive and Source: Federal German Environment Ministry cost-effective option and is developed further. for passenger cars is no longer under example is that of motorhomes over Essentially, the German automotive consideration in the CAFE (Clean Air for 2.5 tonnes. The very purpose of these industry therefore calls upon the legisla- Europe) programme. vehicles means they have to be heavier, tive bodies to let reason prevail in the which justifies their being approved as a discussions on Euro 5 and to assess the In contrast to the Commission’s heavy passenger car. consequences. Just such an approach draft provisions, the German automo- was adopted for the CARS 21 pro- tive industry sees a continuing need for The Commission’s proposal to gramme, an initiative of the EU Commis- separate limits for heavy M1 vehicles. extend the durability – i. e. the number sion. The programme focused mainly on This applies, for example, to 7-seater of kilometres a vehicle must be able to setting realistic and technically feasible vehicles which require more space, have travel whilst still meeting all emissions limits, but also considered vehicle type a special design and are heavier. These requirements – to 160,000 kilometres approval procedures. vehicles are used above all as shut- is rejected. The current in-use require- tle buses, taxis or in regional collective ments (5 years or 80,000 kilometres) The EU Commission’s proposal is transport applications and cater for the and the sanction measures, which the now with the Council of ministers and mobility needs of large families. Another type approval authorities already have the European Parliament for discus- Annual Report 2006 111

sion. After an initial policy debate in the within the framework of the registra- petitive factor, as confirmed by the most Council, there began to emerge a clear tion regulations recent proposal from France to link majority in favour of a combined rul- Euro 5 with the regulation of fuel con- ing, which was originally proposed by ■ Follow-up ruling on the reduction of sumption. In this connection, the German

Germany and aimed to bring together NOX emissions only after an impact automobile industry has declared its the emissions regulations for petrol and assessment and an analysis of cost- commitment to continuing current work diesel engines. Since then, France has effectiveness (2009) on an “integrated approach”, as already categorically rejected this proposal. The initiated in the context of the European competitive significance of emissions There can be no doubt that, in the Climate Change Programme, with the legislation could not be expressed more past 25 years in particular, exhaust aim of reducing CO2 emissions from clearly. The industry, the VDA and the emission legislation has made consider- traffic on a sustainable, long-term basis. European Automobile Manufacturers‘ able progress, with residual pollutant Association (ACEA) unanimously reject levels systematically reduced by half. Be that as it may, problems of any discussion about Euro 5 in conjunc- Some areas can already be regarded competition are not to be solved by tion with a combined ruling. This is due, as completed, and even where further regulating fuel consumption, nor is the not least, to the experiences with the action is allegedly needed, the halving key to CO2 reduction to be found in introduction of Euro 4 and also to the of residual pollutant levels must not be the introduction of upper consumption fear that a common standard could well regarded as an end in itself. The high limits and related action on the part of be discredited again before it actually costs associated with further reductions public authorities. This is the unanimous comes into force. The European automo- in pollutant levels must be tolerable and opinion of Europe’s automobile manu- bile industry’s position on Euro 5 can be represent a reasonable degree of ben- facturers, and as the ACEA’s joint letter summed up in the following key points: efit in the form of improved air quality. to the EU Commission indicates, they will not allow themselves to be divided ■ Limits for diesel passenger cars: 200 In this connection, it should be on this issue. Consumption limits are

mg NOX 5 mg particulates noted that exhaust emission legislation not a source of inspiration to the auto- and lower fuel consumption cannot, of mobile engineer, but such inspiration ■ Limit values for petrol-engined cars course, be viewed in isolation. In most is precisely what is needed if we are to not to be lowered cases, more stringent exhaust emission comply with our Kyoto commitments on limits have an adverse effect on fuel the basis of an efficient strategy that ■ Firm date of introduction for the reg- reduction potential. Fuel consumption, applies to all types of vehicle and makes ulation: 36 months after the directive however, is one of the decisive com- them all, whether large or small, more has been approved petitive factors in every manufacturer’s economical. Fuel consumption regula- strategy, and plays a role that has not tions are and will remain a mistaken ■ Retention of the special ruling for merely become significant in view of the approach. heavy M1 vehicles rapid increases in mineral oil prices in recent years. Commercial vehicles: ■ Retention of the long-term durability Euro IV in force – regulations (80,000 km) With this as a background, it is Euro V on the way entirely understandable if progressive 2005 also saw an important step ■ No ruling to be adopted regarding exhaust emission control legislation being taken towards further reductions the passing on of repair information becomes an increasingly relevant com- in emissions for commercial vehicles. 112 Verband der Automobilindustrie ENVIRONMENT AND TECHNOLOGY

Reduction in exhaust emissions Particulate emissions are now on a from commercial vehicles level with the so-called EEV (Enhanced Environmentally Friendly Vehicles). 100 80 Therefore, modern trucks are making 60 100 a significant contribution to the reduc- 40 -88% 20 40 33 tion in pollutants. This has been made 17 0 12 12 possible thanks to new exhaust gas 100 recirculation systems (EGR), combined 80 60 with diesel particulate filters, and to

100 -82% 40 selective catalytic reduction (SCR) using 20 47 42 25 0 18 18 AdBlue®. 100

80 %

6 Exhaust gas recirculation technology 60 100 -7 40 63 is able to reduce nitrogen oxide emis-

NOx [%] HC [%] CO [%] 49 20 35 24 sions to the Euro IV level and, when 0 14 combined with particulate aftertreat- 100 80 ment techniques, enables all Euro IV 60 100 limits to be met. 40 -95% PM [%] 20 38 25 5 5 0 An alternative method is low-soot Euro 0 Euro I Euro II Euro III Euro IV Euro V Source: VDA combustion optimisation, which also further reduces fuel consumption. This With the coming into force of Euro IV, with Euro III – in the case of particu- does, however, result in higher nitrogen emissions were again reduced on aver- lates, the reduction was even greater at oxide emissions, which are then reduced age by around 50 percent compared 80 percent. in a second stage using AdBlue®.

Emission reductions on commercial vehicles: AdBlue® is an aqueous urea solu- comparison of strategies tion which is injected in a specific way PM (g/kWh) into the so-called SCR catalytic con- Starting point: Ausgangspunkt verter. In a preliminary reaction stage in 0.1 Euro III EuroEuro III 3 an NOX catalytic converter using SCR ® EGRAGR technology, the AdBlue injected into the exhaust system is first converted Combustion into ammonia. In the subsequent cata- PM-NachbehandlungPM aftertreatment optimierungoptimisation lytic reduction phase, the NOX is then, with the help of the ammonia, largely broken down into nitrogen and water. 0.02 SGRSCR Thus, AdBlue® is able to reduce nitro- Euro V Euro IV NOx (g/kWh) gen oxides drastically and enables both 2.0 3.5 5.0 Euro IV and the future Euro V standards Source: Iveco to be met. Annual Report 2006 113

Vehicles equipped with SCR tech- Noise emissions from vehicles: what has been achieved? nology benefit from reduced tolls on Trends in vehicle limits over time German motorways on a long-term Pass-by noise level [dB(A)] 92 Today, 13 modern commercial vehicles basis. German truck manufacturers have 90 88 driven this technology forwards and, are 86 already able to offer these extremely 84 combined produce the same 82 noise level as just one low-emission trucks for sale. 80 commercial vehicle in 1980. 78 76 Today, 6 modern passenger cars combined 74 Natural gas propulsion systems, 72 70 produce the same noise level as which already meet the Euro V stand- just one passenger car in 1980. 8 0 2 4 0 2 4 6 97 98 98 98 986 988 99 99 99 996 998 ard, are increasingly being employed, 1 1 1 1 1 1 1 1 1 1 1 2000 2002 2004 200 Since 1995, vehicles have undergone particularly for town buses. It is even Commercial vehicles > 150 kW Commercial vehicles in Austria regular noise emissions checks. Passenger cars Test conditions: ISO 362 accelerated pass-by possible to meet the EEV standard with So far, a substantial reduction in the noise emissions from motor vehicles has been achieved. natural gas engines. This technology Source: Continental AG will thus make it possible to take a significant leap forward towards a sustainable improvement in air quality in inner To address the issue of noise emis- limits based on the previous measuring cities. sions on all levels, the German automo- procedure. The new noise measuring tive industry has cooperated on the procedure has been adopted by the Noise emissions development of a new noise measuring UN/ECE working group in this field. Modern vehicles are becoming procedure which is representative of Thus, the basis has been created for the increasingly quieter. Just one single road traffic. The new procedure will EU to make this new procedure a bind- commercial vehicle from 1980 produced therefore result in better road traffic ing provision for the European economic the same amount of noise as 13 mod- noise reduction than will reductions in region. ern commercial vehicles combined do today. Likewise, the noise level of one single passenger car from 1980 is Innovative Drives and Fuels of the equivalent to that of 6 modern passenger cars. Future

Noise reduction has been achieved The mobility strategy of and regulatory policy restrictions are above all by improvements in engine the German automotive other factors which are re-defining technology and by extensive encapsu- industry the framework. To safeguard a level lation of engines. Engines have now The German automotive industry of mobility which is able to cope with become so quiet that in normal town considers it its duty to safeguard mobil- the changing challenges, which will driving, it is the tyre/road noise which ity. However, resources, and more continue to be available and affordable predominates. This was the conclusion precisely the very fossil fuel resources to a wide cross section of the popula- drawn in a study carried out by the which we currently use to attain this tion and which is also sustainable, RWTÜV on road traffic noise which was mobility, are becoming scarcer and is one of the major challenges facing published by the Federal Environment more expensive. Dependency on global the German automotive industry Agency in 2005. politics, climate change and transport today. 114 Verband der Automobilindustrie ENVIRONMENT AND TECHNOLOGY

The time is right for new solutions. The rising cost of oil is nudging alternative energy concepts ever closer towards economic viability. The aim is to reduce dependency on fossil energy. Sustainable mobility needs a sustainable energy basis.

The German automotive industry has shifted its focus towards “mobility with a future” and has already taken some strategic decisions in this regard. At the heart of this strategy is a long-term and sustainable energy concept – a “master plan” which will reduce dependency on fossil fuel energy and cut CO2 emissions Four men on a mission to promote sustainable mobility: Dr. Franz-Josef Paefgen (Volks- even further. In the long term, hydrogen wagen), Dr. Thomas Weber (DaimlerChrysler), Prof. Dr. Bernd Gottschalk (VDA) and produced sustainably from renewable Bernhard Mattes (Ford) presenting the strategy of the German automotive industry in sources, will take on the role of energy Berlin in February 2006

The road map for drive system technology source. In the short and medium-term, the German automotive industry is look- Hydrogen ing to bring together a host of diverse Biomass-to-liquid technologies and at the same time is also Fuel cell Ethanol working purposefully on improving the Hydrogen engines efficiency of conventional vehicles and Biodiesel Flex-Fuel vehicles drive systems.

Hybrid drives Nowhere else in the world is the Gas-to-liquid Gas vehicles range of new vehicle technologies being investigated as comprehensively as it Increasing efficiency of engines is in Germany. Each manufacturer is pursuing its preferred options, either Natural gas Lightweight construction independently or in joint ventures. This multitude of development paths gives Optimisation of powertrain the German automotive industry a par- Optimisation of conventional ticular advantage. fuels At a press workshop on the February Source: VDA 17, 2006, the VDA, together with Daimler- Annual Report 2006 115

Chrysler, Ford and Volkswagen presented Biofuels: considerable potential for mixing the manufacturers’ future concepts for The German automotive industry is prepared alternative fuels and drives. They

■ are essentially long-term concepts, though any short-term potential will be exploited, > 10% ■ will not focus on just one type of 5 -10% fuel, and 5% < 1% Average mixing quota Current mixing The German automotive German car ■ represent a diverse strategy with a in Germany (2005) limit for vehicles industry is preparing manufacturers are for 10% mixing quotas the leading suppliers of host of different drive systems, rang- flex-fuel technologies ing from ever cleaner “clean diesel” in the world Source: VDA to hybrid drives and the fuel cell.

These are flanked by measures to improve the transport infrastructure and the proportion aimed for being 10 per- In the interests of the Kyoto process introduce intelligent driver navigation cent. The sector is thereby being more and the climate protection programme, and driver information systems, which, ambitious than the EU target, which is this does not imply in any way a rejec- independently of the increase in vehicle looking to add 5.75 percent of renew- tion of the goal to further increase the efficiency, will reduce fuel consumption able fuels by 2010. This means that the efficiency of conventional drive systems. to a considerable degree. existing fuel standards will have to be revised and, in consultation with all par- First pillar of the “master Four men on a mission to promote ties, the issue of quality will need to be plan”: further optimisation sustainable mobility: Dr. Franz-Josef defined and regulated. of petrol and diesel engines Paefgen (Volkswagen), Dr. Thomas (increasing efficiency) Weber (DaimlerChrysler), Prof. Dr. Bernd The sector is therefore keen to set Increasing efficiency is the first pil- Gottschalk (VDA) and Bernhard Mattes a course that will increase the use of lar of the “master plan”. Modern, low- (Ford) presenting the strategy of the biofuels in road transport and sensibly emission petrol and diesel engines will German automotive industry in Berlin in complement the already successful remain the main power units for our February 2006. process of reducing fuel consumption vehicles even in the near future. The – which has fallen by 40 percent since further development of petrol engines Biofuels mixing: proportion the end of the 1970s and by 25 percent will play a key role. to rise to ten percent since 1990. Furthermore, the automo- A key component of these future tive industry is keen to combine, in an For Volkswagen, the introduction of concepts is the automotive industry’s integrated approach, the process of fuel-efficient engines is an important step initiative to complete the necessary reducing specific fuel consumption in on the road to CO 2 reduction. The lat- engineering groundwork that will enable vehicles, as agreed in the EU as part of est product from this series is the Twin ® more biodiesel to be added to conven- CARS 21, with the CO2 reduction poten- Charger TSI engine which successfully tional diesel and more ethanol to petrol, tial offered by renewable fuels. manages to combine dynamic perform- 116 Verband der Automobilindustrie ENVIRONMENT AND TECHNOLOGY

ance and improved efficiency. This has than a comparable petrol engine. The tinuing. It is not only passive measures, been made possible by using direct injec- result is the typical diesel ride comfort such as noise insulation, which are being tion in the petrol engine, combined with and responsive engine performance, used to influence noise levels. As it is, supercharging and downsizing. including when accelerating from low in real traffic situations, engine noise engine speeds, even in a high gear. This from passenger cars is no longer the Likewise, work on further optimising is because high torque at low engine dominant noise source. New injection diesel engines will continue. German speeds is synonymous with high propul- systems operating at high pressures of manufacturers and suppliers have a sive power and driving enjoyment. up to 2,000 bar or more not only ensure worldwide competitive advantage in this greater efficiency and lower emissions field and are safeguarding this through Maximum scores in terms of torque, but lower engine noise levels as well. logical further development work on the range and driving enjoyment go hand- The result is a tremendous improvement diesel – including work on its ecological in-hand with minimum fuel consumption in noise comfort, both inside and out. So, “qualities”. This also applies, incidentally, and noise. Modern diesels are exten- in terms of dynamic performance, quiet and contrary to widespread opinion, to sively encapsulated, which has reduced operation and clean emissions, a diesel exhaust gas aftertreatment: German manu- engine noise by around a half. Noise is very much a match for the latest pet- facturers have an 84 percent share in the reduction developments are also con- rol-driven passenger car. diesel particulate filter market in Germany!

DaimlerChrysler is pursuing the Modern diesel engines: powerful and fuel-efficient route to the cleanest diesel in the world Diesel: - The most efficient work machine in three stages. In addition to internal - Excellent fuel-efficiency - Low CO emissions engine measures, oxidation catalysts and 2 (l/100 km) 12 - 35 % the standard particulate filters, a new 10 technology, called BLUETEC will be used 8 Average fuel 6 in the future. This could reduce oxides of consumption 4 2 nitrogen – which is now the only exhaust 0 gas component which diesels, because 150 kW 130 kW 2.8-l petrol engine 2.7-l diesel engine of their design, emit more of than petrol Same vehicle model (upper mid-range), vehicle weight 1700 kg, automatic transmission engines – by up to 80 percent. Thanks to this technology, 10,000 commercial vehi- - Excellent performance characteristics - Excellent dynamic performance cles are already complying with the Euro - Driving enjoyment 5 standard which does not even come 14 12 sec. into force until 2009. DaimlerChrysler Time in sec. 12 - 30 % 10 also intends to use the technology on 8 8.4 sec. diesel passenger cars in the future. 6 Acceleration from 4 5th gear 80 to 120 km/h 2 Nowadays, the diesel is already 0 110 kW 110 kW well-known for the high level of torque 1.8-l turbocharged 1.9-l turbodiesel it makes available even at low engine petrol engine engine Same vehicle model (lower mid-range), vehicle weight 1360 kg, manual transmission speeds. The diesel is consequently more flexible and has better acceleration Source: FEV Annual Report 2006 117

Diesel share of new passenger car climatic conditions in some places, the registrations in Germany substitution potential is even greater. In percent 40 Crucial factors when looking at 35 biofuels are the profitability of growing 30 energy crops, the yield from raw mate- 25 rials and raw material waste and the 20 conversion rate – i. e. just how efficiently 15 fuel can be produced from biomass. 10 5 Some biofuels can already be pro- 0 duced today at price levels comparable 5 7 3 with those for fossil fuels. As a rule, and 99 99 1 1996 1 1998 1999 2000 2001 2002 200 2004 2005 Source: VDA statistics particularly in Europe, biofuels are only competitive today because they are free of duty. However, almost all biofuels Anyone taking climate protection bution to reducing the dependency on have the potential sooner or later to seriously cannot ignore the diesel. On crude oil, and substantially reduce CO 2 come down to the fossil fuel price level. average, the diesel engine is 25 percent emissions at the same time. Today, they more efficient than the petrol engine are one of the most cost-effective alter- Ethanol is already cheaper than and is indispensable for reducing CO2. natives available for reducing pollutants comparable petrol from a world market

An increasing proportion of diesel vehi- and CO2. price perspective. Biodiesel can also be cles is vital if the European automotive produced competitively today by using industry is going to fulfil its voluntary In Germany, biofuels already have a old grease, for example, which otherwise pledge to reduce CO2. 2 percent share of the market. The Ger- would be cost-intensive to dispose of. man agricultural industry alone, if the If the number of diesel vehicles in appropriate organisation and manu- One decisive factor for biofuels is the the vehicle population in Germany were facturing processes are in place, will raw materials market. Raw materials for to increase by just one percentage point, already be able to substitute 10 percent biofuels can be procured from places it would be possible to make savings of the fossil fuels with biofuels by 2020, other than Germany. Consequently, the equal, theoretically, to 100,000 passen- with this figure rising to more than 15 per- raw materials market should be analysed ger cars driving for one year non-stop. cent by 2030. Converted into figures for not just on a national level but increas-

If the diesel share in Germany were to CO2, this means potential savings of over ingly on a global level as well. The raw equal that in France, CO2 savings would 10 million tonnes for Germany alone by materials industry must be gradually pre- amount to almost 5 million tonnes. 2030. European Commission calculations pared for this new demand. One advan- are based on the assumption that in the tage not to be disregarded is the increas- The second pillar of the EU just under 10 percent of fuel can ing number of potential raw material “master plan”: alternative currently be substituted with biomass. suppliers – starting with the domestic and renewable fuels agricultural industry and extending right Biofuels. Biofuels are not a pana- For the worldwide market, with a through to the world agricultural markets. cea, but can make a significant contri- wide range of useable areas and better This places our energy supply on a 118 Verband der Automobilindustrie ENVIRONMENT AND TECHNOLOGY

broader basis in the long term and con- Volkswagen: “In the future, synthetic vehicle population in Germany is, at any sequently makes us more independent of fuels from biomass, used mixed with rate, already 39,000. CO2 savings of political crises or cartels. conventional fuels or on their own, with- 25 percent compared with petrol vehi- out any changes to the infrastructure cles are achievable. The course set by Second generation biofuels. being required, will gain acceptance. the previous government to extend the Increasing attention is being paid to the Fuels like these also open up the pos- tax framework until 2020 is therefore second generation biofuels, particularly sibility of developing new combustion a sensible move, not least because it BTL (“biomass-to-liquid”) – fuel from methods, such as the Combined Com- enables vehicle developers and vehicle biomass –, but also GTL (“gas-to-liquid”). bustion System (CCS®), offering further users to make long-term plans. Because of their excellent qualities, these potential for reducing fuel consumption so-called designer fuels can already be and emissions”. Volkswagen is develop- Opel is the market leader in natu- mixed with conventional fuels in larger ing the necessary installations jointly ral gas vehicles in Germany. “The Opel quantities. Fuelled with BTL, a Euro 3 with DaimlerChrysler, Shell and Choren Zafira CNG is the top-selling natural gas diesel would automatically become a Industries. car, deployed successfully in the “thou- Euro 4 diesel, whilst at the same time sand eco-taxis in Berlin” (TUT) project,

“from well to wheel” CO2 emissions Natural gas. Natural gas still has amongst other things. Anyone keen to would be reduced by up to 90 percent. future potential as a drive system, par- drive an economical vehicle cannot cur- ticularly in the light of current discus- rently ignore natural gas. Opel is the only It will be necessary to construct a sions on fine particulates. The number manufacturer to offer monovalent natural new industrial structure for synthetic of natural gas vehicles in the overall gas vehicles which are optimised for nat- fuels alongside the existing supply structure for fossil fuels and the biofuels already available on the market from The CO2 cycle agricultural sources.

Volkswagen is focusing on second generation biogenous fuels, such as biomass-to-liquid (BTL) and bioethanol from ligno-cellulose, both of which demonstrate a CO2 efficiency of more than 90 percent: “A 10-percent mix of bioethanol can already be used now in all modern Volkswagen petrol engines without any further changes to the infrastructure. As a result, the Recovery potential CO2 reductions can be achieved immediately”. At present, SunFuel® Shell, IOGEN and Volkswagen are Biomass together looking at the feasibility of jointly manufacturing cellulose ethanol Source: Volkswagen AG in Germany. Annual Report 2006 119

Number of natural gas vehicles in Germany tion the entire manufacturing process, from raw material to the tank.

