Diesel's U.S. Success Still in Doubt, But VW Says No Delay

By Michelle Krebs July 28, 2008

By Bill Visnic

VW jetta.jpg Although German powerhouses BMW AG, Daimler AG's Mercedes-Benz and perhaps most importantly, mainstream maker Volkswagen AG, all are ready to launch in the U.S. a new generation of diesel-engine vehicles, the once seemingly assured "breakout" of new-age diesel technology in North America now is clouded, thanks largely to the persistently high price of diesel fuel.

But there's another factor: comparatively unremarkable "official" fuel economy figures that may not be the game-changer some advocates had hoped. Fuel economy - the diesel engine's traditional trump card - may be taking a hit because of technical changes required to make the new-age diesels complaint with nationwide emissions regulations.

Although the double-whammy of high fuel prices and somewhat disappointing fuel economy surely won't help automakers convince U.S. buyers about the advantages of contemporary diesels, the German automakers are sticking to their guns, saying they have not changed their forecasts or targets for diesel-vehicle sales this year - and VW for one, dispels industry rumors and a report from one East Coast newspaper that it is delaying for the second time the sales rollout of its diesel-powered Jetta TDI, which Monday announced its buyers were eligible for an alternative motor vehicle tax credit from the federal government.

"No, there is no delay," a Volkswagen of America Inc. spokesman told AutoObserver, adding that the year's entire allocation of Jetta TDIs already has been accounted for by dealer orders. The VW spokesman says sales should begin as scheduled at the end of this month or in early August.

He says the full allotment of Jetta TDI dealers is indicative customers are anxious for the diesel option. "I wish we had more (diesel) cars, available to sell this year, he said.

Diesels On Schedule - But EPA Hurts VW's Feelings

Volkswagen's rollout of the diesel-engine Jetta already had been delayed from an earlier launch slated for this spring. And the company seemingly was stung when the Environmental Protection Agency released fuel economy figures of 30 mpg city/41 mpg highway for the diesel-powered '09 Jetta.

The Jetta TDI's EPA economy numbers are a solid 40 percent better than the 21/29 of the Jetta with the base 2.5-liter gasoline 5-cylinder engine - but not the kind of eye-popping figures for which VW apparently had been hoping. The Jetta TDI's 30-mpg city figure, in particular, is nearly achieved by some gasoline-engine compact cars, and more crushingly from a competitive standpoint, pales in comparison to hybrid-electric vehicles such as the Toyota Prius and its outsized 48-mpg city rating.

There are indications the EPA's newly adopted fuel-economy test procedure, adopted beginning with the '08 model year, may conservatively estimate diesel-vehicle performance by as much as 18 percent - and after seeing the EPA's figures for the Jetta TDI, VWoA quickly organized a response in the form of third-party testing that yielded a more palatable 38 mpg city/44 mpg highway. Bloggers on several diesel-oriented forums believe these figures still may undersell the Jetta TDI's real-world fuel economy.

Fuel Price Still An Odorous Issue

Regardless of whether mileage figures are up to diesel-hungry buyers' expectations, the price of diesel fuel remains the most threatening factor against the uptake of new-generation diesels.

The Energy Information Agency said this week's national average diesel fuel price was $4.76, compared with $4.11 for regular-grade gasoline. The relationship indicates the disproportionate price of diesel vs. gasoline may be gradually shrinking back toward a historically "normal" relationship, but much damage already may have been done in the mind of the driving public, which last month saw diesel prices in excess of $5 per gallon in many parts of the nation.

Moreover, some analysts believe ballooning world demand and a lack of North American diesel-refining capacity may mean U.S. diesel-fuel prices may never revert to their historic levels that typically saw the price of diesel fuel considerably less than gasoline.

Officials at Mercedes-Benz, which is introducing three new diesel-engine crossovers this fall, are under no illusions that the current price of diesel fuel may indeed present yet another BlueTEC badge.jpg factor that mitigates against a pell-mell adoption of diesels in the U.S. similar to that of Europe, but they believe many premium-vehicle customers take the long view on diesel as an investment, not worrying so much about current fuel-price issues, which one Mercedes official refers to as "a blip of a moment" compared to longstanding diesel-gasoline pricing trends.

