Diesel controversy –Temporary shock or paradigm shift in powertrain?
European OEMs have utilized the fuel-efficient diesel powertrain as a key lever to reduce corporate fleet CO2 emissions, especially in the EU due to 2020/21 CO2 vehicle emission targets. These targets are basically impossible to reach without diesel. We therefore expect diesel to remain a key pillar in OEMs' powertrain strategies, especially in Europe.
The current debate about diesel will, however, further drive innovations in combustion and after-treatment of diesel due to increasing regulatory requirements and standards, and will enforce test cycle implementation aiming to reflect Real Driving Emissions (RDE). In order to fulfill RDE regulations, diesel will become cleaner (with emission levels similar to gasoline engines), but also more expensive. The resulting cost increase will accelerate the substitution process from diesel to smaller gasoline engines, especially in lower vehicle segments. Diesel will still remain dominant in the upper vehicle segments but total diesel share in Europe will decline in the coming years.
OEMs therefore have to further accelerate alternative powertrain solutions. Suppliers have the opportunity to implement innovative solutions for the further control of diesel RDE, and should also step up their preparations for alternative powertrains.