The future market of diesel powertrain for passenger cars, european and global

Michel Costes Jamel Taganza

Jean-Michel Prillieux Jean-Bruno Monteil

[email protected]

http://www.inovev.com

Last update: 20/5/2014 13:00

THE FUTURE MARKET OF DIESEL POWERTRAIN FOR PASSENGER CARS,

EUROPEAN AND GLOBAL

mailto:[email protected]

http://www.inovev.com/

INTRODUCTION

Diesel engines for passenger cars has developed quickly for the last two decades to reach in 2013 more than half of the market in Europe and India, and one third of Korean market. However it is not developed in other main automotive regions of the world (such as North America, Japan and China). And it is now strongly challenged, in particular in Europe, by new technologies, and it must adapt itself to new regulations and standards. The objective of this presentation is to shed light on: the future of diesel engines in the world with a focus on Europe. We will scrutinize the state of the art, analyse key factors of changes and build scenarios for future. Within this frame, following issues will in particular be addressed:

• Why diesel is used for passenger cars in Europe and not outside Europe?

• Will diesel motorisation decline in Europe or maintain its position?

• Do exist significant development opportunities outside Europe?

2 May 21 and 22, 2014

Presentation map

Introduction Methodology Definitions and classifications

State of the art: European and Global

Automotive market by itself :

• World

• Europe

Diesel powertrain market: world and Europe

• World

• Europe

Future

World

Europe

Conclusion

Key factors of change

World

Europe

3 3 May 21 and 22, 2014

Methodology

Collecting Raw Data

Source: Car Industry and Countries Governments

Type of data: -Economical (production and registrations) -Technical (innovations, processes, materials…)

1 Treatment

Technical data: - Post of information and

analyses by automotive players on the Inovev Internet platform.

- Disassembly of cars.

Economical data: - Putting into Inovev’s

standards - Estimation of production

figures from sales data

2

Output 3 Analyses

- Market information and analyses

- Technical information and analyses

Experts: - Inovev analysts - Inovev’s worldwide

network

4

Full and coherent databases

Technical information related to

customers’ interest

4 4 May 21 and 22, 2014

MARKET AND

TECHNICAL DATA

Definitions and classifications

Motorisations

100 % thermal engine

• Spark ignition engine (gasoline, LPG, alcohol, other fuels)

• Compression ignition engine (diesel)

Hybrid engine

• HEV gasoline (non plug-in vehicles)

• PHEV gasoline (plug-in vehicles)

• Hybrid diesel

100 % electric engine

• BEV (battery engines)

• Fuel cell

Diesel powertrains =diesel engines=compression ignition engines

Passenger Cars (PC) and Utility Vehicles (UV) European classification. “Passenger Cars” do not include European Light Utility

Vehicles (LUV) but include some vehicles classified as “Light Trucks” in NAFTA (like MPVs and SUVs)

Market segments)

Segment 1: European classification: A, B, C, D, E,F

Segment 2 (in combination with segment 1): Bodies (sedans, SUV, crossovers, SW/estates, coupes…

Production quantities

Vehicles assembled in a given plant;

CKD s and SKDs are counted where they are assembled (and not produced).

Variable geometry Europe: Europe 28, Europe 28 + Turkey, Europe 28 + Turkey + Russia

5 May 21 and 22, 2014

I. State of the art: European and Global

Automotive Market by itself World Europe

Diesel Powertrain market World Europe

6 May 21 and 22, 2014

Automotive World Market: by location of registrations (all motorisations)

7 May 21 and 22, 2014

PC registrations in Asia (2005-2013) by countries World PC registrations (2005-2013) by regions

World PC registrations (2005-2013) Total

Charts available in Premium 2 access



Eight countries control most of the worldwide production: Japan, USA, Germany, France, South Korea, China, Italy, India.

Automotive World Market: by control country (all motorisations)

8 May 21 and 22, 2014

Number of passenger cars by control regions

Inovev definition of a control country: Country where final decisions are taken and generally major Design/Engineering centres are located. For instance UK, Spain, Thailand are major production countries but small control countries; This definition may be argued but has the advantage to give a complementary view of the picture of the world automotive industry.

Number of passenger cars by control countries

Charts available in Premium 2 access Charts available in Premium 2 access




9 May 21 and 22, 2014

Decline in sales and production

Structural factors combined to a depressed European economy explain this decrease:

Car is less and less a social status object.

New mobility ways have developed and will continue to develop: better and better public transportation, car sharing and pooling, 2-wheelers …

However the decline in production has been softened by the increase of German exports, in particular to Asia.

Automotive European Market (all motorisations)

10 May 21 and 22, 2014





11 May 21 and 22, 2014

World diesel powertrain market: registrations 2013

Use of diesel powertrain is restrained to some regions of the world

BREAKDOWN OF FUEL REGISTRATIONS 2013

12 May 21 and 22, 2014

Diesel: 13% of the PC in the world. 53% of PC in Europe. Europe: 72% of diesel PC in the world.







