By William Boston in Berlin and Eric Sylvers in Milan
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (September 14, 2017).
As sales of diesel-powered cars dive in Europe, the Continent's
car makers, heavily invested in the technology, are scrambling to
offset the shortfall.
Electric cars, often said to be the future of the industry,
aren't the solution -- at least not yet.
European auto manufacturers polled by The Wall Street Journal
said demand for electric vehicles remains too small for them to
replace diesel cars anytime soon. While all the companies are
investing in electric mobility, their immediate focus is on
building more gasoline-powered cars and making diesel engines
cleaner.
Since Volkswagen AG, the world's biggest auto maker by sales,
was caught rigging diesel engines to dupe emissions tests two years
ago, sales of diesel cars have declined rapidly.
In diesel-heavy Germany, for example, threats by politicians to
ban the cars from cities have scared off customers, with sales of
new models in August falling 14% from a year earlier, according to
Germany's federal motor-vehicle agency. Sales of gasoline-powered
cars last month rose 15%.
Research group LMC Automotive says diesel's market share in
Europe, always the biggest market for the technology, could decline
to about 45% this year from 53% before the scandal. Meanwhile,
electric cars and hybrids are expected to grab 4% of the European
market this year, up from 2.3% before the diesel scandal.
High prices for electric cars, the scarcity and inconvenience of
charging stations and the vehicles' inability to travel long
distances have put off drivers. Car makers, who dragged their feet
for years on electric cars, also have few models in the market to
lure diesel-driving consumers.
"In many segments that are of interest to families, the products
just aren't available," Steve Armstrong, Ford Motor Co.'s Europe
chief said on the sidelines of the Frankfurt Motor Show this
week.
Auto makers at the Frankfurt show announced big plans for the
future. Volkswagen increased the number of electric models it would
offer by 2025 to 80, up from the 30 originally planned, and said it
would offer electric versions of all of its 300 models by 2030.
BMW AG has committed to offering 25 new electric cars and
hybrids by 2025, and Daimler AG plans to offer an electric version
of every model it makes by 2022.
But car makers aren't sure they will make money on electric cars
soon. A Daimler executive told investors on Monday that the company
expects half the margins on electric vehicles compared with the
cars they replace.
"If it works and companies can be profitable, that's good,"
Peugeot Chief Executive Carlos Tavares said this week. "But if it
does not gain acceptance in the market, then everybody -- industry,
employees and politicians -- have a big problem."
While Peugeot is planning to launch seven plug-in hybrid
vehicles and five fully electric cars between 2019 and 2021, it is
scrambling now to double production in France of some gasoline
engines "to meet growing demand," a spokesman said.
Other car makers said the decline in diesel sales in Europe
would have little to no impact on production or jobs at their
engine plants, as most models already come with a
diesel-or-gasoline option. That means auto makers simply ramp up
production of gasoline engines if demand grows.
The bigger problem is shouldering the costs of developing
electric-car technology as regulators around the world continue to
attack the conventional internal-combustion engine.
France and the U.K. have announced plans to ban all gasoline-
and diesel-powered vehicles after 2040. They would possibly exclude
hybrids, but the aim is to promote all-electric vehicles.
In Germany, Volkswagen, BMW and Daimler's Mercedes-Benz are
working frantically to defend diesel, which they say is necessary
to meet the European Union's ambitious climate goals. Diesel
produces fewer greenhouse-gas emissions than gasoline. The downside
is that it produces toxic nitrogen oxide, which is linked to deaths
and respiratory diseases.
The German manufacturers are spending millions on a voluntary
recall to update the core engine software on some of the newest
diesels to make them cleaner. They are also offering as much as
EUR10,000 ($12,000) in cash incentives to customers who trade in
old diesels and purchase a new car -- regardless of what type of
engine is under the hood.
With so much at stake, the entire auto industry is watching
Germany to see if the car makers can "preserve the validity of
diesel as a technology solution," Fiat Chrysler Automobiles NV
Chief Executive Sergio Marchionne said recently.
"My gut tells me that whatever happens out of all of this that
we're going to see diesel come out of this in a much weaker state
than it was on the way in," he said.
Klaus Fröhlich, BMW board member in charge of research and
development, told reporters last week that the diesel scandal had
spawned "irrational regulatory initiatives" around the world.
BMW expects to sell 100,000 electric cars and hybrids this year
-- out of a total of 2.4 million vehicles. By 2025, it plans to
offer at least 12 pure electric vehicles and 13 hybrids, compared
with nine electric cars and hybrids in 2017.
Volkswagen has launched a major investment drive to develop
roughly 80 new electric models across its brands, which include VW,
Porsche, Audi, Skoda, SEAT, Bentley and Lamborghini. But at a
gathering of roughly 300 employees for a town hall meeting with
Chief Executive Matthias Müller last week, some attendees seemed
unconvinced.
"Why are we investing so much into a market that is a niche of a
niche of a niche?" one person asked.
Mr. Müller said Volkswagen had to have its feet planted firmly
on both sides of the field. It had to keep developing the
combustion engine until the market for new technology takes off.
"That's why I say the technologies will have to coexist," he said.
"One day, electric vehicles will make up 25% of our sales."
Emre Peker in Brussels contributed to this article.
Write to William Boston at william.boston@wsj.com and Eric
Sylvers at eric.sylvers@wsj.com
(END) Dow Jones Newswires
September 14, 2017 15:40 ET (19:40 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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