Diesel at a crossroads after Budget confusion

Alan Tovey
Retailers have been left 'scratching their heads as they watch old diesels in traffic pumping out black exhaust [fumes] while they’ve got new, clean diesels on the forecourt they can’t shift'

The huge slump in sales of new diesel cars is hardly a surprise given Philip Hammond’s ham-fisted handling of the issue in last month’s Budget.

Data from the Society of Motor Manufacturers and Traders this week showed a 30.6pc crash in diesel car sales in November, hot on the heels of a similar sized fall in September. The UK car industry has not suffered these kinds of decline for almost a decade – and that was at the height of the financial crisis.

In the Budget the Chancellor trumpeted the introduction of a levy on the sale of new diesel cars. Proceeds from this charge – a one-time hit of between £20 and £300 – would be used to fund measures to improve air quality, Hammond said.

But the policy totally missed the point. It targeted only the newest diesel cars which produce the same levels of nitrous oxides (NOx) pollution – and sometimes even less – as petrol vehicles. Diesel engines also produce less CO2 than petrol engines – the main reason why the Labour government altered vehicle tax rates back in 2001 to encourage people to buy diesel vehicles. No wonder car makers complain about what they call the “demonisation of diesel”, something they say is causing bewilderment among buyers and resulting in them delaying purchases.

It’s not just car makers talking up their own interests by praising diesel. One of the fuel’s biggest critics, Nick Molden, chief executive of Emissions Analytics, agrees its environmental impact is on a par, if not better than, petrol. His company’s tests of emissions from new diesel cars – in real-world driving conditions, not a lab in which manufacturers can “game” the checks – found some of the latest diesel engines produce far below the 80mg of NOx per kilometre requirement.

Autumn Budget | Cars

But by targeting new cars, Hammond has failed to address the real cause of diesel pollution on the roads: the millions of older diesel vehicles in the UK. It is these clunkers that pump out the most NOx and should be taken off the roads. They rightly deserve the “dirty diesel” label.

The Budget did nothing to encourage people to get rid of these cars. In fact, it encouraged the opposite. Many drivers of such vehicles turned to Twitter to say the Budget had made them less likely to trade up into newer, more environmentally friendly cars.

In private, car industry executives admit they are furious about the Budget’s measures. One said retailers had been left “scratching their heads as they watch old diesels in traffic pumping out black exhaust [fumes] while they’ve got new, clean diesels on the forecourt they can’t shift”. Few executives are willing to speak out. They are desperately lobbying the Government for a Brexit trade deal that will not hurt the £80bn-a-year industry. But in private, one said the Government “just doesn’t get it”, adding ministers are in danger of “becoming part of the problem”. Another said there was a feeling politicians are “meddling in things they don’t understand”.

Diesel sales are plummeting

Jeremy Hicks, Jaguar Land Rover’s UK managing director, is one of the few willing to go on record, saying the new levy “unfairly penalises clean, modern diesel vehicles and discourages customers from buying them”. He adds: “They are part of the solution to global warming and air quality, not part of the problem. The Government needs to support this progress and give clarity and confidence to consumers.” Despite eight consecutive months of sales declines, the industry remains relatively strong off the back of a record year. The fear is that unless the misguided policy is addressed, the consequences could snowball.

JLR is Britain’s biggest car maker, producing more than 500,000 vehicles a year and investing billions annually to design and produce new vehicles with the latest technology – such as low-emission engines.

Such R&D is expensive, one industry insider points out: “If they are suddenly selling fewer cars, you have to ask how JLR can fund R&D. Maybe it won’t be £3bn or £4bn a year. Maybe it’ll be £2bn. And that money supports jobs. And selling fewer cars means building fewer of them, which means fewer staff.”

Diesel's market share is crumbling

Targeting old diesels is, admittedly, a tough problem. There would be few votes in pumping up levies on the fuel; a retrospective tax would hit drivers who followed government advice to buy diesel cars. The car industry would like the Government to fund a diesel scrappage scheme. However, the cash-strapped administration is unlikely to have the necessary resources.

The automotive industry has the technical answers – in the form of clean diesels – to improving air quality.

But it is up to the Government to work out how to encourage the public to buy them – or, at the very least, not turn them against diesel vehicles.