With the impending introduction of Euro5 diesel in the Klang Valley, we set out to discover firsthand how different it is from the Euro2 diesel in the market. We conclude that Euro5 is significantly better and may drive a long-term increase demand for diesel vehicles on the road and benefit the plantation sector via the increase in biodiesel demand. OVERWEIGHT on Singapore and Indonesia, NEUTRAL on Malaysia.

Euro 5 for Klang Valley. According to the website paultan.org and the publication Cars, Bikes and Trucks (CBT), BHPetrol (BHP) will roll out its Infiniti Euro5 diesel in Klang Valley as early as August. So far, Euro5 would be offered only by BHP and Petronas in Johor Bahru, for motorists to comply with Singapore’s stricter emission standards.

RHB conducts diesel comparison test. Being unable to find any test results comparing Euro5 B7 and the current Euro2 B7, we decided to conduct a test ourselves, to see if there was any difference between the two diesels. As we also wanted to find out if adding palm-based biodiesel to diesel would result in any loss of power (in driving), there was a need to compare this to unblended diesel. For the test, we used an unnamed Malaysian Euro2 B7 diesel, Euro5 B-zero from Caltex Singapore, and BHP’s Euro5 B7 diesel, currently available in Johor Baru.

Seriously better! We concluded that the two Euro5 diesel variants are a significant upgrade compared to the current Euro2 B7 – in terms of better power output, lower noise level and cleaner tailpipe emission. The differences could be felt but we conducted the following tests to arrive at our conclusions: i) repeated dynamometer test, a scientific measure of power output, ii) a less scientific measure for noise levels using an Android app, and iii) an unscientific visual test for emission.

Low-grade diesel an impediment to diesel vehicle sales. We are hopeful that this will be a thing of the past with the introduction of Euro5, which will encourage automakers to bring in diesel models. This would, in turn, boost long-term diesel consumption and, along with it, biodiesel demand – provided there is no forced implementation of B10 biodiesel.

A Test Of Diesels

Euro5 introduction in the Klang Valley

Since end-2014, there had been news indicating that Euro5 diesel will be introduced in the Klang Valley this year. Euro5 diesel has already been introduced in Johor Bahru, Malaysia’s border town to Singapore, since end-2014. Our correspondence with BHP, the main Euro5 player in the country, also indicates that Euro5 is on the way, pending government approval. The Euro5 diesel is fully imported, as Malaysia’s refinery can only produce up to Euro4. New refineries would have to be put in for Malaysia to produce Euro5 diesel, which is why the implementation date for nationwide Euro5 is only in 2020

What is Euro5 diesel and is it any good?

Euro5 has been the de facto standard for diesel in Europe since 2009. Europe is now in the process of moving into Euro6. Euro5 is also known as ultra-low sulfur diesel (ULSD) or clean diesel. It contains just 10ppm of sulphur compared with 500ppm for the current Euro2 diesel that is used in Malaysia. Euro2 was introduced in Jan 1996. We are unsure why Malaysia is still using fuel that abide by nearly 20-year-old Euro standards, even though fuel engineers we have spoken to indicated that Malaysia’s refineries are Euro4-ready. Among Malaysia’s neighbours, Singapore is on Euro5 B-zero (B-zero means pure petroleum diesel, ie doesn’t contain any biodiesel) while Thailand is on Euro4 B5. Euro4 contains 50ppm sulphur. Certainly, with a lower sulphur content, the emission will also be cleaner. Carbon monoxide emissions will drop by half with Euro5 and particulate matter could drop by 69%. There was no nitrogen oxide emission specified in Euro2.

Dirty diesel is a hindrance to automakers

Cleaner emission aside, having low-sulphur diesel in the market would also encourage automakers to introduce more diesel models here. High sulphur results in the formation of a higher level of sulphuric dioxide, which is corrosive to engines. Most modern engines are designed to meet Euro4 or Euro5 standards. Other than that, high sulphur content also results in the clogging of diesel particulate filter (DPF), among other issues. These issues have resulted in a few automakers attempting to introduce diesel models in Malaysia. For the models offered here, some are tailored to soften the effects of the high sulphur content, eg BMWs sold here has DPF deleted, as it clogs up too quickly.

Of the automakers who offer diesel models here, the number of models introduced are extremely limited For example, auto giant VW Group is only selling the Touareg SUV in Malaysia despite the huge number of diesel cars in its arsenal. Likewise, Ford, Hyundai, Chevrolet, Peugeot and Mercedes Benz all only have one diesel model each in their offerings. Japanese carmakers, in the meantime, have zero presence in diesel passenger car segments.

Setting out to find the truth about biodiesel

In the name of research, we set out to discover if there is any real difference in Euro5 and whether Euro5 with a B7 biodiesel blend makes any difference. We also wanted to find out if using B7 results in any power loss, given that palm oil by nature has a lower calorific value compared to petroleum diesel. So, the plan was simple. Get a diesel car and run a dynamometer test to establish the base case with Euro2 B7 diesel. Then, head south to Singapore where Euro5 B-zero is available, buy Euro5 B7 from a BHP station in Johor and run a dynamometer test and noise level test as well as get a subjective feel for each diesel.

Our test indicated that the Euro2 B7 diesel used in Malaysia is of poor quality compared to the Euro5 B-zero. This is despite Malaysia being the key producer for Tapis crude, said to be the world’s sweetest crude oil, ie with the lowest sulphur content. (Malaysia exports Tapis crude and imports the low-quality petroleum).

