Stringent emission norms to reduce the uptake of conventional diesel engines, while stimulating plug-in hybrid electric vehicles (PHEVs) and battery electric vehicles (BEVs) sales
Diesel vehicles have a tough year ahead, thanks to stringent emission regulations formulated by several countries, while the sales of electric vehicles (EV) are set to boom, finds the Global Powertrain Outlook, 2019. Diesel vehicles witnessed a strong decline in sales in 2018 across key European countries as consumers started moving towards cleaner technologies.
In Europe, the share of diesel engines fell by a substantial 8% in 2018. The United Kingdom and Germany registered a sales decline of over 20% in 2018 compared to the previous year. In emerging markets such as India, the share of diesel vehicles is estimated to have dropped from 47% to 27% in the first half of 2018.
In Europe, 2019 is likely to be another bad year for the diesel engine market, with sales expected to drop by 4-5%. Original Equipment Manufacturers (OEMs) in North America are likely to return with the ‘clean diesel’ campaign, with a refreshed set of diesel engines for pickup trucks, SUVs and crossovers.
Depending on the impact of factors such as taxes on diesel cars and fuel, and advancements in e-mobility, the share of diesel engines is likely to decline to 37.5% by 2020. In Europe, the share of diesel engines will decline to 30-32% in 2019.
Incentives, emission norms to boost EV market
Around 1.7 million EVs are expected to be sold globally this year, up from 1.3 million in 2018, with European Union, Japan, and China leading the boom. The EV industry is expected to gain momentum from governmental support and the growing autonomous car market.
In Europe, 325,925 battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs) were sold in 2018, second only to China, which sold 980,000 units during the same period. Backed by its new energy vehicles (NEVs) policy, China will continue to do well in this segment in coming years. Under the NEV policy, purchase incentives are offered for EVs and PHEVs. China plans to sell 5 million such vehicles by 2020.
Japan, with its full hybrid vehicles, will continue to dominate the market. The introduction of the new Prius PHEV by Toyota in 2018 injected significant momentum into the Japanese EV market. Nissan Leaf and Mitsubishi Outlander are also adding to sales volumes, with these three models contributing to more than 90% of the overall sales.
South Korea is also making game-changing plans to popularize EVs, and is in the process of amending its legal framework to make the market more EV friendly. In 2016, the country began offering a subsidy of up to $12,000 for the purchase of an EV, with the city of Seoul having announced plans to install 30,000 level-2 charging stations at an average of one every two kilometers by 2020. The country’s EV incentive schemes will make EVs cheaper than their gasoline counterparts.
Gasoline engines will be in demand in Europe
Anti-diesel legislations have resulted in gasoline engines rapidly replacing their diesel counterparts in Europe. Even as a number of buyers opt out of purchasing diesel vehicles, more OEMs are set to push diesel to the backseat. The compact and mid-sized SUV market will continue to boom in Europe.
Meanwhile, OEMs such as Nissan, Hyundai and PSA are aiming to implement 48V mild hybrid systems in their compact/mid-size cars. Such a move is expected to popularize this technology in gas powertrains. This approach is aimed at improving fuel efficiency using energy recuperation as opposed to it being used for running electric turbo. Costing nearly $1,000 less than a diesel equivalent, several OEMs are serious about using mild hybrids as a short-term remedy to meet CO2 emission targets, amid falling diesel vehicle sales.
8.4% drop in diesel engine sales in the U.S.
A little more than 132,000 units of diesel vehicles were sold in 2018, which is an 8.4% drop from the previous year. However, OEMs have announced more diesel options in the popular pickup trucks range, and a few mid-sized SUVs. Most of them are for the model year (MY) 2019. In the lower segments, sales of diesel engines will continue to decline in 2019.
Meanwhile, the sale of EVs in the North American region is expected to reach around 210,000 units, in 2018. Sales are expected to grow faster this decade than in the next, due to the impetus from OEMs involved in developing the required infrastructure.
The latest phase of Corporate Average Fuel Economy (CAFÉ) standards regulations is being deliberated again as the U.S. government is considering freezing the 2021 standards through the 2021-2025 period. Automakers, however, are continuing with electrification by developing highly flexible platforms in anticipation of the varying demand. Advanced combustion technologies that enhance the operational efficiency of engines will play a major role for some OEMs in achieving CAFÉ targets and revolutionizing their vehicle portfolios, which will also compete against hybrid vehicles.
After a decade’s growth, China’s passenger vehicles market to slow down
The Chinese passenger vehicle market is likely to experience a slowdown in 2018. After 10 years of positive sales growth, Chinese customers are reducing their high consumption spending and willingness to purchase vehicles. The main reasons behind this are the rapid development of the housing index and the slowest-ever GDP growth recorded since 2009 in the third quarter of 2018, at 6.5%.However, the NEV credit policy, which will take effect in 2019, is likely to boost the EV market in the long-term.
The credit scheme works in per cent, but functions as a points system in which points are awarded according to a complex formula based on production levels and factors such as energy efficiency and range. Driven by incentives, gasoline powertrain will gradually be replaced by EVs. However, purchase incentives on EVs will be reduced in 2019. For instance, BEV purchase incentive will be at $1,350-$4,500 in 2019 and 2020, compared to $1,800-$6,000 during 2017 and 2018.
In conclusion, while 2019 is likely to be a tough year for diesel powertrains, the EV market is poised for global growth, even with minimal governmental incentives.
For more information on the Global Powertrain Outlook, 2019, please contact Arvind Noel Xavier Leo, Industry Analyst– Powertrain & EV Practice, Mobility at arvindl@frost.com
