What Will the New WLTP Emissions Standards Test Mean For Both Consumers and the Motor Industry?
Worldwide Harmonised Light Vehicle Test Procedure
What are the new WLTP emissions standards and how will it affect you? It wouldn’t be the first thing on your mind but have you noticed your car’s Co2 emissions going up lately? Probably not but that certainly what is bound to happen quite soon.
The new Worldwide Harmonised Light Vehicle Test Procedure (WLTP) and Real Driving Emissions (RDE) has already been introduced in the UK and is also to be introduced here.
WLTP and RDE are both ways of testing a car’s fuel economy and emissions with the aim of providing a more accurate interpretation of the impact the car has on the environment.
The new WLTP test is a displacement for the discredited system known as the New European Driving Cycle (NEDC), which was established all the way back in the 1970s, being heavily updated in the 1990s. As most know by now, these emissions tests were tampered with in the Volkswagen scandal that has brought on these new changes to how cars are tested.
Car manufacturers and not just the Volkswagen Group, have by now become adept at manipulating the NEDC test and massaging the data for their own ends. As a result of this industry-wide tampering, these tougher, new testing procedures are coming into force. The WLTP takes longer to complete and is more realistic in its parameters.
The new procedure will actually drive up the emissions of your car. Technically speaking, the emissions of your car were probably always higher than was recorded up until now but the new test will give a more accurate assessment of your vehicles effect on the environment.
WLTP has not fully rolled out across Europe yet, but here is a possibility that the Irish Government could widen the current motor tax bands by between 10 and 20 per cent just to account for higher emissions under the new fuel economy tests.
Enforcement of the new rules started last September for newly manufactured vehicles entering into the market, and full adoption of the procedures will be in force in Ireland this September when all cars currently on sale will have to be put through the test.
So, a tougher emissions test will mean higher Co2 figures almost across the board and for almost all models. In order to give car manufacturers time to make the changes, the EU has allowed a transition period for WLTP, between now and 2019 (but most likely 2020, as the introduction date is flexible). In that period, the official figure for your car’s emissions will be a so-called NEDC Correlated figure, a sort of halfway point between old test and the new test.
Car manufacturers all over the world are now scrambling to get their stock re-tested under the new legislation, which comes into worldwide force on September 1st, at which time, all cars must display their new Co2 emissions and fuel economy data.
At first, they will not be taxed on the new WLTP figures. The legislation proposes a final cutoff year when all EU countries must change their tax systems to use WLTP data and that is 2020.
This change presents is a potential worry for car makers and consumers alike, because the WLTP test is a tougher and more stringent test of emissions than the old NEDC one. The positive for consumers is a more realistic official fuel consumption figures but on the flip-side, it means higher CO2 figures too, which in turn will mean higher tax.
Despite the complexity of the changeover and the uncertainty surrounding the market and how it will respond, it’s not all bad news, particularly for car buyers. In fact, there may be some great opportunities to be had, for savvy car buyers who may be able to benefit from the new changes.
Many manufacturers and dealers have a large stock of cars built and on their forecourts that don’t meet these regulations. As a result, franchise dealers must sell as many of these cars before then. This could mean significant savings being offered by these dealers before the summer is out?
The impact on dealers
Not only will buyers notice the difference but car dealers also will have to consider the effect it will have on their business, especially in the next few months as the changes come into effect.
During this transition, governments will offer a derogation that will allow manufacturers to have non-compliant NEDC-rated cars on sale when the rules change.
The UK government will allow manufacturers to hold stock equal to 10% of their previous year’s sales volume without the need for testing. So, for example, if a manufacturer sold 100,000 cars in the UK in 2017, it will be allowed to have 10,000 NEDC-rated cars in stock that don’t comply with the new WLTP rules. Manufacturers over in the UK are relieved that this is in effect. The Managing Director of Hyundai UK, Tony Whitehorn said:
“If that wasn't the case, this industry would be on its knees. The reason is it obviously takes a lot of time because WLTP also means the introduction of Euro-6d [diesel] technology. That’s a massive change from the manufacturer’s point of view. The manufacturers have been struggling to keep up with that, and there are still a number of vehicles being produced today that are not Euro-6d vehicles.”
David Kendrick, who is a partner at UHY Hacker Young, which offers specialist automotive accounting services, explained that the new rules could result in availability issues for car dealers:
“There are a number of manufacturers that have a serious shortage of vehicles for Q3 and Q4 this year because production lines aren’t going to flow through,”
“That does build up an order bank at dealerships, but it’s not ideal for the consumer: if you want a new car and the car you want isn’t available immediately, are you going to switch to another brand that can supply you with what you want?”
The pitfalls of pre-registered stock
At the moment, manufacturers and their franchise dealerships are looking at the likelihood that they will hold in stock quite a number of non-compliant vehicles which they can’t sell, so they are seeing the necessity to pre-register their stock. Kendrick went on to say:
“We could see a lot of pre-registered, nearly-new cars available in Q3 – and they’ll have to incentivise the dealers to take them on. There could be some good deals out there for consumers.
“But pre-reg stock can have a detrimental effect on your used vehicles. If you have an almost zero-miles, three-month-old car on the forecourt next to a one that’s six months old with 5,000 miles, and the payment options are very similar, which one is the customer going to buy? It could also put pressure on residual values if there’s a significant surge of stock hitting the market.”
Another major effect of the WLTP test is that every single variant of a model will now have to be tested and not just the basic specification which means inevitable testing costs, leading to fewer bespoke configurations. This is certainly going to be a factor in the months immediately after 1 September 2018, because car manufacturers will not have had the time to test all their model variants.
Fleets may feel the heat
Fleet buyers may also consider their choices going forward, taking into consideration the new changes and the impact that will have on costs. Kendrick thinks this could happen, especially when it comes to fleet buyers.
“People are starting to focus on their choice of company car – that’s where the big impact is. Consumers have road tax implications, but it’s critical when it comes to company car drivers: over the next two years, there’s going to be a 30% increase in costs for company car drivers.”
It is believed that sales of hybrids and especially plug-in hybrids could take a hit because they’ll be less attractive to fleet users. The head of sales for Lombard Vehicle Solutions, Martin Reeves explains:
“With WLTP, the test cycle is a lot more rigorous and a lot of the hybrids have played the game of the NEDC test. That game has allowed them to produce mpg and CO2 emissions that put those hybrid vehicles into some of the lowest tax brackets, incentivising people to use them. But as they’re actually used, which will be better reflected in WLTP figures, the mpg and CO2 will be significantly higher.”
Tony Whitehorn who is the Managing Director of Hyundai UK thinks the important factor with these is the continuation of government subsidies:
“It’s going to depend on what’s happening with the [Office for Low Emission Vehicles] grant. People are mainly motivated by their pocket, so there will still be a place for plug-ins while the grant is there from the government.”
WLTP is no doubt going to be a huge change in the industry and it will have an inevitable effect on the new car market, but it’s essentially a readjustment which manufacturers and dealers will have to prepare for a deal with. If they adjust quickly to the changes, there is no reason to think they will not continue to thrive.
Author
Justin Kavanagh
Justin Kavanagh is a recognised leader
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