Diesel collapse gives automakers carbon headache

The accelerating demise of diesel, long used by carmakers to boost fuel-efficiency, is undermining their plans to meet looming European Union CO2 goals, and avoid big annual fines.

Executives gathered on Tuesday at the Geneva auto show are grappling with unpalatable choices: re-engineer existing vehicles at huge expense, restrict sales of some profitable models; or risk hundreds of millions of euros in penalties.

Others are clinging to the hope that the image of the latest Euro 6 diesels may yet be rehabilitated, and their fortunes restored.

“I am worried,” Volkswagen Chief Executive Matthias Mueller said in a Reuters Television interview.

“But it's our job to solve these problems,” he said. “I'm firmly convinced that diesel will experience a revival.”

But a fresh flurry of bad headlines and the growing prospect of outright diesel vehicle bans are already sending their sales into a steeper tailspin.

While diesels produce more toxic nitrogen oxides (NOx) and particulates than gasoline engines, their efficiency has been instrumental in cutting greenhouse gases. As consumers shun diesels, more carmakers are on track to miss tougher EU carbon dioxide goals taking effect in 2020-21.

Some industry insiders predict carmakers will be forced to rein in sales of larger models by raising prices to avoid overshooting the EU's 95 grammes/kilometre CO2 target.

Ford is reviewing its European line-up in light of diesel's slide and is likely to “restrict the sale of some vehicles that push us over the limit”, a company source said. Steven Armstrong, the carmaker's head of European operations, played down that prospect.

“We're not having to rethink the model line-up,” he said. “Of course we'll have to fine-tune the volume by powertrain by vehicle, but it's not going to be a fundamental shift for us.”

Initially sparked by VW's 2015 emissions test-cheating scandal and subsequent studies exposing the true levels of NOx emissions, the diesel slump has since deepened rather than stabilising, as Mueller and others had hoped it would. Sales of diesel cars fell 8 percent in Europe last year, reducing their market share to 44 percent from a 55 percent peak in 2011.