UBS (NYSE:UBS) : Diesel engine share of global car market to ‘almost disappear’ by 2025
A sharp reduction in global diesel penetration – from 13.5 percent today to just 4 percent in 2025 has been predicted in a research note by UBS AG (NYSE:UBS), the Switzerland-based global financial services business. It sees a sharper decline in the fate of diesel than many other industry forecasts, reflecting in part the falling costs of electric and hybrid vehicles.
Heightened public awareness and tighter regulation and emissions have also contributed to diesel’s fall from grace. Europe has been the heartland for its rise and fall: nearly one in two of every new vehicle is powered by a diesel engine. Although sales have been declining slowly, they are now expected to fall from 40 percent to just 10 percent, according to this prediction.
Ironically, the push on diesel in Europe was driven by regulation in the European Union (EU) designed to limit emissions of carbon dioxide because of its role in climate change. But although diesel engines generally emit less CO2 than petrol ones, they are much higher on emissions of NOx – nitrogen oxide and nitrogen dioxide. These gases react to create smog and acid rain, and EU rules on NOx emissions have been tightened in recent years.
Bad news for diesel first rang out in 2013, when the World Health Organization said for the first time that there was a link between air pollution and cancer.
“The predominant sources of outdoor air pollution are transportation, stationary power generation, industrial and agricultural emissions, and residential heating and cooking,” it said. In 2017 new EU rules will come into force, further tightening the real-world impact (as opposed to just laboratory testing) of vehicle emissions.
Volkswagen AG (FRA:VOW3) has played an important part, through the handling of its emissions scandal, in heightening public mistrust of what the consumer is paying for, as opposed to what he or she is actually getting, when it comes to cleaner vehicles.
Diesel’s market share in Europe was predicted earlier this year by LMC Automotive, a leading forecasting group, to drop 2.6 percent to 49.3 percent in 2016, its lowest level since 2009 and the fastest rate of decline in almost a decade. This prediction was based on sales figures from 17 countries in Europe for the first nine months of the year.
New, tougher EU regulation could now “shove carmakers toward greater degrees of powertrain electrification. Those include not just electric cars and hybrids, but also enhanced 48-volt start-stop systems, which can run a car's accessories for longer even as its engine stays switched off during stops for up to several minutes at a time,” says coverage by Green Car Reports.
UBS expects sales of 48V cars to overtake diesel sales globally in 2021, and to account for a quarter of all cars sold by 2025.
In its investment note on the auto-parts supplier Continental AG (ETR:CON), UBS suggests that strong growth of such 48-volt systems – which it calls "mild hybrids" will more than offset the loss of business to Continental from reduced diesel sales.