Renault Sees Dim Outlook for Diesel Cars

Renault (RENA.PA) expects diesel engines to disappear from most of its European cars, company sources told Reuters, after the French automaker reviewed the costs of meeting tighter emissions standards following the Volkswagen scandal.

The sober reassessment was delivered at an internal meeting before the summer break. It shows how, a year after VW (VOWG_p.DE) admitted engineering software to cheat U.S. diesel emissions tests, the repercussions are forcing major European car makers to rewrite strategic plans that will shape their futures for years to come.

Renault and domestic rival Peugeot (PEUP.PA), both heavily invested in diesel technology, initially scrambled to defend its future viability after the VW crisis erupted.

But in the July meeting, Renault’s Chief Competitiveness Officer Thierry Bollore said the diesel investment outlook had dimmed significantly, according to two people who were present.

Diesel engines, pricier but more efficient than gasoline, had already vanished from the smallest ‘A’-segment vehicles like Renault’s Twingo well before VW’s so-called ‘dieselgate’, as their extra expense outstripped savings on fuel.

By 2020, Renault now predicts that the toughening of Euro 6 emissions rules will push diesel out of cars in the next ‘B’-segment size category, including its Clio sub compact, as well as some ‘C’ models such as the Megane hatchback, the sources said.

Models in those first three size categories accounted for most of the group’s 1.6 million European deliveries last year, and more than 60 percent were diesels.

Starting in 2019, however, vehicle approvals will be based on emissions performance during real driving. This is forcing manufacturers to install costlier emissions treatment systems.

The business case for diesel can only deteriorate further, industry leaders realize, as targets become stricter, while electric and hybrid car batteries get cheaper and more powerful.

Diesel car sales will plummet to 9 percent of the European market in 2030 from 52 percent today, management consultant AlixPartners – regarded as an authority on the auto industry – predicted in June, with the decline accelerating after 2020.

Full article published on Reuters

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