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The future of diesel engines – and how OEMs can shape it

Despite an anticipated decline in the overall diesel market share in the years to 2030, demand for diesel is expected to continue to remain above 50% in medium-upper car segments. By Fabrizio Arena, Hiroto Suzuki, Eric Kirstetter, Wolf-Dieter Hoppe and Daniele Spera of Arthur D. Little

Limits on emissions in the automotive sector are expected to be tightened in the future, with the US and the EU leading the regulation pattern. Although diesel accounts for less than 1% of US car registrations each year, it makes up about 50% of annual car registrations in the EU.

However, when compared gasoline, emissions controls for diesel exhaust – mainly for oxides of nitrogen (NOx) and particulate matter (PM) – are more complex and require the implementation of relatively new technologies, which results in higher costs. The most likely scenario is a progressive diesel market share decrease by 2030, while keeping a relevant positioning (significantly above 50%) in medium-upper passenger car segments.

The ‘diesel’ environmental issue

The transportation sector is one of the main sources contributing to emissions of air pollutants, together with the energy, industry, commercial, institutional and household sectors, as well as agriculture and waste. The transportation sector has considerably reduced its emissions over the past decade, yet it is still the largest contributor of NOx emissions, accounting for 46% of total EU-28 emissions. Diesel-powered vehicles account for 80% of total NOx transportation emissions, ranking as one of the main targets of governmental emissions reduction policies.

For NOx emissions from diesel cars, limits were reduced by 68% from Euro 4 to Euro 6; however, recent analyses indicated that ‘real-world’ performance – on-road driving under normal conditions – is much worse than a typical performance measured by ‘official’ laboratory tests using the NEDC driving cycle. This is true for a set of pollutants, not only for NOx; nevertheless, the amount of CO2 (which is linearly correlated with fuel consumption) produced on the road can be 20-30% higher than the figure indicated by official measurements, and the differences are even greater for NOx emissions, especially for diesel vehicles. In the latter case, real-life measurements show that NOx emissions can be, on average, as much as four or five times higher than shown in laboratory measurements.

NOx emissions are, then, a major issue for diesel engines. And it is mainly a European OEM issue since nearly 50% of yearly new EU car registrations are diesel powered. The situation is different from other major markets; the US, Chinese and Japanese markets are all dominated by gasoline-powered cars, with diesel cars playing almost no role, the exception being India, where diesel currently has a market share of about 50%.

More stringent EU regulations

The EU is currently working not only on tightening emission reduction rules (standard Euro 6 up to Euro 6d), but also on improving testing procedures for pollutant emissions and fuel consumption of light-duty vehicles. Compared to tests under laboratory conditions, light-duty vehicles have significantly higher emissions when on the road, and two new testing procedures are currently being developed to assess the performance of vehicles under real-life conditions: Real Driving Emissions (RDE) for measuring regulated pollutants, and the Worldwide Harmonized Light-duty Vehicles Testing Procedure (WLTP) for measuring CO2 emissions.

The European Commission wants to introduce the new mandatory RDE test procedure for type approval of light-duty vehicles by 2017. According to the new procedure, emissions will be measured on the road by a Portable Emission Measurement System (PEMS). This new procedure will imply significant changes for OEMs and higher costs; since exhaust-control systems will have to perform under a broad range of operating conditions, the logistics of type-approval processes will have to be restructured and new measurement technology will be applied.

Diesel powertrain efficiency costs

Diesel powertrain efficiency improvement will be an important lever for European OEMs in the race to meet EU emissions targets, either for CO2 or NOx. In both cases, though, diesel powertrain efficiency improvement could require higher costs for emission control.

A reduction of 38g CO2/km is needed to meet the 2021 emission target of 95g CO2/km. Relevant contributions will come from powertrain efficiency improvement (gasoline 21%, diesel 32%) and weight (24%). On the efficiency improvement side, other contributions will come from alternative propulsion and/or fuel (11%) and vehicle fuel efficiency technology (5%), as well as from portfolio changes (8%).