13 May 21 and 22, 2014

Registrations of compression engine PC in European Union from 1994 to 2013)

Diesel market share in the different European countries from 1994 to 2013.

Diesel car registrations in the European Union 27 countries (in volume):

In 2011: 7.6 million of passenger cars (56 %)

In 2013: 6.5 million of passenger cars (53 %).

Market share of diesel cars in European Union (27 countries) and in some countries:

- Germany - France - United Kingdom - Spain - Italy

Registrations: Total European Union 27

14

Registrations: European Union 27by countries


Current diesel powertrain market in Europe

• While the hierarchy of proportion of diesel engines is: D, C, B, E, F, A the order in terms of volume is: C, B, D, E, F, A

European diesel powertrain market

15 May 21 and 22, 2014

Production of diesel cars by segments - % Production of diesel cars by segments - Numbers


Current diesel powertrain market in Europe


16 May 21 and 22, 2014

Gasoline Diesel/Gasoline

Fierce competition from capacities of 1400 CC


II. Key Factors of Change

World Europe

17 May 21 and 22, 2014

Future of diesel Powertrain: World (all motorisations)

World automotive market: forecast

The global car market will continue to grow in the next years.

Growth will continue to be drawn by China, but other countries will contribute more and more to the rise, in particular “new emerging countries”.

18 May 21 and 22, 2014



Key Factors of Change : World

The main question which arises is: may some non-diesel countries come to diesel?

Actually diesel will remain in the future a less consuming powertrain than a gasoline engine, even if the difference of consumption with gasoline powertrains will continue to decrease.

The main drawback of the diesel engine remains its higher level of emissions of Nox and particulates. But these levels have decreased significantly.

The choice will depend on the energy policy of the different countries

Pollutant emissions Decrease of consumption and saving of CO2

19 May 21 and 22, 2014

II. Key Factors of Change

World Europe

20 May 21 and 22, 2014


Why has diesel engine developed in Europe?

The specific positioning of Europe is the result of strategies and policies having been implemented and pursued over decades.

Two main motivations have fostered these strategies and policies: the needs to:

• Decrease energy consumption.

• Value the heavy cuts of the oil.

These needs pushed:

• Some European States to favour the diesel motorisation in terms of taxes.

• European Union to differentiate emission norms between gasoline and diesel engines.

• Carmakers to develop more and more sophisticated technologies for diesel powertrains.

As the needs of European States were different, no common strategy/policy was developed in the European Union. Results were a contrasted development of diesel powertrain in Europe.

21 May 21 and 22, 2014

Key Factors of Change : Europe

Different factors may change the market in the next years:

Car market by itself (all motorisations included)

Tax policies of the European States.

European norms.

Technological progress of technologies

• diesel technologies

• technologies of competing motorisations: gasoline and electric/hybrid powertrains.

Carmakers strategies.

22 May 21 and 22, 2014


Car market by itself (all motorisations)

23 May 21 and 22, 2014

PC registrations in Europe (27 countries) – 2000-2018 PC production in Europe (27 countries) – 2000-2019




Tax policies of the European States

• Diesel fuel is more expensive to produce than gasoline fuel.

• In order to favour diesel fuel for automobiles, European States have set taxes, with the result in most European countries of a diesel fuel less expensive for the consumer than the gasoline fuel.

• On one side, European States can be tempted to decrease the advantage for diesel fuel:

- Some reasons that had lead European States to set taxes favourable to diesel fuel are not valid any more.

In particular, the situation relating to imports and exports of gasoline and diesel has changed. The tax incentive was decided at a time when it was necessary to use more diesel in Europe for economic reasons. Due to the rise of diesel engine vehicles, Europe must now import diesel. In France for instance, the deficit of trade balance due to diesel fuel imports account for 13 billion Euros per year, i.e. 20% of the total deficit of the country.

- In some countries European Union, various organisations and lobbies highlight with a strong voice the nuisances of diesel in terms of pollution.

24 May 21 and 22, 2014


- The tax advantage is not the main factor prompting the consumer to choose a diesel motorisation.

- The new diesel engine vehicles responding to the new norms remain soberer as gasoline engine vehicles, and are cleaner and cleaner.

25 May 21 and 22, 2014

Putting taxes on new vehicles is not very productive in terms of pollution decrease.

-It is now difficult for governments to reduce rapidly the tax differential. Diesel engine vehicle owners might have a loss of confidence into a government which incites them to buy engine diesel vehicles and change the rules afterwards. Besides, decreasing the differential means either decreasing the taxes of gasoline fuel (which means a financial loss for the state), or increasing the taxes on diesel fuel (which might be unpopular).

-The best way to reduce pollution and consumption is to replace old vehicles by new vehicles.

Tax policies of the European States

• On the other side, there are many brakes to decrease the tax advantage:



Anti-pollution standards are more stringent for diesel engines from Euro V.

Particulate filters have been and are widely used in order to comply with Euro V. Some improvements are in progress in order to filter smaller and more toxic particles.

