Diesels - running out of gas?
The Chancellor's autumn Budget penalised diesel drivers again.
By Matt Finch
It happened again. For those keeping an eye on the diesel industry, it received yet another very unsubtle hint that it is simply not wanted anymore. Chancellor of the Exchequer Philip Hammond announced in the budget last week that diesels are to be penalised. Again.
Anyone who watched the budget will be slightly puzzled by that statement. Yes, electric vehicles received a handout for charging infrastructure, but the decision to freeze fuel duty (again) will be celebrated as far more of a win by the car groups (notably FairFuelUK and its funders, the Freight Transport Association and the Road Haulage Association) than the greenies will celebrate the rise in vehicle excise duty (VED) that was also announced.
But the sales figures would suggest the Chancellor no longer has to do anything to bring new sales of diesels down. That is happening anyway. Take a look at the table below:
Two things immediately jump out. Firstly, absolute numbers of diesel sales dwarf absolute numbers of alternatively-fuelled vehicle (AFV, which cover both pure electric and electric hybrids) sales. But secondly, sales of AFVs are growing at an amazing rate, whilst sales of diesels are plunging. 20-odd percent year-on-year falls in sales are simply not sustainable for any industry (incidentally, petrol year-on-year sales are broadly flat)
So that begs the question. When will AFV sales overtake diesels? If you simply use the average percentage change of the last six months and extrapolate outwards, then it would be January 2021. But if you apply some proper maths to it*, then AFVs overtake diesels as early as May 2019 (spreadsheet (worthy of Phil himself) here). This date is incredible, as clearly it is only 18 months away. Regardless of when D-Day actually arrives, the point is the future is arriving very quickly, regardless of any ‘nudge’ tactics that any politician offers along the way.
It’s also incredible for another reason, that Big Phil will appreciate. Bizarrely in the UK, the vast majority of cars we make we sell abroad. Conversely, the vast majority of cars we drive we buy from abroad. As a result, plunging diesel sales here does not necessarily mean immediate problems for our factory workers and supply chains that are diesel specific (although clearly the writing's on the wall for them).
So far this year total automobile exports have been broadly the same as last year. The UK diesel sales plunge is seen in a drop in vehicles imported, something that can only be good for the UK trade balance (which is currently in deficit to the tune of £9.5 billion for the three months to September 2017. Ouch!)
The problem though, as every clean-air-campaigner will tell you, is not the cars that are to be bought in the future. It is the cars that are currently driving around on the streets of Britain right now. There are now some 12 million diesels on Britain's roads, (compared to a quarter of that number in 2000). In recent years, diesels have accounted for roughly half the new vehicle market.
It took only five days for Brixton Road in London to break its annual NO2 limit for the whole of 2017. NO2 contributes to air pollution and air pollution is estimated to cause 40,000 deaths per year. Diesels are a major contributor of NO2, so therefore existing diesels are a major part of the problem. The Chancellor's VED trick does not do anything to clean up the existing diesel fleet.
The small print
Or does it?
Buried away in the small print of the budget document is the fact that the Government will be deciding VED rates on the new ‘RDE Step 2’ standard. This snappily-titled standard is based on on-the-road tests (Real Driving Emissions) that were introduced following the 2015 revelations that the Volkswagen Group had used defeat device software to cheat the then-standard tests. RDE Step 2 is therefore much stricter than the Euro 6 standard (indeed, HM Treasury acknowledges that it expects few, if any, diesels to meet the standard in 2018).
And by using this standard, the chancellor has just established RDE Step 2 as the official measure of the oxymoron that is a ‘clean diesel’. This will have implications for all the local policymakers that are committed to combatting air pollution, especially those in Birmingham, Leeds, Nottingham, Derby and Southampton. These cities are required - by law - to implement a clean air zone before 2020.
This last point is actually crucial. Philip Hammond is trying to nudge new sales of diesels downwards, but that curve is dropping like a stone anyway. Any clean air zone will, by nature, have to target already-bought diesels, and Mr. Hammond has just given the local politicians more ammunition in their fight against the polluters by raising the bar on what a clean diesel is.
The decision to freeze fuel duty (again) is a supposed win for the car groups. But by tweaking VED, it turns out the Chancellor has actually given with one hand, whilst taking away with the other.
*Full disclosure, I asked a far more talented mathematician than me to apply the proper maths.