According to a leading academics, in as little as fiveyears, only one-in-ten new car sales could be a diesel vehicle. This is afurther decline from the one-in-four currently being sold by manufacturers. Thisdecline is being seen across multiple sectors, including the company car market,where its tax friendly CO2 performance meant diesel cars were a popular choicefor many years.
New figures show that the proportion of diesel cars on theFN50 fleet – the UK’s top 50 leasing companies by risk fleet size – fell fromalmost two-thirds (63.4%) to close to half (50.5%) over the past 12 months. Almosthalf of the cars ordered in 2019 were petrol (47.6%), while only two-fifths(38.8%) were diesel, and sales in the new car market are down by more than afifth in the last year.
While it’s unclear whether the decline in diesel car salesis mirrored in the used car industry, forecasts suggests that the sharp declinein the sale of new diesel cars since 2017 could lead to an undersupply of usedvehicles in 2020 and 2021, which would help sustain residual values.
David Bailey, Professor of Business Economics at theBirmingham Business School has said, ‘“A big shift away from diesel is stilltaking place. In late 2015, diesel accounted for more than 50% of the market,by March last year it was down to 32% and it has fallen further since then.”
The decline in the popularity is being seen across Europe.Having previously dominated half the market, diesel’s share has fallen below30% in Germany. Similar patterns are seen in France, where three-quarters ofnew car sales were once diesel.
Reflecting on the decline, Bailey commented that “If you goback to the turn of the century, diesel as a share of the market in Europe wasonly 10-15%. We then gave (the fuel) loads of tax breaks, because we thought itwas good for the environment.”
However, concerns over the fuel’s impact on air quality hasput paid to its popularity. ‘“People are completely freaked out over diesels”according to Bailey. ‘“They are concerned about falling resale values, they areworried about tighter regulations in cities, higher taxes and its impact on theenvironment.”
He also commented that the Government policy regardingdiesels has been a “complete shambles”. “One part of Government has been saying‘clean diesels are good’, while another part whacks a load of tax on them.”
The Government however has now introduced tax breaks fordiesel company cars that meet strict emissions limits which are defined by theRDE2 standard. As a result, company car drivers are exempt from the 4% benefit-in-kind(BIK) diesel surcharge, while fleets benefit from not having to pay the higherfirst-year rate of VED on new diesel cars.
The NOx limit for the RDE2 standard, which is measured onthe road, is up to 1.43 times the Euro 6 lab limit of 80mg/km for diesel and60mg/km for petrol. Cars achieving this limit are labelled Euro 6d. Carsachieving RDE1, which allows for a margin of error twice the actual limit, areclassified as Euro 6d-temp.
RDE2 will apply to all new registrations from January 1, 2021,before the margin for error – the conformity factor – is removed by 2023.
Peter Golding, managing director
