Toyota Fortuner: TOYOTA AUSTRALIA, QUICKPIC
Toyota Fortuner: TOYOTA AUSTRALIA, QUICKPIC

Geneva — Toyota Motor announced plans to drop diesel models from its European portfolio this year even as Volkswagen (VW), which sparked the fury over the technology, predicts a rebound.

The diverging views of the world’s two largest vehicle makers reflect the uncertainty over the future of diesel, which has faced a steady drumbeat of bad news since VW’s cheating scandal erupted in September 2015. The German automotive giant is expecting consumers to forgive and forget soon, as cleaner diesels hit the streets.

"Diesel will see a renaissance in the not-too-distant future because people who drove diesels will realise that it was a very comfortable drive concept," CEO Matthias Müller said at the Geneva International Motor Show. "Once the knowledge that diesels are eco-friendly firms up in people’s minds, then, for me, there’s no reason not to buy one."

The comments are bold considering VW put aside about $30bn in provisions to cover fines, retrofits and legal costs stemming from rigging diesel-emissions systems to dupe government pollution tests.

The fallout has been wide ranging. Germany is now considering potential bans of diesel vehicles from cities, and governments, including China, France and the UK, have put in place plans to phase out the internal combustion engine. Consumers have also begun to shun diesel, with its share of German car sales tumbling to a third from half since VW’s cheating scandal.

In contrast to VW’s upbeat prognosis, Toyota is getting rid of diesels in Europe, the main market for the technology. After refraining from a diesel variant of the C-HR crossover in 2016, Toyota will extend that decision across its portfolio, including offering the redesigned Auris compact with two hybrid powertrains and one turbo-charged petrol engine.

Diesel vs electric

There’s more at stake than consumer choice. European car makers have been counting on diesel — a profitable and fuel-efficient alternative to petrol vehicles — to meet tighter environmental regulations until electric cars become more viable.

"We need diesel to get to the carbon dioxide goals," Herbert Diess, who heads VW’s namesake mass-market brand, said after presenting the all-electric ID Vizzion concept car that’s capable of driving as far as 650km on a single charge. "Electric vehicles in many cases won’t keep frequent drivers happy."

Consumers have also begun to shun diesel, with its share of German car sales tumbling to a third from half since VW’s cheating scandal

While Ford Motor still backs diesel, the technology’s role may be further diminished by tighter environmental rules, as regulators target the fuel’s emissions of smog-causing nitrogen oxides, according to Steven Armstrong, chief of the car maker’s European operations.

"We still see a future for diesel, although on some smaller vehicles I do believe it will progressively disappear," Armstrong said in an interview with Bloomberg Television. "We have to work hard to gain consumer trust to make sure they believe the messaging" that new diesels are clean.

Toyota, a pioneer in hybrid technology, has had doubts about diesel’s ability to meet modern environmental rules since 2011, Didier Leroy, executive vice-president at Toyota, said in Geneva. Now, there’s a risk to consumer sentiment, with a "real potential" for driving bans to hit diesel cars in European cities beyond Germany, he said.

‘Final word’

While VW and other proponents argue diesel’s merits from a regulatory and technology perspective, it’s uncertain how customers will react to the threat of driving restrictions and falling prices for used vehicles.

"At the end of the day, consumers have the final world," Carlos Tavares, CEO of PSA Group, the maker of Peugeot, Citroën and Opel vehicles, said in a Bloomberg Television interview. "We have a very clear strategy in terms of multi-energy platforms, which means we can assemble, on the same assembly line, petrol cars, diesel cars, electric-powered cars."

German manufacturers such as VW are more exposed to diesel’s demise than European rivals because they make more powerful vehicles. Mercedes-Benz parent Daimler said the carbon dioxide emissions of its vehicles rose last year, as buyers traded up to bigger models. The hurdles are only getting tougher.

Car makers in the EU need to lower fleet emissions to average 95g of carbon dioxide/km by 2021, from an average of 118g in 2016. Lower demand for diesel cars — which emit about a fifth less carbon dioxide compared to equivalent petrol vehicles — could force vehicle makers to aggressively push unprofitable electric cars to meet these targets.

"The rules of the game in the EU in relation to climate protection and emissions goals on carbon dioxide are so challenging that governments cannot do without diesel," VW’s Müller said. "We’re doing everything to avoid" coming up short, but "if there’s less diesel, then getting to that goal just gets tougher".

Bloomberg