According to a report in the Financial Times, Fiat Chrysler is preparing to unveil a four-year plan in June that will see it phase out diesel engines from all of its passenger car models around the world.
Commercial vehicles, such as the Fiat Professional range of vans and the RAM pick-up truck brand in America, will not be part of the plan and will continue to offer diesel models.
The decision is based on falling demand across Europe and the increasing costs of making diesel engines compliant with tougher emissions regulations. The FT suggests that it will cost car manufacturers about 20% more to develop diesel engines that meet new European emissions laws, at a time when demand for diesel cars is collapsing in almost every European market.
Diesel’s spectacular fall from grace
Fiat Chrysler is the largest global car company to take the decision to kill off its diesel cars, and comes a week after Porsche announced it had already stopped building diesel cars. Unlike Porsche, however, Fiat Chrysler has not been barred from selling its diesel models across Europe by the German government…
Instead, this appears to be a genuine case of a major manufacturer weighing up the economic pros and cons of the situation and making a bold call to do away with diesels altogether. Fiat Chrysler’s CEO, Sergio Marchionne, is notoriously hard-nosed when it comes to strategic decisions, and this report has all the hallmarks of a typical Marchionne call to lead rather than wait and see what others decide.
Diesel is still more popular in Fiat Chrysler’s home of Italy than any other European country, and Italy is responsible for about half of all of Fiat’s European sales, but clearly the business case for diesel is so weak that the company is prepared to risk its Italian sales position by ditching diesel altogether.
Diesel’s share of the new car market has fallen to 43% in Europe, although that is skewed by markets like Italy where it still holds a 56% share. In the UK, diesel has fallen to about 36% of the market and has been falling for more than 18 months. Fiat Chrysler is clearly expecting those numbers to continue to fall further in coming years.
A big nail in diesel’s coffin
The Fiat Chrysler decision will send shockwaves through the global car industry, even though rival manufacturers will currently be weighing up the very same options. Regardless of whether you believe that the latest Euro-6 diesel engines really are as good as the industry cheerleaders claim, and there is considerable dispute to such industry claims from environmental groups, it seems that consumers across Europe have already made their decision.
Many regional governments across Europe have also moved to ban diesel cars, with cities like Paris, Stuttgart (home to Mercedes-Benz and Porsche), Athens and Madrid announcing that diesel-engined cars will be banned from city centres.
If Fiat Chrysler can decide to kill off all its diesel passenger cars within four years, who will be next? Toyota (the biggest automotive brand in the world) has already suggested that it may not launch another new model with a diesel option, and several manufacturers are rumoured to be struggling to comply with tougher European emissions tests (the WLTP tests that will replace the current NEDC tests).