Volkswagen to kill off its small diesels within six years

Rising costs will kill off all of Volkswagen’s small diesel engines within five or six years, according to a senior executive in the firm.

They might have survived the $20 billion (€19 billion) fallout from the Dieselgate emissions scandal, but modifying its diesel engines to meet the European Union’s 2020 emissions laws could balloon beyond €800 a car, which will be enough to wipe the 1.4- and 1.6-litre diesel engines off the board.

Volkswagen’s head of development has admitted that Volkswagen has all but confirmed that it has already developed its last small diesel engine, a 1.6-litre, four-cylinder turbodiesel for this year’s all-new Polo.

While it will retain the more versatile EA 288 2.0-litre TDI for Audi, Volkswagen, Seat and Skoda sedans, hatches, coupes and SUVs, the smaller three- and four-cylinder will be gone completely in around five years, Volkswagen's development boss, Frank Welsch insisted.

They will be replaced, he said, by mild-hybrid versions of petrol-powered four-cylinder engines, most likely to be the all-new 1.5-litre turbocharged petrol engine, which will make its debut in this year’s Golf Mk 7.5 facelift.

It also means the small Polo and even the Up will get both 12- and 48-Volt electrical systems by 2021, at the latest, to run ISG-type (integrated starter generator) electric motors to provide torque boosts at low engine speeds.

“Mild hybrids are right on the cost of small diesels. They are finished. In the small cars, like Polo, diesel gets much too expensive in 2020,” Mr Welsch said.

“We have to see if there is a future for diesel in these small cars at all,” he said.

“The take-rate of diesel in small cars is going down step by step. They are expensive. In the very near future, people will say, ‘Okay, there is the normal price of that car but to add a diesel, it’s 25 per cent of what the car’s price is’,” he warned. “They will say, ‘forget it.’”

The shrinking of Volkswagen’s family of small diesels has been going on for a few years now, with the 1.2-litre three-cylinder and 1.6-litre four-cylinder versions being replaced in the Polo at its 2014 facelift by a lone 1.4-litre four-cylinder.

Modular TDI

The realisation that it needed a new way to lower small-car CO2 levels seems to have dawned on Volkswagen only within the last year, with chief executive Herbert Diess insisting a year ago that a new modular 1.5-litre TDI was deep in development.

Volkswagen had planned to develop a modular 1.5-litre TDI to be built well into the 2020s to be sold alongside the recently-launched 1.5-litre TSI petrol four-cylinder, but all development on smaller diesel has been shelved.

Mr Welsch believed the car market was moving towards electrified petrol powertrains swamping small diesels somewhere around 2021 or 2022 – about the timing of the facelift of this year’s all-new Polo.

“We think there will be a time not so far away that people will go for petrol or a combination with mild hybrid and not diesel,” Mr Welsch insisted.

“A mild hybrid is cheaper than diesel and has more or less the same CO2. From my perspective and Mr Diess’s [Volkswagen brand boss Herbert Diess] perspective, this is four or five years. Maybe five years, it depends on the markets.”

Besides mild-hybrid petrol power delivering CO2 figures on a par with small diesel engines, the rise in emissions clean-up costs would basically cancel out the higher cost of electrically boosting petrol motors.

Emissions target

The EU rules for 2020 dictate a European new car fleet average of 95 grams of CO2 per kilometre, though for complicated reasons the Volkswagen target is 96 grams (Daimler and BMW are both on 101, while FCA has an 88-gram target).

“To make these diesels fulfill these new regulations, it will be at least €600 to €800 per car and that’s just the material costs into these cars,” Mr Welsch said.

“It’s not in the engine, though. The engine doesn’t need to change. It’s for everything behind the engine, all the after-treatment. For a small diesel, the after-treatment is as expensive as the engine is. That’s where we end up. We will have mild hybrids across the range. I think in most cases we will have 48-Volt power (and 12-Volt power), even for the Polo.”

While small diesels will face a sharp uptick in price after 2020, bigger diesel engines will be better placed to absorb the costs of the upgraded after treatment systems that will be mandatory for all diesel engines.

The burden isn’t as severe on larger diesels, which can absorb costs in other areas, so Mr Welsch insists both the 2.0-litre and 3.0-litre TDIs will continue to be developed.

“The 2.0-litre TDI will have a next generation. The EA 288 Evo will get down enormously in CO2 and we will start selling that in 18 months to two years. That’s where we will invest,” he said.