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Volkswagen predicts 'renaissance' for embattled diesel cars

Mar 06 2018 11:00
Elisabeth Behrmann, Bloomberg

Munich - Volkswagen, whose global emissions-cheating scandal has put the future of diesel engines in doubt, expects consumers to return to the embattled technology - and soon.

“Diesel will see a renaissance in the not-too-distant future because people who drove diesels will realize that it was a very comfortable drive concept,” chief executive officer Matthias Mueller told journalists late on Monday at the Geneva International Motor Show.

“Once the knowledge that diesels are eco-friendly firms up in people’s minds, then for me there’s no reason not to buy one.”

Mueller’s comments are bold considering Volkswagen put aside about $30bn in provisions to cover fines, retrofits and legal costs stemming from rigging diesel-emissions systems to dupe government pollution tests. 

The fallout has been wide ranging. Germany is now considering potential bans of diesel vehicles from cities and governments including China, France and the UK have put in place plans to phase out the internal combustion engine. Consumers have also begun to shun diesel, with its share of German car sales tumbling to a third from half since VW’s cheating scandal.

Toyota exit

In contrast to Volkswagen’s upbeat prognosis for a rebound, Toyota is getting rid of diesel versions of its cars this year, offering only two hybrids and one turbocharged gasoline engine in its redesigned Auris model. Ford still backs diesel but sees it disappearing in some segments, according to Steven Armstrong, chief of the automaker’s European operations.

“We still see a future for diesel, although on some smaller vehicles I do believe it will progressively disappear,” Armstrong said in an interview with Bloomberg Television. “We have to work hard to gain consumer trust to make sure they believe the messaging” that diesel is clean.

European carmakers are keen to stick with diesel as an effective and profitable way to meet regulatory demands to cut carbon dioxide output until demand for zero-emissions electric cars takes off. German manufacturers are particularly exposed because of they generally make larger more powerful models.

“We need diesel to get to the CO2 goals,” Herbert Diess, who heads Volkswagen’s namesake mass-market brand, said after presenting the all-electric ID Vizzion concept car that’s capable of driving as far as 650 kilometres on a single charge. “Electric vehicles in many cases won’t keep frequent drivers happy.”

Tougher target

Carmakers in the EU need to lower fleet emissions to average 95 grams of CO2 per kilometer by 2021. Meeting those goals has gotten tougher as demand for diesel cars - which emit about a fifth less CO2 compared to equivalent gasoline vehicles - has slumped amid consumer worries about city centre driving bans.

Daimler, the maker of Mercedes-Benz luxury vehicles, has said its CO2 fleet emissions rose last year, as buyers opted for larger cars.

While diesel’s market share has been dropping in Europe as buyers switch to other powertrains, primarily gasoline, Mueller is predicting a comeback.

“The rules of the game in the EU in relation to climate protection and emissions goals on CO2 are so challenging that governments cannot do without diesel,” he said.

The trickier question though is how will customers react after a steady drumbeat of bad news for more than two years, and facing the threat of driving bans and falling prices for used vehicles.

“At the end of the day consumers have the final world,” Carlos Tavares, CEO of PSA Group, the maker of Peugeot, Citroen and Opel vehicles, said in a Bloomberg Television interview. “We have a very clear strategy in terms of multi-energy platforms, which means we can assemble on the same assembly line petrol cars, diesel cars, electric-powered cars.”

VW’s pledge

Volkswagen pledged last year to spend more than €34bn through 2022 to develop battery-powered and autonomous-driving technology, and it has plans to create electric versions of all 300 cars, trucks and buses sold by its dozen brands by the end of the next decade. Mueller said the company won’t miss the targets the EU has set.

“We’re doing everything to avoid” coming up short, he said. “If there’s less diesel, then getting to that goal just gets tougher.”

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