Industry Trend Analysis - Industry Strength To Slow Demand Destruction - OCT 2017

BMI View: The strength of the domestic auto-industry in Germany will slow momentum behind diesel demand destruction, as punitive legislation and government incentives are not introduced as stringently as in other Western European markets .

Our longer-term view for developed western European fuels demand remains bearish, with several governments taking increasingly stringent action against diesel in particular. However, Germany, with its unique position as global automotive manufacturing hub, will face greater pushback to punitive legislation and government incentives from the powerful domestic car industry. This has been evidenced through the recent compromise reached by government officials and industry executives, in which it was agreed car-makers would provide software upgrades to diesel cars, in lieu of more expensive hardware add-ons to limit fuel emissions. As a sector of distinct national importance both economically and culturally, there is scope for a slower diesel demand destruction trend than other Western European markets.

For diesel vehicles within city centres and major conurbations across Western Europe, the reality of demand destruction is much closer. Several major cities including Madrid, Paris and Athens have plans for a complete ban on diesel-powered vehicles by 2025, with Paris having initiated a ban on all diesel-run vehicles registered before 2000 in order to combat increasing levels of air pollution. Other major cities such as London are set to follow suit, with a variety of diesel-ban propositions set to be implemented in the ensuing years (see 'Scrappage Scheme To Further Erode Fuels Demand', April 19).

Demand To Slow From Policy & Disruptive Technology
Western Europe Distillate Demand, 000b/d
f = BMI Forecast. Source: National Sources/BMI

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