Severe blow to diesel engines

– According to a decision handed down by Germany’s Federal Administrative Court (Bundesverwaltungsgericht) cities that fail to comply with limits on nitrogen oxide may ban cars within their jurisdictions.
– However, the cities’ air quality maintenance plans must be reviewed to determine whether they are appropriate.
– Vehicle owners affected by the bans will not be entitled to financial compensation, while losses in value are to be expected.

Despite the fact that the cities’ air quality maintenance plans must be reviewed to determine their appropriateness, and the fact that some exceptions may potentially be granted, the decision handed down by Germany’s Federal Administrative Court is likely to further unsettle potential diesel buyers and keep sales of diesel vehicles in Germany on a downward trajectory. Retailers, carmakers and suppliers must now all react.

The move places carmakers under increasing pressure to take action aimed at reducing emissions. Economical diesel engines help carmakers to cut the average CO2 consumption of their fleets, as they emit less CO2 than petrol engines despite offering comparable performance.

According to statistics released by the Federal Motor Transport Authority (Kraftfahrt-Bundesamt), sales of diesel vehicles in Germany fell by 17.6% year on year to roughly 89,800 in January. Diesel vehicles accounted for around 33% of car registrations, down 12 percentage points within the space of a year. At the same time, the share of electric power trains (plug-in hybrids and fully electric vehicles) is set to grow only very slowly, from 1.6% today to within the range of 15% to 25% expected by carmakers in 2025.

Potential driving bans on vehicles that meet emission standards lower than Euro 6 will probably have a negative impact on the used-vehicle market. Due to the gradual introduction of driving bans, however, a collapse of the market for older vehicles appears unlikely. The challenges for manufacturers remain substantial due to the stricter CO2 emission standards for 2025 and 2030 that were adopted by the European Commission in late 2017 and can only be met through a rising share of alternative power trains. Still, we believe that all-electric mobility and plug-in hybrids will only prevail if charging infrastructure is expanded, public funding is improved, the range of electric vehicles is extended and a solution to the financial disadvantages is found.

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