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March 2018

Diesel engines to decline? Incentives and super-filters to facilitate the transition

Dino Collazzo

In the wake of the decision by several large cities to ban diesel-fuelled vehicles, announcements by manufacturers determined to stop producing diesel engines are multiplying. In Europe, though, according to Acea data, out of 252 million cars 41.2% are diesel. Bans alone are no longer sufficient.
Diesel days are numbered, or at least so it seems. Sector’s experts and analysts have for some time now been speculating whether this type of fuel will experience a strong market contraction in Europe, given the recent events, plunging from 50% to 9% by 2030. Since these are estimates a certain amount of caution is needed. Also because predicting that all motorists will abandon, in such a short period of time, diesel vehicles in favour of other types of fuel sounds rather far-fetched. However, assuming that fewer diesel cars will be sold in the future, the question that will soon need to be answered is: how are we going to manage the vehicles currently in circulation?
No small matter if one thinks that out of 252 million cars on European roads, according to the latest Acea data, 41.2% of them are diesel . And this is the figure on which national governments as well as the automotive industry must question themselves. Especially in view of the fact that a good part of these fall within Euro 0-3 categories, considered to be the most polluting. Consequently, alongside increasingly stringent emissions regulations and the decision of many large cities to ban the circulation of diesel vehicles in urban centres - most recently the ruling by the Federal Court of Leipzig which considers such prohibitions admissible in German cities - policies and incentives aimed at supporting the demand for replacements are also needed. Modernizing a circulating fleet averaging 10.7 years, will prove neither easy nor quick, considering that recovery in consumption levels is taking place at different rates between nations, and only now the demand for replacements has just started to thaw: especially in southern Europe. At this stage, considering a transitional period, the introduction of super-filters on old cars might represent a viable solution. Not so on Euro 4-5 models, though, as this “upgrade” appears to be quite expensive: from 1,400 to 3,300 euro. Which brings up the next question: who will have to bear the brunt, motorists or producers? If regulators opt for the first solution, then public funding would be necessary to encourage vehicle owners to perform a sort of technological upgrade.
Waiting to see which strategies will be adopted by the EU Commission as well as individual countries, something is already changing in the automobile industry. Several car makers, in fact, have announced that they will stop developing diesel engines starting from 2022. In the wake of stringent emission rules and circulation bans adopted by a growing number of large cities around the globe, the demand has collapsed. Last year, for the first time since 2009, new registration figures saw petrol cars overtaking diesels. On the other hand, the demand for alternative fuels (methane, LPG, hybrid and electric) is likewise growing, albeit rather slowly. According to data on registrations in Europe’s top markets in 2017, with the exception of Italy, diesel car sales have been declining steadily. In Spain, it went from 56.8% in 2016 to 48.3% last year, while in Germany it fell from 45.8% to 38.6%. The United Kingdom too experienced a 17.1% drop. However, the record belongs to France. In fact, for the first time since 2000, the market share for diesel engines failed to reach 50%. In this context Italy appears to be the only country going against the tide. In 2017, 1.10 million diesel cars were registered, a 56.3% share compared to 59.9% in 2016.

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