“Internal combustion engine has a future”
“One prediction says that by 2025, 18% of vehicles in Europe will be electric. I don't believe it”, said Andrew Fellows, CEO of DAT Consulting at the Fleet Europe Remarketing Forum.
The question: whether the shifting perception of diesel is profoundly reconfiguring the way the remarketing industry should approach residual values. “The homework remains fundamentally the same”, according to Mr. Fellows.
The CEO (pictured) is the first to admit that DAT has a well-deserved reputation for conservatism. But he brought some figures to support his skepticism about the imminence of an electric future.
First off – the market share of diesel engines in the EU is indeed declining: from about 53% in 2013 to just over 49% in 2016. “So yes, there is a slight decline. But it's important to point out that we haven't fallen off a cliff either”.
Dieselgate is the catalyst of the decline, but Fellows made two interesting points: “Perception is nine tenths of reality; and Dieselgate was a badly managed scandal. But it has led to a change in mentality, and the car industry is changing accordingly”. One could also see the decline of diesel as a market correction, following a period in which the fuel was actively promoted by governments across Europe.
A slide of the diverging residual values for used petrol and diesel cars in Germany provided stark evidence that the gap between both is widening – to the disadvantage of diesel. Mr. Fellows pointed out that the average days in stock for used petrol cars in Germany is 81 days, against 100 to 105 days for used diesels, with the cost of holding vehicles per day thus contributing to the unattractiveness of diesels.
However, little of the slack in diesel sales was picked up by electric vehicles – or other alternative powertrains. “Is the future electric? Hybrid? Hydrogen? The answer is: none of us know. In Germany, 30% of private customers indicate they would still prefer a diesel, and diesel remains the preferred choice for corporate fleets. So diesel remains in play. Is diesel dead? Absolutely not. Is it declining? Definitely. But things will not change drastically for the foreseeable time. The internal combustion engine still has a future”.
And consequently, the residual value element of fleet value management remains mainly the same as it has, Mr. Fellows said. That does not mean business as usual, however: “Specialised analysis is needed to provide fleet managers with the information needed to build fleets with better RV potential, plan more effective remarketing strategies, and improve the response to emerging technologies”.