Volkswagen nearly killed diesel cars. Now it says they’re back

Volkswagen’s emissions rigging scandal nearly killed diesel car sales. Now the company says they’re making a comeback.

Sales of Volkswagen (VLKAF) diesel cars rebounded strongly in Germany last year after collapsing since the company admitted in 2015 that it had cheated emissions tests.

The world’s biggest carmaker said 43% of all Volkswagen brand cars sold in Germany last year were diesel, up from 39% in 2017. Diesels accounted for 27% of all Volkswagen cars bought by private customers, up from 15% the previous year.

While sales are clearly recovering, they still haven’t reached the levels seen before the “dieselgate” scandal. In 2015, diesels accounted for around 49% of all Volkswagen car sales in Germany.

Volkswagen admitted to cheating on clean air rules with software that made diesel emissions look less toxic than they actually were. The scandal triggered a crisis at Volkswagen and a crackdown on diesel engines.

Cities and countries around the world have announced bans on older generations of diesel cars. Hamburg, the second biggest city in Volkswagen’s home country, banned some older diesel vehicles last May.

New diesel cars have to meet tough new EU emissions standards that significantly reduce the amount of nitrogen oxide and tiny particle pollution they produce. Tougher emission testing was rolled out in September.

The European Union is also aiming to reduce automakers’ carbon dioxide emissions from new cars by 37.5% ahead of 2030. That supports the case for diesel engines, given they burn less fuel per mile than gas cars.

A worker at the ThyssenKrupp steelworks in Duisburg, Germany.

Related article The German economy just had its worst year since 2013

Christian Stadler, professor at Warwick Business School, said that many people in Germany still see diesel as the most practical option. “It is still the economical choice for people who have a longer commute, if you drive for an hour or more each way every day,” he said.

Still, diesel’s popularity is likely to continue to decline in the longer term because of the harmful nitrogen oxide emissions, he added.

Volkswagen invested heavily in diesel technology before the scandal erupted, and is trailing behind other carmakers when it comes to electric and hybrid vehicles.

It has spent the last three years trying to regain customers’ trust. The company has been promoting its “clean” diesel engines, which it says emit 15% less CO2 than gasoline models. It is also subsidizing the cost of retrofitting older diesel cars to upgrade their emissions filtering systems.

“In Germany, the diesel debate is emotionally charged — and frequently strays from the facts,” said Jürgen Stackmann, a board member at Volkswagen. He added that diesel engines will “remain an important technology for years to come.”

Related article Ford, VW alliance may create the cars of the future

Daimler (DDAIF), the maker of Mercedes-Benz, does not publish breakdowns of sales by engine type. However, the company told CNN Business it also believes in the future of diesel because they produce less CO2 than comparable gas engines.

A spokesperson said that over half of Mercedes cars sold in “many European countries” are diesel.

“Not using this technology on the road toward electric mobility would therefore be counterproductive, at least in terms of climate policy,” he added.

Related article Volkswagen sold over 10 million cars last year. Only 1% were electrified

The rest of the industry may not share their optimism.

Diesel cars accounted for just 32% of all cars sold in Germany last year, down from almost 39% in 2017. Across Europe, sales were down 18% in 2018.

“Heavy promotions and discounting by Volkswagen may be behind [the diesel] share of sales stabilizing in 2018 in its home German market … that doesn’t mark a turn around for diesels, however,” said David Bailey, professor at Aston Business School and an expert in car manufacturing.

Bailey said that until electric vehicles become more mainstream, Volkswagen will keep pushing its diesel products.

“There is a lot of hype about EVs, but frankly, not very many people can afford a Tesla. And if you have a longer commute, electric cars are not practical, because the technology and the infrastructure is not there yet,” Stadler said.