Daimler Will Recall 3 Million Diesel Cars Across Europe to Fix Emissions

According to Bloomberg, the company will extend an ongoing upgrade of about 250,000 compact cars and vans to nearly every modern Mercedes diesel on the road. The plan, which involves a software patch and avoids complex component fixes, will cost the automaker about 220 million euros ($255 million), the Stuttgart, Germany-based company said in a statement on Tuesday. If accepted by officials, it could help Daimler avoid the massive penalties that beset Volkswagen AG.

“This is finally a proactive move to put something on the table and a solid attempt at getting out in front of the debate,” said Juergen Pieper, a Frankfurt-based analyst with Bankhaus Metzler. Daimler’s estimation for the cost of the recall, at about 70 euros per car, is “extraordinarily low” and could rise, he said.

The plan marks a change of approach after Daimler vowed to fight accusations of cheating by “all legal means” following a meeting with government officials in Berlin last week. With diesel crucial to Daimler’s strategy to lower carbon-dioxide emissions, the automaker can ill afford to have the technology and its reputation burdened by doubts and allegations. 

Crisis Cloud

The crisis has clouded Daimler for months, with hundreds of police officers and prosecutors searching company sites in May. German authorities have been scrutinizing the carmaker for possible emissions cheating involving two engines used by Mercedes, and Daimler also is the subject of a U.S. probe into allegedly excessive diesel emissions.

Unlike Volkswagen, which admitted it deceived regulators, Daimler says it adhered to regulations that allow vehicles to reduce emissions controls to protect a car’s engine. Still, ongoing concerns about diesel in the aftermath of the VW scandal have sullied the technology and prompted the home states of Daimler, BMW AG and Audi to push for driving bans on older models to cut air pollution.

The emissions crackdown extends beyond Germany, with France’s Energy Minister earlier this month saying the country would end the sale of gasoline- and diesel-powered vehicles by 2040. Paris, Madrid, Athens and Mexico City have all said they will ban diesel vehicles from their roads by 2025.

One of Daimler’s peers is preempting these stricter rules. Volvo Car Group this month said it will phase out vehicles powered solely by fossil fuels and offer only hybrid or full-electric motors on every new model launched in 2019 or later. The Swedish carmaker expects to have five fully electric vehicles in its lineup by 2021 and make its last full-gasoline or diesel car in about 2025.

Gut Punch

While demand has declined since the Volkswagen crisis erupted in September 2015, diesel still accounts for about half of total passenger car sales in Europe. In a sign of Daimler’s commitment to shore up diesel, the manufacturer also plans a “rapid” rollout of a completely new diesel engine family, the carmaker said in the statement.

“The Daimler recall is another punch in the gut to the diesel industry, and an additional black mark in terms of public perception, but the fuel isn’t going away,” said Michael Harley, group managing editor for Cox Automotive. “Automakers continue to believe in a future with diesel technology.”

The recall, which will be free for customers, will take several months, according to Daimler spokesman Matthias Brock. The plan extends a service action that began in April last year on compact cars and V-Class vans. About 45 percent of smaller cars and 75 percent of vans have since been upgraded. Daimler has informed German authorities about its decision, Brock said. Germany’s Transport Ministry declined to immediately comment on the recall.

“The public debate about diesel engines is creating uncertainty,” Chief Executive Officer Dieter Zetsche said in a statement on Tuesday. “We have therefore decided on additional measures to reassure drivers of diesel cars and to strengthen confidence in diesel technology.”