Volkswagen TDI diesel vehicles owned by Phil Grate and family, Seattle, WashingtonEnlarge Photo
Diesel-powered cars, long a staple on European roads, are starting to lose favor as million of dollars of inventory begins to pile up in used diesel models.
The inventory, largely recent models certified under the superseded Euro-5 emission standards, has boomed recently over the possibility the cars will not meet future emission limits to be enacted in German cities.
German automakers and their various brands—BMW, Mercedes-Benz, Audi, Volkswagen and more—have responded to the tougher regulations with diesel software-update initiatives.
Even with the updates, which German automakers claim would let the cars exceed current emission requirements, it may not be enough, per German officials.
German Environment Minister Barbara Hendricks said the planned software upgrades are “insufficient” for many cities as they work to curb air pollution, according to Bloomberg.
With regulators casting a cloud of doubt over the proposed software updates, it's left $5.3 billion worth of diesel cars sitting on dealership lots unsold—some of them as new as 2015 models.
Mercedes-Benz E350 CDI GuardEnlarge Photo
To make matters worse, a sample poll of German diesel-vehicle owners showed 29 percent of them planned to sell their diesel cars as soon as possible as their values continue to fall and cities ponder diesel-vehicle bans.
In turn, 77 percent of car dealerships in Germany have slashed prices on relatively new diesel cars, leading to a slight air of desperation around the formerly favored powertrains.
Not only are consumers left hanging as local government put pressure on the used-diesel car market, but automakers have aided the rise in inventory too.
Volkswagen, Mercedes-Benz, Opel, and Fiat have launched buyback programs for much dirtier, Euro-1 to Euro-4 compliant diesel cars.
The marques offer up to $8,250 towards the purchase of a new diesel vehicle, which is expected to meet any new emission regulations.
Most of the cars in the buyback programs will be scrapped, but the makers have hoped sales of new diesel vehicles will get a boost from the program and have planned accordingly.
2014 BMW 328d xDrive Sports WagonEnlarge Photo
Up to 1.3 million car owners could take advantage of the buyback program, according to the most recent estimates.
Now, dealer associations are looking for clear signals from the government over what will become of recent used diesel vehicles to avoid additional inventory buildup.
“The vehicles are hard to sell at the moment because customers are uncertain,” Thomas Peckruhn, vice president of the association, said.
“We need clear signals from the government if and under what conditions these vehicles might be affected by driving bans.”