Asset value concerns over future of diesel

The call was made by James Dower, senior editor of Black Book with residual value specialist Cap HPI, who said that a lack of certainty was undermining market values in the used car market.

He argued that the problem has been caused because the debate is too broad and targets diesel overall, rather than focusing on older models that aren’t fitted with the latest emissions controls that ensure new diesels are some of the lowest-emitting cars on the road.

While diesel has historically been encouraged because of its low CO2 emissions, which helps combat global warming, debate has turned to the impact of nitrogen oxide emissions, which tend to be higher in diesels and are blamed for rising health problems, particularly in urban areas.

The debate about the future of diesel was given a higher priority following the diesel emissions crisis that engulfed Volkswagen Group more than a year ago and led to several major car manufacturers being investigated.

The call for clarity comes as draft government proposals focus on increasing the number of clean air zones across the country, but this will be in the hands of local authorities, meaning emissions standards could differ.

Dower said: “Confusion is the best way to describe diesel. The focus has changed and a lack of clarity from the government has led to all these vehicles being tarred with the same brush.”

He added that there were three general threats to diesel values. A key element is environmental legislation which specifically targets diesel vehicles, such as restrictions on entering town centres and parking.

In addition, improvements in petrol engine technology are closing the fuel economy gap with diesel, while there is a growing wave of demand for plug-in hybrid and electric vehicles.

There is further market disruption from rumours that a government-backed diesel scrappage could be introduced to take some of the oldest diesel vehicles off the road.

As a result, residual values for diesels are under pressure, with a traditional price premium for diesel vehicles on the used car market starting to decline.Dower said: “Petrol has performed better than diesel and legislation will be a key driver going forward. The diesel premium will decline in most sectors.”

However, he emphasised the impact on diesel values differed according to vehicle segments, with any fall being felt hardest in smaller vehicle segments, while diesel is still the most likely choice for larger vehicles, such as SUVs.

Overall, Dower said there would continue to be a strong market for diesel, but it required legislation to provide clarity on what its future looked like.

Speaking at a Cox Automotive Summit, he added: “I would not suggest diesel is going anywhere anytime soon. Diesel will remain the fuel of choice for most.

He said: “There will always be a driver for a diesel, but we need clarity from the government about what it plans to do. If you have millions of diesel drivers, it would be a brave government that decides to put punitive charges into effect.”