February 14, 2018

One Year Later: Europe's Stance on Diesel

2018, Fuel Retailing, Alternative Fuels

By Elizabeth Kershaw, Client Services Consultant, Pricing

This time last year, I asked the question: Is Europe falling out of love with the diesel fuel — the fuel that promised so much in terms of its eco-credentials? One year later, I ask a new question: Has anything about Europe's relationship with diesel changed? Or are we on the road to a definitive break-up?

Government Stance on Diesel Cars

Since my last blog post, the trends observed have continued, with further government actions to penalise diesel vehicles. In the UK, Vehicle Excise Duty for new diesel cars was increased in 2017, whereas France has increased duty on diesel fuel. Councils and metropolitan authorities, under pressure to meet air quality standards, have continued to look at penalising diesel cars in new ways, such as by differentiating charging structures for congestion, or increasing parking fees for older diesel cars. Even Munich, the home of BMW, has said that it will ban all diesel cars — except those adhering to the latest EURO 6 emissions standards — as a result of a legal challenge to meet air quality standards.

How Are Consumers Acting?

Faced with the potential of higher costs and dropping resale values, consumers are continuing their collective move away from diesel. In the first half of 2017, ACEA (the body representing European car manufacturers) stated that more gasoline cars than diesel had been sold, reversing a trend that had lasted almost a decade. In H1 2016, 50.2 percent of all cars sold in Europe were diesel; this fell to 46.3 percent in H1 2017. This nearly four-percent drop was entirely compensated for in the market by an increase in gasoline cars. Electric and other alternative fuel vehicles also increased, though these still represent a small part of the overall market.

It's Not Just Europe

Diesel is struggling in other markets as well. In the United States, where diesel adoption has never been high, dieselgate caused headaches for manufacturers attempting to gain environmental-regulatory approval. In fact, Mercedes, through its luxury Daimler brand, simply abandoned trying to get approval for any of its 2017 models. According to the EPA, there were only nine total models from five constructors approved in 2017. (Compare this to 22 models from eight constructors just two years prior.)

In Asia, cities are also beginning to tackle diesel, with Hong Kong implementing a scheme to offer subsidies to people scrapping their diesel cars, and Seoul banning all pre-2006 diesels from the city centre.

All indicators show that diesel, at least from a passenger car perspective, is on its way out. Diesel is likely, however, to retain its crown in the heavier vehicle sector — at least for a little while. Even in this sector, there has been a shift towards expanding the use of CNG and LNG. Tesla's recent electric truck premiere showcases and predicts this shift to alternative fuels.

The movement toward renewables might be the greatest threat to diesel, and even to gasoline. In 2017, many nations continued to announce moves away from the combustion engine altogether. Britain, France, Norway and Sweden have all set deadlines for the banning of new gasoline and diesel cars. China has announced that it's working on a timetable for the same, and India has announced an aspirational target of moving to zero-emissions-only new cars by 2030. Volvo also became the first manufacturer to declare that, as of 2019, it will only sell hybrid or fully electric cars. They have since been followed by others, such as Jaguar.

So, should we be expecting our happily ever after with alternative fuels? That remains to be seen. But one thing's for sure: Europe and diesel's relationship is tenuous, likely to fade into a classic love story trope over time: the one where they don't end up together.

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