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Article / 25 September 2015 at 12:48 GMT

Diesel demand in doubt

Managing Partner / Spotlight Group
United Kingdom
  • Diesel engine has perhaps peaked at 50% of new car sales in most of Europe
  • Hybrids are gaining momentum as a way to reduce CO2 instead of diesels
  • It may well be that like the dinosaurs, diesel has had its day

By Stephen Pope

There is a marked contrast in the way by which auto emissions are evaluated and reported.
The practice in the American market is for the auto manufacturers to undertake the emissions tests themselves then submit the results to the regulator. In contrast, the practice is Europe is for the manufacturers themselves to select a preferred external assessor; the manufacturer can set the time and place where the tests will be conducted.

Clearly, after the revelations about Volkswagen (VW) and the fraudulent emissions results one has to question whether either approach is suitable. Certainly both could questioned as to the level of honesty and transparency across the global industry.

Exhaustive checks on emissions

The regulators that have jurisdiction in a number of European countries have opened investigations. In the US attorneys general have joined Federal inquiries. Suddenly the press is full of charts and tables that are set out to compare the emission levels of gasoline or petrol engines with those of diesel. Here, for example, is a study comparing real world emissions of petrol and diesel against the Euro 3,4,5 limits.

Petrol Diesel

Source: The International Council On Clean Transportation (ICCT)

VW is not the first to be penalised

NOx is a generic term for mono-nitrogen oxides NO and NO2 (nitric oxide and nitrogen dioxide). These are produced from the reaction of nitrogen and oxygen gases in the air during high temperature combustion. In areas of high motor vehicle traffic, such as large urban conurbations, the amount of nitrogen oxides emitted into the atmosphere as air pollution can be significant.

NOx gases are formed whenever combustion occurs in the presence of nitrogen, e.g. in an air-breathing engine. In the US, especially California the test for NOx is closer to the real world than the European tests, therefore the diesels there all have to be far less polluting in their emissions.

California’s Air Resources Board for diesel penalised truck and bus fleets a total of USD2.2 Million in 2014 for non-compliance with state diesel risk reduction programs. Penalties worth USD 1.7 Million were levied on 47 companies in 2013 and a further 209 cases for a total of USD449, 838.

Harley Davidson admitted they tuned a flat spot into some of their motorcycles as the emissions requirement at the time only called for the levels to be tested at a certain RPM.

Ford in Europe was punished for their software not picking up on emission faults when it should have been.

BMW has in the past two days denied a report in a German magazine that its X3 sport utility vehicle failed an emissions test, reportedly spewing out 11 times the legal level of pollutants while in operation.

The ICCT suggested Thursday that Volvo, Renault, and Hyundai could all fail future emission tests. None passed emissions limits under current lab conditions approved by the European Union and Volvo's figures escalated to 14.6 times over current limits when subjected to the more rigorous test. Yesterday evening Volvo came out fighting as it said a faulty car had been used.

Diesel
No longer full steam ahead for diesels? Photo:iStock
 
Has diesel had its day?

Climate change has led to a wealth of questions that probe almost every human activity from using plastic bags for food shopping to using energy and of course our carbon footprint from flying and driving cars.

In the light of the VW scandal a question that is being asked in tandem with which fuel type is more environmentally friendly, is whether or not demand for diesel engines will disappear?
Pollution is one reason why the diesel engine has perhaps peaked at 50% of new car sales in most of Europe.

Not only are politicians are attacking diesels, petrol or gasoline-electric hybrids are gaining momentum as a way to reduce CO2 instead of diesels. This has been particularly the case among the Germany luxury brands of Audi (Part of VW), BMW and Mercedes Benz (part of Daimler). Diesel-electric hybrids are feasible, however, so far they have proved to be prohibitively expensive.

As a fuel, diesel burns at a higher temperature than petrol/gasoline and thus the exhaust emissions contains a higher amount of soot which contains carbon compounds and metal oxides. Electrification would be the next logical step, however, as said diesel-electric hybrids are expensive. 

gasoline

Wanna buy a electric car or what are you waiting for? Photo:iStock

Recent sales data shows that smaller, turbocharged petrol/gasoline engines have slowly been edging out diesel sales even though diesel is a cheaper fuel when measured in miles per gallon. Alternatives to diesel are getting better each year and all the evidence suggests that the share of the market for diesel has peaked in Europe.

The UK is typical of many countries that will now call for the emissions test to be rerun. The government will hold its own inquiry into car emissions and testing, running new laboratory tests on engines from across the industry and comparing the results with on-the-road emissions.

The Vehicle Certification Agency, a division of the Department for Transport, will work with manufacturers across the industry as it reruns tests in the wake of the VW emissions scandal. The government also called on the European commission to launch a Europe wide investigation into the car industry.

Clearly whilst this process is underway in both the UK and elsewhere new car buyers, private, companies and fleet buyers are going to be highly reluctant to acquire vehicles that are possibly high polluters that will be either recalled for modification, be subject to higher running costs through increased taxes or most likely both.

It may well be that like the dinosaurs, diesel has had its day.

— Edited by Clemens Bomsdorf


Stephen Pope is managing partner at Spotlight Ideas. Follow Stephen or post your comment below to engage with Saxo Bank's social trading platform.

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