35,000 ■ Alongside the effects on the climate,

30,000 the main factors should also be crop surface area efficiency, or the pros- 25,000 pects of achieving a return on the fuels, the consequences with regard 20,000 to regional availability, the contribution towards energy security and the 15,000 effects on type diversity. 10,000 CNG ■ The more favourable a biofuel’s 5,000 assessment, the higher the fiscal 20012002 2003 2004 2005 2006 incentive should be. Source: KBA The advantage of this type of incentive system is that biofuels which are ural gas. The monovalentplus technology view, or to long-term policy issues or to promising but which are currently still ensures maximum efficiency for natural the question of the cost burden on the expensive would be able to compete gas operation, whilst in bivalent vehicles, driver. fairly with established biofuels. This which are optimised to run on petrol, would smooth the way to a high oil there is a trade-off of around 20 percent. The German automotive industry is substitution quota in the future, an The efficient combustion process releas- therefore seeking a system of initiatives effective use of existing resources

es 10 to 15 percent less CO2 than petrol which will pay more attention to the and crop areas and a substantial reduc-

engines of the same power output.” quality and environmental aspects of tion in CO2 emissions from road trans- biofuels. It should be cost-efficient and port. Plea for fiscal incentives should of course take into account the for renewable fuels to be given budgetary situation, but should The VDA is seeking a dialogue so based on CO2 performance also, for the most part, prevent the car that a clear proposal for fiscal incen- The German government’s inten- driver having to pay more. The aim of tives for biofuels can be worked out tion to introduce a mandatory quota the German automotive industry is for with the interested parties and taking will fulfil the European Union’s biofuels competition amongst the biofuels, tak- into account, amongst other things, the quota requirements and at the same ing into account costs and environmen- financial framework. time will scrap any fiscal incentives for tal performance at the same time. This these quotas. However, the proposed will result in fiscal incentives which are The third pillar of the quota only makes provision for a target based on clear, uniform criteria: “master plan”: alternative amount. Consequently, no considera- power units tion is being given either to the fact that ■ The main assessment criterion Forming the third pillar of the

the various alternative fuels all perform should be the CO2 balance sheet of “master plan” for the future, alongside differently, from an ecological point of each biofuel – taking into considera- the further improvement of the petrol 120 Verband der Automobilindustrie ENVIRONMENT AND TECHNOLOGY

and diesel engine and renewable These vehicles are also available in produced from a number of sources fuels, are the alternative drive systems. Europe and Germany. and therefore has the highest fuel substitution potential. In the future, hydro- Hybrid drive. Where hybrid drives Ford considers flex-fuel vehicles as gen will be obtained sustainably from are concerned, the German automotive an additional option. According to Ford renewable sources. industry and its supply industry working “the main advantage of bio-ethanol vehi- in close cooperation are well past the cles is the reduction of CO2 emissions. However, hydrogen will not conquer stage of discussing who was first and This is because, unlike mineral oil-based the market before 2020. Until then, who was second. fuels, the combustion of bio-ethanol is, problems concerning the current high

in ideal conditions, CO2 neutral. When manufacturing costs, high volatility and The market share in Germany is viewed over the entire life cycle (well low energy density must be solved. currently 0.06 percent and in the USA to wheel), the CO2 balance for ethanol Another crucial factor for the success 0.5 percent, meaning that there are still operation can be as much as 80 per- of hydrogen as a renewable fuel will be

2 to 3 diesel vehicles being registered cent below the CO2 emissions levels for the construction of a widespread filling for every hybrid. petrol operation. Flex-fuel cars therefore station infrastructure. The German auto-

reduce CO2 emissions, protect fossil fuel motive industry has been involved for a The hybrid vehicle is more than a resources and thereby reduce depend- number of years in numerous national fashion statement but less than a pana- ency on crude oil. (…) But for this and international research projects. cea. The advantages of the diesel over technology to find customer acceptance Two possible routes are being taken to long distances are simply too great, not in Germany, an ethanol filling station net- develop hydrogen drive systems, namely to mention the costs. But the race to work is indispensable.” direct combustion in a hydrogen engine win the customer’s favour and offer true and the use of the fuel cell. ecological qualities will still be an inter- Hydrogen. The German automotive esting one. Sales opportunities may be industry sees hydrogen as the energy With its fleet of more than 100 fuel different in North America or in the cit- source of the future since it can be cell vehicles in operation throughout ies of Japan from those in Europe. The German manufacturers will be whole- Hydrogen will be renewable in the future heartedly present with various types of hybrid.

H2O

Flex-fuel vehicles. So-called flex- Electricity fuel vehicles can use either conventional Electroly fuel or ethanol in any mixture ratio. In this sector, the German automotive sis H industry is able to offer the appropri- 2 ate vehicle technology. It is the world leader in bio-ethanol vehicles. And in Fermentation sification Brazil, the largest bio-ethanol market in Ga Compression / CO2 the world, the German industry is the Biomass Liquefaction market leader in flex-fuel vehicles, with Source: VDA a market share of almost 70 percent. Annual Report 2006 121

VDA Technical Congress: showcase for the latest environmental and safety technology

The German automotive industry alternative fuels and drives, including Prof. Gottschalk continued by saying spends more than 16 billion euros per hybrid drives, as well as the optimisa- that, if all passenger cars complying year on research and development. The tion of the petrol and diesel engine. with the Euro 3 standard and lower sector has the opportunity to present VDA President, Prof. Dr. Bernd Gott- were to be replaced with modern its latest developments in environmen- schalk, pointed out the successes Euro 4 vehicles, this would bring

tal and safety technology at the annual achieved by the automotive industry about a further CO2 saving of 15 mil- spring VDA Technical Congress, a two- in environmental and climate protec- lion tonnes, whilst the amount of

day technology exhibition. tion. Fifteen million tonnes of CO2 fuel saved would be enough to run have been saved in Germany since 6 million passenger cars non-stop for At the March 2006 congress, held 1999, making transport the sector one year.

at BMW in Munich, the focus was on with the greatest CO2 reduction. Notable representatives from politics, industry and science – including Minister-president Dr. Edmund Stoiber, the Munich mayor Christian Ude and BMW board member Prof. Dr. Burkhard Göschel – stressed the need to continue along this successful path.

A CD-ROM of the 2006 congress report can be ordered, at cost, by sending an e-mail to: [email protected]. The next VDA Technical Congress will Speaking up for sustainable mobility: VDA honorary board member Dr. Eberhard von take place on March 28 & 29, 2007 at Kuenheim, the Munich mayor Christian Ude, the Minister-president of Bavaria Dr. DaimlerChrysler in Sindelfingen. More Edmund Stoiber, VDA President Prof. Dr. Bernd Gottschalk, BMW board member information can be obtained from the Prof. Dr. Burkhard Göschel. website at www.vda.de.

the world, DaimlerChrysler is already than 20 years in the development of or hydrogen, as the power unit. In 2000, gathering experience that will help bring liquid hydrogen as a fuel which, in the the company presented to the world its this promising technology to market long term, will be produced from renew- small fleet of BMW 750 hL models; these maturity. able energies. This will practically elimi- ready-to-drive hydrogen-fuelled vehicles

nate CO2 emissions and protect natural successfully demonstrated the suitability In addition to optimising conventional resources. The BMW CleanEnergy project of this technology for practical use. The drive systems technology, the BMW focuses on the tried-and-tested combus- BMW Group is the first vehicle manufac- Group has also been involved for more tion engine, operating on either petrol turer in the world to commence develop- 122 Verband der Automobilindustrie ENVIRONMENT AND TECHNOLOGY

ment of a hydrogen vehicle with a view the change of course towards a sustain- should not be left to others without to volume production. able energy and mobility policy will not there being a pressing cause for doing only trigger new research, growth and so. A sustainable energy and mobility Between 2004 and 2006, BMW and employment potential in Germany but policy that is created for the long term project partners used a public filling will also initiate efforts to safeguard is an investment in the future. It may station in Berlin to investigate the infra- mobility for the long term. well require courage to make resolute structure required for hydrogen genera- decisions, it may well cost money in the tion and refuelling. At the same time, on Here, Germany has the opportunity beginning, but in the long term it will a European level, the harmonisation of to determine the direction that is taken. safeguard the future prospects of our legal requirements for the use of hydro- These attractive future technologies country and our society. gen in the transport sector have been pushed ahead.

For a sustainable energy and mobility policy End-of-Life Vehicles In the long term, efforts must be concentrated on finding bridging solutions that will take us into the hydrogen A review of the 2002 EU End-of- disposal management system instead of age. Until then, it will be necessary to Life Vehicles Directive is due this year. fixed quotas. pursue many different avenues and The automotive industry believes this involve all participants in order to make is urgently required in order to assess Recycling quota makes any progress along the long route the viability of the fixed recycling quo- weight-saving design difficult “away from oil”. For the environment, tas. This is because, in all scientifically sustainable mobility and the partners accepted ecological assessments, the In kg Other Plastics recycling involved, this can lead to a “win-win” material and thermal recovery processes Plastics Metals situation. are more or less evenly matched when recycling 1000 examined on the whole, in other words 900 Though the 10-percent renewable when all life-cycle phases are taken 800 50 kg 80% fuels mix can still be heavily promoted into account. In Germany, there is cur- 700 70 kg in this way, without a coordinated strat- rently a virtual ban on the dumping of 600 500 egy involving everyone – from the agri- shredder light fraction (the combustible 400 cultural industry to the vehicle industry, residues from the recovery process), 300 from the oil industry to finance ministers which have until now not been recov- 200 right through to the customer – it is not ered in large quantities. Consequently, 100 likely that it will be achieved. recovery by necessity has to be imple- 0 1000 kg 900 kg mented. An additional quota is therefore Recycling included Recycling included For the automotive industry, which unnecessary and would result in more in above in above 800 Kg 720 Kg is by far the largest investor in research documentation and avoidable costs, Source: VDA statistics and development in Germany and is the without any major environmental gain. The graph shows that, in the case of a car of sector on which, even after restructur- Consequently, the automotive industry weight-saving design, the fixed recycling quota means that more plastics have to be recycled. This ing, one in every 7 jobs is dependent, is calling for a flexible recovery and results in higher costs. Annual Report 2006 123

Generally, a holistic approach is that were used to build the vehicle IPP – Integrated Product required where the car is concerned. In in the first place, in accordance with Policy an integrated approach the most effi- regulations in force at the time. In With the proposals for an integrated cient ecological optimisation potential other words: repair as manufactured. product policy (IPP), the European should be utilised across all life cycle The automotive industry brought this Commission is placing the focus on the phases. The EU Directive with its high problem to the attention of the Com- environmental performance of a product material recovery quotas conflicts with mission years ago, but so far without over the entire product life cycle. The another major EU environmental goal, major success. In the worst-case sce- goal is to bring together the substance namely fuel economy and climate pro- nario, it might not be possible to repair and media-related environmental policy tection. A design that is optimised some vehicles and they may have to be instruments which have so far been purely for the disposal phases may, on scrapped. working in isolation. IPP is therefore the whole, produce environmentally also part of the implementation of the unfavourable results. This is because, German implementation EU’s 6th Environmental Action Pro- through this mistaken recycling ruling, of the End-of-Life Vehicles gramme. After submitting a green paper the EU Commission is actually promot- Directive – infringement in 2001, the Commission is now in the ing heavier vehicles. Since 100 kilo- proceedings process of developing the IPP further grams of additional weight per vehicle Germany was one of the first mem- into a Directive or Regulation. In the increases fuel consumption by ap- ber nations of the European Union to meantime, the IPP pilot projects have proximately 0.3 litres, these two incorporate the End-of-Life Vehicles now been more or less completed. In goals cancel each other out. The EU Directive into national law and was 2007, the commission is due to report to Commission is called upon to resolve also the first country that the EU Com- the European Parliament and the Coun- this contradiction in their adopted mission initiated proceedings against, cil on the progress of IPP. Directives. allegedly for incorrect implementation of the EU End-of-Life Vehicles Direc- The automotive industry welcomes Prohibition of materials: tive. As a result of a revision of the the holistic approach. IPP should also for and against end-of-life vehicles ordinance, how- be applied to the Commission’s body The EU Directive not only regulates ever, the German government now of laws, so that conflicting regulations, how end-of-life vehicles are dealt with complies with the wishes of the EU. such as the End-of-Life Vehicles Direc- but also affects the new design of both Consequently, motor caravans and tive and the EU climate protection policy vehicles and replacement parts. The other category M1 vehicles built for no longer arise. IPP therefore presents End-of-Life Vehicles Directive bans the special purposes are also now subject an opportunity to correct errors made by use of lead, chromium, cadmium and to the German end-of-life vehicles the Commission. It is for this reason too mercury in vehicles. Exceptions are directive. In addition, some restric- that people in the automotive industry listed in a special table in the Directive. tions relating to the free take-back have been working intensively on IPP Some of these exceptions are subject provision for end-of-life vehicles have projects. However, there is no deny- to a time limit. However, it is not clear been dispensed with. The texts of the ing the fear that IPP will lead to further how vehicles are to be repaired once German version of the EU Directive “add-ons” to road vehicle environmental the period for these exceptional cases and the German end-of-life vehicles legislation. This is unnecessary and expires. The automotive industry is of ordinance relating to the regulation must be rejected because no other the opinion that vehicles should be of replacement parts are now iden- product is regulated in such detail as repaired with the same type of parts tical. the road vehicle. 124 Verband der Automobilindustrie ENVIRONMENT AND TECHNOLOGY

Production-Related Environmental Water consumption by vehicle manufacturing Protection plants is falling In million cu. m 80 Total For years, the German automotive ment, because not only has the number Industrial water industry has been pointing the way of vehicles produced risen sharply over 70 Potable water where production is concerned. When the last 15 years, so too has the comit comes to the protection of resources plexity of the vehicles. Hand-in-hand 60 – whether it be water consumption, with these major achievements has 50 waste water, waste or air pollution con- been the exorbitant increase in the trol – the industry is out in front. recycling quota. Whilst in 1990 around 40 25 percent of waste was recycled and 30 In the past year, the German auto- 75 percent had to be sent for disposal, motive industry has managed to keep the automotive industry has now suc- 20 the amount of waste it produces more ceeded in reversing this ratio. It should or less stable, despite rising production 10 2 4 figures. This has been a great achieve- 99 99 996 998 1 1 1 1 2000 2002 2004 Quantities of waste water Source: VDA statistics discharged from vehicle Total waste generated manufacturing plants by vehicle manufacturing are falling plants has fallen be noted that these figures refer to “actu- In million cu. m In thousands of tonnes al” waste, the valuable and much sought- 55 500 Total after scrap metal not being included in Cooling water these statistics. The vehicle manufactur- Waste water ers calculate that, for each vehicle, only 400 45 around 15 kilograms of waste has to be disposed of – a major achievement for environmental protection. 300 35 Similar achievements are also being seen where water consumption is concerned. Here too, the German 200 25 automotive industry is setting world Total records. Despite increasing production Of which recycled and the increasing use of water-based 100 15 paints, both water consumption and 2 4 2 4 99 99 996 998 99 99 996 998 the associated amount of waste water 1 1 1 1 2000 2002 2004 1 1 1 1 2000 2002 2004 have continued to drop sharply. This Source: VDA statistics Source: VDA statistics also includes potable water consump- Annual Report 2006 125

tion. Compared with 1990, potable water Germany was the first in the world to equalisation for manufacturing compa- consumption has fallen by 60 percent. use and deploy on a large scale. nies are currently in force and for the A large proportion of the used industrial sake of competitiveness and planning water is deployed as cooling water. The Solvent emissions must be safeguarded in the long term cooling water which is taken from rivers, further reduced as well. In addition, the EU energy tax for example, is returned to the rivers in a directive makes provision to exempt In thousands of tonnes cleaner state than when it was removed. certain production processes from tax, 25 This is also has a positive effect on the these exemptions also being granted by environment. other member states. This way, processes which help the environment (e. g. No other automotive industry has cleaning of extracted air, combined invested such huge amounts in air pol- 20 heat and power plants) and metal lution control. The results are now very production/machining processes (e. g. evident. Solvent emissions have halved foundries, forges, hardening shops) over the last 15 years, even though should remain, or should be made, 12 percent more cars are produced now 15 entirely tax-exempt. than in 1990. The amount of solvents emitted per vehicle in Germany is only The electricity feed law, which half that of the European average. This was later replaced by the renewable has been made possible by innovative 10 energy law (EEG) has led to a signifi- 19901995 2000 2005 processes, such as water-based paints cant increase in the generation of Source: VDA statistics and powder coating techniques, which electricity from renewable sources and consequently to a reduction in greenhouse gas emissions. The annual Energy additional costs of around 2.7 billion euros (2005), which were passed on to virtually all consumers, account Electricity is by far the most impor- prices for crude oil and coal. Further- for around 5 to 10 percent of the tant energy source in vehicle manu- more, in the case of electricity, several electricity procurement costs in vehi- facturing, followed by natural gas and cost factors are of Germany’s own cle production. In the meantime, district heating. Over the past year, the making, in particular the electricity tax, electricity prices have reached levels prices of all these energy sources have the renewable energy law levies and that are undermining the competitive- continued to accelerate. For instance, the greenhouse gas emissions trading. ness of the German plants. It is imper- today’s electricity prices are around Insufficient competition on the German ative therefore that the costs are 50 percent higher than they were in market is another cause of this trend. capped. 2000. German industry pays the highest In addition, the network usage charges, gas prices in the EU, which has a nega- which have been criticised for some According to forecasts made by the tive effect on competitiveness. time as being too high, are still in place. Association of German Network Opera- tors (VDN in the VDEW), these levies The reasons for these price rises Where electricity tax is concerned, a are due to double over the next five are, firstly, the very high world market reduced tax rate and the so-called peak years. It seems essential, therefore, for 126 Verband der Automobilindustrie ENVIRONMENT AND TECHNOLOGY

Sharp rise in electricity prices for industry Electricity price index, as at February 2006 (January 2002 = 100) 190 184.18

180 178.18 170

165.25 160

151.24 150.89 150 154.28 150.70 147.88 148.55 140 138.08 135.71 130 122.68 126.10 120 122.37 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov DecJan Feb 2005 2006 Source: VIK

Germany’s gas prices for industry are the highest the EEG to undergo a revision. In the #/MWh process, a clear distinction should be 2.8 made between initiatives to promote the

Mean value with taxes market launch and those to promote research. Mean value without taxes 2.2 2.05 In line with the political intention, 1.9 1.85 1.8 1.8 greenhouse gas emissions trading has 1.7 1.6 1.6 1.6 1.6 led to a rise in energy prices. The cur- 1.45 1.3 rent price level for emissions authorisations, however, is considerably higher than expected. Furthermore, there is every indication that the opportunity costs for the emissions authorisations allocated entirely cost-free have been priced-in by the energy industry and subsequently passed on to the custom- Germany Finland Italy Belgium Spain France UK ers. The Association of Industrial Energy Source: BDI and Power Industries (VIK) and the Annual Report 2006 127

Burden of state-imposed five big electricity utilities as a result of discussions about the consequences charges on electricity prices these actions ran to several billion euros of the legislation for the industry as a in 2005. whole. Anteilefor indu in Prozentstry (not including CO2) Data in billion euros, not including VAT Whilst some sectors are able to The European Parliament and the Renewable Electricity tax energy law levies pass on the additional costs for their Council of Ministers have examined Combined heat Concession products to the customers via their the Commission’s proposals and have and power levies charges products, this is often not possible for proposed certain actions to ease the companies or production sectors which situation for the industry. The common compete on an international level. It position of the Council of Ministers is already appears that energy-intensive due to be published shortly and will 1.51 production processes – including some form the basis for the second reading in 1.25 0.93 in the car and supply industry (e. g. Parliament. Wide-reaching reforms are aluminium foundries and plastic parts no longer expected. 0.12 0.11 0.1 manufacturing) – are being shifted to countries which either do not have any The automotive industry will also obligations with regard to the Kyoto be adversely affected by the REACH 1.31 1.35 1.42 Protocol or which are oil or gas-export- instrument. Firstly, the costs for all users ing countries. This shifting of produc- of chemicals will rise slightly because tion operations is not desirable, either registration and testing costs will be from a climate protection point of view passed on to the customers. Secondly, 0.240.24 0.250.25 0.20.26 6 2003 2004 2005 or from an economic point of view. it is feared that chemicals regarded as Burden of state-imposed charges on the Therefore, it is essential that solutions not being worth the additional cost that German electricity market, not including are found within the emissions trading the bureaucratic procedures will incur emissions trading burden system to reduce these effects and that may be discontinued in the future. It is Source: BDI real competition is created within the expected that, as a consequence of the energy markets – something that the improvements proposed by the Europe- environmental organisation WWF have EU Commission has been demanding an Parliament, this risk will be less than calculated that the profits gained by the for some time. was originally feared. However, chemical associations expect that the market will be “cleared up” to a certain degree. As Occupational Safety to what effects this will have remains to be seen, since even low volume or less profitable chemicals may be key compo- REACH hazardous by an Internet consultation process in nents for specific applications. substances and which all parties affected, including chemicals law the automotive industry, took part. The As before, imported products are, The European Commission tabled EU Commission’s draft regulation on for the most part, exempt from REACH a White Paper back at the beginning REACH (Registration, Evaluation and controls. They are only subject to con- of 2001 on a “Strategy for a future Organisation of Chemicals), submitted trol if large quantities of chemicals chemicals policy”. This was followed at the end of 2003, triggered heated are released from the products. On 128 Verband der Automobilindustrie ENVIRONMENT AND TECHNOLOGY

the whole, REACH, even in its planned The industrial safety ordinance aims explosive atmospheres”, are planned new form, will result in production to maintain the existing high degree of for 2006. operations being shifted from the EU protection, but at the same time pro- to other countries where the costs vides the opportunity to seek alternative Occupational safety of chemicals are lower. This works solutions. Deregulation in occupational The automotive industry is continuing against the very aim of REACH, which safety therefore means allowing some the success it has achieved in improving was to improve consumer protection, leeway which, in the old system, could work processes. The number of industri- and the objective of the EU’s Lisbon not have been achieved at all, or could al accidents and the number of days lost Agenda. In the long term, it will under- only have been achieved at considerable as a result of these accidents continued mine competitiveness and increase cost and effort. to fall in 2005, although the potential unemployment. is now more or less exhausted. Further The industrial safety committee – improvements can only be achieved by REACH is a classic example of with the participation of representatives addressing the so-called “behavioural how the Commission, instead of being from the automotive industry – therefore accidents”. Here, too, the automotive on track towards “new sustainability”, agreed to structure the “technical rules industry is holding training courses with is looking at individual aspects in iso- for industrial safety and health” so that the aim, in the long term, of preventing lation without regard for the overall one rule is established for the general these types of accidents from occurring. picture. risks which may occur when operating Occupational safety remains an on- work equipment, instead of for the risks going managerial task. Implementation of imposed by individual machines. This the industrial safety rule should explain to the user how he ordinance: deregulation can achieve the required level of protec- Fewer and fewer in occupational safety tion stated in the ordinance when pro- occupational accidents The “technical rules for industrial viding and using work equipment. The Notifiable accidents (4 or more working safety and health (TRBS)” are one of the rules list measures by way of example days lost) per million hours worked few examples of successful deregula- which, when applied, enable presump- 25 tion. In the past, every new technol- tions to be made and permit safe han- ogy/machine resulted in the publication dling of the work equipment. It is still 20 of new regulations governing the design possible to have alternative solutions, and operation of the machine, to ensure provided they are appropriate and cover it was handled safely. the calculated risk in each case. The 15 “standard solutions” described here can With the creation of the single be achieved at low cost to the company 10 European market, the condition require- itself. It is therefore up to the company ments of machines were separated whether it adopts a standard solution 5 from the operating requirements. The or seeks an individual solution with the condition requirements have since been corresponding planning costs that this 0 harmonised on a European level, leav- incurs. 19901995 2000 2005 ing national legislation to deal with just Source: VDA statistics regulations for the provision and use of Rules covering main topics, such Index of notifiable industrial accidents in the German work equipment. as “mechanical risks” and “potentially automotive industry Auto SAFETY AND TECHNOLOGY

Auto 130 Verband der Automobilindustrie SAFETY AND TECHNOLOGY

Success in Road Safety Improvements

Accident figures continue Since the introduction of official statis- to fall dramatically tics on road traffic accidents at the start Vehicle safety is one of the key tasks of the 1950s, the number of road traffic of the German automotive and parts fatalities has fallen dramatically – from supply industry. It is a decisive factor for 21,000 in 1970 to an all-time low of a company’s success in the face of glo- fewer than 5,400 in 2005. This does not bal competition, since vehicle safety is a mean that the industry is satisfied with central element in product quality. the success achieved. On the contrary, the aim was, and is, to make road trans- That the work of both the vehicle port even safer. Manufacturers and manufacturers and suppliers in this suppliers are not letting up in their field has been extremely successful is efforts to see their vision of accident- evidenced by actual accident statistics. free driving become reality.

