Software updates probably only an interim solution
However, this is probably only an interim solution. In view of the current
negative sentiment towards diesel engines, diesel cars will stand a chance in
the medium to long term only if the auto industry credibly demonstrates that it
can keep emissions below the legal thresholds in real driving situations and in
(almost) all weather conditions. If carmakers do not succeed in this endeavour,
customers will increasingly turn away from diesel cars, as they fear excessive
residual value losses or stricter regulation.
Moreover, a number of stakeholder
groups and politicians will continue to call for lowering the emissions of diesel
engines until the legal limits are respected on the road. Initial responses by
NGOs are pointing in this direction. Admittedly, diesel engines are an ideological
issue for some NGOs, which are against (diesel) cars on principle.
Nevertheless, the market share of diesel engines is likely to decline even if the
car industry meets all environmental thresholds. Clean diesel cars will become
more expensive in comparison to petrol-fuelled engines. In addition, the price
difference between diesel cars and alternative fuel cars will decline. This means
that diesel cars will become less attractive especially in the volume segment.
Nevertheless, many European customers, particularly those who drive a lot for
business purposes, will stay true to diesel engines, which are efficient and
relatively cheap to run, as diesel benefits from lower tax rates in most EU
countries. During the first half of 2017, c. 46% of all new car registrations in
western Europe were for diesel cars.
While this is a decline by 4 pp in a year-
on-year comparison, diesel cars are still miles ahead of alternative fuel cars.
Remember that diesel car engines are not very popular outside Europe.