June 14, 2017 / 8:42 AM / 3 months ago

Munich, home to BMW, considers diesel ban to tackle pollution

FILE PHOTO: Flags near the headquarters of German luxury carmaker BMW before the company's annual shareholder meeting in Munich, Germany, May 11, 2017. REUTERS/Michael Dalder/File Photo

FRANKFURT (Reuters) - Munich, home to carmaker BMW, has become the latest German city to consider banning some diesel vehicles amid “shocking” nitrogen oxide emissions in the Bavarian capital.

“As much as I would welcome avoiding such bans, I think it is just as unlikely that we can continue to do without bans in the future,” Munich mayor Dieter Reiter was quoted as saying by the Sueddeutsche Zeitung newspaper on Wednesday.

Asked about the latest nitrogen oxide readings, which the paper said violated European air quality standards well beyond busy trunk roads, the mayor said: “The results are shocking, nobody expected this.”

The scandal over rigged diesel emission tests at Volkswagen (VOWG_p.DE) has already thrown the future of diesel engines into doubt, and has highlighted carmakers’ struggle to comply with ever stricter rules on the nitrogen oxides emissions.

Shares in German carmakers BMW, Volkswagen and Daimler initially dropped between 0.7 and 1.6 percent amid gains in the broader German market, with traders pointing to the prospect of diesel bans, but later recovered some of their losses.

A spokesman for BMW, whose products range from electric i3 compact cars to luxury gasoline- and diesel-powered sedans and SUVs, said encouraging electric vehicle use was a better way to improve air quality than imposing a ban on diesel cars.

Germany’s federal government was also against individual states and cities banning diesel cars, a transport ministry spokesman said on Wednesday with regard to the possibility of a ban being imposed in Munich.

The Munich skyline with the famous landmark 'Frauenkirche' (Cathedral of Our Lady) is seen in front of the Alps, Germany, January 26, 2016. REUTERS/Michael Dalder

“Driving bans are the wrong political approach,” the spokesman said.

However, the city of Stuttgart, home of Mercedes-Benz and VW’s Porsche subsidiary, is already preparing to ban some diesel vehicles from next year which do not meet the latest emission standards.

Sueddeutsche Zeitung said between 133,000 and 170,000 vehicles could be affected by a ban in Munich, depending on how strict it will be, but cars meeting the latest Euro 6 emission standard would be exempt.

German environmental campaign group Deutsche Umwelthilfe has launched a legal challenge against Germany’s regional states, pushing for measures to improve the air quality in more than two dozen cities.

In response the states’ environmental ministers have already proposed retrofitting Euro-5 vehicles to meet the stricter Euro-6 standard but it is not yet clear how costs will be split between the state, carmakers and owners.

Due to the more efficient fuel burn and lower carbon dioxide emissions compared with gasoline-powered cars, Germany’s three major carmakers have invested heavily in diesel technology.

While only a niche market in the United States, about half the new cars sold in Germany were diesel-powered before the VW scandal broke, but the market share has since declined to just over 40 percent.

The prospect of diesel bans is also seen weighing on the used vehicle market, which would affect carmakers’ leasing and vehicle financing divisions as car loans are secured against these values.

Reporting by Jan C. Schwartz, Sabine Wollrab, Ilona Wissenbach and Ludwig Burger, editing by Louise Heavens, Greg Mahlich

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