How the car industry won the EU's trust

European governments have been acting tough with car makers recently, but in reality over the past decade they have viewed the motor industry more as a job-creation partner than a sector in need of scrutiny.

On 22 April, authorities in Germany announced they would recall 630,000 Audi, Mercedes, Opel, and Volkswagen cars. The same week, French authorities raided offices of the PSA Group, which produces Peugeot and Citroen cars.

All of this happened in the wake of Volkswagen's diesel fraud, as new instances of cheating by car companies emerged - in Japan, Mitsubishi admitted it had misled authorities since 1991.

But the tough-seeming measures are in sharp contrast to how European policy makers have behaved over the past decade.

Recent legal developments show how politicians have placed increasing trust in the car industry - trust that some might argue was misplaced.

A salient example of European decision-makers banking on car makers to do the right thing is the trend towards allowing them to test their own products.

Next door lab

All cars need a certificate to be put on the market, but rather than test every single vehicle, companies can get something called “type approval” whereby only one car needs to be tested and certified to allow the approval of all other vehicles in its category.

Each EU member state has a national type-approval authority, but most of them outsource the actual testing to private laboratories known in legal jargon as “technical services”.

Sometimes even car companies themselves can operate as technical services. The UK's Vehicle Certification Agency (VCA) for example has accredited a facility called JLR Product Compliance Centre Emission Test Laboratory.

The test lab shares its address in the town Solihull, near Birmingham, with the site of a car manufacturing plant of Jaguar Land Rover (JLR).

Now a UK government website lists the lab on a page relating to the so-called Individual Vehicle Approval scheme, which allows people to test individual cars they import from abroad, or those that are built in very small numbers.

It is unclear if the JLR test lab also tests Jaguar or Land Rover cars for the type-approval process, and both the company and the VCA did not return requests for comment.

If it does, the UK may have broken the rules.

An EU commission spokeswoman said a “manufacturer or a subcontracting party acting on his behalf is not allowed to act as a technical service for activities related to vehicle emissions or fuel consumption testing”.

However, the list of tests that companies are allowed to do, if supervised, has grown the past decade.

Not what was planned

Originally, manufacturers were supposed to be allowed to supply technical services only on rare occasions.

When the European Commission proposed a new type approval framework directive in July 2003, it said technical services suppliers would be allowed to carry out tests in a car manufacturer's facilities.

“Manufacturers are not authorised to carry out type-approval tests themselves,” the commission said explicitly, but added that they would be allowed “in a number of exceptional cases”.

Such exceptions could arise when “very expensive testing installations are needed”, but only “under the supervision of the competent authority”. It noted that this would happen in a “very small number of cases”.

The next year, the European Parliament asked for several amendments, some of which the commission granted. Then it became somewhat quiet on the legislative front.

It was not until December 2006 that the EU Council, representing national governments, gave its opinion on the proposal, which needed approval from both the parliament and the council before it could become law.

The member states had introduced some changes to the directive, including a promise to carry out sanctions if car makers breached the rules.

But they also introduced a new article that said a “manufacturer or a subcontracting party acting on his behalf may be designated as a technical service” for a limited number of tests listed in an annex.

In a statement explaining the changes, the member states said the introduction of self-testing would “contribute to the simplification of Community legislation, aiming to enhance the automotive industry's global competitiveness”.

The European Commission did not challenge these changes, nor did the European Parliament, which approved the new rules in 2007. They went into force that same year.

Where did the desire for introducing self-testing come from? What had happened between 2003 and 2006?

The industry strikes back

An initiative called CARS21. That's what happened.

On 11 April 2005, a group of EU commissioners, ministers, trade representatives, and bosses of car firms met for the first time in a high-level group called Competitive Automotive Regulatory System for the 21st Century (CARS21), set up to look at the regulatory environment following a request from the motor industry.

The group's goal, the commission said, was “to generate recommendations to improve the worldwide competitiveness of the European automotive industry”.

It included Bernd Pischetsrieder, then CEO of Volkswagen, and his colleagues from Volvo, Ford, Renault, and Fiat.

Its chairman was German Guenter Verheugen i, who was EU commissioner for enterprise and industry under Jose Manuel Barroso i from 2004 to 2010.

The group's composition was industry-friendly.

There was just one non-governmental organisation (NGO) present, the Institute for European Environmental Policy. Ironically, its director David Baldock is the only one who is not visible on the group photo from their first meeting, as he is hidden behind Verheugen.

Group photo of the CARS21 high level group, which recommended allowing more self-testing

The group also consisted of two pro-industry MEPs, a motorists' lobby club, and the European Metalworker’s Federation.

There were five ministers, but only one of them had environment in her portfolio - the UK's Margaret Beckett.

The others were German economy and employment minister Wolfgang Clement, French deputy industry minister Patrick Devedjian, Italian infrastructure and transport minister Pietro Lunardi, and Czech deputy prime minister Martin Jahn.

Jahn later became CEO of Volkswagen in Moscow.

CARS21 subsequently worked on a report, which argued for “better regulation” in order to give the European car industry an edge over other markets.

“For decades, the automotive industry has responded to a multitude of regulatory initiatives (e.g. in areas of taxation, safety and the environment) while at the same time seeking to improve its competitiveness,” the report said, adding that the sector creates jobs, tax revenue and research & development.

Among other things, the report recommended that the framework directive should include a “possibility that manufacturers are appointed as testing laboratories at their request and after the type-approval authority has determined that the manufacturer has the necessary competence”.

It listed 15 separate steps in the testing process that should be allowed to fall under self-testing, including the certification of towing hooks, wheel guards and rear-registration plates.

Although the 2007 directive initially only allowed self-testing for tyres, the commission amended the legislation the following year to include emissions from air-conditioning systems.

Then, in 2010 it added the 15 sub-tests advised by the CARS21 group.

The amendments were introduced by the commission directly, without involvement of the European Parliament. The commission was able to do that, because the EP had given the commission the power to change the legislation without its involvement.

Formally, member states were also not involved, but in the introductory remarks to the 2010 bill, the commission said that a committee comprising of national government experts - the Technical Committee Motor Vehicles - had given its blessing.

The type-approval process comprises of almost 60 steps, and a majority of them can only be carried out by independent labs.

It is unclear how many car companies actually do their own sub-tests because only the end results are made public. But the legislation shows the trust that the EU placed in the car companies, and in the national member authorities.

And even though the commission announced in January 2016 it wanted greater powers to scrutinise national authorities overseeing technical services, self-testing will not be banned.

The commission proposal maintains the list of test steps that manufacturers can carry out themselves, but added as a requirement that it should be able to show to the national authority “its independence and the absence of any conflict of interest”.