Diesel controversy –Temporary shock or paradigm shift in ... · ≙ 15.1 km/l ≙ 20.3km/l ≙...
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Impact of the diesel controversy on OEMs and suppliers
Frankfurt, October 2015
Diesel controversy –Temporary shock or paradigm shift in powertrain?
2 Roland Berger_Automotive_Diesel_Final_141015.pptx
> European OEMs have utilized the fuel-efficient diesel powertrain as a key lever to reduce corporate fleet CO2 emissions, especially in the EU due to 2020/21 CO2 vehicle emission targets. These targets are basically impossible to reach without diesel
> We therefore expect diesel to remain a key pillar in OEMs' powertrain strategies, especially in Europe
> The current debate about diesel will, however, further drive innovations in combustion1) and after-treatment of diesel due to increasing regulatory requirements and standards, and will enforce test cycle implementation aiming to reflect Real Driving Emissions (RDE)
> In order to fulfill RDE regulations, diesel will become cleaner (with emission levels similar to gasoline engines), but also more expensive
> The resulting cost increase will accelerate the substitution process from diesel to smaller gasoline engines, especially in lower vehicle segments. Diesel will still remain dominant in the upper vehicle segments but total diesel share in Europe will decline in the coming years
> OEMs therefore have to further accelerate alternative powertrain solutions. Suppliers have the opportunity to implement innovative solutions for the further control of diesel RDE, and should also step up their preparations for alternative powertrains
Executive summary
Source: Roland Berger
1) Such as homogeneous combustion and HCCI
3 Roland Berger_Automotive_Diesel_Final_141015.pptx
In the global core passenger car markets, the diesel powertrain is mainly a European phenomenon with more than 50% of new sales
Source: IHS; press research; Roland Berger
New sales of passenger cars, 2014 [m units]
Europe = EU-28
97%
3%
Gasoline incl. alternatives Diesel
13.8 47%
53%
12.5
99%
< 1%
18.1
100% 2.8
52% 48% 2.6
98%
2% 4.7
4 Roland Berger_Automotive_Diesel_Final_141015.pptx
Emission regulations increase pressure on automotive OEMs to improve CO2 emissions, fuel efficiency and exhaust gas emissions
CO2 emissions/fuel consumption Toxic exhaust gas emissions (NOx, PM, HC)
Assessment of CO2 emissions/fuel consumption and toxic gas emission regulations
> Corporate CO2 emissions target [g/km]
> Fuel efficiency targets [km/l]
> Inovar – Auto energy efficiency increases [MJ/km]
> Potential4) corporate CO2 emissions targets [g/km]
> Add. potential fleet xEV target share
> CAFE2) [g/mi] > Additional ZEV
regulation CARB
-25%
2025
68-78
2021
951)
2013
127
2025
tbd
2020
105
2013
154
-32%
95
-31%
2020
117
2013
169
2025 2020
tbd
-13%
2025
166
2013
145
89
-28%
2025 2013
157
2020
113
≙ 15.1 km/l
≙ 20.3km/l
≙ 2.07 MJ/km
≙ 1.82 MJ/km ≙ 182 g/mi
≙ 253 g/mi
1) Average weight-dependent CO2 emissions target 2) Only for passenger cars 3) End customer pull for low CO2 emission/low fuel consumption powertrain and/or alternative powertrains 4) No decision made yet 5) Euro 6c test cycle WLTC: to be confirmed
1 2
tbd tbd tbd
> 2014: Euro 6b emission standard
> 2017: Euro 6c with implementation of RDE5), additionally WLTP
> Tier II Standards
> Low Emission Vehicle Program (LEV2, LEV3)
> 2009: post new long-term standards JC08 mode cycle
Source: Press research; Center for Climate and Energy Solutions; Roland Berger
5 Roland Berger_Automotive_Diesel_Final_141015.pptx Source: EEA; Roland Berger
CO2 emissions by segment/body type in EU-28, 2014
Diesel powertrain utilizes its better CO2/fuel efficiency compared to gasoline especially in the upper vehicle segments
Avg. CO2
emissions1) [g/km]
A B C D E Mini cars Small cars Medium cars Large cars Executive cars
226
157136128111
148131118109106
-35%
-17% -4% -15% -14%
Gasoline Diesel
Diesel share of total sales
0.4% 12.2% 24.8% 11.1% 4.3%
∑ 53%
1) Based on comparison of performance peer groups
1 CO2 emissions/fuel consumption
Segment
6 Roland Berger_Automotive_Diesel_Final_141015.pptx
Diesel efficiency improvements will be the main lever to reduce fleet emissions for European OEMs to reach 95 g/km target in 2020/2021
EU volume OEM1) fleet avg. CO2 emission reduction levers until 2020/2021 [g/km]
> Regarding reduction of fleet average CO2 emissions, diesel efficiency improvement is a key lever to reach the target from the CO2 emission regulations in 2020/2021
> A gap of 12 g/km could not be closed with other powertrain technologies if diesel were to be abandoned
> Therefore, the improvement of diesel efficiency has to be a key pillar of the OEM's CO2 reduction strategy
1 CO2 emissions/fuel consumption
Source: EEA; Roland Berger
Altern.
