The VW emissions affair has put a renewed focus on emissions testing regimes and how they may affect the future powertrain make-up of the European passenger car market.
IHS Automotive perspective | |
Significance | Diesel market share in Europe will progressively drop off between 2016 and 2027 on an average of 1.3% per year as more stringent emissions testing is introduced, while changing consumer tastes in the wake of the VW emissions affair may also play a part in the longer-term outlook for diesel. |
Implications | The "real driving emissions" testing regime is already being trialled in Europe ahead of a phased introduction in 2017 and 2019, while the scheduled adoption of the World Harmonized Light Vehicle Test Procedure is due in 2021. These tests will put significant cost pressures on OEMs in terms of building diesel vehicles that will be able to pass the tests and will contribute to the decline in diesel share in Europe. |
Outlook | With emissions testing regimes having been much in focus in the wake of VW EA189 diesel engine emissions affair there is renewed scrutiny over their stringency and the timescale for adopting tougher tests such as RDE and WLTP in Europe. While the adoption timescales are unlikely to be shifted drastically, a combination of tougher testing, revisited car tax structures and shifting consumer attitudes will see a consistent decline in diesel share in Europe over the next decade. |
The Volkswagen (VW) diesel emissions affair has brought a renewed focus on emissions testing regimes and how they are implemented worldwide, and nowhere has the focus been more intense than in Europe. As we have already seen (see Analysis: 8 October 2015: Differing global emissions testing standards at the heart of the VW affair), one of the main factors in the US Environmental Protection Agency's (EPA) discovery of the "defeat device" on the EA189 powertrain was the difference in demands of the emissions testing regimes between Europe and the US, with the latter much more exacting in terms of testing for Nitrogen Oxide (NOx) emissions. Regulators in Europe have also become increasingly concerned over the discrepancy between lab emissions testing results under the current EU testing standard, the New European Drive Cycle (NEDC), and the real world driving emissions. Between 2000 and 2014, which coincided with the introduction of the Euro-III to Euro-VI emissions norms in Europe, the NOx emissions limits were lowered by 85% as a result of the increasing stringency of the respective upgrade in emissions standard. And yet actual on-road emissions levels fell only 45%. This discrepancy has led to the European Commission pushing to close this gap through the introduction of the new Real Driving Emissions (RDE) testing regime which aims to create a closer correlation between test results and real world driving emissions. The new RDE procedure is designed to complement the existing NEDC test cycle and the forthcoming adoption of the Worldwide Harmonized Light Vehicles Test Procedures (WLTP). The graphic below shows the current implementation schedule for both RDE and WLTP. RDE has already been introduced for the purposes of monitoring with new model types before its mandatory phase-in from September 2017 (with Euro-VI-c) to September 2019.
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Source: IHS Automotive |
Outlook and implications
The emissions testing regimes that govern the compliance of diesel passenger cars for public sale have come under scrutiny as a result of the VW emissions affair. However, long before the situation came to a head in September, there was growing will among regulators to tackle the acknowledged discrepancy between lab emissions testing and real-world driving emissions. The main point of discussion between the regulators and the OEMs regarding the implementation of RWE has been the Conformity Factor (CF) – (the upper limit allowed between the lab result for NOx and on the road result), although a recent Financial Times (FT) report indicated that OEMs have accepted a CF of 1.6 (+60% on the lab result). This remains a huge challenge for them to achieve. In terms of timing, we continue to expect that RDE will come in two phases (September 2017 and September 2019). While the fine detail of the new emissions testing regimes is closer to being agreed, there are still areas to be agreed in terms of future emissions standards. For example, the Euro-VII limit values for diesel and gasoline are yet to be negotiated. But in terms of diesel's future in Europe, what if emissions regulators get tougher in the future on other tailpipe air pollutants because of the raised profile of diesel air quality issues?
In answer to this, the advent of RDE and WLTP is already capturing the vast majority of forward cost implications which will be incurred by OEMs for diesel. This means that in terms of IHS Automotive's sales forecast, any forecast shifts in the medium term, between 2020 and 2025, are already largely understood and accounted for and the move to WLTP circa 2020 already embedded in previous forecasts. So while the VW emissions situation is prompting renewed focus on testing regimes and the regulatory environment, there were already significant targets in place in Europe which will lead to diesel losing share on a consistent basis over the next 12 years. The current/latest Euro-VI NOx limits are still around twice the current US Tier 2 Bin 5 limit values (80mg/km EU vs 44mg/km U.S.), with the US cycle being much tougher. In the wake of the VW affair there might be further regulatory pressure in the future (with Euro-VII) to align closer to the US limits starting from Euro-VII, after the full implementation of WLTP. The net result of the VW affair on the forecast is that it has been lowered, but not slashed. IHS Automotive's latest forecast sees EU28 diesel vehicle sales falling by an annual average of 1.3% (modulated depending on events in each year) between 2016 and 2027. This equates to taking 2.4 million diesel vehicles out of the forecast, with the rate of decline accelerating after 2025.
This article was compiled with the help of Senior Powertrain Analyst Pavan Potluri and was based on slides compiled for the VW emissions crisis initial forecast impact client presentation.