Will the wheels fall off the diesel car boom in the UK?

Allegations by the US Environmental Protection Agency that Volkswagen distorted the results of emissions tests on diesel cars caused the company’s share price to fall significantly at the beginning of this week, and has raised questions about the veracity of emissions testing across the world.

These allegations have also thrown the spot-light on one of the most significant changes the automotive industry has seen in recent years – the massive growth in the number of diesel cars, particularly in the UK and Europe.

Gassing up

Diesel cars use less fuel per kilometre than petrol cars, meaning that they produce less carbon dioxide. As they sought to meet strict carbon dioxide targets, EU governments introduced a range of different polices to encourage the production and purchase of diesel powered cars rather than petrol powered alternatives. These included lower tax on the fuel itself, lower parking charges and lower rates of road tax for diesel cars.

The impact of these policies has been dramatic. Looking only at the situation in Great Britain, in 1994, 1.6 million cars with diesel engines were registered to drive. In 2014, this number had risen to 10.7 million. There has also been a fall in the number of petrol powered cars over the last decade – from 22.0 million in 2004 to 18.6 million in 2014. There were 240,000 gas, electric or hybrid cars registered in Great Britain in 2014.

150923 registered cars

The data above are for registered cars; the picture is even more striking if newly registered cars are considered. Only 6% of new cars in the UK in 1990 were diesel powered, compared to 50% in 2014.

150923 diesel_new

Running on empty?

Although diesel engines generally use less fuel than petrol engines, they produce more pollutants which can be harmful if inhaled. Pollution control standards are meant to limit diesel engines from emitting the most dangerous of these, but increases in urban pollution in the UK have cast doubt on the effectiveness of these standards and the safety of diesel in general. This has led to calls (including from the London Assembly Environment Committee in July this year) for diesel cars to be banned from urban areas.

The latest allegations may serve to increase pressure on policy makers to either reverse incentives to buy diesel powered cars, or to tighten emissions testing and standards. The impact on consumer behaviour could be even greater, and concerns that sales of diesel cars will decline have already led to falls in the share prices of car manufacturers which produce a disproportionately large number of diesel cars (but are not implicated the recent allegations) such as BMW and Volvo.

If mounting concerns about emissions and the current allegations do lead to a reversal in the popularity of diesel cars, the automotive industry would be forced to respond in a profound way. The investment required to refit diesel oriented production plants, combined with the R&D expenditure needed to develop new engines capable of passing emissions tests without running on diesel would be enormous, and could dwarf current efforts to ‘green’ the world’s cars.

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