Running on empty

Diesel SUV sales collapsing, study reveals

VW Chief Winterkorn Steps Down After Diesel Emissions Scandal
Choose your poison. Source: Bloomberg

Make no mistake: German carmakers have staked a lot on diesel SUVs. In the past decade, they responded to growing tastes for large yet fuel-efficient cars by hugely expanding ranges and production of SUVs, all powered by the perfected technology on which they have based their future. The type quickly became a key market segment.

Then, in 2015, came Dieselgate, the emissions-cheating scandal. And now several major cities are planning to ban the nitrogen-oxide spewing vehicles from their centers. A new study shows that both have had a serious impact on sales.

In the first 4 months of 2018, the proportion of new SUV registrations fell to 35 percent. The annual figure had been static at around 70 percent but last year dropped to 44 percent. The figures mean the proportion has almost halved since 2015, according to the study by the Center for Automotive Research (CAR) at the University of Duisburg-Essen.

CAR director Ferdinand Dudenhöffer said diesel was now “burnt.”

Diesel-Zapfsäule
Old and busted. Source: dpa

In the two-and-a-half years since Dieselgate broke, sales of diesel cars as a proportion of new registrations have slumped to less than 33 percent from more than 48 percent.

Diesel has traditionally been especially popular among SUV buyers because the technology offered fuel efficiency even for big and heavy vehicles. Modern diesel consumes up to 25 percent less fuel than gasoline-fired cars.

But sales of gasoline cars are rising, which poses a dilemma for German automakers such as VW, Daimler and BMW, who all specialize in diesel. They invested in the technology because they believed it was the key to meeting EU emissions limits without developing completely new technologies such as electric cars. In 2021, the EU will reduce its CO2 ceiling from 130 grams per kilometer for newly registered cars to 95, and diesels emit up to 15 percent less CO2 than gasoline cars.

That’s why Germany’s auto industry is doing all it can to save diesel even though the reputation of the technology is in tatters.

“Those who want to put the brakes on modern diesels are getting further away from the CO2 target and are damaging efforts to protect the climate,” said the German auto industry association, the VDA.

But Mr. Dudenhöffer believes that is the wrong approach. He said it was time the government abandoned its preferential tax treatment of diesel and provided the auto industry with strong incentives to speed up the development of alternative technologies, primarily electric cars.

An increase in sales of electric SUVs could help automakers reach CO2 targets, he said. But at present, German carmakers don’t have a single all-electric SUV on sale. The first will be launched by Audi later this year. Yet five other global brands already produce electric SUVs, including the Kia Soul, Jaguar iPace and Tesla’s Model X.

The government has been offering generous subsidies to those buying electric vehicles, and set a target of 1 million on the road by 2020. Until now, the uptake had been poor. But, worryingly for the country’s carmakers, that may be about to change.

Franz Hubik covers renewable energy for Handelsblatt. To contact the author: hubik@handelsblatt.com

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