Marchionne could announce in June that FCA will stop producing diesel vehicles in 2022

Everything points to the high costs of meeting emissions regulations together with the gradual elimination of demand for this type of vehicle in the market potentially leading to the announcement, next June, when the CEO of the FCA Group (Fiat Chrysler Automotive) presents his plans for the future of the Italian-American corporation, of the end of diesel passenger car production across the group’s different brands from 2022 onward.

According to the Financial Times, people linked to the strategy of the Italian-American group indicated that Marchionne intends to include this measure in FCA’s future plan for the next four years to be presented next April. FCA thus joins the growing list of manufacturers that have already announced expiration dates for the production of passenger vehicles powered by diesel engines.

For the first time in the past ten years, last January passenger car sales with petrol engines surpassed those of diesel vehicles, completely reversing the market trend toward diesel models that had been in place since the launch of direct-injection, turbocharged diesels at the end of the last century. During those years, both European governments and car manufacturers went all-in on promoting the sale of this type of engine in the market, aiming to achieve the then-necessary reduction of CO§h17Fiath18§ emissions, just as they now seek to reduce particulate emissions.

But the scandal caused by the fraud in emissions measurement committed by the Volkswagen group in 2015, which involved installing software designed specifically to deceive regulators about vehicle emission levels in 11 million diesel units, has triggered a backlash both among regulators and, above all, among the public. Its result, apart from the significant drop in diesel vehicle sales (8 percent fewer sales in 2017, bringing their market share down to 43.8 percent according to Jato Dynamics), has also been the imposition of major restrictions on the free circulation of diesels, as well as cuts to incentives both for their purchase and for their use.

In such a situation, the profitability of the investments needed both to improve diesel engines and the cars that carry them is steadily declining, if not directly compromised. According to various industry estimates, the cost of undertaking new diesel developments so they comply with increasingly demanding European standards (some of whose major cities have already announced they would ban their use from 2030) and American ones has risen by 20 percent compared with the past, and this amount may keep growing as sales of these models continue to fall.

As a result, it is expected that other technologies will gain traction in FCA’s future strategy, especially those related to electric cars, whose production costs have fallen considerably and will continue to fall even further, given that all manufacturers must necessarily introduce them into their ranges if they want to comply with the strict environmental regulations imposed by the EU.

The collapse in diesel demand and rising production costs involved in continuing to manufacture this type of engine after the emissions scandal will lead the FCA Group to stop producing diesel passenger vehicles from 2022.