Road traffic accident trends* Total motor vehicles in thousands Fatalities 60,000 20,000

50,000

40,000

30,000 10,000

20,000

10,000

0 0 1955 196019651970 1975 1980198519901995 2000 2005 *Including the new Federal states from 1994 onwards Source: Federal Office of Statistics Annual Report 2006 131

An analysis of real accident data have a decisive influence on the reduc- Assistance systems shows that the number of accidents tion of occupant injury severity. This becoming more important and the number of severely injured and positive trend in occupant protection A fundamental improvement in fatalities is falling, even though the can also be traced back to the consid- actual accident events cannot be vehicle population and mileages have erable improvements made to vehicle achieved solely by mitigating the effects increased considerably. Specifically, structures. Passenger cells in modern of accidents, because, as accident accident data show that restraint sys- vehicles are designed to remain intact reconstructions demonstrate, human tems, particularly seat belts and airbags, in the event of a frontal impact. error remains the most common cause of accidents. This is where driver assistance systems can play their part as accident avoidance systems. By target- GIDAS – the FAT project that is successfully helping ing their actions on a vehicle’s longi- to reduce the consequences of road traffi c accidents tudinal and lateral dynamic properties, they can help to stabilise the vehicle The tremendous success achieved between 500 and 3,000 individual and even minimise stopping distances. in the fi eld of road safety is to a large pieces of information, such as road Other assistance systems help the degree due to the consistent appli- layout, traffi c control, crash information, driver with direct or indirect visibility cation of accident research fi ndings the sequence of events in the accident by virtually giving the car sight, and to vehicle development. and the causes of the accident, plus thereby helping the driver even in information relating to the people situations that he finds unclear. Never- There are essentially three areas involved, such as body weight, height, theless, the responsibility remains with that are of particular importance when etc. All the information is stored in an the driver at all times, as stipulated in analysing an accident for accident anonymous form in a database. the 1968 Vienna Convention. The ulti- research: the location of the accident, mate goal is to prevent the accident the vehicles and the occupants or The data analysis can be used for from happening in the first place. And those involved. The most informative a host of different applications. When even if accidents cannot be avoided in type of accident data survey is the laws, Directives and standards are every case, assistance systems are at “German In-Depth Accident Study being re-formulated, for example, the least able to reduce the severity of the (GIDAS)”, a joint project of the amendments can be adapted to actual accident. Association for Research in Auto- accident events. The information is also motive Technology (FAT) and the used to defi ne suitable test procedures Though the further development of Federal German Highway Research for type approval. Detailed fi ndings can accident avoidance systems has been Institute (BASt), in collaboration with also be useful for the vehicle manufac- stepped up, this does not mean that Dresden Technical University (TUD), turers and assist them in raising safety less attention has been paid to reduc- which is being carried out in Hanover standards even higher. GIDAS can ing the consequences of accidents and Dresden. provide valuable assistance when by means of passive safety systems. erecting traffi c signs, masts etc, and Whether relating to occupant protection The surveys in these two areas even in the layout of protective systems or protection of other accident partici- record approximately 2,000 accidents in front of trees – all in the interests of pants, reducing the consequences of per year and collect, per accident, making the roads even safer. accidents remains, as before, of utmost importance. 132 Verband der Automobilindustrie SAFETY AND TECHNOLOGY

But it is also vitally important to be paid to linking individual systems measures and systems to reduce the bring together all these powerful indi- together intelligently. The automotive consequences of an accident, ranging vidual active and passive vehicle safety industry and suppliers are pursuing an from the triggering of the airbags right systems to form one whole system. integrated concept in this regard – the through to the deformation of the crash Consequently, most attention must “integrated approach to vehicle safety”. elements in a specific way to absorb the energy whilst simultaneously maintaining a rigid passenger cell. The Integrated Approach to Safety Accident rescue is also part of this integrated approach. Automatic emer- Multi-stage vehicle safety an accident can no longer be avoided gency call systems are able to inform system despite the use of assistance systems. the emergency services quickly and The Integrated Approach to Safety In this phase of vehicle conditioning, accurately of the location and severity brings together accident avoidance occupant protection systems are of the accident. systems and systems that reduce the switched to stand-by. The measures consequences of accidents to form taken within this phase are reversible. Accident avoidance one whole vehicle safety system. The For example, the belt tensioners may systems provide active integrated safety approach makes a respond at this point, and the sunroof assistance distinction between several phases and may be automatically closed. One important assistance system, is structured into a series of stages ABS, is now standard equipment on – like a cascade. The subsequent stages of the all new passenger cars as a matter of safety cascade include non-reversible course. This was not brought about In the first step, the driver is alerted to hazards. This can take the form, for example, of a display warning of low outside temperatures and hence of the The integrated approach to safety risk of black ice on winter roads. This Active safety Passive safety phase is the driver conditioning phase.

If the driver does not take any notice or does not respond to displays

or warnings in an appropriate man- CRASH ner, he will be supported by dynamic Hard Soft crash Minor crash handling control systems such as ABS, Take damage Assist action Warn brake assistant (BAS) or ESP to keep Inform Rescue the vehicle stable. Nevertheless, these ABS Seat belts Airbags TeleAid assistance systems cannot override the ESP BAS Driver Vehicle laws of physics. conditioning conditioning

The next step in the cascade is then Source: DaimlerChrysler/VDA reached when it has to be assumed that Annual Report 2006 133

by regulations, but rather the industry accident which these assistance sys- case the brake assistant), is still the one itself decided that the life-saving ABS tems aim to prevent, or at least reduce who makes all the decisions. should be introduced across the board. the consequences of in as many critical Likewise, the widespread introduction of situations as possible, is the rear-end Other assistance systems concern the Electronic Stability Program (ESP), collision with a moving obstacle. It the visibility from vehicles, particularly an extension to ABS, will not have to is important to stress here that the at night. Accident statistics show that be promoted by legislation either. ESP systems do not just take over control risks are higher for nighttime journeys. features yaw rate and steering angle from the driver. Instead, a warning During the night, traffic volume is only sensors as well as ABS. This means the strategy is used which enables the 25 percent of the daytime volume, yet system is able to stabilise the vehicle driver to overcome the critical situation 40 percent of all fatal traffic accidents not only during braking but also when himself. occur during this time. Driving in the cornering or when starting off on slip- rain also increases the risk of an acci- pery surfaces. Used as a basis here is the “esca- dent. Therefore, the ability to see and be lating warning” strategy. It begins by seen, using appropriate lighting technol- At present, the ESP equipment rate giving a visual warning in the form of ogy, is an important building block of in Germany for new passenger cars a warning lamp. After that comes an active vehicle safety. is already 72 percent, compared with audible signal. This is followed by a 21 percent in 2000 – a meteoric trend touch-sensitive warning, whereby the Pedestrian protection is also that will increase safety. German manu- driver is alerted to the hazard by the increasing all the time. A European facturers are taking the lead where ESP steering wheel vibrating. If the driver Union Directive, which came into force is concerned: in Germany, 90 percent of does not respond despite this cascade in January 2005, contains technical all passenger car model variants from of warnings, the Active Brake Assist- specifications which describe test pro- German manufacturers are already ant will automatically apply the brakes cedures with impactors. Pedestrian- being offered with ESP. fully so that, if optimum conditions are vehicle impacts are simulated using prevailing, a rear-end collision can be dummy subsystems (head, lower leg), Another extremely successful acci- avoided. and the measured data (accelerations, dent avoidance system is the so-called forces) are evaluated. Expert discussions brake assistant. The system uses elec- Once again, it is important to stress and decision-making processes relating tronic sensors that identify the need in this connection that this system is not to what further pedestrian protection for full brake application from the taking over control from the driver. Even measures should be implemented after speed with which the brake pedal is after the Active Brake Assistant has trig- the present decade are currently on- de-pressed. Investigations using a gered an all-out braking response, the going. What is really noticeable here is driving simulator have shown that driver can still switch off the system (by that the legislators are, for the first time, around 45 percent of all accidents kickdown or by operating the switch). looking at approving active measures involving pedestrians, during which The road traffic regulations clearly see – including brake assistant – as well as the driver applied the brakes, could the driver as the one responsible for the passive safety measures, as sensible have been avoided if a brake assistant operation of the vehicle. The driver must additions to the pedestrian protection had been installed. always be in control of events – speak- system. The legislator is thereby, for ing metaphorically, the driver is the boss the first time, embracing the automo- Active brake assistants can do even who, although he may delegate some tive industry’s concept of an integrated more. One frequently occurring type of preparatory work to his assistant (in this approach to vehicle safety. 134 Verband der Automobilindustrie SAFETY AND TECHNOLOGY

The VDA “Impulskreis”: Safe, Intelligent Mobility

The widespread networking of energy consumption. Despite improve- By networking systems in the vehi- vehicles with each other and with the ments in the transport infrastructure and cle, it is also possible to assist the driver infrastructure will help enormously to major achievements in the development in a potentially critical driving manoeu- improve road safety and traffi c effi - of fuel-effi cient and safe vehicles, the vre by implementing active measures. ciency in the future. The basic techno- current transport system requires new This will also help improve road safety. logy for this, which has already been innovative intellectual and problem-sol- Should an accident be unavoidable de- developed by the German automotive ving approaches which move away from spite the assistance functions, a vehicle industry, is now to undergo joint fi eld looking at each road user individually conditioning phase can be initiated trials and will be developed to market towards examining the transport system which, for example, would place the maturity. as a whole, and which are based on restraint systems on stand-by to deploy. the use of intelligent technologies. The Providing information about accidents The VDA is laying the found- “Impulskreis Automobil” of the VDA or traffi c jams at an early stage enables ation stone for the use of intelligent believes that by creating a networked vehicles immediately behind to be vehicle-to-vehicle and vehicle-to- transport system using vehicle-to-vehi- warned of a risk of rear-end collisions; infrastructure communication with cle or vehicle-to-infrastructure commu- furthermore, traffi c further downstream its major R&D project “Impulskreis nication, new pioneering milestones for can be quickly and automatically Automobil – Sichere Intelligente safe, effi cient road transport in Germany informed about delays and possible Mobilität” (“The Automotive Think- can be achieved. alternative routes using infrastructure Tank – Safe, Intelligent Mobility”). equipment such as overhead traffi c Here, vehicles will automatically signs and traffi c control centres. The “Impulskreis Automobil – Siche- exchange information about incidents re Intelligente Mobilität” project was such as accidents, hazards or traffi c The “Impulskreis Automobil” is started in 2005 as part of the “Partners jams and will thereby warn other road intending to develop the technology to for Innovation” and is therefore part users directly and in real-time. Unlike market maturity using a fi eld trial and of the Federal German Government’s the current system, which involves create a basis for the practical intro- initiative to promote innovation. In 2006, being routed through traffi c control duction of the technology in Germany. the plans and preparation for the project centres, the driver will at all times have will be agreed on in cooperation with up-to-date traffi c information avail- Outline of the project fi eld trial the Federal German Government and able to him, to which he will be able In a world fi rst, the “Impulskreis Au- project partners from the authorities, to respond accordingly. Vehicles send tomobil” is planning to bring together offi cial bodies and the industry involved. virtually “online” information on hazards the various communications techno- The outline of the project is as follows: in the form of direct warning messages logies and their applications which to vehicles following them. In this way, have been developed over the years The “Impulskreis Automobil” has the driver in the vehicle behind can be in various research projects (e-Safety, set itself the goal of tackling the confl ict warned and consequently accidents WillWarn, Network on Wheels, Invent, between the increasing volume of that were previously unavoidable can Fleetnet, etc.). Some of the essential traffi c, greater road safety and reduced be prevented. work on these projects has been Annual Report 2006 135

carried out by the German automo- ■ Traffi c fl ow optimisation: By disse- prototypes and tested in practical tive industry, which is also part of the minating traffi c data between vehi- conditions. The fi eld trial needs to be of Car-2-Car Communication Consortium. cles on motorways, main highways a suffi cient size in order to ensure the As a result, the German automotive and in towns necessary quantity of data and experi- industry can provide both in-depth ences in the fi eld and at the same time know-how and the required core tech- ■ Commercial applications, e.g. infor- to enable a scientifi c analysis of the eco- nologies. mation for vehicle occupants nomic contribution that the technology may make towards reducing the number Likewise, the trial will for the fi rst ■ Traffi c fl ow controls by local author- of traffi c accidents and preventing traffi c time bring together and demonstrate ities: Recording of “online” traffi c jams. all the applications and devise tech- data; use of this data to control, nical solutions and proposals for their e.g. lighting installations and adap- The construction of a commu- roll-out and operation. In particular, the tive traffi c signs nications infrastructure, which is an trial will focus on applications from the important part of the fi eld trial, is also following areas: The key position and technology essential, not least for the commercial leadership held by the German auto- launch strategy of the vehicle-to-vehi- ■ Active safety functions: Direct haz- motive industry will be further sup- cle communications systems. Infrastruc- ard warning between vehicles, e.g. ported and enhanced by the practical ture-based systems are of benefi t to end of traffi c jam round a corner; testing of these technologies and every equipped vehicle right from day warnings at stationary facilities applications, whilst research results will one – regardless of the penetration (e.g. red light) be implemented in industrial-strength quota for such vehicles.

Vehicle-to-infrastructure Vehicle-to-vehicle communication vehicle communication the individual communication is the goal can only be used to its full potential if systems and their interfaces have to The holistic, integrated approach as many vehicles as possible are fit- be matched with each other, the vehi- to vehicle safety will be given an even ted with it. However, cost factors mean cle-to-infrastructure option, by neces- more significant boost when vehicle-to- that vehicles with such equipment are sity, also brings the authorities, as vehicle or vehicle-to-infrastructure com- unlikely to penetrate the market quickly operators of the infrastructure, into the munications systems are in place. Their in the medium-term. The solution will equation. primary purpose is to improve active be vehicle-to-infrastructure communi- safety, in other words to contribute to cation. With this system, vehicles are As part of an initiative by the Fed- accident avoidance, and they will con- able to communicate with each other eral German Government to promote siderably extend the driver’s perceptible and also via the infrastructure. This will Germany as a centre of innovation, the horizon. However, these systems need enable a functional system to be up VDA set up an “Impulskreis”, or think- to be deployed on a widespread basis to and running in a considerably shorter tank, for the introduction of vehicle-to- get the full benefit of the safety applica- time. To be successful, however, there vehicle and vehicle-to-infrastructure tions. This is not expected to happen needs to be a sufficient level of stand- communication (see box entitled “The before the following decade. ardisation. Whilst with pure vehicle-to- VDA “Impulskreis”: Safe, Intelligent 136 Verband der Automobilindustrie SAFETY AND TECHNOLOGY

Mobility”). The aim is to secure for driver can be warned and accidents 42 percent, in Spain 40 percent, in the Germany and the German automotive that were previously unavoidable can be UK 34 percent and in Italy it was industry a worldwide pioneering role prevented. 30 percent. in the development and introduction of appropriate innovative vehicle safety Information about the “Impulskreis” ESP for heavy commercial vehicles and traffic management technologies. and the latest developments in automo- and buses has also been on the market tive safety technology are presented at for a number of years. Back in 2005, the Where vehicle safety is concerned, the annual VDA Technical Congress. bus manufacturers amalgamated with networking vehicles with each other and A CD-ROM of the proceedings from the the VDA undertook to offer their new with vehicle safety systems will enable latest Congress can be ordered at cost coach models with ESP. Consequently, vehicles to send virtually “online” direct from [email protected]. The next Congress ESP has also become well established warning messages about hazards to will take place on March 28/29, 2007 in in the coach sector. vehicles behind them. In this way, the Stuttgart-Sindelfingen. Though the major European manufacturers are certainly offering ESP for heavy commercial vehicles and High-Tech Tyres, Chassis and Brakes articulated tractor units, truck operators are apparently not yet ready to order vehicles with ESP in any great num- Worldwide success with new passenger cars in Sweden were bers. The installation level is, as before, ESP fitted with ESP, whilst in Germany the around 5 percent. Like with ABS, there ESP (Electronic Stability Program) figure was 72 percent, in France it was will undoubtedly be a breakthrough with – or ESC (Electronic Stability Control), as it is referred to in America – is a milestone in the on-going development ESP installation rates in Europe of active vehicle safety. As investiga- In percent tions carried out by the US National Highway Traffic Safety Administration (NHTSA) demonstrate, ESP can reduce the number of passenger car dynamic 85 accidents (that is, accidents in which the driver has lost control of the vehicle) 72 by 35 percent, whilst accidents of the same kind involving sport utility vehicles (SUVs) can be cut by as much as 42 40 67 percent. The considerable accident 34 30 avoidance potential that ESP offers has meant that more and more vehicles Sweden Germany France Spain UK Italy are being fitted with this system, with Sweden and Germany being the leaders ESP installation rates for new vehicles in 2005: Estimates Source: Bosch in this regard. In 2005, 85 percent of all Annual Report 2006 137

ESP for heavy commercial vehicles, but addition to a functional description of The electric parking brake, which is all the same, the authorities are consid- them. Such a test, if it is also to include normally equipped with an electronic ering how best to speed up the process criteria for differentiating between control unit, offers a host of advantages in the interests of road safety. The Ger- acceptable and unacceptable systems, over the mechanical parking brake: man Federal Government has already is extremely difficult to define. This par- approached the UN in Geneva about ticularly applies to heavy commercial ■ Actuation is much safer and more making ESP compulsory on vehicles vehicles where rollover stability plays a convenient; it can be carried out used for transporting hazardous goods. major role as well as directional stability. automatically when the ignition key Another option, which meets with more It is possible that the problem may be is removed. approval amongst vehicle manufactur- solved by separating the requirements ers, is the offering of incentives for ESP, for passenger cars and heavy com- ■ Just the right amount of applica- for example through lower insurance mercial vehicles. In the case of passen- tion force is generated every time, premiums or by exempting vehicles with ger cars, a practical test for ESP with thereby preventing the vehicle from ESP from certain regulations. In the specific driving manoeuvres is being rolling away. case of hazardous goods vehicles, this devised which will also be used in the would be exemption from the require- USA. The tests envisaged will include ■ On hill-starts, it can be released ments of ECE Regulation 111 relating lane change tests using a steering automatically to prevent the vehicle to the determining of static rollover machine to eliminate driver influence as rolling back. stability. much as possible. ■ In stop-and-go traffic, it can be In any case, a definition for ESP/ESC In the case of heavy commercial actuated automatically, thereby needs to be formulated which can then vehicles, testing using a validated com- relieving the strain on the driver, be used as a reference. An international puter simulation is being considered particularly on uphill and downhill working group with representatives since, for safety reasons, practical tests gradients. from industry and government has been on the limit of rollover stability are only working on this issue for some time possible if stabilisers are fitted. ■ The manual lever can be dispensed and is due to draw up a definition of with, thus creating further advan- ESP/ESC which will be anchored in the Electric parking brake: tages in terms of the layout of the ECE regulations 13 and 13H for braking increasing safety and interior; the risk of injury in the systems. The purpose of this definition comfort event of an accident is also reduced. is to ensure that systems can only be On most passenger cars, the park- designated as ESP/ESC if their func- ing brake is still applied using muscle ■ It can also be used as an anti-theft tionality is, at the very least, the same as power and a lever and cables. However, device by making it impossible for that of ESP/ESC systems currently being there are already some executive class unauthorised persons to release offered by the major brake manufactur- vehicles where the driver only has to the parking brake using simple ers. Unfortunately, discussions are turn- operate a small lever or button, an means. ing out to be rather difficult, because electric motor doing the actual work of government representatives and test applying the parking brake. As required ■ In conjunction with ABS, it can authorities in the working group are by national and international braking also be used as an auxiliary brake demanding practical testing or verifica- regulations, however, the brake is still if a fault occurs in the service tion of the operation of the systems in held on by purely mechanical means. brake. 138 Verband der Automobilindustrie SAFETY AND TECHNOLOGY

■ If the appropriate proximity sensors stances, the driver may not even notice a flat tyre. The current guideline is a dis- are installed, it can come into opera- the loss in pressure at all. However, tance of 80 km at a speed of 80 km/h. tion automatically when the vehicle since vehicles in this condition should This also means that the vehicle or tyre is being parked to prevent any not be driven for long distances at high manufacturer must develop a logistics shunting accidents. speeds, vehicles with run-flat tyres are concept which ensures that, in the event required to be fitted with tyre pres- of a flat tyre, it is possible at any time Judging by this comprehensive list sure monitoring systems which emit an to reach a workshop stocking a suit- of advantages, it is likely that the elec- appropriate warning signal. able replacement or, alternatively, which tric parking brake will also be used in ensures that the tyre can be changed by other vehicle segments in the future. Making it possible to continue a other means (for example by a mobile So as costs do not get out of hand, the journey with a flat tyre is an advantage tyre change service). technical requirements stipulated by that should not be underestimated, par- the legislators should not be pitched ticularly when driving through motorway In principle, there are two different unnecessarily high. To be sure, current roadworks, on roads where visibility designs of run-flat tyres: requirements call for redundancy (that is poor or in isolated areas at night. is, a dual system) in electrical systems, However, this does not mean that the a) Tyres using a support ring on the rim but this is something that the mechani- vehicle can be driven any distance with b) Tyres with reinforced sidewalls cal parking brake does not actually have at present. A compromise formula might involve having redundant designs Run-flat tyre system: just for the electrical actuation function safety reserves even with a flat tyre instead of for the entire system.

