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Europe diesel forecasts decline due to Volkswagen scandal say just-auto’s QUBE analysts

Press release September 30, 2015 Volkswagen scandal Volkswagen Diesel engines Emissions scandal Diesel market

The expected decline of the popularity of diesel-fuelled vehicles in the European car market has been significantly accelerated in the light of the Volkswagen (VW) diesel emission fixing debacle, according to the automotive analysts at just-auto’s QUBE.

According to just-auto's QUBE, a number of factors were already expected to gradually reduce the significance of diesel light vehicles in Europe over time. The factors include: the increasing cost of aftertreatment to reduce NOx emissions under Euro VI and future regimens; more efficient direct-injection turbocharged downsized petrol engines; a mounting backlash against diesel emissions from cities such as Paris and London, and increasing electrification of powertrains.

The VW imbroglio, in which US government regulators found software in vehicles that produced false emissions data, should see that anticipated future decline accelerate. QUBE’s team see West European diesel penetration declining from 49% in 2016, as in the last forecast to just 44% in its October 2015 release. Mid-term diesel penetration in light vehicles will fall to 38-39% in 2020 from 44% previously. By 2025, QUBE analysts expect diesel penetration in West Europe to fall to 33.7%.

This decline in the European diesel forecast could cause problems for automotive manufacturers (OEMs) as Calum MacRae, QUBE’s head of development, explained, “Many OEMs will have been banking on Europe having a much higher diesel market share to ensure their fleets comply with 2021’s 95g CO2 fleet target. Those calculations will now have to be revisited, which should have implications for powertrain planning mixes and potentially total market volume.

Benefiting from these revisions will likely be hybrid vehicles. There could be increased financial implications too. Failure of any OEM to meet individual targets under the 95g legislation will result in a €95 fine for every gram exceeded over the OEM’s limit value curve target multiplied by the number of vehicles registered by the OEM in the EU. 

In Europe, the bastion of the diesel market since the 1980s, the picture is very complex. Due to the extra cost of diesel powertrains, penetration in Europe is concentrated around certain segments. For example, penetration among high-mileage D-segment drivers is highest, while smaller vehicles - with their lower sticker price - have low diesel penetration due to the relative cost of diesel engines compared to petrol and the likely typical annual mileage of smaller cars.

Additionally, many markets in Europe are led by the fleet sector - in the UK for example fleets typically account for 50% of the new car market - and it could be that many large companies will reconsider having diesel and/or VW group products on their lists.

Furthermore, throughout the 2000s many European governments have been promoting the use of diesel as a means to meet European CO2 targets, which has led to increasing take-up of diesels.

QUBE’s analysts do not believe the revision is all downside for the European OEMs though. The furore could see prices for Euro 6 diesels and future compliant diesels increase so consumers pay market prices for DeNOx technology. In Europe’s deflationary pricing environment for cars, it’s hitherto been very difficult for OEMs to pass on emission compliance costs to the market. “Now automakers might be in a position to say to consumers ‘if you want low-NOx and low-CO2 diesels you'll have to pay for the technology,” added MacRae.

However, the potential for higher diesel transaction prices and a more expensive and electrified powertrain mix, in order to meet CO2 targets, could result in a lower total industry volume depending on demand elasticity.

Similarly, QUBE’s analysts have announced that the expected penetration of diesel in the light vehicle market in the US has also been significantly downgraded.

About just-auto and QUBE exists to provide news, analysis and market intelligence to support the automotive industry. We are driven by a passion for an industry with a global turnover of €3 trillion that directly and indirectly supports 60 million jobs. We offer an independent voice with a global remit, championing automotive best practice wherever we find it.

In 2011 just-auto launched QUBE, the automotive database for the auto industry. Supported by a team of experienced automotive analysts, QUBE serves the automotive supply chain, providing them with OEM and supplier automotive competitive analysis, component sector forecasts, and automotive technology intelligence.


Volkswagen scandal Volkswagen Diesel engines Emissions scandal Diesel market