VW scandal pushes diesel cars into the slow lane – The Guardian

Posted: Saturday, December 05, 2015

Since the Volkswagen emissions test scandal in September, it is not just the German carmaker that has suffered a blow to its image. Diesel automotive technology also faces a battle to regain public trust.

There are already some signs of demand for diesel cars shrinking since VW was forced to apologise for installing “cheat devices” in 11 million vehicles. In Germany, Europe’s largest car market, demand for diesel cars was down 11% by the end of October compared with the average level this year, according to data from car buying website MeinAuto. The decline for VW diesel cars was even steeper, down 14%.

“The slump in demand has surprised us,” said MeinAuto’s managing director, Alexander Brugge. “It’s interesting that it’s not only VW customers who are reluctant to buy diesel vehicles but customers of other brands, too.”

In the UK, official registration numbers of for diesel cars seem to be holding up. Diesel made up 51% of new car sales in both October and November, according to Society of Motor Manufacturers and Traders (SMMT). That is in line with last year and above this year’s average of 48%. However, there could still be a decline, because of the three-month wait between car order and delivery.

VW chief executive Matthias Müller has promised that the company will increase spending on alternative technologies such as electric and hybrid vehicles by €100m next year.

Audi, VW’s premium brand, has also admitted that it had not informed US authorities properly about emissions-control software in its diesel cars, and estimates the cost of fixing this problem at “mid-double-digit millions of euros”.

Over the past two decades sales of diesel cars across Europe have been boosted by tax incentives. In 2001, for example, then Labour chancellor Gordon Brown introduced a UK tax break for diesel cars on the grounds that they emitted less CO2 than petrol cars – though it is now known that diesels emit other harmful pollutants, known as nitrogen oxides.

The results of those incentives have been spectacular: in 1990, diesel cars made up only 14% of new sales in 18 European countries (according to data gathered by the industry group ACEA). By 2000, diesel’s European market share had jumped to 32%, with 4.7m new cars registered, and by the end of last year diesel cars accounted for 53% of sales, or 6.4m new registrations.

Outside Europe, diesel is far less popular. In the US, just 3% of car sales were diesel last year, and just 2% and 1% respectively in Japan and China.

“Over the past years, policy initiated by the EU institutions has focused on reducing greenhouse gas emissions,” said an ACEA spokesperson. “The European automobile industry’s success in reducing CO2 emissions has been, to a greater extent, dependent on higher sales of cars with diesel engines, since they emit 15-20% less CO2 on average than comparable petrol engines.”

But diesel cars are a major cause of high levels of nitrogen oxides (NOx) – gases linked to respiratory problems and now the subject of increasing political interest around the globe.

All but two of London’s boroughs exceed EU limits for nitrogen dioxide, and the mayor of Paris has announced that diesel cars will be banned from the French capital by 2020 in order to reduce pollution.

In the light of the VW scandal, which has been called the car industry’s “Libor moment”, industry experts expect diesel’s share of the European market to decline. Management consultancy Roland Berger reckons it will be down to 41% by 2030. But the decline could be far sharper: in the consultancy’s worst-case scenario, the percentage of diesel cars hitting the road every year drops to 10%.

“It is hard, but it is possible to make diesel clean, even under the new real drive test conditions,” said Roland Berger’s car industry expert, Thomas Schlick.

EU member states recently agreed to more realistic testing conditions, and additional combustion and after-treatment technologies could add up to €3,000 to the cost of a car, the consultancy estimates. Among higher-priced cars, said Schlick, that would be “manageable”, but in the smaller car market, diesel engines were likely to lose their attraction.

Among the major motor companies, BMW has the biggest proportion of diesel cars: they account for more than 80% of its new ones. VW, with a diesel share of 56%, recently announced that the next version of its luxury Phaeton car would be electric. The company is also looking for partners to set up a battery plant in Germany, so it will be less dependant on Asian suppliers for components for electric cars.

“The new testing standards will be extremely difficult for automobile manufacturers to reach in a short space of time,” said the ACEA. “As a direct consequence, a substantial number of diesel models will have to be phased out earlier than planned.”


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