Run-flat tyres with emergency running properties The recent development of run-flat tyres is another example of how the overall vehicle safety system is being enhanced by individual components. The major advantage of a run-flat tyre is that, should the tyre be damaged, the wheel does not have to be changed immediately. Instead, the journey can be continued, albeit at reduced speed.

The safety gain that this represents cannot be underestimated. Instead of the vehicle breaking away when there Reinforced tyre sidewall Support ring on rim is a sudden loss of pressure in the tyre, Source: Continental/Michelin it remains controllable. In some circum- Annual Report 2006 139

Reinforced sidewalls have the There is currently no uniform lighting, the headlamps follow the advantage that conventional rims and opinion amongst car manufacturers on steering movements of the driver and fitting equipment can be used, but have the use of run-flat tyres. In any case, swivel to the side when the vehicle is disadvantages in terms of ride comfort. the chassis has to be specially tuned negotiating a bend. This improves road By contrast, a support ring requires spe- to the characteristics of the run-flat illumination. Active bend lighting con- cial fitting equipment and in some cases tyre, making retrofitting currently tinually adapts to the vehicle’s respec- a special rim as well. impossible. tive speed.

Daytime running lights Light and Visibility In the daytime too, a vehicle is more noticeable with its lights on than without. A study commissioned by the Euro- The lighting equipment on vehicles tribute light along the road in pean Commission proved clearly that and trailers is an important element of accordance with weather conditions driving during the day with the vehicle’s active road safety. The “to see and be and the individual preferences of the lights on is one way of promoting road seen” concept, therefore, has a special driver, will improve road safety. At safety. There are several reasons why role to play in road safety. present, bend lighting represents the driving with the lights on during the day state-of-the-art and is already being is a good thing: On April 6, 2004, the EU Commis- fitted to vehicles, even to lower mid- sion adopted a recommendation from range models. A dynamic cornering ■ Driving during the day with the vehi- the “White Paper on European Trans- headlamp system enables the dipped cle’s lights on reduces the likelihood port Policy for 2010” which stipulated beam’s range to be increased by of colliding with other vehicles by a target of halving the number of fatal almost 50 percent. 25 percent. accidents on Europe’s roads by 2010. Vehicle lighting equipment can make The next stage in the development ■ Driving during the day with the vehi- a significant contribution towards the is the AFS. This is required because cle’s lights on reduces dangerous achievement of this challenging goal. drivers are still missing information frontal collisions by 50 percent. about the areas directly to the side According to a current survey, one in front of the vehicle, particularly in ■ 80 percent of accidents at junctions in every two car drivers would like to very tight corners, hairpin bends, at occur because the road user con- see brighter lights on his vehicle. Those junctions and when manoeuvring. In cerned did not see the other vehi- questioned also admitted to feeling these situations, static bend lighting is cles until it was too late or did not unsafe driving at night. Accident statistics switched on in addition to the dipped see them at all. show that this is not just a perceived lack beam. When a vehicle is approaching a of safety. An disproportionate number of junction, it is useful to have an extend- ■ 73 percent of all car drivers believe accidents do occur when it is dark. ed illuminated area to make it easier that, during the day, they see vehi- to see cyclists and pedestrians. When cles that have their lights on better Bend lighting and AFS: cornering, conventional headlamp than they see vehicles that do not light in the right places systems primarily illuminate the edge have their lights on (Source: Meta The “Advanced Frontlighting Sys- of the road, but not the critical areas. study by the SWOV Institute in the tem (AFS)” project, which aims to dis- By contrast, with dynamic active bend Netherlands). 140 Verband der Automobilindustrie SAFETY AND TECHNOLOGY

Advanced Frontlighting System of the lights), or which use the front foglamps as an interim solution until special daytime running lamps come into use.

However, in accordance with the current version of ECE Regulation 48, “The Installation of Lighting and Light Signalling Devices”, all these options, with the exception of the special daytime running lamps, would involve switching on the normal vehicle lights, which brings disadvantages in terms

of fuel consumption and CO2 emissions, as the engine has to work harder to generate the electricity in the car. Therefore, the regulations should be adapted as quickly as possible to these requirements. Here, too, an integrated approach is required.

The EU study cites special daytime running lamps as the only possible option in the long term, particularly when service life and additional fuel consumption are taken into account. However, for the installation of daytime running lamps in accordance with ECE Regulation 87, there are still some tech- Source: Audi AG nical and administrative changes that need to be implemented on an international level. The Commission would therefore Essentially, it is possible to increase like to make driving with the vehicle the conspicuity of vehicles by switch- Light-emitting diodes for lights on during the day compulsory. ing on the existing dipped beam head- greater safety and a long Nevertheless, it must be left to the auto- lamps – which therefore means driving service life motive industry to decide which lighting with the lights on during the day. Solu- LEDs have a whole host of techni- technology they use to implement this tions have also been devised which cal advantages over conventional bulbs requirement. Furthermore, the transition operate the headlamps in a special – in particular their faster response, periods should be chosen in accordance daytime running mode at reduced which brings with it an obvious safety with the data agreed in CARS21. voltage (to increase the service life advantage when these lights are used Annual Report 2006 141

Mandatory and recommended use of headlights lighting functions will all be achieved during the daytime in Europe exclusively with LED lamps.

From a vehicle styling point of view, IS since LEDs require less space, future headlamp designs could look radically

S FNI different. The main reason for the devel- N opment of this new LED headlamp tech- ETS DK LV nology, in addition to the styling aspects, LT is the fact that this type of headlamp PL is maintenance-free. LED headlamps CZ SK are already matching the performance A H SLO of gas discharge headlamps in dipped HR P I beam mode. MZ

Mandatory Rearward signalling Regulated (for certain periods) or recommended Vehicles and vehicle trailers must Recommended be equipped with sufficiently effec- Source: AXA/Hella 2005 tive red brake lights at the rear. Brake

for brake lights, for example. In addition, Luminosity advantages of xenon and LEDs light emitting diodes last for the entire In lumen per headlamp life of the vehicle, but use up to 50 per- 1000 cent less energy. 1000 Approx. 1000 LED technology is beginning to be 800 Light flux of dipped beam used in headlamp technology as well. The advantage here is its outstanding luminous efficiency, which is on par 600 with today’s xenon headlamps. On these LED headlamps, which are currently in 400 development, the 400

■ dipped beam 200

■ main beam 0 Halogen Xenon LED ■ turn signal and daytime running Source: Hella lamp 142 Verband der Automobilindustrie SAFETY AND TECHNOLOGY

lights have an important role to play Prototype of an LED headlamp both in daytime and nighttime driving, because they warn the traffic behind of hazards.

Lighting technology and accident research experts have given consideration as to how following traffic might be informed of hazards at an earlier stage in the event of an emergency braking procedure. For a defined deceleration event (emergency braking), the brake lights are actuated in such a way that they do not just light up, as before, but flash quickly. Experts have discovered that the warning is most effective when the flashing frequency is four times faster. Another Source: Hella development relates to enlarging the illuminated area in emergency braking conditions. This visual effect is also useful as a warning signal. Pedestrian Protection and Child

Expert reports have proven that Safety these safety solutions reduce the reaction time of following traffic by up to 0.2 seconds. This can reduce the stop- There is much evidence to suggest road users before and in the event of ping distance from a speed of 100 km/h that pedestrian road safety has also a collision with a motor vehicle” was by 5.5 metres. improved. Over the last 15 years, the enacted and is to be implemented in number of fatally injured pedestrians two phases. The Directive stipulates Discussions are currently being has fallen by 60 percent. And this down- requirements for vehicle front-ends and held on an international level as to ward trend has been ongoing for dec- surface stiffnesses which will be tested which of the various developments ades, with pedestrian fatalities falling by using different impactors. These impac- in this field should be incorporated as much as 80 percent since 1980. tors are parts of dummies which repre- into the ECE Regulations as optional sent areas of a pedestrian’s body, such equipment. In this connection, it New Directive for as the head or the legs, and are suitable must be stressed that the regula- pedestrian protection is for calculating acceleration and decel- tions should not exercise a pre - implemented eration values in defined tests. These ference for any individual system, In 2003, the European Directive values give an indication of the potential because this would stifle engineering 2003/102/EC relating to “the protection hazard that a vehicle front-end presents creativity. of pedestrians and other vulnerable to a pedestrian. To meet the pedestrian Annual Report 2006 143

protection requirements, all tested areas In the discussions on the develop- passive pedestrian protection solutions of the vehicle front-end must deform to ment of the new draft, the German in particular must be taken into consid- a considerable extent in order to dis- automotive industry has been able to eration in the very early development sipate the impact energies and protect make it clear that, in addition to passive phases. For this reason, the automo- the pedestrian as much as possible. measures to reduce accident sever- tive industry hopes the political powers ity, such as improved vehicle front-end come to a quick agreement about the Phase 1 of the European Directive designs, considerable importance must technical contents of phase 2, so that on pedestrian protection came into also be attached to accident avoidance the appropriate requirements for imple- force on October 1, 2005. Vehicles from measures. mentation within the specified time lim- German manufacturers were the first its can still be taken into consideration. to meet these requirements and were The brake assistant in particular has presented at the IAA Cars in September tremendous potential in this regard. It is At the same time, the UN/ECE are 2005. able to reduce stopping distances by a working on a Global Technical Regula- few metres and as such is able to pre- tion (GTR) on pedestrian protection. The The measures taken to meet the vent many accidents from happening, automotive industry actively supports pedestrian protection Directive are com- or at the very least reduce the conse- these efforts to harmonise the differ- plex and have far-reaching implications quences of accidents. Tests have shown ing requirements throughout the world. for the vehicle structure. Depending on that up to 45 percent of pedestrian acci- This would not only improve road safety the current vehicle design, an additional dents could be prevented. but also help ease the cost situation space may have to be created between with regard to vehicle development. The the engine bonnet and the engine com- Pedestrian protection is a good automotive industry would therefore ponents underneath it, a space which example of why the automotive welcome the current draft being dis- can only be achieved by structurally industry is calling for an integrated cussed and adopted in 2006. lowering the engine or raising the vehi- approach to safety, which involves cle structure. An equivalent measure, combining both active and passive Child safety in the car depending on the basic design of the safety measures. Only by combining Alongside measures to protect vehicle, may involve having an automati- active elements, such as the brake children as pedestrians, one of the cally lifting bonnet (what is known as an assistant, with passive elements, such main tasks occupying vehicle and child “active bonnet”). as pedestrian-friendly vehicle front- restraint system manufacturers is occu- ends, will it be possible to optimise pant protection specifically targeted at Phase 2 of the European Direc- pedestrian protection as a whole. children. One major step forward has tive on pedestrian protection is due to Furthermore, the brake assistant, as been the compulsory introduction of come into force on September 1, 2010 an active safety feature, offers tre- ISOFIX anchorages (with top-tether for new vehicle models and on Sep- mendous potential for improving road anchorage point), required for all new tember 1, 2015 for all new vehicles. The safety in general, since its beneficial vehicles from February 26, 2006. The exact contents are currently the subject effect can be brought to bear on vari- regulation specifies that anchorage of intensive discussions between the ous different types of accident. points have to be fitted to two seats in European authorities after independ- the car. ent reports confirmed that the original requirements of phase 2 were not However, since vehicles undergo a To install ISOFIX anchorages, com- implementable. long and complex development process, plex changes to the load-bearing areas 144 Verband der Automobilindustrie SAFETY AND TECHNOLOGY

ISOFIX mountings for child seats

Child seat Anchorage point

Bodywork

123 ISOFIX guide Top tether mounting Connector

Source: Britax-Roemer

of the vehicle body are required. using the range of child restraint Consequently, retrofitting is not pos- systems available. sible. A transitional period up to 2011 has therefore been granted for all current vehicle models. There are already several passenger cars on the market which are fitted with ISOFIX anchor- Vehicle Electronics improve Safety ages. This means that child seats which have ISOFIX universal approval can be used in many different cars. There are Vehicle electronics: a key the car would never have been pos- also ISOFIX systems available which are technology for safety sible without electronics. The figures approved for specific vehicles. When the car was invented by Gott- speak for themselves: exhaust emissions lieb Daimler and Karl Benz more than have fallen by up to 98 percent and the It appears that new and better is 100 years ago, any thoughts of linking it risk of being killed in a road accident the enemy of good: consequently, older to the telecommunications system – at is now the lowest since records began child seats which meet ECE Regulation the time consisting of the telephone in 1953. In the meantime, electronics 44 Series 02, a very old version of this which had just been invented by Philipp are now responsible for more than 20 safety regulation, are no longer permit- Reis – were still far away. Likewise when percent of the added-value of a vehicle. ted. From April 2008, seats marked with the computer was invented more than Alongside the “traditional” areas where R.44.02 will lose their approval. Two 70 years ago by Konrad Zuse, no one electronics are used, such as engine revisions have already been introduced could have imagined what we are see- management and vehicle safety systems since this one, namely revision R.44.03 ing today – a rapidly growing symbiosis (ABS, ESP, airbags, etc.), there is now in 1995 and revision 04 in June 2005. between electronics, IT and the car to an increasing number of information create a safe, highly efficient mobility and telecommunications systems, which Nevertheless, there are still par- system. are already contributing 4 percent to the ents who either do not strap their added-value. It is forecast that electron- children in properly or do not strap The tremendous successes being ics, including IT, will be responsible for them in at all. It will therefore very achieved today in terms of road safety approximately 35 percent of a vehicle’s much depend on car drivers actually and the environmental compatibility of added-value by 2015. Annual Report 2006 145

Increasing operational safety further through international standards

Thanks to electronics, the number The purpose of the automotive indus- Within the “Functional safety” work- of safety-related functions in the vehi- try’s “Operational safety working group” ing group (WG) 16 of ISO/TC22/SC3, cle has increased considerably. To which was set up in 2005, is to formulate therefore, work is being carried out prevent any failures, therefore, special an internationally agreed standard which on a multi-part standard which will be standards for safety-critical systems are is suitable and manageable for the vehicle divided into the following parts: essential. sector. Operational safety here means freedom from non-acceptable risks, non- ■ Definitions The international standard IEC 61508 tolerable hazards, predictable incorrect ■ Management of functional safety “Functional safety of electrical/elec- action by the user and expected misuse. ■ Concept phase tronic/programmable safety-related ■ Product development system systems”, which is also available as Euro- In the preparatory phase, specifica- ■ Hardware pean standard DIN EN 61508, has set tions relating to quality (ISO 9000, ISO TR ■ Software a high standard for application across 16949, VDA publications, technical reli- ■ Production and operation, and all sectors. Applying this standard in the ability) and other industry sectors (space ■ Support processes automotive industry, however, has shown industry, aviation, power station construc- that it does not cover the needs of the tion, the armed forces, rail vehicles, medi- Following intensive preparatory vehicle industry appropriately enough. cine, processing technology) were also work which was carried out jointly The main changes that need to be made consulted. by the VDA (specifically the FAKRA to the current standard relate, amongst standards committee) and experts from others, to the safety life cycle, which Against this background, a motor- the French automotive industry, WG must be adapted specifically to motor vehicle-specific standard must, for exam- 16 commenced its international work vehicles, the risk analysis procedure, the ple, be able to do the following: in November 2005. The founding of consideration that sometimes OEMs this new working group attracted an and suppliers share development tasks, ■ Define a life cycle which is typical for exceptional amount of interest, which and the development of E/E systems as vehicle development and operating was expressed in the high number of embedded controllers. phases participating countries and companies. ■ Match hazard analysis and risk At present, the working group has del- Because of its generic structure, assessment to typical vehicle applica- egates from the following countries: the application of this standard to the tions Germany (chairman and secretary), motor industry requires a great deal of ■ Develop suitable test and validation France, England, Italy, Japan, Sweden interpretation and consequently does criteria and the USA. not represent the “state-of-the-art” right ■ Regulate procedures relating to prob- across the board here. DIN EN 61508 abilistic targets According to a preliminary time- forms the basis from which a sec- ■ Regulate relations between vehicle table, an internationally coordinated tor-specific standard can be derived to manufacturers and suppliers as well draft standard will be devised over the define the “state-of-the-art”. as the entire development process next two years. 146 Verband der Automobilindustrie SAFETY AND TECHNOLOGY

Nevertheless, the potential of new movements, or, for example, to debit their less, the automotive industry and sup- technologies is dependent on the speeding ticket fine from their account pliers are, technically speaking, always acceptance by the consumer and this in even before they have got home, and more than one step ahead. turn is dependent on how reliable the with no consideration for data protection, system is. For this reason, hardware and will certainly do nothing to promote the A rise in car embezzlement crimes software faults can have serious implica- acceptance of new technologies. The has also been observed. The car indus- tions. The automotive industry therefore yardstick in this case is the customer, not try takes this matter very seriously and has a clear goal in its sights: a zero-fault what is technically feasible. has already been working closely with approach to vehicle electronics. the authorities on the Eufid (European Theft protection: the vehicle identification file) project for a When electronic systems were first success of the electronic number of years. The Eufid information being developed, there was initially a immobiliser file contains all the main identifying great deal of design freedom. Each vehi- Since the introduction of the elec- features of a vehicle. The authorities cle manufacturer and each supplier of tronic immobiliser in 1993, the number are also kept informed, in the course of electronic hardware used their own of vehicles stolen has been falling regular meetings, about new improved design methods for implementing elec- steadily. Whilst 144,057 vehicles were anti-theft systems and about new devel- tronic functions such as engine manage- reported stolen in Germany in 1993, opments. ment or the control of ABS braking sys- experts estimate the figure for 2005 tems. But for some years now, the trend will be just 22,000. This success has Reliability of biometric has been towards binding standards for been achieved thanks to the on-going systems basic electronic elements, be they operat- improvements in anti-theft measures Another element of theft protection ing systems or communication protocols. made by the industry and also to the is the introduction of so-called biometric By moving away from the old, more good cooperative work being carried out systems. Access control systems at air- mechanical engineering-orientated devel- with the authorities. ports are already using iris recognition, opment structure and by adapting speci- digital fingerprints and face recognition, fications and test procedures, company As anti-theft systems have been for example. It is possible that some of development processes have been adapt- steadily improving over the years, how- these may well be used in vehicles in ed to the requirements of electronics. ever, so thieves have become more pro- the future. But the automotive industry fessional. Premium vehicles in particular, will set strict quality standards: only if It is clear that, despite all the are being stolen to order, their anti- biometric systems work properly and progress made in vehicle electronics, theft equipment being replaced by the safely in the future will they be accepted the ultimate responsibility must remain thieves at considerable cost. Neverthe- by the automotive industry. with the driver. For example, a politically imposed system of externally-applied “compulsory braking” in zones with Commercial Vehicle Safety speed limits would flagrantly conflict with this fundamental principle and would not EU control device: uniform This has established a new Europe- really be accepted by the driver either. framework conditions for wide, uniform tamper-proof standard Likewise, the idea that some European greater road safety which will help to improve road safety, politicians had of electronically iden- On May 1, 2006, the digital tacho- particularly where commercial goods tifying cars and drivers to record their graph replaced analogue tachographs. and bus transport is concerned. Annual Report 2006 147

Analogue tachographs have, for calibrating the devices and to make land, Turkmenistan, Turkey, Uzbekistan years, been a legal requirement in and distribute the necessary encoded and Belarus) have also decided to vehicles used for business purposes driver, workshop and control cards. implement the digital tachograph for to transport goods or people and Because of the high degree of coordina- cross-border traffic over the next four which have a gross weight of more tion required, the implementation of the years. than 3.5 t or more than 8 seats. In the digital tachograph in the end phase has old tachograph, a needle was used to been repeatedly delayed. Load securing devices trace onto a tachograph disc inserted in vans into the tachograph the speed of the Almost all EU member states will If one compares the load securing vehicle over the length of time the be prepared to implement the system equipment found in today’s small vans vehicle spends on the move. The digital properly by the now officially confirmed with that of 10 years ago, when the tachograph, on the other hand, uses a launch date of May 1, 2006. With regard first vehicle-specific standards on load cryptographic procedure which receives to countries where implementation will securing appeared, some very positive its signal from an encoded pulse gen- be delayed due to lack of calibration trends can be seen. And the latest revi- erator on the transmission output shaft. facilities or driver cards, the European sion of the standards has raised the The data is stored electronically in the community and the governments repre- safety levels yet again for new vehicles. tachograph and cannot be accessed. sented in it are called upon to develop Only monitoring organisations, using practical interim solutions for vehicle The main improvements introduced special control cards, are able to read manufacturers and haulage companies. are as follows: out and analyse the data, thus ruling out Otherwise, severe delays will be expect- any possibility of tampering. ed, particularly where cross-border traf- ■ Because of the higher requirements fic is concerned. relating to the maximum permissible The overall system for using and distances between lashing points, monitoring the tachographs requires not Against this background, the Ger- new vehicles will usually be fitted only the corresponding devices and the man automotive industry expressly with more lashing points. installation of the devices in the vehi- welcomes the fact that the AETR states cles, but also the setting up of a sov- (Andorra, Azerbaijan, Bosnia-Herzegovi- ■ The load securing equipment ereign infrastructure. For this purpose, na, Bulgaria, Serbia-Montenegro, Kaza- – primarily the bulkhead between all member states were called upon to khstan, Croatia, Macedonia, Moldova, the driver’s cab and the load area accredit a network of workshops for Romania, Russian Federation, Switzer- – must be able to withstand much higher forces than before. The following tests are definitive: The digital control system ■ Test 1: Testing with a test die of small surface area to determine the resistance of the bulkhead to penetration by small heavy loads (e.g. long objects such as pipes).