propulsion
94
-3
Gasoline1) Diesel
-2
Vehicle Vehicle
power/fuel
-2
2012 fleet
average
Road load
-12
132
-1
-8
-1
2020/
2021
-1
Segment
shift
Altern. fuel
-9
Trans-
mission
1) Exemplary OEM 2) Including CNG/LPG engine technology improvements
Powertrain efficiency improvement
Weight Aero Tires
Vehicle FE
technol.
Changes of vehicle power and propulsion
Market- driven
Portfolio changes
Efficiency improvements
7 Roland Berger_Automotive_Diesel_Final_141015.pptx
As of today, the road transport sector is the largest source of NOx emissions in Europe – Diesel is a major contributor
NOx emissions by sector in EU-28, 2013 [%]
Source: EEA; Bosch; Roland Berger
0,1%2,6%2,8%
6,8%
12,2%
15,1%
21,0%
Waste Industrial
processes &
product use
Agriculture Non-road
transport
Energy use
in industry
Commercial,
institutional &
households
Energy
production &
distribution
8.2 m tons
2 Toxic exhaust gas emissions
Approx. 10% diesel
passenger car contribution1)
Road
transport
39.4%
1) In Germany, as of 2012
8 Roland Berger_Automotive_Diesel_Final_141015.pptx
The diesel's NOx and PM limits have approached the level of gasoline but also lead to increases in emission control costs
Toxic emission limits1) of diesel vs. gasoline passenger cars NEDC [g/km]
Source: ICCT; Roland Berger
NOx limits
PM limits
1) All emission limits as tested in New European Drive Cycle (NEDC) 2) Only for diesel 3) For a 2.0 liter diesel engine in 2010
0.060
0.180
0.060
0.080
0.250
0.080
0.500
0.150
0.0045
0.02502)
0.0502)
0.005
Gasoline Diesel
Same PM limits for gasoline and diesel
2 Toxic exhaust gas emissions
Emission control techn. costs3)
[USD/vehicle] ~520
~1,630
~1,082
~675
Euro 6 Euro 3 Euro 4 Euro 5
9 Roland Berger_Automotive_Diesel_Final_141015.pptx
Nevertheless, the discrepancy between real emissions and EU limits for diesel cars has substantially increased since 2000
NOx emissions: Diesel passenger cars NEDC [g/km]
Source: ICCT; Delphi; Roland Berger
Measured on road Cycle limit
Toxic exhaust gas emissions 2
Euro 6c (2017)
> Implementation of new Real Driving Emission tests (RDE) is expected
> Reducing the RDE of the diesel powertrain becomes a challenge for OEMs and suppliers
> Manufacturers will need to find solutions for good CO2
efficiency, low real NOx
emissions and good driving experience
Euro 3 (2000) Euro 4 (2005)
Euro 5 (2009) Euro 6 (2014)
x 4
0.8
0.18
x 8 0.6
0.08
x 2 1.0
0.5
x 3 0.8
0.25
10 Roland Berger_Automotive_Diesel_Final_141015.pptx
The 2025 outlook for diesel – Decrease of diesel share in nearly all major automotive markets is expected
Source: Diesel Technology Forum; press research; Roland Berger
> Chinese government is heavily promoting the development of battery electric vehicles (BEV)
> Diesel engines will not play any role in China for passenger cars
> Diesel engines are only relevant for trucks
> Customer interest in diesel in the US market will decline due to the recent controversy; diesel fuel price remains higher than gasoline
> Main local car makers will focus on efficient gasoline engines and electrification
> Diesel will only be offered in some niche market segments
> Ban of diesel engine passenger cars in place
> Fierce competition with ethanol/flex fuel (local production)
> No uptake of diesel engines in passenger cars expected
> Strong focus of Japanese OEMs in alternative powertrain technologies (i.e. hybrid and electric vehicles)
> Government subsidies for alternative powertrains
> No major share of diesel engines in passenger cars expected
> Diesel fuel has a price advantage even without subsidies
> Sales of diesel-fuelled cars expected to keep on rising
> European OEMs will still focus on diesel technology due to existing investments and CO2 emission targets
> Diesel powertrain is getting more expensive, partly due to implementation of RDE cycles with Euro 6c
> Diesel will lose market share (esp. in smaller vehicle segments)
