The Volkswagen diesel emissions scandal is due to have some lasting consequences, not just for the German automaker itself but for the entire global auto industry.

It may lead to a serious contraction of the diesel market worldwide—including in the very near future, the phase-out of a number of current European-market diesel models.

The issue has been pushed to the forefront this year by the allegations (and admissions) that through a software-based “defeat device”—now alleged to be in a wider range of models than anticipated before, including the company’s V-6 TDI engines—Volkswagen has been able to trick regulators in Europe, the U.S., and elsewhere by meeting emissions targets during a specific test-mode cycle, while during real-world driving these models produce at the tailpipe up to 40 times the levels of nitrogen oxides (NOx) permitted.

But the issue isn’t limited to Volkswagen vehicles. The European Commission has said that its data shows a range of currently produced Euro 6 [the current emissions standard for Europe] diesel models now exceed NOx limits by four to five times in real-world driving conditions, without the trickery.

Cheating vs. real-world discrepancies: how different?

This past week, at the Tokyo Motor Show, Nissan chairman and CEO Carlos Ghosn, who is also the president of the European Automobile Manufacturers' Association (ACEA), a group of 15 manufacturers that have significant operations in the EU, commented on the issue and noted that it’s important to distinguish between cheating on a defined test versus the real-world discrepancies that accompany any test standard.

Nissan CEO Carlos Ghosn, at the 2015 Tokyo Motor Show

Nissan CEO Carlos Ghosn, at the 2015 Tokyo Motor Show

“Before working towards that direction, we need to define it,” said Ghosn, suggesting that shoppers shouldn’t see numbers that are so different from those in real-world use. “If I promise you something and you find that it’s not true, you’re going to be even more frustrated.”

“At least when you have a standard, you have one set of measurements with a tolerance that everybody follows,” added Ghosn. “We all want to be transparent because we gain the trust; trust is fundamental to our business.

This past week the ACEA also released a statement noting that the move will bring some serious economic implications because, “as a direct consequence, a substantial number of diesel models will have to be phased out earlier than planned.”

That leaves any growth opportunities for diesel very slim at present, argued Ghosn. “There are certain things within common sense—that this scandal is not going to make diesel more popular in the United States; this scandal is not going to make diesel more popular in Japan. So for the countries that don’t have diesel, I think if you come and say that you have a competitive advantage, a clean diesel, I think it’s not going to be a brilliant campaign.”

Diesels on the decline in Europe?

Ghosn said that the diesel market in Europe is going to depend a lot on the new standard. “Which means that we have to be ready for the decline of diesel no matter what—the decline of diesel in Europe,” Ghosn said.

“There is such a backlash on diesel today—which by the way didn’t start with the unfortunate event of one of our competitors, it started before...But I would say that today is about the maximum that we can expect for diesel in Europe.”

Audi A3 TDI clean diesel - European model

Audi A3 TDI clean diesel - European model

The U.S. EPA hasn’t weighed in on the matter yet with any change in measurement methodology; although both it and the California Air Resources Board are currently testing a wider range of diesels and driving conditions.

As for Europe, the EU is moving fast to tighten requirements on diesel tailpipe emissions. Last week a committee of the European Commission met with member states to approve new rules that will require real driving emissions (RDE) tests for diesel-powered passenger vehicles.

Those new rules are slated to be adopted by September 1, 2017, and are anticipated to help close the gap between laboratory and real-world driving. They include a “not to exceed limit” under worst-case-scenario conditions.

That limit, also called a “discrepancy factor,” will be set at a maximum of 2.1 times the Euro 6 test limit, while it will tighten to 1.5 times the test limit beginning in January 2021.

“The problem right now, as the Commission has pointed out time and again, is that laboratory tests do not accurately reflect the amount of air pollution emitted during real driving conditions,” said the commission in an official release.

The ACEA meanwhile notes that Europe will be the only region in the world with such rules: “As well as having serious economic implications, this will make it more challenging for manufacturers to meet the 2021 targets for CO2 emission reductions, since diesel engines emit 15-20 percent less CO2 than comparable petrol [gasoline] engines.”

This certainly isn’t the first time for industry to say that tightening emissions rules for diesel will choke the market. But we’ll see in coming months how this scandal alters the sales mix.


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