These automakers earn quite a huge share of sales via diesel engines in Europe. Soon that could collapse.
There are currently a few potential catastrophes brewing for the auto industry that seem to be on the verge of spilling over and reinforcing the old maxim, “what goes up must come down.” Fresh off of a buzz from strong sales in 2016, the threat of a ballooning and out of control loans and the declining value of used cars due to an oversupply in the market are hazards to the era of automotive utopia we currently find ourselves in. Now, as Forbes claims, there is another menace taking place in Europe.
That would be the slow and potentially overdue collapse of diesel in the European market. Diesel’s demand in Europe has been one that automakers have been happy to supply cars for, and both customers and countries in Europe were once happy for this. Not only does diesel net more mileage per gallon, but it rivals the price of gasoline in many European countries due to taxes on the stuff, making it a popular option. The only problem is that diesel cars are dirtier options for the environment, pedestrians, and inhabitants of city centers, leading some municipalities to begin banning the fuel type. If this becomes the norm in Europe, automakers will face a disaster, especially those from Germany.
That’s because German automakers tend to sell quite a few diesel vehicles, and with a decline in demand due to outright bans, investment in the technology as well as plummeting values for diesels on the lot will cause automakers will lose quite a bit of money. Furthermore, trade-in value for used diesels would drop drastically, slashing profits automakers and banks gain from lease financing schemes. Making matters worse is the fact that the crash could come quickly. At current, around 50% of cars sold in Europe are diesels, but experts predict that the number could fall to 15% by 2025. If this were to happen, automakers would need to rush to fill the gaps with fuel efficient battery-electric vehicles of the pure EV and hybrid types.
More vulnerable automakers like BMW, Mercedes, and Audi are thankfully already going this route, however the impact would still be drastic as diesels make up between 65%-100% of sales for these companies in Western Europe. Governments would have to play things smart to ease the shift and mitigate the damage, especially because the entire push for diesel has stemmed from the government in the first place. All we can say is that the auto market in Europe is going to go through some drastic changes in the coming years.