In September 2015, the US EPA issued a notice of violation to Volkswagen. The European carmaker had, apparently, engineered its turbocharged direct injection diesel engines to turn on the vehicle’s emissions control only during testing. Discrepancies had been discovered by California regulators the year before, many involving European makes and models. The Volkswagen emissions scandal touched off a global regulatory fury.
The end result so far has been the Worldwide Harmonised Light Vehicle Test Procedure (WLTP). The name is misleading in the one sense because it hasn’t been adopted worldwide, just Europe. It is a new way to test vehicle emissions, though, longer and more intensive examinations of cars and trucks outside of laboratories on actual roads.
These new much stricter standards were phased in last September, applied to some specific new model autos. On September 1, 2018, WLTP began to cover every vehicle intended to be sold in Europe. Some exceptions were made as car companies complained about what would happen; there would be a rush to buy up the old standard models significantly cheaper than the new ones.
They were right. In August, there was a massive surge of new vehicle registrations. When WLTP took effect, sales plummeted. In Western Europe, it had meant a 23% decline during the month of September, according to data from LMC Automotive. Worse, the slump continued in October with new data on vehicle registrations showing a 7.4% decline across all Europe.
Regulations are, of course, an easy target and an easy answer. There is no doubt WLTP created an artificial distortion in Europe’s car market and a big one. But it is masking an underlying weakness and therefore allowing that undesirable baseline to go unappreciated. This disconnect, a very familiar one, was said best by one LMC analyst in September:
Putting the recent WLTP distortions to one side, underlying market demand for the region is clearly close to its peak. We’re therefore cautious on the 2019 outlook, given where we are in the market replacement cycle. Much depends on developments for the region’s economy – which is performing well at present.
