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Diesel or petrol?

Diesel or petrol?

Tuesday, June 27, 2017

In the face of environmental challenges and increased pressure from the authorities, the finger is being pointed at diesel. Is its "supremacy" in the heart of vehicles fleet being challenged in favor of petrol? It’s a question that needs to be asked.

 

It is an interesting paradox.

On the one hand, a KPMG study of the automotive industry revealed that 53% of industry leaders believe “diesel is dead ”.

Source: KPMG

https://assets.kpmg.com/content/dam/kpmg/xx/pdf/2017/01/global-automotive-executive-survey-2017.pdf

 

On the other hand, the share of diesel in car fleets should decrease from 95% in France today to 79% within five years, according to a study by the Corporate Vehicle Observatory.

So what should Fleet managers do?

 

The cities come into play

Fuelled by a big buzz in the media, the stakes are high for diesel. Long favored by a reduced fuel cost and an advantageous tax sytem, its “bashing” now is mainly due to NOx-type particles.

"Historically, CO2 has been the target governments want to fight. Recently, the battle has focused on NOx particles that have a proven impact on health,” said Hervé Girardot, international director of Arval Consulting and Corporate Vehicle Observatory.

However, since the tax system relies on CO2 (VAT, etc.), taking NOx into consideration recently has led the French authorities to correct the situation by progressively aligning the taxation of diesel with petrol within three to five years(1).

But this “planned re equilibrium” of diesel does not rest solely on fiscal constraint, another parameter has come into play. The major French and European cities want to restrict or even prohibit the use of diesel-fueled vehicles. Cities are becoming major players for companies. The latter must now design an “energy mix” for their fleets which meet traffic rules in certain cities (Low Emission Zones).

 

So what can be done?

What should Fleet Managers take from this? They need to take a step back, as Hervé Girardot points out. “The natural renewal rhythm of a fleet needs to be taken into consideration, as well as the current high percentage of diesel in fleets. These diesel vehicles cannot be replaced with a simple snap of the fingers. What’s more, given the rather limited alternative offered today by manufacturers for users (in LCV segments for example), diesel will remain the right solution.” Also it must be recognized that diesel engines from corporate vehicles are much cleaner  than the majority of privately owned cars, due to compliance to latest Euro 6 standards, whereas privately owned cars are normally older and they will not be to the same Euro standard. Corporate vehicles thus contribute to improving air quality!

 

Vehicle usage in the spotlight

In addition, fleet managers must begin to determine a more precise, nuanced level of analysis of their fleets. A simple TCO (Total Cost of Ownership) is no longer enough. They need to look at the precise true usage of vehicles (urban vs highway ; low vs high mileage), in other words, profiling, without forgetting which vehicles are authorized to drive where. In the light of this review, renewal strategies should enable fleets to adapt to the current fiscal and operational realities. Finally, the future of diesel versus petrol will be looked at, not just in terms of TCO, but also in relation to traffic restrictions (Low Emission Zones). These are measures that are likely to have an increasing impact for companies in the years to come.