Europe's Diesel Phaseout Gains Traction as Volvo Changes Lineup

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(Bloomberg) -- Diesel’s demise in Europe, the main market for the engine type, is accelerating with Volvo Cars saying it won’t be offered for the upcoming S60 sedan as the shift to electrified cars takes shape.

The revamped mid-size S60 sedan, to be unveiled in the next few weeks, will become Volvo’s first model not featuring a diesel option, the Gothenburg, Sweden-based company said Wednesday in a statement. While Toyota Motor Corp. and Nissan Motor Co. earlier decided to phase out diesel choices altogether amid declining demand, diesel sales made up 70 percent for Volvo in Europe last year. At Toyota, it was 10 percent.

“Our future is electric and we will no longer develop a new generation of diesel engines,” Volvo Chief Executive Officer Hakan Samuelsson said. “We will phase out cars with only an internal combustion engine with petrol hybrid versions as a transitional option as we move towards full electrification.”

Consumer demand for diesel vehicles has slid ever since Volkswagen AG’s cheating on emissions regulation became public in September 2015, with concern spreading as more carmakers became embroiled in the ensuing fallout. European carmakers are divided on diesel, with German manufacturers committed to the embattled technology as a stop-gap to reach the E.U.’s ambitious regulation on cutting carbon dioxide emissions.

Meanwhile, Fiat Chrysler Automobiles NV will cease to offer diesel versions for its Alfa Romeo, Fiat, Jeep and Maserati brands by 2022, as Chief Executive Officer Sergio Marchionne sees hybrid vehicles as the way to meet goals on CO2 reduction -- with diesel sales unlikely to recover.

About 44 percent of cars sold in Western Europe last year were equipped with diesel engines, down from a peak of 56 percent in 2011, according to statistics from the European Automobile Manufacturers Association.

Volvo, owned by China’s Zhejiang Geely Holding Group Co. Ltd, has said it plans to offer only hybrid or full-electric motors on every new model launched from 2019. In Volvo’s home country, municipalities will be able to ban older diesel cars from certain areas of cities from 2020. Other cities like Paris have outlined similar plans.

Production of the S60 will start later this year at Volvo’s new plant near Charleston, South Carolina.

©2018 Bloomberg L.P.

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