The Government might have thrown a spanner in the works, but diesel continues to do well in the used sector.
The rhetoric from Westminster and the mainstream media may be dying down a little, but the damage has been done in terms of the popularity of diesel as a new car fuel.
As the graph below shows, the fuel’s share of the new car market has plunged from taking more than half of new car sales as recently as 2014; the latest figures for the first quarter of 2019 has the market share down to just 27.4% and still dropping.
But that has created a differential with the used market that will continue to play out over the next few years, as the supply of defleeted diesel cars continues to decline.
“Diesel remains a popular choice for consumers considering a new car,” Jayson Whittington, EurotaxGlass’s Chief Car & Leisure Vehicle Editor tells Company Car Today. “There remains no fiscal penalty associated with ownership and the cost of running a diesel
car is favourable compared to petrol alternatives.”
“The volume of diesel cars sold in the new car market suffered a dramatic drop in 2017. As a result the volume of three-year-old ex-fleet cars returning to the market next year will fall,” Whittington continues. “Should consumer demand remain unchanged in the used market, we should expect to see the supply and demand dynamic change, which could lead to rising auction hammer prices and Glass’s Trade values. The effects will be felt even more in 2021, where demand could outstrip supply.”
Cox Automotive agrees that there’s still an important role for diesel in the used sector. “In the wholesale market, good condition diesel vehicles are selling well, and dealers are still reporting decent levels of consumer demand,” says Philip Northard, customer insight and strategy director. “When the demonisation trend first emerged we did see a decline in values, but they recovered fairly quickly.”
ULEZ BOOSTS EURO4 AND EURO6 AWARENESS
The London ultra low emissions zone (ULEZ) launched at the beginning of this month, and with Birmingham and others set to follow, the focus on cars’ emission levels is likely to intensify, with Euro6 for diesels and Euro4 for petrol being the key qualifiers.
“In terms of the consumer market, awareness of Euro6 is certainly more prevalent in the London and Birmingham areas, and it’s likely that the regional awareness will grow as more cities implement clean air zones,” Philip Northard, customer insight and strategy director at Cox Automotive tells Company Car Today. “It’s also clear that regional policy will impact demand, and fuel type will certainly be a more significant consideration for buyers in clean air zone areas.”
DOING THE RIGHT THING WITH DIESEL
Stuart Pearson, BCA’s COO UK Remarketing gives five top tips on attitude towards diesel cars:
1. Used buyers appreciate diesel’s strengths
Demand for diesel in the used sector has remained strong over the past three years. For many used car buyers, diesel will remain the preferred choice of fuel type as it offers great economy and typically lower running costs.
2. Diesel prices are still on the up
Overall, average diesel prices at BCA continue to rise steadily, underlining that trade buyers continue to see a profit opportunity in diesel product.
3. Real-time is really useful
There is a complex and evolving picture, and fleet managers should look to real-time data to inform remarketing decisions. The BCA valuations system provides an immediate and detailed view of the market performance based on actual auction prices.
4. Not all sectors are the same
Overall we see smaller petrol vehicles now demanding a premium over diesel examples, while diesel SUVs still have a higher hammer price than petrol versions. The gap continues to narrow for small executive models, with diesel still demanding a premium.
5. Demand could rise in low emission zone areas
There will continue to be demand for diesel in segments where it makes sense, such as SUV, and as clean air zones are announced in cities around the UK, we expect to see demand rise for those exempt vehicles with the latest clean diesel technology.