Rising diesel costs could harm TCO

November 18, 2016

Diesel powered cars could cost double the price of hybrid vehicles to produce in future because of tougher emissions legislation, according to a senior Toyota executive.

Manufacturers are having to respond to increasingly tough emissions requirements from European governments including improvements to the on-road environmental performance of vehicles.

As a result, diesel engines will require more expensive particulate traps and exhaust after-treatments to meet the requirements of new legislation.

Koei Saga, Toyota’s powertrain boss, told Autocar: ‘I think diesel has got a very big challenge, maybe also some petrol engines. For diesel, the emission treatment is very difficult. You need a lot of technology for that and the regulations are getting harder and harder.

‘And I think in the future diesels could cost double what we pay for a hybrid, so the costs will go up. Therefore I think for the diesel engine it will become more and more difficult.’

While Saga sees a future role for diesel engines, he expects it will increasingly only be in corporate and industrial settings, particularly for cars, vans and buses that cover large distances in their lifetime.

He added: ‘We are continuing developing to get more efficiency and more environmentally-friendly diesel cars, so I do not think that diesel will die.’

Demand for diesel has been falling in many countries throughout Europe as governments encourage drivers to switch to alternative fuels. The perception of diesel has also been harmed following the Dieselgate scandal.

Already there are signs that total cost of ownership is shifting in favour of alternatives to diesel. For example, in a comparison of equivalent Toyota Auris models in France over a replacement cycle of three years/ 90,000km, the diesel has the highest total cost of ownership at €0.35 per km, 6% higher than the petrol/ electric hybrid alternative. The hybrid has a better residual value, lower insurance costs and cheaper servicing.

Official fuel economy figures indicate the diesel is also less efficient, but it has lower fuel costs because diesel is cheaper at the pumps compared to petrol in France. Over the next few years, tax changes will remove this advantage.

Despite the changing environment, Saga’s views are not supported by some other manufacturers. PSA Group research and development director Gilles Le Borgne said earlier this year that diesel will still generate significant sales beyond 2020 and play a critical role in meeting its official emissions targets.

Diesel accounts for around half of all new car sales in Europe and although its proportion of total sales is declining, research by Autovista Intelligence indicates that it will still account for 35-45% of the market in Europe by 2024.

CO2-based vehicle taxes play an important role in the popularity of diesel and governments tend to favour gradual changes to avoid disrupting markets, which means that any new policies are likely to focus on encouraging gradual declines in diesel demand.

 Future of the diesel market…

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March 31, 2017

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