Diesel: a catch 22 situation for the car industry?
According to consultancy firm AlixPartners the sales of diesel cars will not exceed 5% of the total market anymore in 2030. That’s a decline at a speed never thought of in the car industry.
AlixPartners has just published its global report on the car industry for 2018, and the future for diesel cars doesn’t look bright at all. Three years ago (just before dieselgate) the diesel share in most European countries was still half of total sales, although beginning to regress a little.
Now, especially the European car industry is really shocked by the speed of the decline. Last year the same study of AlixPartners still predicted a 40% share for diesels in 2020. The current study talks about only a quarter of total sales. That’s a (very) big difference.
“The decline is bigger than predicted”, confirms Laurent Petizon, CEO of AlixPartners. “That poses a new, big problem for the car industry, the problem of CO2 emissions, difficult to solve in this transition period, where electric cars are not yet capable of taking over from diesel.”
The CO2 problem
CO2 is not a toxic emission gas, but it causes global warming. That’s why the European Union (among others) has created average emission limits per vehicle for the whole industry from 2021. The limit is 96 g/km CO2 and every single gram above will be penalized with a 95 euro fine, for each and every car sold.
We’re talking billions here: a group like Volkswagen is still 20 grams above the prescribed average today. A difference of only 3 grams will cost the VW Group already a billion euro of fines if they sell the same amount of cars in three years as they do now. Other manufacturers are in an even worse situation: Fiat Chrysler turns around 30 grams in excess for the moment, some (like the French) are doing a little better (between 10 and 15 grams in excess).
Maybe even a bigger worry is that diesel cars are only part of the total problem. The average CO2 exhaust will also increase because of the new, more realistic measuring procedure (WLTP) and because of the still increasing interest of the car buyer for even less frugal Sports Utility Vehicles (SUVs).
According to AlixPartners, the changing of the measuring procedure accounts for a 10 grams surplus, the shift from diesel to petrol for 5 grams and the love for SUVs 2 grams. “Manufacturers are struggling to avoid a disaster”, says Petizon. “They are heavily investing in electrification now to avoid as much as possible the huge fines that are looming in the future. Some will even have to count the fines into a new price setting, other will simply stop producing their most polluting cars.”
These changes will also cause a mutation in the economic ecosystem. In France 10.000 jobs are already influenced by this fast mutation of the energy mix, according to La Plateforme Automobile, an organization created by authorities to accompany the industry in this change. If the diesel decline is going to accelerate like now predicted, it could affect 45.000 jobs.
Others don’t have such an alarming view. François Roudier, communication director for the joint committee of French manufacturers, replies: “Since several months diesel sales represent 40% of the total market and we don’t see signs of a new decline in sales for the near future.”
For long distance drivers or frequent car users the alternatives for diesel are not competitive yet. The car manufacturers see some of their clients return to a diesel after having paid too much for petrol refills in their SUV or big sedan. According to Roudier, “the real decline of diesel in France will come when manufacturers have a consistent portfolio of plug-in hybrids (PHEVs).”