Diesel fashion

The Audi A10’s win at this year’s Le Mans 24 hour endurancerace was the most significant victory yet for a diesel-powered car in a majorracing event.   Moreover, not only did the Audi win, but it was also thecleanest and quietest car in the race.   Diesels are also enjoying success offthe track.   Underpinned by lower running costs, diesel cars’ popularity in Europeis now such that they are expected to out-sell new petrol cars during 2006.[1]

While still very much a niche market in New Zealand (newdiesel imports in the year to June amounted to only 5.3% of total new car salesin the same period), diesel cars have experienced a sharp rise in popularity inrecent months.   Imports of new diesel-powered cars with an engine capacity ofless than 2500cc[2]overthe six months to June were up 112% on the same period in 2005, while importsin the June quarter were 200% higher than a year ago.

SUV’s aside, diesel-powered cars have proven far lesspopular in New Zealand than in other countries in the past.   But theintroduction of cleaner diesel, improvements to diesel engine performance and$1.70/litre plus for regular petrol appear to be changing our attitude towardthe oft-maligned noisy stinkers.

Sorry, did you say a diesel?

Part of the explanation for the lack of diesel carpenetration here is due simply to the dearth of new diesel passenger cars on offer.  Of the top five new car distributors in 2005 (Toyota, Ford, Holden, Honda, andMitsubishi – which collectively accounted for 60% of the market), only Holdenis currently offering a diesel-powered passenger car – the Astra 1.9 turbodiesel.  

Petrol’s up, better get a diesel

The graph below demonstrates the close relationshipbetween petrol prices and demand for diesel cars.

Although rising fuel prices are a major factor in theirincreased popularity, improvements in the quality of diesel sold in New Zealandhave also spurred diesel sales.   With higher quality diesel meeting thespecifications of new-technology diesel engines, local dealers have been ableto import models that incorporate the improvements made to diesel power plantsin recent years.   The improved performance, noise, and emission attributes ofthe latest diesel engines has reduced the "trade-offs" previously associatedwith owning a diesel car.   Imports of new diesel cars (maximum engine capacityof 2,500cc) lifted sharply after the introduction of diesel with a sulphurcontent of 500ppm in mid 2004, and then again at the end of 2005, when the standardwas tightened to 50ppm.

As with cars generally, larger diesel cars (enginecapacity greater than 2,500cc), have become less popular.   Large car sales ingeneral have declined from 23.7% of the new car market in 2000 to just 10.5% inJune 2006[3],whileimports of both new and used large diesel cars have fallen steadily over thefirst half of this year.  

Less pain at the pump

The Automobile Association has conducted tests measuringthe relative running costs of diesel and petrol cars.   The fuel economy for thepetrol and diesel cars in their sample with engine capacities below 2000ccs was6.9 and 8.9 litres per 100 kms, respectively.   Similarly, the larger dieselcars (cc rating exceeding 2000) in their sample also had better fuel economy thantheir petrol counterparts – 10.3 litres per 100kms versus 11.1.   Using anunleaded petrol price of $1.77 and a diesel price of $1.25, and including roaduser charges (RUC) of $0.03 per kilometre, the relative costs of like dieseland petrol cars can be summarised as follows:

On a per kilometre basis the fuel cost savings for smallerdiesel cars is $345 per 10,000 kms, or $3,450 per 100,000 kms.   For largerdiesels the difference is $3,630 per 100,000 kms.   On a straight fuel economybasis, therefore, there are clear advantages in owning a diesel car.   Interestingly,the AA found that when maintenance and fixed costs are taken into account, thepremium (up to $9000 in their sample) placed on new diesel models makes petrolcars the more cost effective option (this gap is closing on many models,however).

Bright prospects

While the 50% market share currently enjoyed in Europe isa long way off here, the popularity of diesel cars in New Zealand is likely tomaintain its recent upward trend.   The improvements being made to dieseltechnology will assuage performance concerns, and in doing so, highlight thefuel efficiency benefits of diesel cars.   The small end of the market inparticular is an area where the fuel economy benefits of diesels will have themost appeal to fuel-cost conscious consumers.

 



[1] PricewaterhouseCoopers.

[2] 2,500ccis used here as it is one of the three engine size categories used byStatistics New Zealand when recording motor car imports.   The three categoriesare: 0-1,500cc; 1,501-2,500cc; and 2,501cc and over.

[3] MotorIndustry Association

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