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Daimler warns Germany may get tougher on Mercedes diesel cars

Feb 22. 2020
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By Syndication Washington Post, Bloomberg · Christoph Rauwald, Karin Matussek · BUSINESS, WORLD, US-GLOBAL-MARKETS, EUROPE 

Daimler is warning of a further crackdown on Mercedes-Benz diesel vehicles in Germany, after mounting legal and regulatory costs already crimped profits last year.

It is likely the country's motor industry watchdog, KBA, will rule that other vehicles made by the luxury brand were also "equipped with impermissible defeat devices," Daimler said Friday in its annual report, referring to banned software designed to bypass emissions tests.

Daimler has temporarily halted delivery and registration of some models, according to the report. The German manufacturer also said that complying with stricter emissions rules in some countries will be difficult.

The carmaker's comments indicate further difficulties lie ahead on diesel cars. Daimler took a massive earnings hit in 2019 and slashed its payout to investors to the lowest level since the financial crisis, blaming an 870 million euro ($940 million) fine by German prosecutors and costs related to reducing diesel-car emissions. The penalty coincided with record investments to boost the manufacturer's electric-car lineup and expansion of software operations. Daimler is also putting aside 2 billion euros in restructuring costs.

Chief Executive Officer Ola Kallenius has acknowledged in recent months that meeting Europe's tougher emission targets will be a challenge in the next two years because consumers may not move away from choosing combustion engines fast enough.

Under the bloc's rules, carmakers face penalties if the average of the total passenger vehicles they sell exceeds a level of CO2 emissions. Mercedes-Benz, which makes large-cylinder gas and diesel guzzlers in addition to battery-run models, plans to make use of so-called super credit incentives on electric and plug-in hybrid models to lower its average.

Daimler could face a total of more than 1.5 billion euros in fines in 2020 and 2021 for missing European CO2 limits, according to BloombergNEF estimates. To avoid such penalties, electric vehicles sales must account for about 10% of total deliveries in the region by 2021, compared with about 2.8% last year.

The company's average fleet emission in Europe was 137 grams in 2019, well above the 95 grams per kilometer stipulated by the rules that start taking effect this year and gradually get tougher by the end of 2021.


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