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Diesel Sales Stumble, Undermined By VW, Health Worries

Diesel Sales Stumble, Undermined By VW, Health Worries.

“Germany too is falling out of love with diesels, propelled by the fallout from dieselgate, and adverse publicity about the fuel’s health risks”

Americans might find it hard to believe that roughly every other car bought by Europeans is powered by a diesel engine, but the fallout from the Volkswagen dieselgate scandal and worries about health threats has started a trend which could see that share slashed to about one in 4 by 2020.

That poses a big dilemma for car makers, who had assumed diesel technology would allow them to meet ever-tightening fuel economy regulations starting in 2021. The manufacturers have invested massively in diesel, assuming that battery and hybrid power would not come close to providing the necessary economy at an affordable price.

Diesel power has burgeoned because European governments decided that if global warming targets for carbon dioxide (CO2) emissions cuts were to be met, the best way was to promote the use of much more efficient diesel engines. The sales tax on diesel was slashed across Europe, and when you realize taxes on gasoline are huge here – up to an effective 75% in countries like Britain – any relief was bound to be greeted with enthusiasm.

The push to diesel started in the 1990s. In 1990 about 10% of European car sales were diesels. By 2011 this had jumped to nearly 60%. This transformation was also helped by improvements in technology that turned noisy, smoky, clattering clunkers into turbine smooth and quiet machines which provided almost instant acceleration because of its low-down torque. The switch to diesel quickly paid back with big dividends in fuel economy gains of around 30%, but there have been sinister unintended consequences with increased emissions of harmful pollutants like soot, particulates and nitrogen oxides (Nox). Some experts say this brings on heart attacks, lung disease and asthma attacks.

France triggers reversal
France has been a leader in promoting diesel power, but now it is attempting to trigger a reverse. The government has raised tax on diesel fuel and removed incentives for diesel car purchases. Paris and other French cities plan to ban diesel vehicles built before 2011 by the end of the decade. France’s Renault expects tighter regulation to force diesels out of small cars because of their expense. 

Germany too is falling out of love with diesels, propelled by the fallout from dieselgate, and adverse publicity about the fuel’s health risks.

According to Professor Ferdinand Dudenhoeffer, director of the Center for Automotive Research (CAR) at the University of Duisburg-Essen, demand for diesel powered cars and SUVs is weakening in Germany, and may well drop sharply across all of Europe by 2020 to around 25%.

Alix Partners, quoted by Automotive News Europe, said diesel cars’ market share in Europe might sink to 9% by 2030 from 52% currently.

Al Bedwell, analyst with LMC Automotive, expects a more gradual decline in Europe, to 49.3% in 2016, 43.5% in 2020 and 39.0% in 2023. In August, diesels won a market share of 48.3%, the lowest monthly level since the peak of 2011, according to LMC Automotive. 

In Germany, Europe’s biggest car market, buyers face a dilemma.

“German customers are getting more and more negative news on diesels, but on the other hand they want to buy more and more SUVs which are much bigger than most vehicles and which often rely on diesel engines to provide economy,” CAR’s Dudenhoeffer said.

Dudenhoeffer said it is likely that diesel sales will fall slowly, losing about 10 percentage points by 2020, as more substitution appears in the form of battery cars and hybrids. But that assumes taxes on diesel remain roughly the same. But he warned there is a growing movement across Europe to penalize diesel power, and is this gains momentum, market share could slump to 25% by 2020.

Dudenhoeffer added that the latest slump in German diesel sales has been a boost to Toyota, where 85% of its RAV4 SUV sales are now gasoline and hybrid. This sector has been dominated by diesel power for years.

End of the affair?
Industry newsletter Automotive Industry Data, in an article headlined “Is this the beginning of the end of Europe’s diesel love-affair” warned about the possibility the “trickle of desertions (from diesel) could become a torrent”.

“The fact remains that in the majority of West Europe’s markets demand for diesel-fuelled cars is now slipping faster than ever. Moreover, since last year’s fourth quarter, following the fast-spreading fall-out from Volkswagen’s dieselgate emissions-rigging scandal, the rate at which bewildered consumers dumped their long-trusted diesel for future-proof petrol-fuelled (gasoline) car has picked up notable extra momentum,” AID editor Peter Schmidt said.

While diesels stumble, European politicians have been demanding action. Next year, the E.U. will tighten fuel consumption regulations for gasoline and diesel engines insisting that they reflect so-called real-world driving conditions. The current rules allow much use of computer simulation and laboratory testing, which are unattainable on the road.

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