Euro5 B-zero – a difference you can feel

Upon filling up with Euro5 B-zero, the difference was visible. The engine was quieter and smoother. Acceleration became more effortless. So, not surprisingly in the dynamometer test, which was carried out to test power output, Euro5 B-zero resulted in 3 horsepower (HP) more than Euro2 B7. However, it is the torque number where there is significant difference. Euro5 B-zero produced 259 lb-ft (pound feet) of torque compared to Euro2 B7’s 241 lb-ft. The 7% increase in torque is a very visible difference when accelerating. especially given that one key appeal of diesel cars is the strong torque.

There is also a clear difference between where peak torque is reached. With Euro5 B-zero, peak torque is reached much earlier at 2,400 RPM engine speed vs 2,900 RPM for Euro2 B7. Having peak torque arriving earlier means more effortless acceleration. Peak HP is also arrived at earlier at 3,750 RPM for Euro5 B-zero vs 4,100 RPM for Euro2 B7.

To test the noise level, we employed an Android app named Sound Meter. When on Euro5 B-zero, engine noise level was at 55 decibels, visibly quieter than Euro2 B7’s 59 decibels. Other than that, we also noted some marginal improvement in fuel consumption. With Euro5 B-zero, fuel consumption dropped to 7.0L/100km on a long distance drive compared to 7.2L/100km for Euro2 B7. Again this is not surprising given the higher HP and torque of Euro5 B-zero means less effort and therefore less consumption.

We were not able to test emission on lack of available facilities (short of going to Puspakom). However, one can tell the difference visually. On a hard acceleration, there is always a puff of dark smoke from the exhaust pipe with the car running on Euro2 B7. We detected no such puff when the car ran on Euro5.

Is Malaysia’s Euro5 B7 really B7? BHP’s Euro5 is that good!

When the tank was depleted of Euro5 B-zero from Caltex Singapore, we filled up with Euro5 B7 we bought from BHP station in Pagoh, Johor. We found that Euro5 B7 was surprisingly good, with little to differentiate it with Euro5 B-zero. There is less than 2 HP and less than 1 lb-ft of torque difference between the two. Looking at the dynamometer test result in the chart below, the HP and torque lines of both diesels hug each other. The RPM at which peak torque and peak HP were arrived at were very close for both Euro5 B-zero and Euro5 B7. The noise level for Euro5 B7 is also recorded at 55 decibels, same as Euro5 B-zero. So close are the test results that we can’t help having suspicions that BHP’s Euro5 may be the unadulterated version despite BHP indicating that its Euro5 is indeed blended with 7% biodiesel.

Power loss with B7

Having said how good Euro5 B7 is compared to B-zero, there is still some mild power loss with B7. This suggests that a higher blend of biodiesel would result in a more significant power loss.

Why Euro5 will boost biodiesel demand

We believe the availability of Euro5 will encourage automakers to introduce diesel models here. We believe the small price premium (MYR0.10/litre) for Euro5 would not hinder consumers from switching to Euro5. Already, Mazda will have models based on its new 1.5L and 2.2L diesel engines introduced here in end-2015 or early 2016, which is likely a bet on Euro5 availability. These models have already been introduced in Thailand. The main increase in diesel models offered will come from European carmakers. The European marques with presence here – such as Audi, Ford, VW, Skoda, Renault, Citroen, Mercedes Benz and BMW – are the most likely to introduce diesel models. The upside for increase in diesel consumption and hence biodiesel offtake, is significant, in our view. Based on World Bank data, Malaysia’s road sector diesel consumption per capita stood at only 211kg compared to more than 300kg for developed countries. We estimate that the diesel car population in the country is less than 10% compared to 50-55% in Europe. Assuming Malaysia hits a 300kg per capita, biodiesel consumption could rise to around 1m tonnes from the current 0.7m tonnes per year.

The threat of B10

Malaysia’s Plantation and Commodities minister Dato’ Sri Douglas Uggah Embas has said that B10, ie 10% biodiesel mixed with 90% petroleum diesel, will be introduced in September this year. B10 will lift the country’s biodiesel consumption to 1.2m tonnes per year. We admittedly were surprised by the strong objection from the automotive industry to B10 implementation. BMW warned of potential engine damage and other automakers have indicated various instances of issues with B7, like the fuel filter clogging among them. The existing issues with B7 will likely worsen with B10. However, unlike B10, the existing B7 implementation was actually supported by the automotive industry.

The short-term boost to biodiesel demand notwithstanding, we fear that a forced implementation of B10 without the automakers’ nod will give rise to the risk of long-term decline in demand for biodiesel. This is especially so should engine failure become evident following the B10 implementation, as automakers are likely to withdraw diesel models from the Malaysian market. Hence, the 1.2m tonnes of biodiesel consumption targeted could be reached but will not be sustainable.

Sustaining 1m tonnes biodiesel consumption on B7

Should the Government maintain the existing B7 blend and better-quality diesels such as Euro5 or Euro5 are introduced, we believe Malaysia will be able to consume at least 1m tonnes of biodiesel pa on a sustained basis, given time for the adoption of new diesel models. The number could rise further in accordance with vehicle population growth. Road sector diesel consumption has risen at the rate of 3.7% pa from 2000 to 2011. Should this rate be maintained, diesel consumption would be 16% higher by 2020.

Source: RHB Research - 3 Aug 2015