Diesel residual values outperform petrol in four of the EU5 markets

6 March 2019

Neil King

Diesel residual values (RVs) are outperforming the development of petrol RVs in four of the EU5 markets, France being the exception.

The arrival of clean diesels, less negative media coverage and a possible U-turn on driving bans in Germany are all contributory factors. Furthermore, it was always expected that values would bottom out at some point as the lower they became, the more attractive used diesel cars would be. This recovery is therefore the natural progression from the stabilisation of diesel values, as reported back in November.

RV advantage of diesel vs petrol in the EU5, 36months/60,000km, January 2018 to January 2019

In Germany, diesel RVs developed at a better rate than petrol values in January and February. The recovery of the average RVs of diesel cars in the 36month/60,000km scenario means that diesels now retain almost as much of their value as petrol cars, at 43.6% and 44.3% respectively. This recent improvement in diesel values aligns with the improvement of the diesel share of the new car market in Germany. Although this was boosted by improving supply of diesel cars as they have gained WLTP homologation, it does suggest a thawing of the reaction to diesel in Germany.

The situation in Germany is despite the looming spectre of diesel driving bans in numerous cities. However, the German Government is now actively working to step back from banning diesels and major cities within Germany seem content to pay fines rather than enact bans. The diesel ban planned for Frankfurt has even have been halted by a German court as there is now ′insufficient’ reason to implement it. with the reasons for instating the ban in the first place being ′insufficient’. This raises the question as to whether the German Government and the cities involved are even still in favour of the bans. Moreover, as other solutions are presenting themselves to solve Germany’s pollution crisis, are the bans even necessary?

Petrol and diesel RVs, Germany, percentage, 36months/60,000km, January 2015 to February 2019

Andreas GeilenbrÜgge, Head of Valuations and Insights at Schwacke, Autovista Group’s German division, comments that ′2016 was the last time there were more diesel fleet registrations than in the year before. As these cars return to those who are in charge of their buy-back and remarketing as 3-year-old cars, we expect 2019 to be the last year of significant pressure on diesel values. Values are already stabilising if not recovering but as diesel bans come closer and will again feature in the media, there could be some implications. However, this will mostly affect EU5 and older diesels that will then be more than three years old.’

GeilenbrÜgge adds that ′What will be interesting to observe is if manufacturers will start a ″renaissance″ campaign of ″clean″ EU6d-Temp diesels at the end of 2019 in order reduce their CO2 fleet emissions to avoid penalties. This could put additional pressure on diesels by increasing supply of young used cars into the market without the used car demand existing anymore. But, in general, both new and used diesel demand appears to be stabilising at the current low level.’

Diesel residual values in the 36 month/60,000km scenario developed at a better rate than their petrol counterparts in the UK between October 2018 and January 2019. Both fuel types retained 46% of their original list price in January. In February, RVs for both fuel types fell, possibly as Brexit uncertainty disrupts used car demand, and petrol subtly increased its value retention advantage over diesel. Nevertheless, the residual value advantage of diesels averages out lower for the last three months than in the preceding three month period from September to November 2018. Diesels now retain 45% of their value after 36 months compared to 46% for petrol-powered cars.

RV advantage of diesel vs petrol, UK, 36months/60,000km, January 2015 to February 2019

Diesels have consistently held a value advantage over petrol cars in Spain, although this has eroded from five percentage points in August 2015 – immediately prior to the Dieselgate scandal breaking – to two percentage points since October 2018. The deterioration accelerated at the start of 2018 in Spain but despite the lag compared to other markets, the slump in diesel RVs appears to have bottomed out as the advantage of diesel values over petrol improved from November 2018 to January 2019. Autovista’s latest RV data reveal that the diesel advantage narrowed again in February, albeit only slightly, with diesels retaining 51% of their original list price compared to 49% for petrol cars.

Ana Azofra, Valuations and Insights Manager at Autovista in Spain, comments that ′we expect more stable values as long as the current market circumstances remain. However, if the media resumes its discrimination against diesel engines or if the Government decides to implement a higher tax, residual values could be affected again.’

RV advantage of diesel vs petrol, Spain, 36months/60,000km, January 2015 to February 2019

Diesel RVs are performing similarly in Italy as in Spain, with an advance in January followed by a subtle retreat in February. The diesel RV advantage over petrol has been the least impacted in Italy and was still over seven percentage points in February. Diesels now retain 45% of their value after 36 months and 60,000km compared to 37% for petrol-driven cars.

Only France is still seeing the residual value advantage of diesel cars continue to erode compared to petrol cars, However, even here the situation is expected to change following the ′yellow vest’ protests against diesel fuel price hikes, which subsequently led to President Macron reversing his policy to increase tax on diesel fuel.