This post is one in a series of feature stories on trends shaping advanced energy markets in the U.S. and around the world, drawn from Advanced Energy Now 2016 Market Report, which was prepared for AEE by Navigant Research.
In the wake of the VW clean diesel emission scandal, compression ignition engines for light-duty vehicles are undergoing enhanced scrutiny, though the market for these vehicles remains strong globally. Clean diesel vehicles dominate the advanced vehicle market in Europe in a way they do not in the United States. But as VW has struggled to update more than 11 million diesel-powered vehicles globally in response to revelation of its emissions cheating, the German automaker has expressed a newfound interest in a different form of advanced transportation: electric vehicles.
Since it was developed by Rudolf Diesel in the early 20th century, the compression ignition engine has had the advantage of being more fuel efficient while producing greater torque than comparable spark ignition engines. Today’s clean diesel engines are quieter, more efficient, more reliable, and cleaner than older diesel vehicles, thanks to innovations such as allowing for higher fuel-air mixing prior to combustion and the addition of re- circulated exhaust gas to the intake air stream.
Still, diesel engines produce higher emissions of particulate matter and nitrogen oxides. Over the past decade, tightening emissions limits in Europe, North America, and Asia have prompted the development of technologies to clean up these pollutants without sacrificing the benefits of diesel in performance and fuel consumption (and resulting CO2 emissions) compared with gasoline-powered cars.
In September 2015, the U.S. Environmental Protection Agency (EPA) announced publicly what had been alleged for some time: VW diesels were not as clean in the real world as they were in regulatory compliance tests. The resulting scandal has cost the jobs of numerous executives and managers within VW Group and will likely cost the company tens of billions of dollars in fines, lawsuits, and modifications to millions of cars already sold.
The “defeat device” revealed in VW diesel cars in 2015 has called into question the emissions performance of clean diesels more generally, though there is currently no evidence that other manufacturers have circumvented tailpipe emission standards in a similar manner. The use of this method by one manufacturer also does not entirely negate the significant improvements in recent years with diesel vehicles of all classes, including the 90% of heavy-duty vehicles powered by diesel, one-third of which is clean diesel. Companies including Daimler, BMW, and General Motors (GM) remain committed to diesel as part of their technology portfolios for reducing fuel consumption and CO2 emissions in a cost-effective and customer-friendly manner.
Despite the VW controversy in the United States, sales of Clean Diesel Vehicles globally grew strongly in 2015, with revenue up 18% – the biggest year-over-year increase of the past four years – to $288.1 billion worldwide. Revenue in the much-smaller U.S. Clean Diesel Vehicle market was down just 2% in 2015, to $6 billion, from a 2014 peak of $6.1 billion.
While any long-term implications of the VW scandal on the clean diesel market are as of yet unknown, it is clear that VW is now becoming the latest major automaker to show new enthusiasm for EVs. In a recent restructuring, VW has created a dedicated battery car division. VW has already committed to offering plug-in variants (both PHEV and BEV) of all of its mainstream models by 2020; its premium Audi division expects 25% of its sales to be PEVs by 2025.
Navigant Research projects that PEV sales will grow at a CAGR of 21% over the next decade, hitting more than 2.7 million annual sales by 2024. With GM launching the Chevrolet Bolt EV with a 200-mile range and $30,000 price (after incentives) in 2016, significant progress is clearly being made on making electrification appealing to mainstream consumers. VW has announced it will introduce a mass-market BEV as well, entering into competition not only with the Chevy Bolt but also the Tesla Model 3, when it goes into full production next year.
Learn more about the advanced vehicle market in Advanced Energy Now 2016 Market Report, available for free at the link below.