■ Test 2: Testing with a test die of Source: Siemens VDO large surface area to determine 148 Verband der Automobilindustrie SAFETY AND TECHNOLOGY

whether the bulkhead is firmly Main requirements for standard anchored to the vehicle structure. and strengthened vehicle bodies

The more stringent requirements Requirements for of the standard, as described in these tests, are being incorporated into new Component Standard body Strengthened body vehicles by vehicle manufacturers. Code L Code XL Bulkhead 0.4P 0.5P Load securing devices in but max. restriction without max. restriction heavy commercial vehicles Rear wall 0.25P 0.3P On the initiative of the German but max. restriction without max. restriction industry, the European standard EN Side walls up to 0.3P 0.4P 12642 is currently being revised with P = Payload the aim of incorporating more stringent Source: EN 12642 requirements. The FAKRA working group responsible for this has drawn up the following two-stage concept: Load securing devices in injury. This standard has been revised 1) Requirements for standard bodies passenger cars, passen- by experts in the Motor Vehicle Stand- initially to be the same as those in ger car estate vehicles and ards Committee (FAKRA) and the new the current EN standard. multi-purpose passenger version published in 2006. cars 2) Additionally: More stringent require- Securing of loads is a topical subject The main requirements of the new ments for strengthened vehicle with regard not only to commercial vehi- version are as follows: bodies (“XL” requirements profile). cles but also to passenger cars. Here too, the aim is to provide optimum pro- ■ Backrests: Where they are able to Discussions on a European level tection for the occupants by improving perform a load area separation func- have progressed relatively quickly. The the standards. tion, the strength of the backrests two-stage German concept has been must be such that they are able to met with widespread support amongst Standard DIN 75410-2 sets out the protect occupants from unsecured the European standardisation commit- requirements for load-securing devices loads when the vehicle is subjected tees. The final draft is scheduled to be in passenger car estate vehicles, multi- to heavy deceleration. The standard submitted for approval to all members purpose passenger cars and passenger defines exact test procedures in this of the CEN European standardisation cars whose seats border directly onto regard. committee in mid-2006. The new ver- the load area. The standard specifies sion of European standard EN 12642 is the minimum requirements and tests ■ Headroom above the backrests: expected in the second half of 2006. for representative front and rear seat For the vehicles concerned, the configurations. These should enable respective rearmost row of seats The following table shows the main loads to be secured safely, from both that borders on the load area in the requirements for standard and strength- a transport and an operational point of various load area configurations, ened vehicle bodies: view, thereby protecting occupants from must also be able to protect the Annual Report 2006 149

occupants from the load in the area More precise details are defined in commercial vehicles (light trucks, above the backrests. The standard the standard. heavy trucks, trailers, semitrailers) and defines exact test procedures in this buses. regard. Both DIN documents have set standards in the vehicle sector. This year, these Only with the aid of the common ■ Lashing points: The vehicles con- DIN requirements, drawn up by the type approval system is it possible to cerned should be fitted with at least VDA/FAKRA, became the subject of inter- check on an on-going basis whether the four lashing points in the load area. national standardisation (ISO), the aim production conforms with the require- The lashing points must be located being to carry through the high German ments of the relevant regulations. Type in pairs along the two longitudinal standards onto an international level. Dis- approval is based on the idea that for sides of the load area and must be cussions with foreign experts, under Ger- each vehicle manufactured, a certificate approximately opposite each other. man guidance, will commence shortly. of conformity has to be issued which ensures that the vehicle corresponds with the approved vehicle type.

Technical Harmonisation The proposed Directive introduces a new method of EC type approval, namely the multi-stage type approval EU type approval procedure fundamental principles to other vehicle procedure. Each manufacturer involved Uniform technical rules for the categories. in building a vehicle (e.g. chassis manu- approval of products are an essential facturer or body manufacturer) fills in part of the completion of the single The automotive industry welcomes the section of the conformity certificate market in the European Union. Since this opportunity and early on played a which corresponds to his particular 1998, the EC Directive relating to the decisive part in the new version of the manufacturing stage. This way, the spe- “Type approval of motor vehicles and Directive by tabling corresponding pro- cial case of commercial vehicle manu- their trailers” has replaced the national posals to amend the EC type approval facturers can be catered for. In the first general operating permits. To simplify process. Consequently, the proposal for stage, for example, the manufacturer of the procedure, the Directive was initially one Directive contains revised forms the first manufacturing stage carries out limited to category M1 vehicles (pas- of most of the regulations found in EC the approval for the chassis, which may, senger cars). Directive 70/156/EEC. However, com- for example, include the drive unit, the pletely new concepts and obligations wheels, the suspension and the brak- Since 1970, EC Directive 70/156/EEC are also being introduced. ing system; an EC type approval will (type approval of motor vehicles and then be issued for this. In the second their trailers) has been the main statu- Access to the single market via manufacturing stage, the manufac- tory instrument for implementing the the common system of type approval turer builds the body onto the chassis single market in the vehicle sector. To currently concerns only passenger cars, and then enters the whole vehicle for keep up with this continually evolving motorcycles, small motorcycles and type approval. Vehicles where just one sector, the Directive has been amended agricultural tractors. The European manufacturer makes both the chassis a number of times. During the last revi- Union is now keen to extend this and the body can be approved using the sion, the opportunity was also taken to system to all vehicle categories. The procedure which already exists for pas- extend the scope of application of the proposed amendment mainly concerns senger cars. 150 Verband der Automobilindustrie SAFETY AND TECHNOLOGY

The proposal will be implemented rulings will apply until June 30, 2013, was also incorporated. As part of the in stages by 2010. Provision is made for provided no associated technical radio impending revision of type approval transitional periods so that the indus- interference is reported and the moni- directive 70/156/EEC, the EU Com- try can gradually adapt their current toring of vehicle numbers in the individ- mission published a draft which made production to the new regulations and ual member states goes without a hitch. provision for introducing Article 29a and the authorities can implement revised Article 35 as supplements to the exist- procedures. Some all too major bureaucratic ing directive. The aim of this draft docu- hurdles have been avoided here. For the ment is to extend the operating permit Short-range automotive monitoring procedure, the Commission obligation, which currently exists for radar undergoes at first published a modification to the passenger cars, to vehicle replacement monitoring CoC (Certificate of Conformity) docu- parts which are sold on the so-called Thanks to the latest sensor technol- ment of EC Directive 70/156/EEC, which aftermarket. According to the draft, ogy, the car is now able to “see” even consisted of a yes/no statement. This the scope of application is parts which better. The key technology in this field meant that every vehicle manufacturer may be considered as safety-critical or are the 24 gigahertz radar sensors, was obliged to change its documents relevant to the environment, though it which are used to observe the area regardless of whether it was installing does not exactly specify which parts are around the vehicle. The SARA (Short this technology. After the VDA suc- meant by this. Range Automotive Radar Frequency cessfully negotiated with the EU Com- Allocation) industrial consortium is look- mission, the Federal Motor Transport The Commission’s proposal for after- ing at how 24 GHz broadband automo- Authority (KBA) will now be undertak- market parts is divided into two areas: tive radar sensors for improving road ing the monitoring operations across safety can be regulated on an interna- the whole of the EU; now, a note only 1) Article 29a, which deals with how tional level. 24 GHz technology is cur- needs to be made in the CoC document the approval of replacement parts rently being used by two German vehicle if these 24 GHz technologies are fitted relevant to safety or the environment manufacturers. Future developments will in the vehicle. and intended for the aftermarket feature 79 GHz technology, though this should in principle be regulated has not yet been sufficiently developed The monitoring procedure requires for series production applications. the vehicle manufacturers who are 2) Article 35, which requires vehicle installing this technology to also notify manufacturers to provide parts The Commission has approved the the KBA of the chassis numbers of all manufacturers with the necessary use of the 24 GHz frequency range for vehicles which will be sold in other EU information to design components short range vehicle radar systems. This member states and Switzerland. The for the after-sales market. approval is subject to specific condi- KBA will compile the relevant statistics tions, however. At the beginning of and monitor the situation to see that the It must be noted that should the 2005, the Commission stipulated that 7 percent limit is being observed. amendments be adopted in the pro- a maximum of 7 percent of the vehi- posed form, aftermarket parts will, in the cle fleets in the individual EU member Regulations for add-on future, be subject to the same approval states may be fitted with 24 GHz short parts will also be more requirements as category M1 vehicles range radar equipment. This is because stringent (passenger cars) already are today. the frequency range is also used by In the course of the revision of Costs for testing and approving the other services in some countries. The the framework directive, Article 29a parts will, by necessity, be incurred. It is Annual Report 2006 151

still unclear whether and to what extent “Fahrzeugschein” (vehicle log book)] and home and abroad. The exceptions to this new ruling will give additional ben- Part II [which replaces the “Fahrzeug- this are non-registered vehicles such as efits to the consumer. brief” (registration document)]. For vehi- mopeds, boat trailers and horse boxes. cles that were already registered, noth- They only require Part I of the registra- New vehicle registration ing will change initially. The original reg- tion document. On request, however, documents istration documents will remain valid Part II of the document can be issued With the adoption of EU Directive until new documents have to be issued. for these vehicles if, for example, a loan 1999/37/EC, the European Union has If a vehicle changes ownership after company requires security when arrang- moved towards the standardisation of October 1, 2005, for example, new-type ing vehicle finance. vehicle registration documents. Germa- registration documents will then be ny has been implementing this Directive issued. The new documents and the infor- since October 1, 2005; from this date, mation contained in them are safe- the vehicle registration documents must This ensures that the vehicles can guarded against falsification. This will consist of Part I [which replaces the be driven without restriction both at help enormously to stem the flow of

New vehicle registration documents from October 1, 2005

Approval certificate, part I Approval certificate, part II

Source: KBA 152 Verband der Automobilindustrie SAFETY AND TECHNOLOGY

vehicle crime. The forms consist of a The new format and the fact that When carrying out inspections, the uniform backing sheet into which can the document contains less information monitoring authorities are still able be incorporated or onto which can be will make things much easier, since the to retrieve this data online from the printed various security features, such as: corrections to the registration docu- approvals authority (KBA). The vehicle ment that previously had to be carried manufacturers have also published the ■ A watermark (a stylised Federal out when vehicle technology changed approved wheel/tyre combinations on Eagle) are now no longer required. Because their websites. there is only space for two owners or ■ Various visible and invisible fluores- registration entries on the document, Revision of the StVZO cent fibres or planchettes a new Part II document has to be With the revision of EC type approval issued when a vehicle changes hands and the extension of it to include vehi- ■ Microlettering for a third time. So only the owners cle classes other than M1 (passenger entered on the document can be seen. cars), it appears that a revision of the ■ A Federal Eagle only visible under A buyer also knows, therefore, how national road traffic licensing regula- UV light many times a vehicle has changed tions (StVZO) is also required, in order hands. Details of the previous vehicle to replace national references with ref- In addition, Part I of the registration owners are not lost, however. They erences to international regulations and document will have a changing image are stored in the central vehicle regis- Directives. element in the form of a kinegram. It ter of the Federal Motor Transport provides additional proof of authentic- Authority. For this purpose, the Federal Min- ity and can be checked by the police istry of Transport founded a working authorities using a machine. Further The buyer can also obtain the “old” group and recruited experts from the safeguards against misuse include the registration documents when a new automotive industry and the approv- unique numbering system on the blank registration document is issued; this als authorities. The first stage involved forms and the number entered by the way, information about tyres and the drawing up a regulatory structure, the registration authorities which matches number of previous owners can be framework of which has in the mean- the data stored in the vehicle registers. viewed easily. time been more or less fleshed out When carrying out vehicle checks, the completely. police can check the authenticity of the In Part I of the document, data registration documents by comparing about which tyres have been approved The structure envisages the new the number on the document with the for the vehicle are no longer required; StVZO being sub-divided into three number stored in the central vehicle details of just one tyre are sufficient. ordinances: register. This is a response to calls from the ■ Vehicle approval ordinance VDA, as in the past there have been Part II of the registration document recurring discussions with the ■ Vehicle operation ordinance contains only essential vehicle data. monitoring authorities when a vehicle There is only room for entering the has been fitted with a wheel/tyre ■ Vehicle registration ordinance details of two vehicle owners, unlike the combination that, although approved old document which could hold details by the manufacturer, was never- The draft of the “new StVZO” is of six owners. Part II is in DIN A4 format. theless not listed in the vehicle docu- scheduled for completion by the end of All the information is on the front page. ments. 2006 and will come into use in 2007. Annual Report 2006 153

Worldwide harmonisation vehicle safety systems, as, in addition the years have made them even more of technical vehicle to OBD for emissions-related systems, disparate. regulations it is possible that diagnosis will also be With the UN/ECE Agreement of required for vehicle safety systems. Nevertheless, it appeared sensible 1998, a regulatory mechanism was to use Regulation 13H as the basis for a established whereby both the USA At the end of the day, however, it GTR on passenger car braking systems and, for example, Europe, with their must be noted that, as before, practi- and commence discussions with a view widely varying vehicle approval proce- cal experience of implementing global to achieving global harmonisation. A dures, were permitted to use common regulations is lacking. Global regulation corresponding working group, consisting regulations. Since then a number of GTR2 (exhaust emissions measurement of government and industry representa- other countries have also signed the for motorcycles) does not set any actual tives, has since reached an agreement 1998 Agreement: Canada, USA, Japan, limits, but does define a drive cycle. And on the harmonisation of various techni- France, UK, European Union, Germany, so far, the door locks regulation has not cal braking requirements. However, it Russia, China, South Korea, Italy, South been implemented, either in the USA or emerged from these discussions that Africa, Finland, Hungary, Turkey, Slo- in Europe, to a level where it is suitable full harmonisation would be extremely vakia, New Zealand, the Netherlands, for use, let alone actually used. Never- difficult, if not impossible. This is not Azerbaijan, Spain, Romania, Sweden, theless, this should not deter us from because views on sensible safety stand- Norway, Cyprus, Luxembourg, Malaysia pushing ahead and making the vision ards vary greatly, but rather because and India (listed in order of signing). of global harmonisation, of a “tested of the different approval procedures in once – accepted everywhere” product, place in the USA on the one side and in Door locks may open a reality. Europe and Japan on the other. the door to global harmonisation Global braking regulation One particularly problematic area The first global harmonised regula- for passenger cars involved finding a global, uniform regu- tion under the 1998 Agreement was When the 1998 UN/ECE Agreement lation for measuring the friction coef- adopted in 2004. It relates to “Door on global harmonisation of approval ficient between the road and tyre. This locks and door retention components” regulations was made, the first thing concerns all vehicle categories. A work- and is given a designation GTR1. The that was required was to identify suit- ing group which is drawing up a globally industry hopes that this first global able candidates for global technical reg- harmonised regulation for motorcycle harmonised regulation on door locks ulations (GTR). The area of passenger braking systems on behalf of WP.29 is will, indeed, open doors and lead to the car brakes soon found its way onto the currently also working on the question 1998 Agreement being successfully put list of candidates, since extensive talks of friction coefficient measurement. into practice. Other global regulations on the harmonisation of passenger car From the industry’s point of view, have been adopted in the meantime braking regulations had already taken finding a quick solution to this problem (GTR2, exhaust emissions measurement place way back in the 1980s between will be crucial to technical harmonisa- for motorcycles) or are expected to be Europe, Japan and the USA, the results tion. adopted shortly (exhaust emissions test of these talks being ECE Regulation 13H cycle for engines of heavy commercial and US FMVSS 135. Regrettably, these Other projects for global vehicles, global regulation for on-board two regulations were still not 100 per- harmonisation diagnosis (OBD)). This latter regula- cent identical, and the various amend- WP.29 has also set out a host of pro- tion could also become significant for ments and supplements to them over posals and priorities for global harmo- 154 Verband der Automobilindustrie SAFETY AND TECHNOLOGY

nisation of technical vehicle regulations. Compulsory certification ■ For suppliers (replacement parts) These include regulations for in China from December 1, 2006 for certain The CCC system (China Compulsory parts ■ Lighting installations Certification) was implemented in China on May 1, 2002 and became fully effec- Since December 1, 2005, 13 new ■ Tyres tive on August 1, 2003 as mandatory regulations relating to the certification certification and marking. The aim of of vehicle components have come into ■ Safety glass the certification system is to establish a force (as CNCA Document no. 28). uniform standard in China for selected Likewise, the provisions for importing ■ Controls and symbols products. CCC has replaced the former motorised vehicles have been revised CCEE (China Commission for Conform- and supplemented with additional ■ Pedestrian protection ity of Electric Equipment) symbol for product tests relating to fuel con- domestic products and the CCIB (China sumption. Vehicle manufacturers ■ Head restraints (strength) Commodity Inspection Bureau) symbol must comply with these new tests for imported products. by July 1, 2006 at the latest, even if ■ Off-cycle emissions a CCC certificate has already been This change ensures that domestic obtained. ■ Particulate emissions test for and international companies and their off-highway vehicles goods are treated equally in accord- In addition, according to CNCA ance with WTO rules. Both Chinese Document no. 137, vehicle front and rear ■ Hydrogen and fuel cell vehicles and foreign manufacturers are affected, lights, other lights and reflectors, rear therefore. Checks will be made to see view mirrors, loudspeakers, fuel tanks, As part of the work on globally har- if imports into China are complying door locking systems, seats and head monised draft regulations, discussions are with the regulation. However, domestic restraints (in all, 11 parts for passenger also being held as to whether, and to what operations will also be monitored. Since cars, plus two more for commercial extent, regulation options or modules August 1, 2003, the Chinese customs vehicles, namely the side marker lights within a GTR could be used as pragmatic have been using CCC as the valid and the tachograph) have all been solutions. Modules are, for example, parts guidelines for the import into China of classed as products requiring CCC, with of regulations which the respective signa- goods subject to certification. immediate effect. tory states are free to choose whether to use or not. Options mean that there is a The CCC test mark is a compulsory Type approval in China: choice of several regulations. From the test mark relating to the safety and procedures and service automotive industry’s point of view, quality of products sold on the Chinese providers options and modules must always be market. It is intended for 19 product Experience shows that certification regarded as a “second best solution”, groups, these, in turn, being sub-divided is tedious and expensive. At present, since it appears that full harmonisation into 132 product categories. a certification process takes between would not be achieved in this way. Never- three and seven months. The main dif- theless, the industry would accept mod- The CCC is being introduced in two ference between the certification system ules or options on the condition that a stages: in China and those in other countries is common framework for compliance with that no foreign test agencies have the the global regulations is defined. ■ For motor vehicles, from 2002 required accreditation. In other words, Annual Report 2006 155

type approval has to be carried out in ■ Inspection of manufacturing facilities ■ Parts marking Chinese laboratories. by Chinese inspectors (duration including preparation four to six weeks) ■ Fuel tanks Only manufacturers can be certified. The manufacturing facilities are ■ Drafting of certificate ■ Flammability of interior materials inspected by inspectors representing the Chinese authorities. In other words, ■ Approval to use the test symbol or ■ Seats and head restraints they are usually Chinese inspectors. It is obtain stickers also possible to commission accredited ■ Motorcycle topics institutions (e.g. technical service pro- ■ Annual follow-up inspection viders). Overseeing the whole process ■ Mirrors are the Chinese authorities. There is no On March 31, 2006, therefore, the way of predicting or influencing whether VDA arranged a workshop for supplier ■ Horn a commission will get the go-ahead. members of the association at which vehicle manufacturers shared their ■ Brake hoses If a manufacturer has several manu- experiences of the Chinese market and facturing facilities, these must all be all topics relating to or affected by CCC ■ Locks and hinges certified. Certification is carried out by certification. the Chinese authorities and must be These included: ■ Lighting equipment and reflectors repeated every year. ■ The certification system It is particularly important to simplify The China National Accreditation the accreditation and inspection pro- Administration (CNCA) is responsible ■ Inspection of the manufacturing cedures. For example, efforts should be for managing and coordinating the plants made to get the Chinese authorities to certification and approval operations. recognise ISO 9000 certification in the It comes under the authority of the ■ Parts testing future. state quality monitoring institute, the State General Administration for Quality Supervision and Inspection and Quar- antine (AQSIQ). The technical testing authorities are the CQC. Standardisation

