How long has diesel got?
13 June 2007
Picking diesel over petrol isn't quite the no-brainer it once was, writes Rupert Saunders
Given the current business car tax environment, it hardly comes as any surprise that diesel engines dominate most company car parks. Figures from the recent Bank of Scotland Vehicle Finance Drivers' Report put the level of diesel cars in fleet at 64%, while that rises to 71% among 'essential' (non-perk) business car users.
Of course, the clear signals from central Government to reduce CO2 emissions mean it makes economic and political sense to run diesels. Plus, it would be a brave business car manager who didn't minimise the personal tax position of his drivers. But it is also important to keep an open eye on the wider picture.
By 2009 the new Euro5 emissions standards will put extra restrictions on diesel exhaust gases and, inevitably, add further to manufacturing costs. Most notably, diesel particulate filters will have to become standard equipment in order to meet the tougher limits.
The true cost of these extra anti-pollution measures is hard to quantify. The European Commission has estimated it at ?375; the carmakers claim it will be more than ?900. Either way, these costs will add significantly to the premium you are already paying for modern, compliant diesel engines.
There are also some doubts arising as to their efficiency, particularly if your drivers do a lot of urban motoring. So-called 'self-cleaning' filters rely on a reasonably sustained burst of driving above about 40mph to burn off the soot particles.
Already Lex is warning it has seen diesel cars on its fleet with engine warning lights glowing because the particle filter is blocked. In most cases a burst of open road driving will solve the problem, but the worst case scenario is the expensive option of a new filter.
“While diesel values were roughly 5% ahead of petrol throughout 2006, that differential has been narrowing in recent months.”
Tony Gannon, BCA communications director
Finally, of course, there are the economic arguments over fleet whole-life costs. Your diesel cars are costing you more to acquire but less to run - and they are delivering better residual values on disposal. But even here the market is beginning to shift.
Tony Gannon, BCA communications director, warns: "The price premium that diesel enjoys over petrol in the fleet and lease sector is eroding, even accepting that the mileage figures remain well apart. While diesel values were roughly 5% ahead of petrol throughout 2006, that differential has been narrowing in recent months."
So, how long has diesel got? Automotive engineers are working to resolve the soot problem. They would prefer to develop leaner, clean burn engines rather than rely on after-treatment devices such as particulate filters. But such developments may be several years away.
Carmakers, having invested so heavily in diesel power in the past few years, are unlikely to want customers to switch back to gasoline. Besides which, diesel engines mean European carmakers can get closer to the fleet average CO2 emissions that the legislators seem certain to enforce.
All of which means the balance is likely to remain in favour of diesel for the time being - but at a cost. Professional business car operators will want to quantify that cost and keep it under review, particularly for lower mileage drivers.