VW, Fiat, Mercedes will benefit from CNG market growth

European sales of vehicles powered by compressed natural gas could grow tenfold by 2020, according to the organization responsible for promoting the fuel in the region. Analysts and carmakers, however, say that growth is dependent on government incentives and an increase in the number of stations offering the fuel across the continent.

“We believe gas is the next big thing in transport,” Matthias Maedge, deputy secretary general of the Natural and Bio Gas Vehicle Association in Europe, told Automotive News Europe. The organization predicts the number of CNG-powered vehicles on Europe’s roads will grow to between 10 million and 12 million by 2020 from about 1.2 million now. Most of those vehicles will be passenger cars.

Natural gas costs about half the price of gasoline. As of September the average price for CNG across Europe was 79 cents compared with 1.49 euros for gasoline and 1.39 euros for diesel, according to NGVA data. CNG is promoted as a low-CO2 fuel that can be easily mixed with biogas, enhancing its environmental credentials, according to the NGVA.

The number of new, factory-built models equipped with standard CNG tanks remains limited, but is growing with the recent commitment from Volkswagen brand to launch more gas-powered vehicles under its TGI badge.

Earlier this year the Golf TGI compact went on sale, joining three other model lines with variants using the fuel: the Up minicar, Touran minivan and Passat midsize. Other VW Group brands using the technology include: Seat, with the Mii microcar and Leon compact; Audi, with a G-tron badged version of the premium A3 compact; and Skoda, with the Citigo minicar and the recently launched Octavia compact both wearing the Czech brand’s G-Tec badge.

“There are only advantages as far as the customer is concerned, since he can use the more affordably priced CNG fuel, but when he needs a greater range he can also fill up with normal gasoline,” Skoda sales and marketing chief Werner Eichhorn told Automotive News Europe.

Other newcomers to the niche include Mercedes-Benz, which added a B-class Natural Gas Drive compact to its midsize E-class NGD car earlier this year. The proliferation of new models helped boost Europe’s overall CNG sales by 7 percent to 66,952 after nine months, according to JATO Dynamics data.

Fiat dominates

Fiat is Europe’s top-selling CNG player -- its nine-month sales of 33,197 were almost double that of second-placed VW (16,755). Fiat has a commanding lead because of the size of the CNG market in Italy, which had 880,000 gas-powered cars and light vans as of June this year, compared with 95,708 in Germany and 43,796 in Sweden, according to NGVA data.

CNG-powered cars also account for a Europe-best 5 percent of Italy’s new-car market, according to JATO data, while markets with no gas infrastructure, such as the UK, have zero sales. Private sales of cars such as the gas-powered Fiat Panda are possible because the bulk of Italy’s 1,040 natural gas filling stations, located mainly in the north, are public.

Germany has almost as many stations at 920, but 840 aren’t for public use, according to NGVA data. The poor availability of stations puts off buyers when there are 10,000 stations in Germany that sell diesel and gasoline.

Skoda’s Eichhorn said: “If one constantly has to make a detour to find a filling station then it doesn’t make sense financially at some point.” Another deterrent is that few fuel station owners are willing to invest in the complicated and costly pumps that gas requires.

Al Bedwell, head of powertrain analysis at LMC Auto, said: “CNG stations are expensive to set up at around three times the price of those for gasoline and diesel. This is a headwind for the industry.” NGVA’s Maedge agrees. “Infrastructure is key and we have a lot of work to do,” he said.

Helped by regulation

The struggle by European cities to reduce diesel emissions is seen as a catalyst for the creation of more natural gas stations and the sale of more CNG models. “Low-emission zones will help us,” Maedge said. Like the operators of buses and garbage trucks, taxi companies could decide to switch to natural gas vehicles to comply with tougher tailpipe regulations, he said. Mercedes already sells a taxi version of the B class.

Maedge argues that as manufacturers are forced to add technology to reduce diesel emissions from cars to Euro 6 levels, the price gap to converted natural gas vehicles will close fast. The price gap remains wide. In Germany the CNG B class costs almost 1,800 euros more than the equivalent diesel and nearly 4,000 euros more than the version with a gasoline engine. The CNG-powered VW Golf costs 25,400 euros while a diesel with comparable power starts at 23,475 euros. The Golf CNG and diesel variants both have CO2 emissions of below 99 grams per kilometer, which is less than the 114g/km produced by the equivalent Golf with a gasoline engine.

According to Mercedes, future competition for natural gas cars could come from EVs. Asked how much the company saw the CNG market growing, a spokesman told Automotive News Europe: “This will depend heavily on the incentives for this type of powertrain, along with the further development of the electric segment.”

Mercedes’ electric B class, starts at 39,151 euros in Germany. Both electric and natural gas variants rely on incentives, but those for natural gas are more vulnerable. LMC’s Bedwell said: “As soon as there may be a boom, governments increase duty on gaseous fuels so that they don’t lose revenue.”

Christiaan Hetzner contributed to this report