The following steps must be followed to obtain certification: Standardisation in vehicle design other road users. The work of the VDA’s will benefit rationalisation and qual- Motor Vehicle Standards Committee ■ Application to the Chinese authority assurance. It increases user and (FAKRA) in the DIN is therefore closely ities maintenance friendliness and will help linked with advancements in automobile to achieve even greater environmental engineering. ■ Type approval in an accredited labo- compatibility. Standardisation also plays ratory in China (duration approx. six an important role in vehicle and road There is a link to FAKRA on the VDA weeks) safety – to the benefit of the driver and website at www.vda.de. 156 Verband der Automobilindustrie SAFETY AND TECHNOLOGY

End-of-life vehicles: components to be dealt with before method complex and not very cost-effec- improving safety by vehicles are sent to the shredder. tive to use. activating pyrotechnic components prior to ■ Vehicle manufacturers support the To avoid these disadvantages in disposal activation of pyrotechnic devices future vehicles, an existing vehicle Pyrotechnic components which have whilst they are still installed as access point was sought, preferably one not been deployed present a considerable effective and desirable. that was already standardised. The on- risk when disposing of end-of-life vehi- board diagnosis (OBD) socket fitted the cles. If intact gas inflator assemblies are The working group is to devise both requirements perfectly. sent for aluminium smelting, they present short-term solutions for existing vehicles an incalculable risk for the safety of the or vehicles already being developed and In 2005, the solution formulated by the smelting plant. Even the removal and a standard solution for the future. vehicle manufacturers was submitted to collection of pyrotechnic devices require ISO as an application for standardisation. specialist knowledge and procedures. To Global standard at work This led to the founding of the Task Force prevent these and other operating risks, Japan has a solution for existing 12, called “Road vehicles – end of life the automotive industry agrees that acti- vehicles which involves an additional activation of on-board pyrotechnic de- vating all pyrotechnic components whilst connector on the control unit. In Europe, vices”. To implement the procedure quick- they are still installed is the safest and at the initiative of a VDA committee ly, the already-standardised diagnostics most effective method of disposal. (AK2015), a tool was developed within communication link is being extended to a matter of a few months which can include the requirements for this task. The vehicle manufacturers have be used on any vehicle in the world. enlisted an international group of The disadvantage, however, is that either The solution is based essentially on experts, Working-Group 3 (WG3), the components have to be wired indi- communication between an external tool which will be engaged in the “design vidually or an adapter specific to the and the control units which control the for recycling of pyrotechnic compo- control unit is required. This makes this activation of pyrotechnic components. nents in vehicle applications”. The aim of the international working group, Pyrotechnic Device Deployment Tool (PDT) under the leadership of the Japanese automotive industry association JAMA, ¥ Connection to the vehicle Tool via diagnostics interface. side is to develop cost-effective procedures ¥ Additional cable possible for for the environmentally-friendly, safe Software and safeguarding hardware hardware updates and cost-effective disposal of pyrotech- or for additional communications. nic systems in end-of-life vehicles. The ¥ Special coded software, central guiding themes are as follows: present in control unit, but only decoded for recovery. Special tool: ■ Vehicle manufacturers do not support ¥ Can also be used for systems updates possible with several relevant re-use as a suitable method of dis- control units. posing of pyrotechnic components. ¥ Existing test solution for vehicles without ACL Diagnosis via (additional cable). ■ Vehicle manufacturers consider it OBD with ACL Source: BMW AG absolutely essential for pyrotechnic Annual Report 2006 157

Joint Automotive Research

FAT joint automotive research Safety: The FAT is working inten- ogies and processes for the mainte- refocuses on 6 key areas of sively on research into active and nance and upgrading of software. research passive safety. Driver information sys- Preference is given here to those tech- tems and accident data recording are nologies which support the “pre-emp- The success of the German auto- improving safety levels in German cars. tive car”. This will make driving even motive industry is based on its con- Thanks to FAT research, driver informa- safer. tinual use of technology. To ensure that tion systems are being optimised so the sector remains ahead of worldwide that it is easier for the user to learn Materials and manufacturing competition, therefore, innovations how to operate them. For this purpose, technology: Lightweight construc- that are the products of research are the FAT is developing suitable methods tion and modern joining techniques will becoming more and more important. which demonstrate the effort involved enable weight savings to be achieved, in learning and calculate how much has which in turn will help to reduce fuel The Association for Research in been learned. consumption. Automotive Technology (FAT) brings together 52 major German companies Environment: The key areas here Development methods: This in the automotive industry, including are protection of resources and sus- involves using suitable product proto- passenger car and commercial vehicle tainability. This includes research into types and software tools and the verifi- manufacturers as well as suppliers. The the effects of vehicle emissions. The cation of simulation software to reduce FAT’s task is to pursue pre-competitive, results of these studies will help to the development time for vehicles. cooperative research on road vehicles. evaluate exactly how harmless sub- Here, manufacturers, suppliers and the stances present in the environment Research topics are defined and scientific community work together in a actually are. managed in specialist working groups fruitful dialogue, with the aim of estab- within the FAT. The task profiles are lishing the basics for new products. Transport efficiency: The FAT then handed over to those who will produces forward-looking road trans- potentially carry out the research, The research goals of the FAT port scenarios through its research usually universities or research insti- adapt dynamically to the chang- work in the fields of “Fuel consumption tutes, to work on. The results then flow ing requirements of the markets and and alternative fuels”, “Infrastructure” back via the working groups to the companies. The FAT has therefore re- and “Efficiency of traffic modes and companies concerned. The research focused its research activities. Existing vehicles”. results are also made available to the topics have been brought together or public in the form of the FAT series of supplemented where necessary, whilst Electronics: New software and reports. new areas of research, such as elec- hardware solutions will enable func- tronics and software, have been added. tional networking, which will make Further information about the FAT The FAT now has a total of six research mobility even safer and more conven- can be obtained from the VDA website focal points: ient. The FAT is structuring technol- at www.vda.de. 158 Verband der Automobilindustrie SAFETY AND TECHNOLOGY

lines, processes, materials, locations, Quality Management technologies, installation points or operating conditions are notified, agreed and approved in good time Among the outstanding character- 1. Mutual responsibility during series production. istics of German cars are comfort and Quality assurance is a responsibility convenience, the highest safety and envi- shared by manufacturers and sup- 5. Rapid action ronmental acceptability standards and pliers. In the event of a defect, manu- premium quality. The success enjoyed by facturers and suppliers will work German manufacturers as a result of their 2. Commitment and implementation closely together in an atmosphere policy of focusing on top quality is illus- Manufacturers and suppliers under- of trust to ensure that information trated by the excellent positions obtained take to apply all the necessary staff, is exchanged without delay, suitable by German brands in the latest quality organisational, tangible and financial counter-measures initiated immedi- rankings and in the breakdown statistics resources to ensure the quality of ately and the causes identified and published by the German ADAC auto- their products. Each of them accepts permanently rectified. mobile club in the spring of 2006. responsibility for their area and also to the interfaces, in view of the 6. Quality costs German manufacturers are reaping fact that quality is indivisible and to Warranty and guarantee costs are the benefit of their unceasing, intensive ensure that agreements are com- to be processed with the supplier efforts to improve quality and the fact plied with. fairly and in accordance with the that quality as a topic has been system- causal principle, in accordance with atically raised to board-of-management 3. Quality assurance throughout the the relevant contractual agreements. status. The strategy of concentrating life-cycle The VDA has recommended suitable on an overall view of quality covering Manufacturers undertake to define conditions of purchase as a means all interfaces from development to pro- product specifications clearly and in of processing quality costs. duction start-up and series production good time, including the allocation through to the end of the product’s life of responsibilities, interfaces, dead- 7. Communication has proved to be successful. lines, costs and quality targets and Manufacturers and suppliers under- the design freeze. Suppliers undertake not to apportion blame to Quality – the basis for take to cooperate on definitions each other in public statements. If mutual success within the framework of their devel- external communication is required, Intensive discussions held between opment responsibility, to comply it must be agreed between them manufacturers and suppliers on the with time, cost and quality agree- and will normally be undertaken executive committee of the VDA, and ments during the product creation by the manufacturer, but this does also in other major bodies within the process and to ensure that these are not absolve the supplier from joint VDA organisation, culminating in the maintained throughout the delivery responsibility for quality. executive committee’s meeting on June chain during series production. 22, 2005, served to emphasise mutual This agreement is published on responsibility for quality, and resulted in 4. Information and transparency the VDA Quality Management the following basic principles for coop- Manufacturers and suppliers will Centre’s website (VDA-QMC) at eration being agreed upon: ensure that any changes in dead- www.vda-qmc.de. Annual Report 2006 159

New VDA standards for the The “Robust Production Processes” Quality Summit in Stuttgart, supply chain working party was inaugurated in June 2005 On the initiative of the VDA 2005 to study problems that primarily In view of the extremely positive quality management committee, con- arise after the start of series produc- response to previous years’ events, cepts for improved cooperation in the tion (SOP). The aims are to safeguard the VDA-QMC held a further summit automotive industry’s supply chain have production processes by laying down meeting for the German automotive been drawn up for rather more than a minimum requirements throughout the industry on November 24 and 25, year now by inter-company working supply chain, and to describe a “robust 2005 in Stuttgart, with “Quality” as parties under the title “The Joint QM production process”, which, if achieved its topic. System in the Supply Chain”. In the throughout the supply chain involving “Maturity Assurance for New Parts” the OEM and the supplier, will improve Under the heading “Stable Process- and “Robust Production Processes” and stabilise product quality (that is es in Partnerships”, the conference working parties, experienced practical to say defect-free products in accord- dealt mainly with the topics “Joint staff from the BMW, Bosch, Daimler- ance with specification, reliable Maturity Assurance” and “Robust Pro- Chrysler, Johnson Controls, MAN, Sie- delivery, optimised incoming goods duction Processes”. In addition to pres- mens VDO, Volkswagen, Audi, WABCO quality and thus higher quality in the entations of current project progress, and ZF companies are working on joint field) to such an extent that German various talks furnished participants standards, with support from the Man- automobile manufacturers will be able with a large number of stimuli and agement Engineers business consul- to achieve a lasting improvement in new ideas. Talks on specific subjects tancy. their ability to compete. In economic provided invaluable insight into terms, a distinct reduction in testing, actual practice and were clear evi- The focus of the activities under- defect elimination and field costs is dence that in Germany, quality has taken by the working party “Maturity another objective. become a topic to which importance Assurance for New Parts” is on coop- is attached right up to board-of-man- eration and communication throughout For the user, the VDA documenta- agement level. Considerable potential the supply chain with a view to ensuring tion is intended to still exists, however, in particular in series-production maturity in the prod- the area of cooperation with suppliers, uct creation process. ■ act as a guide to realisation of the and the intention is to tackle this planned “robust production process” jointly. In June 2005 the VDA Quality Man- agement Centre (VDA-QMC) in Bad ■ draw up minimum requirement Initial and follow-up Homburg held a conference under the standards for the operation of a training at the VDA-QMC heading “Component Maturity for the robust operating process The VDA-QMC places the emphasis Start of Series Production – Systematic on developing training in accordance Maturity Attainment in Project Man- ■ state key figures and minimum with actual needs at every stage of the agement within the Supply Chain”. The requirements suitable for evaluation supply chain. By incorporating know- additions recorded there were incor- how from experts at automobile manu- porated into the documentation for the ■ perform the role of navigator in facturers and suppliers, ideas capable of new VDA standard that was posted as the planning, malfunction and fault generating new qualification measures yellow pages on the QMC website in elimination and continuous improve- and achieving mutual objectives are November 2005. ment process. being developed. 160 Verband der Automobilindustrie SAFETY AND TECHNOLOGY

With its 2006 programme of initial is to say until December 15, 2004. For ics with which it dealt were “Quality and follow-up training, the VDA-QMC this reason, activities in 2005 took Management Strategies” and “The QM hopes to provide OEMs and suppliers place entirely on the basis of the new System in the Supply Chain”, together with precisely the content and tools standard. At international level, the total with topical reports from VDA working they need to withstand increasingly number of certificates granted rose by parties. There was a highly favourable strong international competition suc- about 52 percent, from 12,261 to 18,642. response to the report of results in cessfully. At national level, the VDA-QMC was the ISO/TS 16949:2002 area presented able to increase its share by 54 percent jointly by the “DQS - German Associa- The “Automotive Product Portfolio” compared with 2004, equivalent to an tion for the Certification of Management and the close connections that the initial increase from 5,365 to 8,279 certificates Systems” and the “TÜV Management and follow-up training instructors have – a clear indication of international Service”. with actual practice are qualitative VDA- acceptance for ISO/TS 16949:2002 QMC features. Its initial and follow-up within the worldwide automotive supply VDA-QMC in Beijing training work strives to offer the client chain. In the spring of 2005 the German the correct products and to be under- automobile and supply industries in stood as a link between manufacturers In order to uphold this new, high- China, after a lengthy planning period, and suppliers. quality management systems standard, received support in the form of a the main activity in 2005 of the Over- local quality management centre. The Particular priorities of the service sight Offices within the IATF was prepa- Chinese VDA-QMC (currently being offered in this way are personnel qualifi- ration for the requalification of third- registered) takes the form of a joint cation, but also automotive process sup- party auditors. The first of these were venture (90 percent VDA) with an port and consultation. The qualification obliged to undergo initial requalification experienced start-up partner, namely enhancement measures include the cor- in accordance with ISO/TS 16949:2002 Shanghai Huade Consulting Co., Ltd. porate quality, process quality, methods from October 2005 onwards, so that and has been named “VDA-QMC Qual- and tools product areas, and also initial they could continue their auditing activity Management Center (Beijing) Co., and follow-up training for auditors. To ity for a further three years. Altogether, Ltd”. It received its licence to conduct quote only one example: work began 370 auditors have so far been requali- training in August 2005 and was then at the end of 2005 on requalifying cer- fied worldwide (this was the position in able to begin work on building up its tification auditors in accordance with February 2006). training facilities. A highlight for 2005 ISO/TS 16949, a measure that will con- was the start of training in the Chinese tinue until approximately mid-2006. In As one of the IATF Oversight Offices, language. this way, the VDA-QMC alone will have the VDA-QMC offers certification com- requalified some 300 auditors for this panies, or more precisely auditors, an The business licence planned for control procedure. opportunity to undergo suitable training 2006 is a precondition for offering train- and take the necessary examination. ing to external and internal auditors, Certifications sourcing and development partners as The ISO/TS 16949:1999 standard International Auditors’ well as other target groups. became officially invalid on Decem- Symposium in Darmstadt ber 14, 2003. The IATF agreed on a 218 people attended the 10th Inter- With support from German auto- transitional period of one year for the national Auditors’ Symposium, held in mobile manufacturers’ and suppliers’ introduction of the new standard, that Darmstadt on May 2/3, 2005. The top- local joint ventures, intensive coopera- Annual Report 2006 161

tion with Chinese trade associations 2005 and a high level of demand are worldwide implementation. In the VDA, and universities was built up. Positive evidence that the strategy pursued so consulting bodies supported by the VDA feedback from the training held during far has been successful. Logistics Department, manufacturers and suppliers are therefore working in partnership with ITA (Information Technology for the Automotive Indus- Logistics try) companies, their central concerns being the shaping of logistical process sequences, the handling of business Automotive logistics design of complete process chains. transactions electronically, packaging Automotive logistics is a growth This starts when the product is devel- logistics and CAD/CAM. sector that also opens up consider- oped: the earlier the involvement of able opportunities for cost saving. New logistics, the more efficiently parts can To enable tasks in the logistics area locations abroad, reduced manufactur- subsequently be produced and sup- to be tackled, a new organisational ing depth, global procurement and an plied directly to the assembly process structure has been drawn up within increasingly complex supplier network at various locations without passing the VDA Logistics Department. The are making logistics more important as through any intermediate stages. In this concept has already been submitted to a central function in the overall value way, there is considerable scope for cost and approved by those responsible for creation process. Modern logistics are savings. Using conventional methods, logistics at the participating companies. essential if a global production structure logistics costs within the global produc- Its objectives are the strengthening of is to operate at low cost but achieve tion structure would more than double, logistical activities, the assumption by high levels of quality and transparency. and thus negate all the potential for companies of greater responsibility for cost saving generated by the improved the VDA’s logistical activities and the In view of this, the German automo- sourcing process. The primary objective intensified promotion of our interests at tive industry has, since 1990, almost is therefore to reduce costs to a mini- international level. trebled the number of foreign locations mum while maintaining high levels of that it operates, to a current figure of quality and transparency. A contribution The organisational structure is being almost 2,000. The division of labour to this can be made by optimised infor- strengthened by forming a strategy between manufacturers and system or mation-flow management, from produc- committee to which logistics executives parts suppliers is also increasing: the tion planning through delivery monitor- from OEM companies and selected traditional, largely hierarchical form of ing to quality control and the processing suppliers will belong. It will define both cooperation is being superseded more of payments. strategic and contextual objectives and and more by value-creation partnerships boundaries for the logistics sector and between manufacturers and suppliers, VDA logistics now on a for the adjacent IT technology area. In with logistic providers incorporated into broader basis addition, the new organisational struc- the structure as well. As a consequence of globalisa- ture will take the aftermarket, B2B and tion and changes to the value creation CAD/CAM sectors and their interfaces In addition to conventional methods chain, automotive logistics are thus con- with logistics into account. of managing material flows, modern fronted with a series of new challenges. logistics are therefore establishing new Effective process management calls Their joint tasks will be to pro- priorities. There is a trend toward the for standardised solutions suitable for vide services for member-companies, 162 Verband der Automobilindustrie SAFETY AND TECHNOLOGY

coordinate and group together mutual by more than 300 people, was rounded The platform discussion reached the objectives, promote interests at interna- off by various topic blocks dealing conclusion that global standards offer tional level and establish standards and with new process and IT standards numerous advantages, but that they competences for quality and information and worldwide communication require- must be implemented even more rapidly technology. ments, workshops on RFID and charge than at present. This could in fact take carriers, visits to industrial companies place more quickly on new markets, An exchange of information between and an extensive trade fair. An exclusive where the structures are not yet fully the various business sectors will ensure first-time presentation was the survey formed, than in Europe. OEMs would that the best possible level of synergy “Trends in IT and Logistics in the have to give up their internal company is achieved and avoid the duplication of Automobile and Supply Industries, or group standards. There was unequiv- work in the various projects. The cen- 2006”. ocal praise for the VDA’s activities in the tral VDA office will coordinate project standardisation area, with its recom- reporting for each business sector and VDA-ITA survey: mendations accounting for the highest between them. A special feature of the standardisation is the key percentage. technological sector is its interactive In the survey conducted jointly function, which makes it available for by the VDA and ITA, online question- The results of the survey “Trends in all IT matters as a source of know-how, naires and personal interviews were IT and Logistics in the Automobile and a means of realisation and a commu- used to obtain the views of automobile Supply Industries, 2006” are available nicator of trends. This sector receives manufacturers and suppliers on current on the ITA website www.ita-int.org support from member-companies of trends. By means of various questions, (projects/survey). the ITA (Information Technology for the the analysis concentrated in particular Automotive Industry) circle. on logistics, processes, IT and commu- Logistical processes: nication standards. The survey results current VDA projects The VDA Logistics were presented to the 2006 VDA Logis- The “Logistical Processes” work- Congress tics Congress, followed by a platform ing party is maintaining active contact A highlight of the VDA’s logistics discussion with leading representatives with the projects currently concluded at activities is the annual VDA Logistics from OEMs, suppliers and the VDA and Odette level. Two projects are concerned Congress, the most recent of which was ITA. with the standardisation of logistical held in Kassel in February 2006, with processes for the flow of goods from the motto “Logistics and IT - Important A significant conclusion from the China and Central/Eastern Europe. Value Creation Factors in the Global report and the discussion was the need In the third project, key performance Production Structure”. At the 2006 con- for standardisation as a means of fur- indicators are being drawn up for the gress, which was organised in coopera- ther enhancing the ability to compete assessment of freight carriers and logis- tion with the ITA (Information Techno- on the global market as customers’ tics providers. logy for the Automotive Industry), demands increase. The survey indi- acknowledged experts from the auto- cated that standard software occupies Logistics evaluation: A user-group mobile and supply industries and also a clearly dominant position in business is supporting the application of the from logistics and IT companies pre- within Europe, but that, in many cases, Global Logistics Evaluation (GMMOG) sented practical examples from their companies’ own standards are used and recommendation drawn up at global own companies. This most significant thus represent a potential obstacle to level by the VDA together with Odette meeting in the logistics sector, attended harmonisation at international level. members and the American association Annual Report 2006 163