2025 worldwide outlook and drivers for the use of diesel in passenger cars
11 Roland Berger_Automotive_Diesel_Final_141015.pptx
Three scenarios on future of diesel possible in Europe 2030 – "Most likely" is decrease of diesel with shift toward upper car segments
Diesel scenarios in Europe/forecast new car diesel shares in EU-28 until 20301)
Source: EEA; Roland Berger
1) In % of new car sales
"Diesel constant"
No changes regarding diesel as powertrain solution
"Focused shift"
Diesel engines decreasing, but remain the dominant powertrain in upper vehicle segments
Conclusion > Diesel will stay at the same level as today in terms of volume
> No change in vehicle segments
> Diesel engine will lose market share constantly, esp. in lower car segments
> Diesel will still play a major role in upper vehicle segments
> Diesel will completely lose all importance by 2030
> OEMs have to shift their powertrain strategy to alternative solutions
> Diesel engine becomes more expensive due to additional after-treatment technologies
Diesel technology
> No additional technology needed > Does not meet new regulation targets
Politicians > Support the diesel engine without any restrictions
> Accept importance of diesel technology for CO2 reduction in general
> Increase regulation on Real Driving Emissions > Tax changes in some EU member states
> Scrap actual tax incentives for diesel fuel > Strong support of alternative powertrains > Change regulations against diesel, e.g. ban
it from the roads
"Diesel extinction"
Diesel engines to be fully replaced by gasoline and alternative powertrains
Customers > Still trust diesel technology as "clean" > Diesel is "technology of choice"
> Still trust diesel technology as "clean" > TCO will be a strong buying criteria
> Do not trust diesel technology as a "clean" solution any more
Diesel (incl. MH diesel)
RB most-likely scenario
53%20%
2030 2020 2015
10%
53% 48% 41%
2030 2020 2015
53% 53% 53%
2030 2020 2015
12 Roland Berger_Automotive_Diesel_Final_141015.pptx
Diesel powertrain still expected to hold dominant position in upper passenger car segments despite decline in diesel share by 2030
"Focused shift": New car diesel forecast by segment in EU-28 until 20301)
Source: EEA; Roland Berger
98% 100% 100%
2%
36% 33% 26%
64% 67% 74%
64% 60% 55%
36% 40% 45%
2030 2020 2014
84% 79% 69%
16% 21% 31%
88% 80% 70%
20% 30%12%
50% 44% 37%
50% 56% 63%
2030 2020 2014
Diesel (incl. MH diesel) Other powertrains
Mini cars
Small cars
Medium cars
Large cars
Executive cars
Luxury cars
A
B
C
D
E
F
e.g. VW Passat e.g. Fiat Panda
e.g. MB E-class
e.g. BMW 7 series
e.g. Peugeot 208
e.g. Citroen C4
1) In % of new car sales
13 Roland Berger_Automotive_Diesel_Final_141015.pptx
Diesel essential for CO2 reduction by OEMs but higher technology demand to meet regulations – Potential benefits for supplier industry
"Focused shift": OEM and supplier implications
Accept and close the gap between cycle and Real Driving Emissions of diesel engines
Develop and implement (after-treatment) solutions in order to reduce RDE
Adapt powertrain strategy by shifting the diesel focus from lower to upper car segments
Accelerate implementation of alternative powertrain solutions (electrification) to meet CO2 regulations
Successfully convince car buyers and policymakers of "The New Clean Diesel"
OEMs Suppliers
Innovative solutions for more efficient and clean diesel technologies needed
Innovative solutions for more efficient gasoline technologies needed
Higher demand for alternative powertrain solutions increases demand for cost-intensive BEV/PHEV cars
Higher demand for after-treatment solutions for diesel engines to meet RDE regulations
Long-term volume reduction through increasing demand for BEV cars
Shift from diesel to gasoline engines in car segments changes the technology
Po
wertrain
sup
pliers
Exh
aust syst. su
pp
liers
Source: Roland Berger