It’s possible I’m on an island all by myself for being bullish about the light-duty vehicle market for diesel engines. Some experts in the market have told me I am fooling myself, that the recent emissions scandals have scared off consumers and automakers, deflating the potential growth of this market.
I am not an ostrich with my head stuck in the sand—I know what has been going on and what the media is saying about the technology. But when everyone is telling me one thing, I have found it useful to look at additional information to form my own opinion and I continue to believe there is a viable market for light-duty diesel vehicles—provided the automakers put them on dealer lots.
What’s the basis for my opinion? Vehicle sales data and consumer opinion research.
Immediately following the revelation that a certain automaker had installed emissions test defeat devices on some diesel-powered vehicles, the Fuels Institute fielded a survey to determine whether the news impacted consumer opinions about diesel. In September 2015, we asked consumers if their views of diesel had changed in the past three to six months. For the vast majority (73%), there had been no change. But 14% said their views had become more positive, and another 14% said their views had become more negative.
A few months went by and we got curious again, so in February 2016 we asked a more robust series of questions. We found that of those who would buy a vehicle in the next couple of years, 45% would consider purchasing a diesel-powered vehicle. This was the highest level in three years, up from 42% and 41% in 2015 and 2014, respectively. When asked why, 51% cited better fuel economy.
We asked those who would not consider diesel why, and only 8% said they were concerned about recent scandals, not an overwhelming or foundational issue for the market. A more significant number of consumers (48%) said diesel was too expensive. The fuel price response is something we have tracked for years and has remained consistent, but what happened last year? Diesel and gasoline actually reached parity at the pump, helping to eliminate this hesitation in the consumer’s mind and creating an opportunity for automakers. Under recent pricing conditions, it is not necessary to explain energy content and the miles per dollar calculation that makes diesel a better financial option, even when priced as a premium compared with gasoline.
But what consumers say and what they do is not always the same. Yes 45% said they would “consider” a diesel-powered vehicle, but through May 2016, only 2.6% of all light-duty vehicles sold were equipped with a diesel engine. And the momentum for new diesel vehicle sales has slowed. Compared with the first five months of 2015, total light-duty diesel sales are down 16.2%. Is this indicative of a major issue?
Looking at the raw numbers, total diesel light-duty sales are off 31,447 units, according to WardsAuto. We know that Volkswagen is not permitted to sell any new diesel vehicles in the U.S. yet, resulting in a loss of 33,776 units. This means sales of “permitted” diesel vehicles are actually up over 2015.
The loss of VW diesel vehicles has significantly crippled the diesel car market, but the light truck market is doing very well. In fact, the improved fuel efficiency, power and durability of diesel-powered trucks play well with that target market, as indicated by sales figures. Of all Ram 1500 trucks sold through May 2016, 27% were equipped with a diesel engine. Ford F150s, Chevy Silverado and GMC Sierras came in with 14.3%, 11% and 16%, respectively. These sales figures are far above the national market share for light-duty diesel vehicles and indicate strong demand continues in this segment.
I argue further that the consumer interest in diesel vehicles, the price point relative to gasoline and the improved performance and efficiency of the technology give the market significant legs going forward. The scandals have resulted in a major reduction in U.S. diesel-powered cars sales, but that too will pass and I believe once these vehicles re-enter commerce consumers will be ready and accepting. In fact, it could be a great opportunity for the industry to reintroduce diesel vehicles to the American consumer, perhaps in a market where diesel, on its face, is price competitive with gasoline at the pump—not just on an energy equivalency basis.
It will of course take some time to regain momentum, but in the meantime America keeps on trucking and the diesel powertrain is chugging along just fine.
So, though I might be on an island I am confident that it won’t be long before my island starts getting crowded with those who also believe diesel has a future in the United States. Remember, stay focused on the facts and data that provide true indications of the market and where it might be heading—these factors often run at odds with common perceptions.