Navigant Research Blog

Diesels Set for Surge in the United States

— April 17, 2013

Automotive analysts – including this one – have been predicting a comeback for diesel cars in the United States for several years.  Demand in the United States has indeed been steadily rising in recent years.  According to the HybridCars Dashboard, sales rose from just over 58,000 in 2009 to 125,522 in 2012, a compound annual growth rate of 29%. Despite these rising sales, though, diesel’s share of total passenger car sales has persistently remained well below 1%.  In 2010, diesels captured 0.7% of U.S. passenger car sales, while in 2012, diesels captured 0.87%.  So why the hype over clean diesels in the United States?

First, the reality is that all alternatives to conventional gasoline cars are but a tiny portion of the total U.S. car market.  Hybrids are selling around 3 times the number of diesel cars – which means that, more than 15 years after the Prius was introduced, hybrids still only capture 3% of the market.  Plug-in vehicles are receiving a huge amount of attention, as they represent the potential to be a disruptive technology.  However, while we’ve seen a significant uptick in sales in the United States, from roughly 18,000 in 2011 to 53,000 in 2012, PEVs are an even smaller percentage of the U.S. car market than diesels.

Annual Sales of Clean Diesel and Hybrid Passenger Cars, United States: 2009-2012


(Source: HybridCars Dashboard)

Second, as has been discussed in this blog, automakers must come up with an array of fuel-efficient options to meet the stringent federal Corporate Average Fuel Economy (CAFE) standards for 2017 and beyond.  While automakers will primarily focus on modifications to conventional gas cars, diesels may well appeal to a different demographic than small, fuel-efficient gas cars.  The diesel Chevrolet Cruze, to be introduced for model year 2014, offers an example.  The diesel Cruze gets 42 mpg on the highway.  While this is the same highway mpg as the gasoline-powered Chevrolet Cruze Eco, the Eco is equipped with a manual transmission, and U.S. drivers are not big fans of manual transmissions.

Volkswagen (VW) just released the results of a survey that found that the likely clean diesel customer is also different from the average hybrid customer.  VW’s survey indicated that, while both groups are concerned with fuel efficiency, diesel buyers tend to be more concerned about torque and acceleration, while the hybrid drivers are more motivated by the car’s eco-friendliness.  These results suggest that the soon-to-be-introduced hybrid Jetta will not compete with the diesel Jetta – the best-selling diesel in the United States – but will expand VW’s appeal to a different type of efficiency-conscious consumer.  This survey will be heartening to automakers as they marshal a combination of diesel, hybrid, start-stop, plug-in technology, and other options to meet the CAFE standards.


In China, EVs are Not Necessarily Green

— January 2, 2013

Tesla Motors opened its Beijing showroom in early November, and the company’s China-based website went live in December, allowing Chinese citizens to place deposits on the Model S and the yet-to-be-launched Model X.   China’s luxury vehicle market is second only to the United States in sales, so Tesla should do well in meeting its goals to sell 5,000 PEVs in Asia annually.  Tesla’s move to access the market is one of many to be made in coming years from global automakers looking to shop PEV technology in the country.   While the adoption of PEVs anywhere is seen as a good thing for reasons both environmental and economic, in China’s case it may be a detriment.

In most regions, PEVs reduce emissions when compared to conventional gasoline and diesel vehicles on a per-mile basis.  This is due to both the significant energy efficiency improvements of electric motors over conventional internal combustion engines, and increasing penetrations of cleaner burning fuels (natural gas) and renewable resources (wind and solar) to replace coal in the overall electric grid.

The Coal Factor

As PEV’s made their first sales in the United States, some questioned whether PEVs actually reduced emissions compared to conventional and/or advanced fossil fuel burning vehicle technologies, given the increased emissions stemming from PEV development over conventional vehicle manufacture and the mix of generation resources on the grid. Results of studies in the United States have shown that PEVs do reduce emissions over conventional vehicle technologies, but it depends on the mix of generation resources used to power the grid.

Though China has made significant advances in developing wind and solar power, the country’s grid is dirty, being predominantly powered by coal.  While China is making strides in substituting cleaner fuels for power generation, the amount coal consumed will likely continue to climb as energy demand continues to grow.  The EIA reported in 2011 that around 70% of China’s primary energy use stemmed from 4 billion short tons of coal, roughly half of worldwide coal consumption.

Contributing to the severe pollution problems, in no small part, is China’s escalating number of vehicles in use.  In our report, Electric Vehicle Market Forecasts, Navigant Research estimates that in 2013 China has the second highest number of light duty vehicles in use, at more than 108 million.  While the combustion of gasoline and diesel are still harmful to the environment – combustion of either fuel produces fewer emissions of CO2 and other harmful gases/matter per million BTUs produced than coal.  Paradoxically, driving on electricity sourced from the coal-powered grid, rather than on advanced gasoline or diesel technologies probably worsens China’s dire pollution situation.

Though China promises to be a significant market for PEV automakers, it’s not quite apparent that PEVs will help the country reduce its dependence on fossil fuels.  Increased investment in natural gas and renewable resources for electricity generation, rather than coal, will make the potential environmental benefits of PEVs a reality.  At the same time, emphasizing increasing fuel efficiency through hybrid gasoline and high mileage diesel vehicles purchases will be a tangible and certain way to reduce vehicle emissions and overall pollution.


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