(AIAG). It deals with questions that arise attached within the logistical process Since it has not been possible with during practical operation by member- chain to the identification of malfunc- existing tools to produce the VDA-R-KLT companies. tions in the logistical process and their to the necessary tolerances as speci- future avoidance. Different methods for fied in VDA Recommendation 4500, Forward and retrospective tracing the determination, avoidance and elimi- incorporation into this standard was of of vehicle parts: VDA Recommendation nation of logistical process malfunctions no value. The VDA-R-KLT with provision 5005 defines unified processes capable in the automotive supply chain led to for static electrical discharge was there- of forward and retrospective tracing and the compiling of VDA Recommendation fore defined in VDA Recommendation identification of vehicle parts throughout 5008 on “Logistical Quality”, available 4504. A second working priority was to the delivery chain. Based on possible since July 2005. It defines the quality of incorporate a stackable VDA-R-KLT lid, applications and their peripheral condi- logistical processes and indicates how also with provision for static electrical tions, it describes suitable documenta- malfunctions should be traced back discharge, since only a closed electro- tion processes and generally valid re- to their origins and suitable measures statically conductive system is capable quirements for the identification of parts. developed for their elimination. As an of providing the products with complete The second part of the recommendation aid to this, a catalogue of malfunctions ESD protection in transit. In accordance is intended to achieve the unified tech- and means of escalation manage- with members’ wishes, samples were nical implementation of the previously ment in the event of logistical process produced for examination, and in this stated minimum identification require- malfunctions are provided. Key data way agreement between members of ments, taking existing data structuring to ensure the quality of logistical pro- the working party was reached extreme- and encoding standards into account. cesses are listed, and unified measured ly rapidly. VDA Recommendation 4504 Systematic overall application of the pro- values for the objective assessment of has now been published and therefore cedure described here will result in a logistical quality defined. The benefits provides the small-load carrier manu- unified identification system throughout offered by this VDA recommendation lie facturers, approved by the VDA, from the automotive industry and avoid the in the increased objectivity and simplic- now on with a further basis on which to need for individual, cost-intensive solu- ity of communication between customer, carry out their work. tions. The processes and methods service provider and supplier if logistical described in this recommendation can process malfunctions occur, and in the Data exchange between users: be applied to all vehicle parts (unma- distinctly more rapid and permanent The Container Management work group chined parts, individual components, fin- elimination of their causes. drew up Recommendation 5007 to ished products, materials/parts groups, describe the information needed for the batches, manufacturing batches and Transport container standardised exchange of data between software) within the automotive industry. standardisation and the users of container management Implementation of the recommendation management systems. The background to this devel- for certain vehicle parts is to be agreed VDA-R-KLT with static electri- opment was the existence of a large unilaterally between the supplier/manu- cal discharge: The aim of the VDA’s number of systems that make it neces- facturer and the customer. Parts or Container Standardisation (BS) working sary for suppliers in particular to create assemblies for which this recommenda- party was to create a standard for small an interface with their own systems for tion is mandatory were not defined. load-carriers with provision for static each of them. A joint work group was electrical discharge (VDA-R-KLT). These therefore formed with the Electronic Logistical process quality (LPQ): containers are of great importance for Business Transactions working party to Increasing importance has to be the movement of easily damaged parts. use Recommendation 5007 as a basis 164 Verband der Automobilindustrie SAFETY AND TECHNOLOGY

with the aim of developing standardised This was subjected to external load ‘ConPearl’) and therefore in cost. The information processes. For this purpose tests. The working party prepared a crit- extent to which a VDA recommenda- the process description was revised ical assessment of the test results and tion can be issued is to be determined again, so that suitable information flows suggested further improvements, which through practical application. could be derived from it. These were led to the construction of a second included in Recommendation 5007 in “lightweight” GLT and its use to deter- Use of RFID at container level: In the form of graphs and converted into mine stress values. At the 2006 Logistics March 2005 the RFID (Radio Frequency a data model. With the aid of the data Congress, additional safety coefficients Identification) project group was set up, models, types of message were selected were agreed, and are now being exam- with members from the BMW, Daim- and guides developed in Edifact and ined with the aid of further FME analy- lerChrysler, VW, Bosch, HUF, Siemens Odette XML. The results are now avail- ses. The final design of the load carriers VDO, SAP and Seeburger companies. able on the VDA website as the revised will be based on these results. The aim is to standardise the use of Container Management Recommenda- RFID for container management in tion 5007 and the Message Recommen- Development of a plastic large- the supply chain and for this purpose dations 4941 - 4947. load carrier: A number of widely dif- to develop a unified data structure for ferent concepts for plastic large-load transponders on small- and large-load Development of a modular-ele- carriers (GLT) are currently on the mar- carriers. Five workshops in all were held ment system for large-load carriers ket, with considerable variations even to analyse processes within the supply (GLT) of lightweight steel construc- within the ranges offered by individual chain; these were rewritten for RFID tion: A large number of different packaging manufacturers. The reasons use at container level for both inbound company-specific standards for the for this are the continual introduction of and outbound processes and docu- design of large-load carriers are cur- new ideas and improvements, and the mented as process data flyers. From rently in use, and in many cases do not high cost of manufacturing tools. These these, a standardised data structure fully exploit the available potential for factors have so far prevented a plastic and the requirements to be satisfied by optimisation. In order to develop uni- GLT system similar to the successful the applicable technology were derived. fied standards for a modular-element small-load carrier (KLT) concept from The results were transferred to a VDA system suitable for use in a pool, taking being built up. A project team formed Recommendation, and also presented at modern joining techniques and FME from members of the working party Odette level so that a decision on incor- analyses into consideration, a research has therefore concentrated initially on porating them into an Odette standard project was initiated by the University of an alternative plastic design to replace could be taken. Stuttgart. The Container Standardisation the German Rail (DB) lattice box. At working party is supplying this project two workshops, various manufacturers New CAD/CAM with intensive support, with a view to presented possible solutions, and these developments incorporating the automotive industry’s were assessed by the working party The VDA’s CAD/CAM working party requirements into it and evaluating the with the aid of a unified requirement list. initiates and promotes efficient com- results appropriately. A requirement The two preferred solutions comply with munication between those participating specification was agreed at the 2005 requirements to the greatest extent and in the generation and use of CAD and VDA Logistics Congress, after which the are being investigated further by means CAM data in motor-vehicle construction. modules for the load carrier and their of practical tests. These two solutions For this purpose, the manufacturers and design details were laid down, and an are similar in construction but differ suppliers jointly issue recommendations initial functional sample constructed. in the materials used (‘Twinsheet’ and on procedure, data and systems, and Annual Report 2006 165

these are implemented and utilised by continually to suit new requirements, for faces with simulation systems compiled. member-companies but also outside instance increasingly complex product In addition, a recommendation for the the working party. The relevant work structures and more stringent safety exchange of 3D factory planning data areas extend well beyond the product standards. The results of the work group was prepared; it is intended to publish geometry area into the management (see VDA Recommendation 4951) make it in 2006. and use of product data, structures and it possible to automate the process- characteristics. On the basis of objec- ing of transmission and reception data, Vehicle electrics: The significance tives and methods that were updated and are used throughout the German of electrics and electronics in vehi- in 2003, the working party achieved the automotive industry. For the DFÜ work cles has increased to an exceptional following results in various work groups group, 2005 was the fourth year of degree in recent years, and with it the and projects: globalisation of its results: together complexity of their wiring harnesses. with SASIG partners, the electronic Development of vehicles’ actual wiring Data quality: Poor data quality delivery note (ENGDAT) was consider- harnesses, for example wiring, plugs is the main cause of data-exchange ably extended and published as Version and housings, is partially taking place in losses and the need for rectification 3. Since there is a difference between body and mechanical assembly devel- work when using CAD data. In recent Version 2, which is in use in Germany, opment, or the actual electrical-system years, the work group has defined CAD and the new Version 3 that is suitable components must at least be integrated data quality and also made it visible and for global use, a ‘migration guide’ was there into the virtual vehicle. In this con- verifiable by initiating test programmes. drawn up both for users and for the sys- nection, the Vehicle Electrics work group Complying with and testing data quality tem providers. The electronic parameter has also drawn up standards for terms has been incorporated into agreements list “ENGPART” was revised to permit and data models on the basis of the and procedures in the German motor- automated updating of the partner neutral STEP format. In 2005, the work vehicle industry, with results that are database that is needed for exchange group published a data model definition proving extremely positive (see VDA purposes. for the “harness description list (KBL)” Recommendation 4955). During 2005, (see VDA Recommendation 4964). This the work group promoted the globalisa- Digital factory: CA applications are recommendation also includes a glos- tion of these results in the interests of also used to a considerable extent in sary of vehicle electrics and is already its internationally active members: in the factory planning field, and therefore being implemented by leading manu- conjunction with other national automo- CAD data generated and exchanged. facturers and suppliers. In addition, the tive-industry associations (www.sasig. The Digital Factory work group draws work group has drawn up a draft data com), the international “SASIG Product up standards for the neutral descrip- model for the description of system Data Quality Guideline” recommendation of specific elements and attributes and electrical circuit diagrams, which is tion was submitted to the ISO and on the basis of the STEP (ISO10303) scheduled for publication in 2006. accepted there as a publicly available international standard for both 2D specification (ISO PAS 26183). and 3D data, and these are accepted Long-term project archiving and implemented by the main system (LZA): The long-term archiving of Remote data transmission (DFÜ): manufacturers. In 2005, application soft- product data still takes place today for The Remote Data Transmission (DFÜ) ware was initiated in close cooperation the most part in the form of 2D draw- work group has, for some years now, with software suppliers for electrical ings, since the 3D data lack certain supplied a basis for the simple, reliable engineering, mechanical handling and important manufacturing information exchange of CAD data, and modified it technical building services, and inter- and also the signature that would give 166 Verband der Automobilindustrie SAFETY AND TECHNOLOGY

them document status. In addition, produced; these are scheduled to reach Steering Committee, which supports there is no accepted filing methods production maturity in coming years. them subsequently. The following that would guarantee that they remain Last year, the draft for the next section, projects have been completed or are in intact for re-use, for example after 10 namely the Engineering Change Order progress: years. The LZA product group compiles (ECO) was also produced; this is to be suitable procedures for handling 3D published and evaluated in pilot projects Container Management Informa- data or draws up solutions that also during 2006. tion Concept: Based on the process take official requirements into account. description (VDA 5007) and in close These are published as a VDA Recom- Collaborative Product Visualisa- cooperation with the process group, the mendation (see VDA Recommendation tion project: This project name relates associated messages were developed 4958), with the aim of reducing the to the concept of using simplified CAD on an EDIFACT basis. The project group effort involved in producing drawings data – known as “viewing data” – and completed its task in December 2005. or dispensing with them altogether. the associated simpler, less expensive The result was a set of 17 messages, In 2005, the project group compiled a presentation programmes (“viewers”) in which are summarised in codes 4971 to reference process for the archiving of inter-company communication of prod- 4947. They were published in the spring 3D data, including preparation and the uct data as an alternative to CAD data. of 2006 and can be downloaded free of work needed later to provide proof that The project group commenced its work charge from the VDA website. the material is intact when it is to be re- last year, and devoted the first stage of used. Information events were also held the project to identifying six potential Drop shipments: The aim of the in order to convince more companies of application areas for viewing data. Ref- project is to draw up a communication the advantages and practicability of the erence processes are to be created for concept that will assist in the process- recommendations. these application areas, with descrip- ing of bypass (drop-shipment) transactions that illustrate not only the interac- tions in the after-sales area, based on Change management project: tions and relevant information but also EDIFACT messages, and using exist- Considerable potential for improve- the benefits of using viewing data. ing standard messages for the order ment in terms of throughput times and processing and delivery notification process quality and stability has been Electronic business processes in an adapted, extended form. detected when product changes are transactions The project also takes into account the processed, particularly if they affect The structure of the Electronic Busi- documents accompanying the delivery, more than one company. In this connec- ness Transactions working party is cur- by suitably modifying the VDA 4939 and tion, the Engineering Change Manage- rently being reorganised. Two bodies VDA 490. The project is scheduled for ment (ECM) project group draws up ref- will operate within it in the future: the completion in July 2006. erence processes with interaction sce- Steering Committee and the Informa- narios, data models etc., for the various tion and Practical Forum for Information “Aftermarket Exception Han- stages in the change process. In 2005, Technology. The Steering Committee has dling”: The “Aftermarket Exception the project group produced a descrip- OEMs, suppliers and ITA (Information Handling” project was initiated at short tion of the Engineering Change Request Technology for the Automotive Industry) notice. Its aim is to use standardised (ECR) section and published its results companies among its members. The communication media to optimise (see VDA Recommendation 4965). In Information and Practical Forum is a exception handling and thus ensure addition, pilot projects were undertaken platform and an information exchange smooth supplies by way of the supply and the initial relevant applications network. Projects are initiated by the chain, taking stock levels and time and Annual Report 2006 167

cost factors into account. For this it is the development of innovative solutions ■ IT-aided realisation/optimisation of necessary to convert the existing pro- and standards, more rapid introduc- inter-company processes based cess of communication between the tion of modern IT technologies and the on companies’ global business partners from the telephone, mail and improvement and unification of existing alignment and the challenges which fax methods used so far into standard- procedures. ITA has thus developed into they have to contend with as a ised electronic messages. an important communication platform result. between the automotive industry and IT In addition, the Electronic Business companies operating within the auto- ■ Means of adapting IT solutions Transactions working party is supporting motive sector. flexibly by means of standards. the “RFID in the Supply Chain” project and in particular the “Data Structures” In 2005, ITA member-companies ■ Definition of business processes topic. At Odette level, representatives of employed approximately 350,000 people that should be supported or this working party are cooperating in and achieved a turnover in the region of realised by means of RFID techno- the global DELFOR (globally usable 50 billion euros. As an associate mem- logy, messages for the transmission of deliv- ber of the VDA, ITA also exhibited the ery call data on an EDIFACT basis) and ‘IAA’ motor show for the first time on its ■ SCMo and SCI requirements, Version 2 of the OFTP (Odette File own stand. Representatives of ITA com- Transfer Protocols), which has additional panies used this opportunity to establish ■ “Business Integration on Demand” security features such as authentication contact and communicate successfully (BIOD) as opposed to existing and encoding, but also permits larger with industrial companies and also with operating models. files to be transmitted. The last-named trade associations and service provid- project will be concluded at the end of ers. In view of this positive result and In addition, the ITA has contributed 2006 with a new recommendation. favourable response, the ITA plans to above all to the container standardisa- expand its commitment considerably at tion, drop-shipment and RFID tech- ITA – Information the next IAA Cars to be held in Frank- nology projects (see above), and ITA Technology for the furt in 2007. member-companies are also involved in Automotive Industry international (Odette) projects such as Since 2000, ITA (Information Tech- As detailed objectives representing XML, OFTP and RFID. nology for the Automotive Industry) a special challenge in the IT sector, the has, in partnership with the VDA, been ITA dedicates itself to the following prin- For further information on the ITA, supporting the automotive industry on cipal topics: please visit www.ita-int.org.

Auto IAA 170 Verband der Automobilindustrie IAA

The IAA

“Commercial Vehicles: their products and services cover every quarter of 2006, new registrations of On the Move for Everyone” area of the commercial-vehicle world. heavy trucks rose by 15 percent against at the 61st IAA Commercial For the first time this year, the exhibitors the previous year, incoming orders from Vehicles in 2006 include two Chinese companies: a truck Germany increased by 41 percent, and From September 21 – 28, 2006, the manufacturer and a bus manufacturer. orders from abroad reported a rise of slogan at the 61st IAA Commercial 25 percent. There is also unmistak- Vehicles in Hanover will be “Commercial With more than a quarter of a mil- able dynamism as far as transporters Vehicles – On the Move for Everyone”. The lion visitors, the 60th IAA Commercial and light trucks are concerned: new VDA will be welcoming a record 1,400 Vehicles in 2004 supplied a positive registrations, export and production exhibitors of light and heavy trucks, signal to the entire business sector, all enjoyed double-digit growth. Prof. delivery vans, buses, coaches and trail- to which 92 percent of the visitors Gottschalk remarked, “In an IAA Com- ers for various purposes, not to mention belonged. This is the highest proportion mercial Vehicles’ year no less, the manufacturers of workshop and garage ever recorded at an IAA Commercial commercial vehicles sector is thus prov- equipment, parts and accessories, to Vehicles – a sign that this has devel- ing itself to be a powerful engine in this exhibition. At the IAA Commercial oped from a product display into a fully the economy as a whole and a stable Vehicles, which is held every two years integrated “mobility, transport and logis- employment factor. On the basis of good and alternates with the IAA Cars, the tics show” that extends well beyond the demand, capacities as regards heavy exhibitors come from 43 countries, and basic added-value chain, and focuses trucks are fully booked a long way into on innovations. This is emphasised by the year 2006.” Exhibitors are planning the large number of international con- a magnificent display of innovations gresses and specialised events held and highlights for the 2006 IAA, includ- during the exhibition and attended ing many specialised events on topics by more than 3,000 visitors. The proof current interest to the commercial- gramme of exhibits was rounded off by vehicle industry, in many cases accom- presentations on the innovation platform panied by an extensive programme and on the road-safety training site of special displays and presentations. – operated by the German automobile Once again, there will be opportunities club ADAC – to the south of the main to test-drive light commercial vehicles, exhibition site. buses and coaches.

The atmosphere at the show, There is more information about the said VDA President Prof. Dr. Bernd IAA Commercial Vehicles on the Internet Gottschalk at the IAA preliminary press at www.iaa.de. conference in April 2006, would be positive on account of the fact that the commercial vehicles sector was still enjoying an economic upswing. During the first

172 Verband der Automobilindustrie IAA

Successful 61st IAA Cars fers from other exhibitions: it is a trade in 2005 show for the entire automobile chain. In accordance with its slogan “Cars One of the most important topics was – Pure Fascination”, the 61st IAA Cars exhaust emission technologies – state- captivated visitors and media repre- of-the-art petrol and diesel engines. sentatives alike from September 15 – 25, 2005. On a total stand and site area Another source of interest at the of 225,000 square metres, a thousand IAA Cars for both trade and private visi- exhibitors presented their latest products tors is the extensive programme of and innovations at the Frankfurt Trade accompanying events. On this occasion Fair Centre. The car manufacturers alone there were open-air road safety demon- had 122 new products on display, 80 of strations, a special “Milestones of Auto- them – more than ever before – world mobile Design” show, the “Automania” premieres. The innovative strength of exchange market for model car collectors, the supply industries was confirmed a “Get to Know the Motorcycle” course by a further 107 new developments. At for those wishing to take up (or return least 14,000 journalists from 93 countries to) motorcycling, and even an exciting ensured thorough worldwide coverage in motorcycle stunt show, also held on one the media. At the IAA’s concluding press of the open-air sites. The public flocked conference, VDA President Professor in large numbers to the off-road vehicle Bernd Gottschalk was able to make the track, with more than 46,000 trying their confident claim: “The 2005 IAA was a hand at the wheel. The opportunity to great success, and in terms of quality drive one of the latest cars was taken the best IAA we have ever held!” up by some 13,000 visitors, and provided clear evidence of the appeal of the new 941,000 visitors made this the models on display at the IAA. best-frequented IAA since the car and commercial-vehicle shows began to be The IAA Cars also has the character held separately – despite the national of a major international congress elections, also held on a Sunday in on mobility. More than 3,000 guests Germany. The 132 countries from which attended one of the many specialist visitors came are evidence of the IAA’s events, workshops and platform international significance: more than discussions dealing with every aspect one in every ten visitors was from of mobility. Furthermore, the “VDA another country. Design Award” was presented to young designers for the first time. For the first time, Chinese car manufacturers were among the 1,000-plus The 62nd IAA Cars will be held in exhibitors. Featuring 500 companies Frankfurt am Main, Germany, from from the supply industries, the IAA dif- September 13 – 23, 2007.

Auto FACTS AND FIGURES

Auto 176 Verband der Automobilindustrie FACTS AND FIGURES

Facts and Figures

Record exports and opportunities at home, too, benefiting continued growth in from a slight upturn in domestic sales, commercial vehicle from the strength of its product ranges business sustain further and from the continued growth of the increase in sales commercial vehicle sector. Domestic The globalisation strategy of the sales rose by 3 percent to 95 billion German automotive industry proved euros. to be successful in 2005. Total sales for the sector rose to 236 billion euros Over the past ten years, the German – 4 percent more than in 2004, itself a automotive industry has managed to record year, and the twelfth successive more than double its revenues and annual increase. Thanks to a worldwide to increase its share of German manu- trend towards premium vehicles and facturing as a whole from 12 percent diesel cars, the German automotive to nearly 19 percent. The automotive industry was able to increase its export industry has become Germany’s sales by an exceptional 4 percent to most important industry - by a wide 141 billion euros. The industry seized its margin.

