Diesels Make Comeback in European Markets

PARIS – Sales of diesel-powered cars are making a strong comeback in their traditional markets of Western Europe following a dip in 2009.

Through November, diesels accounted for 51.5% of passenger-car sales in 2010, up from 46.1% in recession-crippled 2009, according to the ACEA, the European auto makers’ association.

Peter Schmidt, whose AID consultancy in the U.K. specializes in diesel watching, says the rebound is continuing this year, with the European market in January at 55.5%, up from 47.7% in like-2010.

Rising fuel prices are behind some of the rebound. Diesel fuel in France now costs about €1.30/L, equivalent to about $5.13/gallon.

“The higher the fuel price, the more economy-conscious motorists become, and the more they are drawn to diesels,” Schmidt says.

Diesel’s market share climbed steadily from 1990 until 2007, when it peaked at 53.6%.

The share dropped a fraction in 2008 when the crisis began, but was seriously affected in 2009 when government incentives in many countries encouraged people to buy less-expensive new cars.

For example, the bonus of €2,500 ($3,400) in Germany amounted to 25% of a €10,000 ($13,600) car such as a Dacia sedan, but only 7% of a €36,000 ($49,000) BMW 3-Series. And in general, gasoline cars cost less to buy, although running costs of diesel models are less because they are more fuel efficient and diesel fuel is taxed at a lower rate than gasoline in many countries.

In Germany, the diesel-vehicle penetration rose from 30.7% in 2009 to 41.3% in the first 11 months of 2010, for a 34.5% increase in volume. Diesels regained ground significantly in Ireland, Sweden, Greece, Austria and the U.K., while market share fell only in Finland and the Netherlands.

Auto makers have been preparing for a rebound in gasoline-engine demand in the small-car sector. PSA Peugeot Citroen, for example, is investing in a new engine plant to make a 3-cyl. 1.0L turbocharged gasoline engine.

The industry expects Euro 6 emissions rules requiring new aftertreatment systems for nitrogen-oxide emissions to add significantly to the cost of a diesel engine, while modern downsized gasoline engines narrow the fuel-efficiency gap.