‘Perfect storm’ could see the end of diesel domination

Diesel dominance of the company car market could disappear within five years, according to a Fleet News poll.

More than half (52.5%) of respondents believe petrol powertrains and alternatively fuelled vehicles (AFVs), including plug-ins and hybrids, will account for the lion’s share of fleet registrations come 2021. This rose to four out of five (80.9%) by 2026, while just 7.2% said diesel’s dominance would endure for at least the next 25 years.

However, it would require a seismic shift in fleet registrations, not seen since the introduction of the CO2-based taxes in 2002, for diesel to lose majority market share within five years.

Figures from the Society of Motor Manufacturers and Traders (SMMT) show that sales of new diesel cars accounted for just 14% of all new car registrations in 2000. 

Today, almost half (48%) of new cars are diesel and they hold an even greater share of the company car market, thanks to the tax savings and fuel consumption benefits they offer.

Tamzen Isacsson, director of communication and international at the SMMT, said: “Diesel cars continue to be very popular, accounting for almost two-thirds of new fleet and business registrations.” 

So far this year, SMMT figures show that 59.4% of fleet registrations have been diesel, with petrol accounting for 36.9% of the market and AFVs 3.7%.

The split has remained virtually unchanged for the past four years. In 2012, diesel accounted for 62.7% of the company car market, petrol 35.7% and AFVs 1.6%.

Isacsson explained: “Although we have seen a rapid rise in alternatively-fuelled vehicles in recent years, the numbers are still relatively small and diesel continues to present numerous advantages for business users, including low CO2, low tax liability, impressive fuel efficiency and ultra-low NOx emissions.”

However, proposed changes to the company car tax regime, real world testing, air quality concerns and a greater choice of alternative powertrains could provide the perfect storm.

The City of London Corporation took the decision last month to remove new diesel vehicles from its procurement process. 

Like Camden Council, which announced a ban earlier in the year, it will no longer lease or purchase diesel models when replacing its 300-strong fleet, choosing instead to adopt petrol or hybrid alternatives. 

Chris Bell, head of procurement at the City of London Corporation, said: “We are taking responsibility for the
cleanliness of our fleet and encouraging the use of low and zero emission vehicles with our partners.

He continued: “It complements the work that we are doing to support many city businesses which are also cutting back on vehicle deliveries and using more hybrid vehicles.”

It has been spurred into action by the air quality crisis facing the capital – according to the latest research, almost 10,000 Londoners die every year because of pollution.

Currently, 38 out of 43 UK geographical zones are failing EU air quality standards due to high levels of nitrogen oxides (NOx) – the gas emitted by burning fuels, especially diesel.

The Mayor of London, Sadiq Khan, is considering a range of measures to tackle air quality in the capital, including the expansion and earlier introduction of the ultra-low emission zone (ULEZ).

Khan also wants to add an additional premium to the congestion charge for the most polluting vehicles from 2017 and is researching the merits of a diesel scrappage scheme.

Five cities outside London – Birmingham, Leeds, Southampton, Derby and Nottingham – will also be given charging powers to tackle pollution.

The Government wants public sector fleets to lead by example on NOx, with minimum mandatory standards on emissions for cars, vans, buses and trucks outlined in a new national fleet procurement strategy due to be published this year.

Private sector suppliers could be forced to follow suit, if the public sector specifies the standards in tenders, as the Government suggests.

Its long-term vision is for nearly all cars and vans in the UK fleet to be zero emission by 2050. This will mean that by 2040 nearly all new cars and vans will need to have zero tailpipe emissions.

Faced with what it described as the increasing “demonisation of diesel”, the SMMT launched a nationwide consumer campaign last year. It was quickly followed by a Europe-wide initiative, called the Clean Diesel Tech campaign, organised by Europe’s automotive industry to coincide with the launch of the latest Euro 6 engines, a year ago.

Since 1992, the EU has introduced increasingly stricter limits on vehicle emissions through a series of ‘Euro’ standards. Euro 6 is the latest and most stringent of these standards, which all new cars must now meet. 

It has reduced NOx limits for diesel car engines by 84% and particulates (PM) by 90% over the past 15 years. 

However, the fuel was dealt a double blow last year. Volkswagen Group was forced to admit that ‘defeat devices’ were used during NOx emissions tests to mask the true level of pollution produced by some of its diesel engines.

The controversy was swiftly followed by an announcement that the Government would postpone April’s planned removal of the benefit-in-kind (BIK) tax 3% diesel supplement – handing the fleet industry an unexpected BIK and Class 1A national insurance bill for £1.36 billion over the next five years (Fleet News: December 10, 2015).

Coupled with further changes to the company car tax regime, which are currently out for consultation (Fleet News: August 14), it could push more company car drivers towards smaller petrol engine cars, plug-in hybrids or electric vehicles (EVs).

Cars powered by the latest smaller-capacity turbo petrol engines are now offering lower P11d prices, NOx and particulate emissions than their diesel counterparts.

A recent Fleet News online poll showed a possible change in attitude, with almost two-thirds (64%) of respondents saying they would consider replacing their diesel car with one of the latest small-capacity petrol-engined cars.

Plug-in cars are also gaining traction in the fleet market. Almost three-quarters (72%) of plug-in cars were registered to businesses in the first six months of the year which, including July’s registrations, equated to more than 15,000 units – a 45% increase when compared to last year (Fleet News: August 18).

A KPMG survey published earlier this year found that 79% of UK automotive executives believe that hybrid electric vehicles would be the powertrain of choice by 2030.

The Low Carbon Vehicle Partnership (LowCVP) believes the development of new powertrains could sound the death knell for diesel in the long term. 

A spokesman told Fleet News: “Diesel’s dominance of the fleet market is likely to decline in the long run, because of the range of new technologies now gaining a foothold in the market. 

However, he added: “As we have seen in the bus and truck markets, when equipped with the right technology to be compliant with the Euro 6 standards and tested under a more robust, real world test cycle, diesel can still offer many performance and emissions advantages. 

“Don’t rule out diesel yet, but consider the cleanest and most efficient models alongside the new alternatives.”