Diesel's decline may prove segment specific

The diesel debate has been thrust into the spotlight yet again by reports that FCA will phase out the fuel option in its passenger car line-up. Apparently, the company may keep it on offer with the Ram pick-up range. The OEM itself is keeping quiet but the Financial Times is quoting unnamed sources as stating that the official plan will be announced as part of a new business strategy on 1 June. Just last week Porsche confirmed that it had temporarily paused all diesel options in its line-up, though it would return with the new Cayenne. Both Porsche and FCA have come under scrutiny for potential use of defeat device software. Last year the US Environmental Protection Agency and the California Air Resources Board submitted a complaint against FCA for using illegal software on diesel Jeeps and Rams to pass laboratory emissions tests. It also faces substantial fines from the Justice Department for its actions. "Demand for diesel is nosediving as people realise its links to air pollution and the scale of cheating by car companies in emissions tests. Across Europe, diesel is facing many city-wide bans or charges, so as a consumer you’d be taking a huge risk to buy a diesel car now," commented Morten Thaysen, Clean Air Campaigner at Greenpeace. Interest in key diesel markets has been on the decline. Sales in France dropped 5% last year, leaving diesel's market share below 50% for the first time since 2000. The trend has continued into 2018. In the UK, January kicked off with a 25% plunge in diesel sales. However, most industry watchers suggest this is not due to dieselgate, but rather punitive measures from governments in the form of future bans or higher tax rates. "The year after the Volkswagen scandal broke, diesel sales in the US increased by 260,000 units. That told us consumers were not judging the technology based on that one OEM's misdeeds," observed Allen Schaeffer, Executive Director of the Diesel Technology Forum. What could impact consumers is a price bump. FCA Chief Executive Sergio Marchionne has made it clear that diesel technology will very soon become cost prohibitive in light of tightening emissions and testing standards. Speaking at this year's North American International Auto Show, he suggested diesel would remain relevant in a minor way in the US but that it was already losing its significance in Europe. "We have to find an alternative to diesel which involves gasoline and electrification of some form to bridge us over," he told media at the show. John German, Senior Fellow and Regional Co-Lead at the International Council on Clean Transportation (ICCT), expects diesel use to decline dramatically in the passenger car segment in the years ahead. In fact, he argues that demand has only reached the heights it has because of government subsidies. "Subsidies made the diesel market, not a natural demand for diesel vehicles," he commented. "The only countries with more than a small diesel market share are those that have subsidised the price of diesel fuel. Without subsidies it is too expensive. Some OEMs have attempted to reduce expenses by cheating. Stopping that cheating will make them more expensive." However, light commercial vehicles and pick-ups are another story. For these segments, where hauling cargo is a high priority, he sees a definite market for diesel. Schaeffer also sees strong demand for larger vehicles like pick-ups and SUVs, which tend to be more expensive and can therefore more easily absorb the cost of clean diesel technology. "One of the reasons that I think diesels will stick around is the segment shift towards the larger crossovers and heavier SUVs," he noted. Kia recently announced it was bringing a diesel option to its US-market Sorento SUV. The OEM is currently working on securing certification from the US Environmental Protection Agency but the option could launch by the end of this year. Pointing specifically to pick-ups, Schaeffer added: "This is a substantial part of where we see diesels doing even better." Chevrolet, Ram and Ford all offer diesel in this segment, one of the strongest growing segments in the US. "We see the pivot into that space and it gives us great optimism," Schaeffer added. But what about growing interest in electrification? Marchionne himself touched on that as a hope for meeting future targets. Greenpeace is also bullish on its outlook. "The future of the car industry is in electric vehicles, which will help to combat illegal air pollution and climate impacts," noted Thaysen. However, global demand from consumers has consistently fallen short of expectations. "Last month diesel powered Ford Transit commercial vans outsold all the plug-in hybrid and EVs combined," pointed out Schaeffer. "That signals that diesel is still very popular in the market place."

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