VW CEO Urges Excise Tax Based on Fuel Efficiency

VIENNA – Bernd Pischetsrieder, CEO of Volkswagen AG, is calling on the European Union to scrap national excise taxes based on weight, horsepower or displacement and instead use a car’s fuel-efficiency rating as the tax basis.

Each country would set its own tax rate based on its own revenue needs, but a single method of taxing cars in Europe would be more efficient and help reduce fuel consumption, he says.

“We have an engine that makes 103 kW (138 hp),” Pischetsrieder tells an industry meeting here sponsored by Automotive News Europe. “One country changes its tax structure at 100 kW (134 hp), so we have to find a way to take out 3 kW (4 hp) for cars there.”

Taxes based on weight or displacement do not encourage fuel efficiency, because a heavy car or a big displacement engine can be more efficient than their lighter, smaller competitors. Fuel efficiency ought to be a major concern, he says.

“It is worthwhile to spend much of our effort on fuel consumption,” Pischetsrieder says.

It would help encourage fuel efficiency if governments were smarter in establishing fuel taxes and incentives, he adds. For example, the push toward ethanol fuel ignores the fact that producing the fuel from corn adds so much carbon dioxide to the atmosphere.

Ideally, fuel taxes would be based on their net carbon dioxide production, and not just on what comes out of the exhaust pipe, he says.

VW CEO Bernd Pischetsrieder

Pischetsrieder also warns the government against over-regulation of vehicle design. If a Volkswagen car made for Brazil is adapted to meet European homologation rules, it adds 50% to the cost.

“There are too many doorkeepers and not enough go-getters” in government, he says.

Additionally, Pischetsrieder warns the coming competition from East Europe and Asia means disposable income in West Europe is going to fall, “and companies not able to adapt will have survival problems.”

Much of Volkswagen’s financial problems are based on the weak U.S. dollar, he says, noting North America is a big market for the company. He says he has asked his executive team for a business plan that will earn money at an exchange rate of €1:$1.40.

Those who know Pischetsrieder, say running Volkswagen appears to be wearing on him. His efforts to change the German auto maker’s direction have been frustrating and fatiguing. Normally enthusiastic and engaging, he rarely smiles as he addresses his audience here.

“I’m concerned with limitations in Europe; the Europeans’ willingness to accept that they are living in a global world,” he says. “The limit on the mood for change could be an obstacle, or it could be fatal.”

While the he doesn’t say it, Pischetsrieder clearly regards union intransigence as a big problem in reducing Volkswagen’s costs.

Volkswagen workers have a 26-hour workweek, and manufacturing studies indicate the company has an above-average labor content in their cars. The auto maker produces about 40% of its parts, while most European competitors make 25%-30%.

The only time the CEO reveals his normal joie-de-vivre is when asked how fast he has driven the 1001-hp Bugatti Veyron 16:4, Volkswagen’s most powerful car.

Pischetsrieder breaks into a wide smile: “402 km/h (250 mph),” he says.