Germans have had a long, lusty love affair with diesels. While motorists in some parts of the world have largely ignored diesel vehicles (looking at you, America), in Germany, consumers have snapped them up as quickly as homegrown companies like BMW and Mercedes-Benz could turn them out.
But not anymore. New reports indicate that $5.3 billion worth of perfectly good late-model diesels are sitting on dealers' lots, gathering dust under the late summer sun.
What's the problem? The simplest answer is: Volkswagen.
The Volkswagen Dieselgate scandal that's been making front-page news for nearly two years has done plenty of damage--not only to Volkswagen's image and that of its sub-brands like Audi, Porsche, and VW, but also to that of diesel in general.
For decades, Volkswagen promised the world that its so-called "clean diesel" vehicles could reduce auto emissions while offering improved fuel economy. Then in September 2015, we all learned that those claims were patently false, and that 11 million consumers had purchased diesel vehicles capable of pumping out 40 times the legal limit of pollutants.
Environmentalists and watchdog agencies sounded the alarm, demanding that automakers speed up their transition to electric vehicles. Doing so, they argued, was the only way to truly reduce greenhouse gases, address the growing problem of climate change, and shift the planet toward greater reliance on renewable energy.
Governments have heeded those calls, especially in Europe. Last summer, we learned that Norway and the Netherlands aimed to outlaw the sale of gas and diesel vehicles by 2025. A year later, France and the UK promised to follow suit by 2040. And in between, German officials called not just for a ban on gas and diesel vehicles within Germany itself, but across the entire European Union.
Uncertainty is bad for biz
Those kinds of pronouncements have created a lot of uncertainty--not just among automakers, but also among consumers. A recent survey revealed that 29 percent of diesel owners in Germany plan to trade in their vehicles due to concerns about declining resale value.
Used car shoppers are wary of getting trapped behind the wheels of those cars, too, and sales of used diesels are declining. That's even true for "new used" diesels from model year 2015 and later that meet stricter Euro 5 standards. To date, some 300,000 of those cars have begun piling up on dealers' lots. At an average value of €15,000, that works out to inventories of €4.5 billion, or $5.3 billion U.S. Dealers have responded by slashing prices.
Automakers haven't completely given up on diesels--at least not yet--but some are trying to cash in on the public's growing fears. Volkswagen, for example, recently launched a cash-for-clunkers trade-in program to entice owners of older diesels to trade them in for new, fuel-efficient models. And the company is offering plenty of encouragement: depending on the vehicle that's being traded in and the one that's being purchased, shoppers could receive nearly $14,000 in incentives.
This may not be the absolute end of diesels, but the fact that diesels are facing such problems in friendly territory like Germany suggests that it's the beginning of the end.