PARIS (Bloomberg) -- PSA/Peugeot-Citroen, Renault, Fiat and Opel could be hit by Volkswagen's admission that it rigged diesel engines to fool U.S. regulators as the revelations help to accelerate the technology's decline in Europe.
With the fuel systems already under attack in the region because of pollution concerns, VW’s diesel testing scandal could cause the market share of diesel cars to drop to as little as 35 percent of cars sold in Europe in 2022 from 53 percent in 2014, according to industry consultant LMC Automotive.
“Europe will go down particularly in the segment for smaller cars,” said Sascha Gommel, a Frankfurt-based analyst at Commerzbank. With subcompacts like the Peugeot 208, Renault Clio and VW Polo, "you can’t charge your customer for the additional content that needs to go in the car in order to comply with regulation,” he said.
Diesel-powered models accounted for 53 percent of new car registrations in EU nations in 2014, down from 55 percent in 2011, according to the European industry body ACEA. That compares with about 1 percent in the U.S.
Unlike German luxury-auto producers Audi, Mercedes-Benz and BMW Group, volume automakers including Fiat, Opel, Renault and PSA offer mass-market diesel hatchbacks and compact cars, on which margins are lower.
A backlash against diesel by consumers and more stringent scrutiny from regulators would make it even tougher for carmakers in Europe to meet tightening rules on fuel consumption and carbon-dioxide emissions. That might mean an accelerated shift to hybrids, which are costly to produce because they contain combustion engines as well as electric motors.
Still, the backing for diesel remains, not least because of lower operating costs for drivers. Almost all European Union countries tax the fuel less than gasoline, and it offers about 30 percent better mileage. And Germany’s manufacturers aren’t giving up, either.
“We still care about diesel,” Rupert Stadler, chief of Volkswagen’s Audi brand, said at a conference Thursday in Frankfurt. “The customer has decided that diesel offers the most attractive cost of ownership. So diesel should not be demonized.”
Since the VW scandal broke a week ago, PSA’s shares have plunged 13 percent and Renault has dropped 9.5 percent, wiping out a combined 3.7 billion euros ($4.1 billion) in market capitalization. The two French manufacturers, along with Fiat Chrysler Automobiles and Opel, are most likely to be hurt by any European contraction in demand for diesel cars, Gommel says.
The second best-selling diesel car in Europe this year will be the Renault Clio hatchback with more than 286,000 vehicles sold, LMC Automotive estimates.
Sales of diesel cars accounted for 68 percent of PSA's European vehicle sales last year, while the figure was 60 percent for Renault.
"We have the industrial capacity to adapt to the new demand," Renault spokesman Bruno Moreau said. "And we are a leader in the electric-vehicles market,” along with Japanese partner Nissan.
Pierre-Olivier Salmon, a PSA spokesman, declined to comment.