Diesel is back thanks to the Danes

If one mentions Diesel in Brussels these days, the words 'scandal' and 'Volkswagen' are not far behind. The fact is that diesels are everywhere in Europe and they are not all made in Wolfsburg. At present diesel cars cover 50% of the EU market.

Why do Europeans love this technology so much? For one the fuel is cheap, the engines are more durable and as the energy content in Diesel fuel is higher the mileage per tank is around 30% greater, they are also more fuel efficient and as a result they emit less C02 than gasoline powertrains. Lastly diesel has great power, great torque and makes for a very attractive package. In short Diesel ticks a lot of boxes and ensures great retail value when you are done with your vehicle. However, there is one snag:  Diesels have never been cleaner than Gasoline engines. That was also the reason why Americans, where gasoline fuel is traditionally cheap and plentiful, were reluctant to buy them.  

This began to change when the price of oil went up. At this point Americans became more susceptible to the Diesel powertrain technology, even if this meant filling up behind an 18 wheeler using the same pump. With this new demand, in one of the world’s largest car markets, the prospects of European car makers started to look up. However a Diesel engine block is expensive to build. More so then a gasoline powertrain. The price goes up even further when you start adding expensive diesel exhausts after treatment technologies. Now if you are selling a premium vehicle in the US you can afford to let that eat into your margins when selling the car or simply pass this cost on to your consumer. However Volkswagen,  as a mass volume manufacturer and brand, did not have this luxury. Should we be surprised in hindsight that it might have cut some corners? BMW and Mercedes, with more expensive after treatment devices in place, have not encountered any problems so far.

So does that mean the end of diesel for the masses? Automotive experts are certainly predicting that Diesel car demand in Europe is forecast to fall below 40% of all new car sales by 2020. However a Danish research startup company might have just saved this plagued powertrain technology. The European Patent Office certainly thinks so as it has awarded the innovation prize of the Year to Amminex AS. I won’t bore you with the technical details but this firm has invented a solid state ammoniac based diesel after treatment scrubber called AdAmmine. An innovation like this could do away with the cumbersome liquid adblue ammonia after treatment equipment that has proven to be unreliable during cold start conditions, typical to a European morning. In short this technology could be a game changer and put diesel right back in the center of things.

The societal advantage of having fewer pollutants in the air is hard to appraise financially. However a recent French Senate committee report estimates that the total effects of all air pollution (not just cars) cost the country some EUR 100 billion annually, citing reduced health as the major expense. It is fair to say that reducing diesel-engine-related smog through technologies such as AdAmmine would have a positive effect on pollution-related costs because transportation makes up about 44% of all NOx pollution.

For all of you investors out there I would keep an eye on this outfit as the potential roll out of this technology could be huge. The big question for regulators and the European Commission would be: could we retrofit this device onto the current diesel vehicle fleet in Europe? These Danes might have just saved Volkswagen. You have got to love the power of engineering.


Enza Fragapane

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