Diesel Car Sales Peaking In Europe?

Posted on September 29, 2006

Sales of diesel-powered vehicles may be peaking in Europe as stringent emissions laws push up prices, but the popularity of the engine is likely to increase in other parts of the world, auto industry executives said at the Paris Auto Show.

Diesel engines now power about half of Europe's new cars, rising from a market penetration of about 32% in 2000. The vehicles cost about $2500 more than gasoline-powered cars, but typically get 30% better mileage. But the price of the cars and the cost of producing them have been rising in Europe as automakers have to invest in advanced technology to meet stricter emissions standards for diesel engines, which have higher exhaust levels of NOx.

Dan Morris, Mazda Motor Corp's sales and marketing chief, said the fuel efficiency of diesel engines and its higher performance benefits should increase the popularity of the vehicles in other auto markets. "I think diesels have room to grow globally," Morris said.

Industry analysts also see the pace of growth of diesel engines in Europe slowing but sales gaining pace elsewhere. Global demand for diesel light vehicles is expected to nearly double over the next 10 years, increasing from 15 million sales in 2005 to 29 million in 2015, according to J.D. Power and Associates. The auto consulting and forecasting firm said in a recent study that share of diesel vehicles in Western Europe is expected to peak at below 60% of the new vehicle market. "South Korea and India are key markets for diesel growth in Asia and the market in China is continuously developing," Alastair Bedwell, analyst at J.D. Power and Associates, said in the report.

Global carmakers are also eyeing United States, the world's largest vehicle market, for their diesel offerings. Honda Motor Co. recently said it has developed a new and simple diesel powertrain that is as clean as gasoline-fueled cars, unveiling plans to mount it on a car for the U.S. market by 2009 and later to other regions. DaimlerChrysler and Volkswagen, which sell an array of diesel cars in Europe, are also preparing next-generation diesel cars for 2008 U.S. launch.

Klaus Maier, sales and marketing chief for Daimler's Mercedes Car Group, said Mercedes-Benz could meet or surpass the 15% market share that diesel was expected to have in the U.S. premium segment by 2015. It also is stepping up its diesel campaign in other non-traditional diesel markets such as Japan.