It is clear that a complete CO2 reduction strategy should include a ‘diesel focus’ in order to fill in the gap, and investments will be required in R&D.

Analysis shows that the relationship between diesel car NOx emissions and related emission-control costs is non-linear: emission-control costs necessary to be compliant with Euro 6 limits are more than three times those required for Euro 3.

Diesel engines require higher costs to control and reduce polluting emissions than gasoline engines. For gasoline engines, emission-control technologies (air-fuel control and catalytic after-treatment) have reached a high level of maturity, and the incremental compliance cost is low, even for more stringent standards. On the other hand, emission-control technologies for diesels (involving air management, fuel injection, after-treatment) are more complex and require higher costs.

Diesel engines – future scenarios

Here we break down the main scenarios for the future of diesel engines, according to market trends, policy and regulations, and technology:

Market trends: Diesel will remain attractive to consumers because total cost of ownership (TCO) will become a strong buying criterion. TCO models (including depreciation, fuel costs, insurance, maintenance, fees and taxes, repairs) show that diesel vehicles can have a lower TCO than their respective gasoline counterparts in a three- to five-year time frame.

Policy and regulations: Analysis has shown that the problem of vehicles generating higher emissions on the road than in laboratory conditions affects mainly diesel vehicles, and specifically NOx emissions. On 12 February 2016, the European Council gave the green light for the adoption of the second package of rules to introduce RDE tests, establishing emission limits (80mg/km) and two implementation dates: the first step will apply from September 2017 with a 2.1 conformity factor, and the second from 2020 with a 1.5 conformity factor.

Conformity factors introduce a higher allowance than the established limit, and the aim is to give manufacturers time to gradually adapt to the new RDE rules.

Technology: After-treatment technologies are available to reduce harmful emissions from diesel engines (DOC – diesel oxide catalyst, DPF – diesel particulate filter, SCR – selective catalytic reduction, LNT – lean NOx trap), but they require more investment, leading eventually to higher costs.

Because of the increasing costs of being ‘clean’, diesel engines are expected to lose market share progressively, especially in lower car segments. That notwithstanding, they will help match the targets of the emission-limit standards and will continue to play a relevant role in the medium-upper vehicle segments.

Further insight from the industry

Advances in R&D have made it possible to increase engine performance without increasing displacement, so both premium and mass-market OEMs are reshaping their powertrain portfolios, including a higher proportion of smaller engines.

In particular, all premium car manufacturers are introducing basic engines of 2000cc, as well as in the medium-upper segments, which in turn reduces the number of cylinders across their entire powertrain line-ups (from 8 to 6 or from 6 to 4, with a single cylinder volume of about 500cc). The final effect will be engines with higher efficiency and lower fuel consumption.

And mass-market car manufacturers are focusing on smaller engines, namely those of 1.6- and 1.8-litre displacement, and turbochargers that will provide customers with both the driving experience they desire and lower fuel consumption due to lower displacement.

Conclusion

In the context of increasingly stringent automotive emissions regulations, ‘clean’ diesel will still play an important role in helping OEMs reach emissions targets in the next five to ten years. Yet clean diesel will require higher costs; diesel engines are expected to lose market share progressively, especially in lower car segments, although they will still play a relevant role in the medium-upper vehicle segments. Since diesel will mainly remain an issue for the EU (and, as noted above, India), despite European manufacturers’ efforts to push diesel technology in other markets, the strategic action that OEMs will need to take if they wish to compete in the European market falls into two categories – technology and market.

On the technology side, vehicle manufacturers must develop and implement the required technologies to fill the gap with more stringent standards and RDE test procedures at a reasonable commercial cost for the final client; and they must accelerate the deployment of alternative powertrain solutions, for example electric or hybrid cars.

On the market side, OEMs should shift the diesel focus to medium-upper car segments, and convince end-customers and policy makers that diesel is not an environmental issue.

This article appeared in the Q4 2016 issue of Automotive Megatrends Magazine.