Taxation changes and innovation are expected to increase diesel penetration.

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The company car market is expected to see a shift in its choice of fuel over the coming year. Diesel is to become the first choice among fleet managers and increasingly, drivers too. Vehicle manufacturers that lead the way in diesel technology will benefit in what could be a difficult year for new car sales.

In the UK, sales of diesel-powered vehicles are set to increase significantly over the next year. The Society of Motor Manufacturers and Traders (SMMT) says that diesel sales have increased for 29 consecutive months, and they are expected to account for one third of all new cars sold this year. This figure is likely to be even higher in the fleet sector, where fuel economy, benefit-in-kind (BIK) taxation and residual values are critical.

A new survey from HSBC reveals that 60% of businesses expect to switch to diesel cars over the next 12-18 months and Bosch, the automotive components manufacturer, is similarly bullish about the uptake of diesel in the UK. Datamonitor’s “Fleet Procurement Survey” has also revealed the anticipated change, with many fleet managers citing the change from petrol to diesel as the biggest single change in their fleet over the next 12 months.

Whilst the uptake of diesel engines has been slower than in France or Spain, recent changes to the taxation of company cars in Britain have accelerated the growth of diesel sales. They too are now taxed according to the levels of carbon dioxide they emit, making diesel the logical choice for many company car drivers.

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At the volume end of the market, Volkswagen and Peugeot/Citroen (PSA) have been the winners in the diesel war thus far, while BMW have led in the prestige sector. Both Ford (in collaboration with PSA) and Mercedes Benz have now introduced diesel models that are capable of challenging the market leaders. Around 50% of all Mercedes Benz flagship S Class models sold in the UK are now diesel powered, something that would have been unthinkable in such a car only a few years ago.

SOURCE: DATAMONITOR COMMENTWIRE (c) 2003 Datamonitor. All rights reserved. Republication or redistribution, including by framing or similar means, is expressly prohibited without prior written consent. Datamonitor shall not be liable for errors or delays in the content, or for any actions taken in reliance thereon.