Mercedes is forecasting diesel fuel prices to gradually recede and plateau at a point near parity with premium gasoline, which they believe will make the diesel-engine option, delivering roughly 20-25 percent better fuel economy than the same vehicle with a gasoline engine, a more financially compelling choice.

The coming 3-liter diesel V6-powered ML 320 BlueTEC crossover, for example, gets 18 mpg 2009 ML 320 BlueTEC.jpg in the city and 24 mpg on the highway. The same vehicle with a 3.5-liter gasoline V6 delivers 15 mpg city and 20 mpg highway. In addition, AutoObserver's testing of the ML 320 Bluetec would appear to support the contention that EPA fuel-economy ratings for diesels may be artificially conservative: day-long, brisk-driving testing of the ML 320 BlueTEC in varied conditions generated an overall figure of 24 mpg, indicating the official fuel-economy figures may be less than will be achieved in real-world driving.

And another of the Edmunds.com family of websites, Edmunds Green Car Advisor, reports BMW's diesel-engine 335d, coming this fall, will generate 23 mpg in the city and 33 mpg on the highway - while also delivering on the brand's signature performance image, darting from 0-60 mph in 6 seconds, a figure that should help dispel any lingering perception that diesels are performance dogs. The 335d also leverages new emissions technology that now enables sales nationwide, including California, the nation's largest-selling state.

Gasoline Engines Improve - And Has Europe's Diesel Share Hit The Wall?

But diesel growth rates in the U.S. - and worldwide - face at least two other challenges: continuing efficiency advances for gasoline engines and the possibility that diesel penetration rates have slowed.

The adoption of direct-injection fueling and other advances for gasoline engines are bringing gasoline technology towards the efficiency of diesel - and gasoline engines typically do not have the emissions challenges of the diesel. Further advances toward stratified-charge direct injection for gasoline engines may inflict additional emission-management expense, however.

And a study earlier this year from Germany's Centre for Automotive Research at the college of Gelsenkirchen said the diesel installation rates in the German auto market had peaked from today's 48 percent and would slip to 30 percent of the market by 2020.

Two reasons, among several, for diesel's predicted pullback, according to the study: gasoline-engine advances - and ongoing movement towards parity of the price of diesel fuel (typically lower than gasoline in Europe because of tax structuring) and gasoline, the same situation already wrought by market forces in the U.S.

Bosch: Confident of North American Diesel Uptake

Fuel prices are troubling, but Robert Bosch GmbH, a prominent supplier of diesel components, particularly the sophisticated new fuel injectors and other fuel-system parts that have enabled the tremendous efficiency and performance gains of new-age diesels, has not altered its forecast for diesel-engine penetration in North America.

Johannes-Jorg Rueger, Bosch's vice president-diesel engineering and regional business leader for ECUs, told AutoObserver Bosch continues to forecast 15 percent of vehicles sold in the U.S. by 2015 will be diesel-powered.

"We never changed it (the company's forecast of North American diesel market share), even in recent months," Rueger said, adding it would be nice to see an increase in diesel-fuel refining capacity in the region, but admitting a hike in refining capacity "is nothing that will be resolved in a matter of months." He said he thinks diesel-fuel supply issues in North America may be alleviated by about 2010.

And Rueger says Bosch remains confident diesels will win over American customers, regardless of fuel-price concerns.

"We do not see a clear correlation on the fuel-cost side," he said of potential diesel-vehicle demand being hampered by high fuel prices. And he said Bosch believes an increasing variety of diesel-powered models will be the best thing to expand knowledge about - and sales of - diesel-powered light vehicles.

He said once customers understand the potential efficiency gains and performance available from today's diesel engines, the diesel also will win its stripes - even against hybrids.

Rueger said it will take some sorting out for customers to determine whether a diesel or a hybrid better suits their type of driving situations, but insisted that a diesel engine is "definitely" less-expensive than the extra cost of the technology comprising a so-called "strong" hybrid, such as the Toyota Prius.

Photos by the manufacturers

1 - Volkswagen says diesel version of Jetta compact car ready for scheduled deliveries.

2 - Mercedes BlueTEC badging

3 - Mercedes ML 320 BlueTEC finally available for sale nationwide thanks to new emissions technology.

 

 

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