Selective NOx reduction catalysts should be used in order to pass Euro VI standards in September 2015 (SCR systems with added urea or catalyst).

Convergence of standards between diesel and gasoline over time: Euro 3 (2001), Euro 4 (2006), Euro 5 (2011), Euro 6 (2015)

Emissions in mg/km - Passenger cars

26 May 21 and 22, 2014

European norms

Innovations in technologies for competitive engines

Competition between diesel engines and alternative motorisations have increased very much over the last 5 years: competition with gasoline engines, but also electric-equipped vehicles.

Thermal engines

• For same power output:

• traditional gasoline engines produce more CO2 compared to diesel engines: 15 to 20% according to carmakers data.

• gasoline direct injection engines, the gap is weaker: 0 to 15 % according to carmakers data. VW Group is the leader in the development of these engines, which are used in Golf, Passat, A1, A3 and A4.

• Gasoline engines become smaller and smaller for the same output (downsizing)


27 May 21 and 22, 2014

Average capacities weighted by the number of vehicles (production in Europe)


Innovations in technologies for competitive engines

Competition between diesel engines and alternative motorisations have increased very much over the last 5 years: competition with gasoline engines, but also electric-equipped vehicles.

Electricity-equipped engine vehicles

• Hybrid gasoline vehicles are in direct competition with diesel engines. They have made a breakthrough in Japan and USA. But the quantities remain modest: 1.7 million vehicles (HEV + PHEV) in 2013 into 72 million passenger cars. Hybrid diesel vehicles are expensive and will be restrained to a niche market (30 000 vehicles in 2013).

• Battery electric vehicles will develop in the dense areas. Around 150 000 vehicles have been produced and sold in the world in 2013. The rise will be slow at the beginning but accelerate strongly afterwards.


28 May 21 and 22, 2014

III. Future: European and Global

World Europe

29 May 21 and 22, 2014

Future of diesel Powertrain: World

World automotive market: main countries

USA

• USA have always been reluctant to use diesel engines for passenger cars. As neither the energy saving nor the CO2 emissions have ever been a chief concern, they privileged the reduction of Nox and particulates against reduction of consumption and CO2. Consequently they had not invested in technologies relating to design efficient engines nor market appropriate diesel fuel.

• But situation may change. USA have developed now a better diesel fuel. And they can feel more concerned by energy saving and CO2 emissions under international pressure.

• It is to be added that diesel engine vehicles are very well adapted for many regions of the USA which have a low density of population and in which pollutants are diluted (with clean diesel of Euro 6, it means the combination of small emission per car with low number of vehicles per square km).

30 May 21 and 22, 2014

Future of diesel Powertrain: World

World automotive market: main countries

Japan

• The situation in Japan is quite different from the USA’s, as most regions are very densely populated. Hybrid and electric vehicles seem more adapted to this country. However electricity must be produced in a country which has some willing to withdraw from nuclear energy.

• Next-Generation Vehicle plan displays government targets for diesel engine vehicles:

• in 2020: 5%

• and in 2030: 5-10 %.

China

• China has many densely populated areas, but also less populated regions. China has to face severe pollution issues in big cities. The best way from an environmental point of view would be electric and hybrid vehicles. But these vehicles remain expensive and need investments for charging stations.

• Clean diesel engines would therefore be an excellent compromise for many regions of China.

31 May 21 and 22, 2014

III. Future: European and Global

World Europe

32 May 21 and 22, 2014

As the overall passenger cars production will increase in Europe, diesel engines production may also increase even if its market share will decrease. Diesel production share will decrease slowly from now to 2020. However the decrease of diesel share might be stronger in case that European states decide new scrapping bonuses (which will favour the purchase of small gasoline engines) or measures in favour of electric-equipped vehicles.

Future of diesel Powertrain: Europe

33 May 21 and 22, 2014


Conclusion

34 May 21 and 22, 2014

Conclusion

Diesel powertrain is often and regularly attacked by organisations putting on the front drawbacks of diesel, in particular its higher emission levels of NOx and particulates. However differences between pollutant emissions of diesel and gasoline powertrains have narrowed. On the other side, clean diesel powertrain remains less fuel-consuming than its gasoline competitor, and then enables both saving resources and protecting our earth (less CO2 emission). At a time when:

Many countries develop further the automobile use (in particular BRIC and new emerging countries) and many countries have to face a steep energy need increase.

Traditionally developed countries commit themselves to reduce their CO2 emissions and have to contribute to the earth resources saving.

New clean diesel powertrain remain a good option for many uses. It will be challenged in Europe by new efficient direct-injection gasoline engines and electric-equipped vehicles (which will develop in densely populated areas). The market share (registrations) of diesel will decrease but production in Europe will decrease much less and might even increase (due to exports to fast growing countries).

On another side big markets become accessible in other regions of the world.

35 May 21 and 22, 2014

Postal address: 34 rue Camille Pelletan 92300 Levallois-Perret France Phone: + 33-952 96 06 68

Contacts: Managing director

Michel Costes [email protected]

Sales and marketing Jamel Taganza [email protected]