Craig Thomas 4 Apr 2018 04:16pm

Why diesel still has a future

Diesel demonisation is leading to fleets having to reconsider their choice of vehicles. But is this necessary? And what are the options for the future? Words by Craig Thomas

Caption: Rex Features

Volkswagen has a lot to answer for. The scandal that engulfed the company over its fitting of “defeat devices” to its diesel cars in an attempt to subvert CO2 emissions regulations has snowballed into a campaign against all diesel vehicles, one of society’s biggest bêtes noires. In the wake of the scandal, we’ve seen governments saying that the sales of vehicles powered by internal combustion engines will be banned, from an ambitious 2025 (Norway) to a more feasible 2040 (the UK and France).

There has also been change in the emissions testing process, with the adoption of the new Worldwide Harmonised Light Vehicles Testing Procedure, which uses real driving emissions data to measure CO2, as opposed to the previous laboratory-based protocols.

Air quality issues have also leapt up social and political agendas, with clean air zones and even outright bans being established, which will make life more expensive or even downright awkward for diesel drivers.

Volkswagen has been a catalyst for legislators to introduce measures that were already being considered. The need for everyone to address climate change and air quality has become more urgent in recent decades and the Volkswagen scandal was perhaps just the straw that broke the environmental camel’s back.

Either way, huge changes in road transportation are under way and our reliance on fossil fuels is about to be seriously challenged.

Not dead yet

Fleet operators, many of whom are heavily reliant on diesel as a fuel – because of the cost benefits it brings and the positive effects those have on lowering fleet vehicles’ total cost of ownership (TCO) – will particularly feel the impact of measures to reduce its use.

The reality is, of course, that diesel still has a place in fleet use, especially as the latest engines – designated Euro 6 in Europe – are much cleaner than ever before, with strict controls on NOx emission and particulate matter. The key for fleets is to choose the right vehicle for the job, which will sometimes be a diesel.

John Pryor, chairman of ACFO, the fleet decision-makers’ organisation, says: “It is for fleets to look at what the requirements for the journey are and then choose the vehicle to fulfil them accordingly. Companies and fleets have to look at the requirement for the job. Sometimes it will be an EV, sometimes it will be a plug-in hybrid (PHEV) and sometimes it will be diesel,
or even petrol.

“Sometimes, they’re going to have to bite the bullet and decide that it has to be a diesel: they know that drivers will be driving into a low emission zone and there’s going to be a cost to that. But at least they know about it. And where people can make a change, they will make a change. It’s a mathematical equation.”

Fleets will continue to use diesel vehicles for many years simply because they’re cheaper
to operate over longer mileages. But do fleet managers and senior management also have to consider diesel’s continued use as a corporate social responsibility issue? \

Understanding diesel technology

It’s fair to say that diesel vehicles are being demonised. And for new vehicles that’s unfair and unwarranted: the air quality-damaging NOx being emitted by Euro 6 vehicles is set at 0.08g/km, compared to 0.25g/km for Euro 4, introduced in 2005. Older diesels are dirty (particulate matter has only been regulated since Euro 5b was introduced in 2011) and there is a watertight case for restricting their use in areas with poor air quality: that case is considerably weaker for Euro 6 diesels, but media coverage has lumped them all together.

As Ian Robertson, editor of Diesel Car magazine explains: “In terms of emissions, Euro 6 diesel cars continue to produce CO2 emissions that are around 20% lower than an equivalent petrol car and, in terms of NOx, the Euro 6 limits mean that the regulations require diesel cars to produce similar levels to petrol cars. Business users can choose new diesel cars with absolute confidence.

“The biggest problem is that the media isn’t differentiating between modern Euro 6 clean diesels and older, dirty diesels that produce higher levels of emissions. In a similar way, many of the regulations will mean that older petrol cars will be outlawed, too, but this never appears to hit the headlines. Clear differentiation between the latest Euro 6 clean diesels and older diesel cars, vans and buses needs to be made.”

Much of the hysteria surrounding diesels will abate in time – although it might take the introduction of Euro 7 regulations in the early 2020s for that to happen.The current attitude towards diesels is undoubtedly having an effect on sales, with demand falling relatively rapidly: the Society
of Motor Manufacturers and Traders (SMMT) recorded a year-on-year 17.1% fall in diesel vehicles registrations in 2017. This fall in demand is yet to hit the used car market, though: SMMT figures show that used diesel car transactions rose 3.3% in 2017, with more than 3.3 million motorists (40.8% of buyers) investing in one.

