Fleet News

Diesel demand set to slacken

THE meteoric growth in diesel sales over the last five years is set to stall as demand slackens and concerns over its environmental impact increase. According to a study by the Society of Motor Manufacturers and Traders, diesel reached the peak of its popularity in 1994 and sales will now edge downwards before stabilising towards the end of the century.

Although the report concludes that diesel has a relatively bright future, it touches upon several issues - most notably environmental and taxation factors - which could adversely affect sales. The report highlights the important role the fleet sector played in sustaining diesel sales momentum, which started in the retail sector at the beginning of the 1990s.

The report suggests the annual diesel market will stabilise at around 400,000 units, but warned that these figures could be optimistic given the extent to which the fundamentals of the market had altered. In the short term, the study describes the outlook as uncertain, but far from bleak.

DIESEL sales could be severely hit by continuing uncertainty over its environmental impact and the prospect of changes in fuel duty policy in the longer term, according to the SMMT report.

In the most likely scenario outlined in the report, diesel sales will level out at about one in five of total new car sales while the total number of diesels in use will double to around 13% of the total car parc. An alternative projection suggests diesel sales will slip to around one in seven new car sales and around 11% of all vehicles in use compared with today's 8%.

The study highlights a number of factors which could put the brakes on the further development of diesel. As reported earlier this month (Fleet News, July 5) pollution experts have raised serious questions over the oil and motor industries' ability to make diesel-powered cars meet forthcoming EC emissions legislation without large scale investment. It also highlights increasing small car sales, rising environmental awareness, the erosion of the residual value advantage over petrol, uncertainty over a future Government's attitude towards diesel duty and concern about more stringent European emissions legislation as potential checks on further growth.

The report acknowledges the extra cost of low-sulphur fuel, the restricted availability of NOx catalysts and the likely requirement for particulate traps by the year 2000 but concludes that the manufacturers will deliver the technological fixes required without driving diesel car prices up excessively.

The buying decisions of fleet customers are cited as crucial to sustaining current sales.

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