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End of the road for diesel-fuelled fleets?

Has the time come for fleet managers to reassess their dependence on diesel? Over the past year or so, we’ve seen more and more reasons to reassess the economic viability of the fuel. Four major cities – Paris, Athens, Madrid and Mexico City – have already committed to banning diesel vehicles by 2020. Cities across UK are implementing clean air zones, including London, which has an Ultra Low Emission Zone planned for launch in September 2019. These zones will mean extra congestion charges, with some estimates suggesting to could cost an extra £200 a month for an average city commute for diesel engines.

Diesel’s downfall
Diesel has long been the fuel of choice for fleets. It has traditionally been more efficient, with more miles per gallon compared to petrol, and with lower depreciation of diesel models, over the lifetime of the vehicle it was the cheaper choice. Diesel vehicle also emit less carbon dioxide than petrol, meaning it was often seen as the greener fuel choice.

However, studies done by University College London suggest that diesel emissions are responsible for thousands of premature deaths per year. This is largely due to the high levels of nitrogen oxide (NO2) emitted by diesel vehicles. There are regulations in place to limit NO2 emissions, but the lab tests used have been shown to underestimate the levels being emitted by as many as five or six times. The real-world implication is a vastly higher level of NO2 in our atmosphere – which The European Environment Agency estimates cause almost 12,000 premature deaths in the UK per year, and 71,000 across Europe.

This has led to a damning ream of publicity, and subsequent policy changes that will make diesel an unviable option for fleet managers. As well as clean air zones, the Treasury announced that it would not be scrapping the 3% diesel surcharge in April 2016, instead postponing the move until 2021. This is expected to raise an extra £1.56 billion for the Treasury – a large portion of which will be coming from fleets.

Short-term solutions
In the short-term, it seems that petrol will be the viable alternative. The difference in depreciation between diesel and petrol has lessened, petrol has easily the largest supporting infrastructure, and smaller-capacity turbo petrol engines now offer lower P11D prices, NO2 and particulate emissions than their diesel counterparts, as well as ever-improving efficiency.

Other options include the rise of “mild hybrid” vehicles – a combination of electric and petrol that helps keep emissions, running costs and taxes low. This could be the stepping stone on the way to wider use of electric vehicles, and the demise of diesel is just one catalyst that will speed this along.

However, for some, diesel is still the best option, even if only for lack of better alternatives. In KPMG’s Global Automotive Executive Survey 2017, it states that “for applications like medium and heavy trucks, there might not be any short term alternative”, and diesel will still be a viable option for vehicles doing long distances and operating in rural areas.

Longer-term view
In the longer term, it looks like life without the combustion engine might be finally coming into view. However, battery electric vehicles (BEVs) aren’t seen as a realistic option – according to the KPMG report, 62% executives agree that BEVs will fail due to infrastructure challenges. More optimistic is the view on fuel cell electric vehicles (FCEVs), which can be refuelled as quickly as traditional vehicles, with hot air and water as their only waste products. Sounds ideal – but the technology is not ready for mass market and there will be new, as yet unresolved, challenges, not least of which is the current prohibitive cost.

Next moves for fleet managers
There’s no certain option for fleet managers: completely investing in one fuel over another will always lead to some issues. However, now seems like a good time to look at your specific needs and reassess the costs of sticking with what you know.

Diesel’s demise – the essential stats

  • Four – number of capitals cities that will ban diesel vehicles by 2020
  • £1.36 billion – the amount that will be raised by the Treasury between 2016 and 2021 due to the delayed scrapping of the 3% BIK tax.
  • 2020 – the year by which most major cities in the UK will have introduced clean air zones
  • 30% – the percentage of commercial vehicle operators that believe emissions legislation will pose a big challenge for their business in 2017.