“The media isn’t differentiating between modern Euro 6 clean diesels and older, dirty diesels that produce higher emissions”

If used diesel values fall, however, fleets don’t necessarily need to be overly concerned, especially as so many fleet vehicles are leased. It’s the leasing companies that will be worried, as Martin Reeves, head of sales at Lombard Vehicle Solutions, explains: “Leasing companies are going to be worried about the fact that they’ve got a load of vehicles on their books that potentially aren’t going to be worth as much as they thought at the end of their life. That doesn’t necessarily affect the fleet customer, directly, unless they do own vehicles.”

Going electric

The alternative to diesel for fleets is to go electric, in part, if not completely.A recent report from Sewells Research and Insight has illustrated the need for fleet operators to recognise how alternatively fuelled vehicles (which includes EVs and plug-in hybrids) are increasing in popularity – sales grew by 34.8% in 2017 – and embrace them.

Report author Mark Sutcliffe says: “At some point before 2020, the majority of fleets – especially those operating vans predominantly in urban environments – will need an emissions reduction strategy that will see them replace a proportion of their fleet with electric vehicles. The timing of this decision and the extent of their commitment to EVs will be the defining strategic choice facing fleet decision makers over the next five years.

“Proactive fleet managers who work out their transition strategy now will more effectively manage their residual value risk and avoid some awkward conversations with their finance and operations directors over the next three years.”

So fleets need to start thinking about that switch now because, as the Sewells report concludes: “The risk for fleet operators in delaying adoption of EVs is that by the time the next phase of emissions legislation makes the switch unavoidable, demand for EVs may already outstrip supply, leading to serious availability issues which could impact on fleets’ ability to operate cost-effectively in urban environments.”

The change seems to be happening already, albeit gradually, says ACFO’s Pryor: “Fleets will be quite happy to adopt electric vehicles – we’ve seen more coming on to fleets. But there is still range anxiety. As that changes and more vehicles have a much longer range, that will disappear. We’ll then come to other issues about where to charge it up, how to charge it up, have fleets got enough charging units? I suspect that they will increase their range, which will lead to less use of petrol or diesel engines, especially when we see EVs with 300- or 400-mile ranges. Then in time, we’ll have hydrogen.”

Many automotive industry experts see the journey as a series of progressions in technology. The product plans of the car industry appear to be geared up in this way. We’re seeing more plug-in hybrid electric vehicles (PHEVs) coming on to the market, with the likes of Volvo, BMW, Mercedes-Benz and Audi leading the way (Toyota and its Lexus sub-brand are also pursuing a policy of hybridisation, but their cars are hybrids that don’t require plugging in, so have shorter electric-only ranges).

“Proactive fleet managers who work out their transition strategy now will more effectively manage their residual value risk”

Volkswagen already has a PHEV Golf, while Kia and Hyundai have launched plug-in variants of their own models. The fall in diesel sales is suddenly exposing manufacturers to fines for not meeting corporate CO2 targets, so the pace of plug-in development will have to be increased.

A load of hot air?

The next stage is the steady stream of new EVs from around 2019-2020. Again, the premium car makers are taking a lead here: this is partly because the technology always tends to be premiered in more expensive models, before trickling down to smaller, less pricey cars, but also because the likes of Mercedes, Volvo and Audi have rather had their thunder stolen by Tesla, which has truly disrupted this area of the car market. So we’ll see the Mercedes EQ electric car range, perhaps more BMW i cars, Audi e-trons, a Volvo EV and the Porsche Mission E, all within the next two to three years.

And then, as Pryor implies, around 2025 to 2030 onwards we could be seeing hydrogen fuel cell cars (FCEV) starting to be launched in numbers. These vehicles can be filled with hydrogen in minutes, will have ranges comparable with petrol and diesel vehicles, but only emit water, as the hydrogen reacts with air in the fuel cell to produce electricity to power motors.

Toyota already has its Mirai on sale in the UK, with Hyundai about to launch its second FCEV, the SUV-style Nexo, later this year (replacing its ix35 FCEV). The drawbacks for fleet use currently are that they’re expensive – the Mirai is £66,000 – and that there are fewer than 20 publicly accessible hydrogen filling stations in the UK.

But if the refuelling infrastructure issues are overcome – and they could be if more countries adopt a wider hydrogen economy – FCEVs could be a serious option for fleet vehicles needing to cover longer distances, with EVs being used for shorter, more urban-oriented tasks.

Which leads us back to the need for future fleets, in the coming years and decades, to have vehicles powered by petrol and diesel, electricity and even hydrogen. Each will have a place in the fleet mix, ensuring that operators minimise their costs and the impact that their fleet has on the environment.