Sales volume of the German automotive industry by manufacturer groups In billion euros 159.1 160 153.7 2004 140 2005 120 100 80 65.4 68.2 60 40

20 8.6 9.0 0 Production of Production Production of passenger cars of trailers automotive parts and engines and bodies and accessories Source: Federal Office of Statistics Annual Report 2006 177

In 2005, German passenger car German automotive was not quite able to maintain the level and commercial vehicle manufacturers industry still a secure of employment from 2004. Including achieved a total business volume employer downstream and upstream activities, the (domestic and export) of 159 billion The German automotive industry industry employed a total of 1.4 million euros, or +4 percent. Despite the created 130,000 jobs during the past people last year. 766,350 were employed strength of the euro, export sales ten years. The peak employment level directly in the automotive industry itself. enjoyed a robust rise of 4 percent to has now been passed, as a result of in- This represents a drop of 7,000 from the 107 billion euros. Domestic sales rose creased international competition, higher previous year. Further adjustments are by 3 percent to 52 million euros. Exports prices for raw materials and oil, weak expected to be made during the course thus accounted for a significantly larger domestic demand (which has continued of the current year in order to secure share of total sales. In 2005, German for the past five years) and the depressed long-term employment in the German manufacturers achieved two thirds of state of the markets of Western Europe manufacturing base. their sales abroad; ten years ago, it had and North America. Nevertheless, the only been one half. German automotive industry remains one Nevertheless, growth is certainly in of the country’s largest and most secure evidence in a number of areas, particu- The German trailer and body indus- employers. In 2005, the automotive sector larly in the fields of engineering and in try increased its sales performance by employed 13.2 percent of all those work- R&D. The number of academics finding 5 percent to just under 9 billion euros in ing in industry in Germany. Ten years employment in the automotive industry 2005. Its export sales rose to 5 billion ago, it was less than 10 percent. has risen sharply in recent years. Aca- euros and domestic sales to 4 billion demics accounted for 11 percent (over euros. The sector thus benefited from In 2005, after years of regular rises 85,700) of the people employed in this the increased demand for commercial in the numbers employed, the industry sector in 2005. vehicles at home and abroad, registering a record trade surplus of 1.5 billion euros – 15 percent up on the previous year. Employment figures for the German automotive industry Employees in thousands The success of the German sup- Production of automotive parts and accessories ply industry continued in 2005. Thanks Production of trailers and bodies in particular to a substantial increase Production of passenger cars and engines in export business and the continuing 700 311 327 329 trend to better equipped and higher 315 329 298 600 5 290 280 6 2 251 quality vehicles, sales increased by 254 500 4 percent to more than 68 billion euros. 38 38 36 37 38 36 36 36 Even though automotive suppliers in 400 43 44 35

Asia and Eastern Europe are busy build- 7

300 1 6 422 6 411 411 408 410 402 401 392 373 3 ing new manufacturing plants – either 3 422 411 411 410 408 402 401

200 392 373 367 to achieve a local presence or to reduce 361 100 costs – the sector’s export sales grew 0 twice as fast (+6 percent to 29 billion 19951996 19971998 1999 2000 2001 2002 2003 2004 2005 euros) as its domestic sales (+3 percent Source: Federal Office of Statistics, 2005 adjusted to 39 million euros). 178 Verband der Automobilindustrie FACTS AND FIGURES

Employment in 2005 developed Exports of automotive products unevenly in the industry as a whole (in million euros)* as well as in the various manufacturing groups. Nearly all of the Country of destination 2005* 05/04*) Share in % job losses came from manufacturers Austria 6,263 6.3 4.0 of cars and car engines (total work- Belgium 8,896 7.3 5.7 force: 401,400). The bodies and trailers Denmark 1,545 21.5 1.0 Finland 1,778 32.3 1.1 sector and the component supply France 13,487 7.0 8.6 sector managed to maintain their Greece 1,170 -2.3 0.8 workforces at a similar level to last Ireland 817 7.2 0.5 year: 328,700 and 36,300 respectively. Italy 12,583 7.2 8.1 Luxembourg 423 8.4 0.3 The parts industry in particular has Netherlands 4,975 4.3 3.2 experienced an above-average Portugal 1,422 6.5 0.9 increase in employment figures in Spain 10,771 1.9 6.9 Sweden 3,415 7.7 2.2 recent years: its workforce has United Kingdom 16,529 -1.6 10.6 grown by approximately 30 percent EU-15 84,074 4.9 53.9 since 1995. Cyprus 168 8.6 0.1 Czech Republic 2,839 9.5 1.8 Estonia 136 11.2 0.1 The trading performance Hungary 3,801 15.9 2.4 of the automotive industry Latvia 151 -4.8 0.1 remains a bulwark of the Lithuania 191 -23.3 0.1 German economy Malta 43 77.2 0.0 Poland 3,256 1.0 2.1 During the past year, the German Slovenia 408 3.5 0.3 automotive industry exported goods Slowakia 1,410 -15.1 0.9 worth 156 billion euros, although EU accession states 12,403 4.6 8.0 EU-25 96,478 4.9 61.9 40 percent of this comprised upstream Western Europe 88,795 5.1 56.9 components from low-wage countries. Eastern Europe 20,867 8.0 13.4 During the same period, auto-motive Europe together 109,662 5.7 70.3 products worth 67 billion euros were Africa 3,737 14.3 2.4 USA 22,574 7.9 14.5 imported. This meant that the trade Canada 1,369 14.1 0.9 surplus for automotive products rose Latin America 3,189 32.4 2.0 by over 10 percent to just under America together 27,131 10.6 17.4 Of which: NAFTA 25,614 9.7 16.4 89 billion euros. Automotive exports Asia 14,110 4.9 9.0 thus made an extremely important Of which: Japan 3,932 10.1 2.5 contribution to Germany’s visible China 2,496 -19.9 1.6 trade surplus. The most important Australia, Pacific 1,259 4.8 0.8 Country not known 50 9.1 0.0 trading partners are still – despite the strong euro – the USA with a trading Total 155,949 6.6 100.0 volume of over 19 billion euros and * Preliminary results the United Kingdom at nearly 12 billion Source: Federal Office of Statistics euros. Annual Report 2006 179

Imports of automotive products German automotive industry keeps looking (in million euros)* to the future Country of manufacture 2005*) 05/04*) Share in % Over the past five years, the German

Austria 5,710 11.8 8.6 automotive industry invested a total of Belgium 4,246 -7.6 6.4 57.5 billion euros within Germany – the Denmark 493 14.5 0.7 equivalent of 23.5 percent of the entire Finland 559 148.2 0.8 investment in German industry. Invest- France 9,509 -0.4 14.3 Greece 12 73.1 0.0 ment in 2005 remained at a high level, Ireland 118 123.3 0.2 albeit 11.3 billion euros lower than in Italy 4,955 2.7 7.4 2004. This year, the German automotive Luxembourg 93 3.7 0.1 industry expects its investment perfor- Netherlands 1,793 -4.1 2.7 Portugal 591 -11.0 0.9 mance to be close to last year’s high level. Spain 5,333 3.3 8.0 Sweden 1,016 11.6 1.5 The German automotive industry United Kingdom 4,922 3.5 7.4 EU-15 39,349 2.9 59.0 invested 77 billion euros on research Cyprus 2 8.9 0.0 and development over the past five Czech Republic 3,942 17.4 5.9 years. R&D expenditure in this sec- Estland 17 58.1 0.0 tor rose to 16 billion euros in 2005, Hungary 4,290 4.7 6.4 Latvia 10 246.0 0.0 accounting for more than one third of Lithuania 18 67.0 0.0 the country’s expenditure on research Malta 2 24.2 0.0 and development. This forward-looking Poland 2,768 -3.5 4.2 Slovenia 306 1.0 0.5 activity employs a total of 85,000 people. Slowakia 2,817 -27.7 4.2 As a result of its research intensity, the EU accession states 14,173 -2.6 21.3 automotive sector in Germany applied EU-25 53,522 1.4 80.3 for more patents than any other country, Western Europe 40,102 2.9 60.2 Eastern Europe 15,756 -0.6 23.6 accounting for 35 percent of applica- Europe together 55,858 1.9 83.8 tions worldwide – a total of over 3,600 Africa 387 -2.9 0.6 patents. This confirms the role of the USA 3,229 -16.1 4.8 Canada 46 -6.3 0.1 German automotive industry as a major Latin America 1,525 55.1 2.3 innovator and a key industry. America together 4,800 -1.7 7.2 Of which: NAFTA 4,008 -11.1 6.0 Freight traffic rose sharply Asia 5,578 3.4 8.4 Of which: Japan 3,893 -1.7 5.8 in 2005 China 259 53.2 0.4 Following a sharp rise in passenger Australia. Pacific 32 99.3 0.0 transportation in 2004, the overall Country not known 1 17.6 0.0 demand for passenger services Total 66,657 1.7 100.0 grew only slightly by 0.4 percent last * Preliminary results year. Private motor transport rose 0.2 percent, even though there was a Source: Federal Office of Statistics reduction in the frequency of car use. 180 Verband der Automobilindustrie FACTS AND FIGURES

R&D expenditure in the German automotive industry In recent years, the age of the car population in Germany has increased In billion euros steadily. The weak market that has 16 existed since 2000 has caused a steady increase in the average age of the car 14 population. At the beginning of 2006, 12 the average age was 97 months (8.1 10 years). In 2001, it was one year less. 8 Surprisingly, diesel cars are much 6 younger than petrol cars. On January 1, 4 2006, the average age of petrol-engined 2 0 1990 1992 1994 1996 1998 2000 2002 2004 Passenger traffic 2005 Share of traffic in percent Source: Stifterverband für die Deutsche Wissenschaft (Endowment Association for German Research) Public road transport Rail 7. 6 7. 1 The increase in car population thus commercial vehicles increased by had a greater impact than the slight 1 percent. Local traffic fell by 3 percent reduction in the annual mileage per car whilst regional traffic increased by Private cars 85.3 or the substantial increase in the price 3 percent. Rail traffic also experienced of fuel during 2005. Rail travel grew by a 3-percent increase. These figures do an above average 3 percent last year, not represent an increase in the number largely as a result of an increase in of journeys; rather, they demonstrate Source: DIW, Federal Office of Statistics, BVU long-distance travel (+4 percent). a shift from shorter to longer journeys Overall, however, rail accounted for and a corresponding increase in the just 7.1 percent of all passenger traffic. average distance travelled. Goods traffic 2005 Private transportation accounted for Share of traffic in percent 85.3 percent of passenger traffic and Marked rise in the average Inland public transport for 7.6 percent. This age of cars waterway Other 11.6 3.7 means that 92.9 percent of all passenger As part of the EU-wide harmonisa- Rail travel was by car, bus or taxi. tion of the definition of passenger cars, 15.8 motorhomes, ambulances and other The freight transport volume for the special vehicles have been classed as whole of 2005 rose by 3 percent. Road passenger cars since the beginning of freight transport also rose by 3 percent, 2005. This has increased the figures for due mainly to an increase in foreign car ownership up to January 1, 2006 by trucks, which continue to benefit from 440,000 units – over 90 percent of the expansion of the EU to the east. The which are motorhomes. Passenger-car Source: progtrans mileage covered by German-operated density rose to 559 per 1,000 people. Annual Report 2006 181

cars was 107 months (8.9 years), but for pany. German manufacturers increased again led the list of major manufactur- diesel-engined cars was just 65 months production from their German-based ing countries with a production volume (5.4 years). Thanks to the keen demand factories by 3 percent to nearly 5.8 mil- of just under 12 million units, similar to for diesel-powered vehicles, diesels lion vehicles. That makes Germany once that of the previous year. Japan, which have increased their share of the vehicle again the third largest manufacturing produced 10.8 million vehicles in 2005 population over recent years, and now country for passenger cars and com- (+3 percent), retained its second place account for one in every five vehicles on mercial vehicles. Nearly one in ten of all position. With +15 percent, China ex- the road.’ vehicles produced worldwide comes off perienced the fastest growth, followed a production line in Germany. The USA by Brazil with +11 percent. The German commercial vehicle population fell to 3.1 million vehicles, primarily as a result of the reclassifica- The ten major car manufacturing countries 2005 tion of motorhomes and other special- In million units purpose vehicles. Four out of every five of these vehicles are in a low exhaust 11.9 emissions category. For tractor units, the 10.8 figure is nine out of ten.

German brands are 5.8 responsible for a fifth of 5.3 world production, with ten 3.7 3.5 2.8 2.7 2.4 percent coming out of 1.8 German-based factories German brands (incl. Chrysler) produced a total of 13.5 million passenger an ain USA p p dom Ja China S anada Brazil g France C cars worldwide last year. A fifth of all Germany vehicles produced worldwide were South Korea therefore built in a production plant United Kin Source: VDA statistics belonging to a German automotive com-

Auto INDEX

Auto 184 Verband der Automobilindustrie INDEX

22nd Federal German Immission Biofuels 115, 117 Coach tours 66 Protection Order 88 Biometric systems 146 Coach travel 65 Block Exemption Regulation 51, 52 Collective wage agreements 18 ABS 17, 132, 146 BLUETEC 116 Commercial-vehicle exports 40 Accident avoidance 132 Borrowing 46 Commercial-vehicle sales 33 Accident fi gures 130 Brakes 136 Commercial policy 21 Accident frequency 65 Brake assistant 133, 143 Commercial vehicle industry 38 ACEA 100 Brand piracy 59 Commercial vehicle safety 146 Active safety technologies 13 Brazil 26, 42, 181 Companies 47 ADAC 73 BTL (“biomass-to-liquid”) 118 Competitiveness 35 Add-on parts 150 Buses 65 Compulsory certifi cation in China 154 Added-value chain 45 Buses and coaches 39, 40, 65 Consumer protection 21 Added-value depth 45 Bus and coach production 40 Consumption pledge 97 Added value 17 Corporate Governance Code for Family- Advanced Frontlighting System (AFS) CAD/CAM 161, 164 Owned Companies 50 139 Canada 42, 153 Cost of raw materials 20, 45 AETR states 147 Caravans 43 Credit brokerage 54 Aftermarket 58, 161 Carbon monoxide (CO) 101 Cross-border refuelling 76 Air pollution control 103, 125 CARS 21 13, 20, 21, 110 Customs barriers 22 Air pollution control plans 105 Car population 180 Cyprus 153 Alternative fuel 13 Catalytic converters 106 Czech Republic 29, 30 Alternative power units 119 CCC system (China Compulsory Certifi - Argentina 26 cation) 154 DAB (Digital Audio Broadcasting) 85 Assist systems 131 Certifi cations 160 Daytime running lights 139 Association for Research in Automotive Change management 166 Declining balance depreciation 20 Technology (FAT) 131 Chassis 136 Design 56 Autobahns 70, 72 Child safety 142 Design protection 56, 57 Automalls 52 China 14, 27, 28, 29, 34, 36, 47, 99, 153, DIANA pilot project 84 Automotive banks 52, 53, 54 160, 181 Diesel oil price increases 42 Automotive Cluster East Germany (ACO) City traffi c 87 Diesel particulate fi lter (DPF) 37, 106 49 Clean Diesel 14, 98, 115 Diesel passenger cars 32 Average age 180 Climate change 15 Digital factory 165 Away from oil 92, 122 Climate protection 20, 94 Digital tachograph 40 Azerbaijan 153 Clusters 49 Discounts 36

CO2-based car tax 20 Domestic sales 176 Baltic States 29, 30 CO2 emissions 94, 100, 117 Drives and fuels of the future 113 Basle II 46 CO2 reduction 98, 115 Driving bans 88 Belgium 33 CO2 reduction pledge 100 Bend lighting 139 CO2 saving 99 Eastern Europe 25, 47 Big Three 25 Coaches 66 Eco-tax 76 Biodiesel 92, 115 Coach holidays 65 Eco Combis 86 Annual Report 2006 185

EC type approval 149 Finance 46 Harmonisation of technical vehicle EEV (Enhanced Environmentally Friendly Finance communication 46 regulations 153 Vehicles) 112 Financial services 54 Hungary 29, 30, 153 Electricity prices 125 Financing 54 Hybrid drive 120 Electric parking brake 137 Financing by user charges 77 Hydrocarbons (HC) 101, 107 Electronics 144 Financing instruments 46 Hydrogen 13, 120 Electronic Stability Program (ESP) 133 Fine-particulate dust emissions 37 Emission reduction 12 Fine particulates 101, 103, 106 IAA Cars 172

Employees 17 Fine particulates (PM10) 103 IAA Commercial Vehicles 170

Employee discount rates 25 Fine particulates (PM2.5) 103 Iceland 94 Employment 43, 44, 177, 178 Fine particulate emissions 105, 106 Impulskreis Automobil – Sichere End-of-life vehicles 122, 156 Fine particulate pollution 107 Intelligente Mobilität 134 End-of-Life Vehicles Directive 122, 123 Finland 153 Incidental labour costs 19 End-of-pipe technology 93 Fiscal incentives for renewable fuels India 15, 21, 28, 29, 153 Energy 125 119 Indonesia 29, 21 ESP (Electronic Stability Program) 17, Fiscal policy 19 Infrastructural policy 73 136 Flex-fuel vehicles 26, 120 Infrastructure Charging Directive 66 Ethanol 92, 115, 117 Floating car data (FCD) 84 Infrastructure ﬁ nancing 67, 73, 82 Ethanol euro 177 Fluorinated gases 96 Infrastructure policy 70, 84 European Emissions Trading Directive Foreign demand 36 Infringement proceedings 123 96 Foreign locations 161 Integrated approach 20, 99 European Union 153 Foreign production 34, 41, 42 Integrated approach to safety 132 Euro 4 emissions standard 108 France 21, 31, 33, 40, 42, 153 Integrated processes 93 Euro 5 models 39 Freight trafﬁ c 179 Intellectual property rights 57 Euro IV 111, 112 Fuel consumption 63, 86, 92, 97, Investment 179 Euro V 111 Fuel consumption reduction 12 IPP (Integrated Product Policy) 123 EU Civil Code 21 Fuel prices 20, 37 Italy 31, 42, 153 EU consumer credit directive 54 ITA (Information Technology for the EU control device 146 German Association for Motor Trades Automotive Industry) 161, 162, 167 EU policy on air pollution control 101 and Repairs (ZDK) 58 EU type approval procedure 149 Germany 31, 153 JAMA 100 Exhaust emissions 144 German In-Depth Accident Study Japan 14, 27, 29, 57, 94, 99, 153, 181 Export markets 43 (GIDAS) 131 Jobs 44, 177 Export sales 176 German main road network 70 Joint automotive research 157 External trade 36 German manufacturing base 16, 17 Globalisation 14 KAMA 100 Federal German autobahn system 70 Globalisation strategy 33, 176 Kyoto Protocol 94 Federal German Transport Plan 72, 73, 75 Global production structure 161 Federal German transport planning 74 Global technical regulations (GTR) 153 Latin America 34 Federal Highway Research Institute Great Britain 31, 40 Latvia 94 (BASt) 86 GTL (“gas-to-liquid”) 118 Leisure vehicles 43 186 Verband der Automobilindustrie INDEX

Light-emitting diodes 140 New EU member states 29, 47 Product quality 45 Liquidity 46 New Federal states 49 Prohibition of materials 123 Lisbon Agenda 93 Network privatisation 69 Quality 13, 18, 45 Load securing devices 147, 148 New vehicle concepts 86 Quality management 158 Local production safeguard contracts New Zealand 153 Quality Summit 159 45 Noise emissions 113 Local public transport 65 Norway 153 R&D expenditure 179

Location management 47, 48 NOX 109 Rail reform 69

Location migration 48 NOX limit 109 Raw material and energy costs 42 Location selection 44 Raw material markets 42 Logistical location 68, 86, 87 Occupant protection 131, 143 REACH (Registration, Evaluation and Logistical processes 162 Occupational safety 127 Organisation of Chemicals) 127 Logistics 161 Oil 114 Rearward signalling 141 Luxembourg 33, 153 Outsourcing 47 Recycling quota 124

Oxides of nitrogen (NOX) 101, 107 Reform of business taxation 19 Main roads 74 Ozone 101, 107, 108 Remote data transmission (DFÜ) 165 Malaysia 21, 29, 153 Research and development 12, 17 Manufacturer/supplier relationships Pällmann Commission 77 Revenues 176 45 Parking guidance system 89 RFID (Radio Frequency Identifi cation) Manufacturers’ banks 53 Parts and accessories industry 43 164 Mercosur nations 36 Passenger-car exports 36 Road freight transport 62, 180 Mexico 42 Passenger-car production 35 Road infrastructure 71 Mezzanine capital 46 Passenger-car tolls 79, 80, 81 Road safety 12, 67, 130, 132, 136, 139 Mineral oil tax 82 Passenger-car density 180 Road safety road tax 78 Mineral oil tax income 77 Passenger transportation 179 Road traffi c licensing regulations Mittelstandskreis 46, 48 Passenger transport performance 64 (StVZO) 152 Mobile homes 43 Passive safety 13 Road user charges 67 Mobility 66 Patents 179 Romania 153 Mobility packages 54 Pedestrian protection 142, 143 Run-fl at tyres 138 Mobility services 54 Philippines 29 Russia 30, 153 Motor-vehicle insurance 55 Poland 29, 30, 42 Motor-vehicle trade 56 Portugal 21 Savings ratio 36 Motorhomes 180 Pre-material costs 45 SCR technology 112, 113 Motorised passenger transport 64 Prices for raw materials and oil 177 Second generation biofuels 118 Motor Vehicle Standards Committee Price of oil 27 Semi-trailer 42 (FAKRA) 155 Private equity 46, 47 Short-range automotive radar 150 Private motor transport 179 Slovakia 29, 30, 153 NAFTA 25 Production-related environmental Slovenia 29, 30 National Allocation Plan (NAP) 96 protection 124 South Africa 153 Natural gas 118 Production location factors 35 South Korea 29, 153 Netherlands 21, 42, 86, 153 Product pirates 57, 58 Spain 31, 42, 153 Annual Report 2006 187

Standardisation 155 Transport Infrastructure Financing Western Europe 31, 32, 33 Steel price discussion 20 Company (VIFG) 68, 79 World production 181 Stuttgart Declaration 106 Transport policy 13, 66 WTO 14, 21 Subsidy reduction 19 Transport trade 42 Summer smog 107 Truck tolls 42, 77, 78, 79, 81 Suppliers 47 Trunk roads 79 Supplier database 50 Turkey 153 Supply chain management 59 Type approval in China 154 Supply industry 43, 177 Tyres 136 Surplus 17 Sustainability 12, 75 UK 153 Sweden 153 United Kingdom 94, 178 USA 14, 25, 36, 42, 57, 94, 137, 153, 178, Taiwan 29 181 Tax increases 19 User fi nancing 83 Tax reform 19 US market 26 Technical harmonisation 149 Telematics 14 Value-creation partnerships 161 Thailand 21, 29 Value added tax 19 Theft protection 146 VDA 48 The ‘autobahn’ highways 70 VDA cooperation portal 48 The Automotive Think-Tank – Safe, Intel- VDA international trade fair programme ligent Mobility 134 14, 51 The Association for Research in Auto- VDA Logistics Department 161 motive Technology (FAT) 157 VDA manufacturers’ platform 50 The automobile industry’s key demands VDA Mittelstandskreis 46, 48 67 VDA Quality Management Centre (VDA- The economic situation in the global QMC) 159 automotive industry 24 VDA rating tool 50 The European Climate Change VDA standards 159 Programme (ECCP) 95 VDA Technical Congress 136 Toll charges 78 Vehicle-to-infrastructure communica- Total turnover 43 tion 135 Trade surplus 177, 178 Vehicle-to-vehicle communication 135 Traffi c jams 13, 73, 99 Vehicle electronics 144, 146 Traffi c management 84 Vehicle identifi cation order 88 Traffi c restrictions 105 Vehicle population 117 Trailer, body and container industry 42 Vehicle registration documents 151 Trailer and body industry 42, 43, 177 Vehicle safety 130 Trailer markets 42 Vehicle tax 80 Transport effi ciency 86 VOC emissions (volatile hydrocarbons) 103 ISSN 0171-4317 Copyright: Verband der Automobilindustrie e. V. (VDA) 2006 Westendstrasse 61, 60325 Frankfurt am Main Internet: www.vda.de Editor: VDA Communications Dr. Karsten Eichner Design: edition agrippa gmbh, Cologne . Berlin Printing: Henrich Druck + Medien GmbH, Frankfurt am Main Translation: CB Übersetzungen GmbH, Munich