BMW: Plump Price Premium for U.S. Diesels -- but Tax Break, TooBy Michelle Krebs November 11, 2008
By Bill Visnic
Sure, BMW North America Inc. is going to charge more for the diesel-engine versions of the 2009 3 Series sedan and X5 crossover when they show up in U.S. dealerships late this year.
Whether the diesel price premium is reasonable or outrageous depends on what you're using for comparison.
In a Web teleconference with automotive reporters, BMW announced the diesel-powered 335d, which delivers 23 mpg in the city and a fat 36-mpg highway rating and runs a six-second 0-60-mph time, will start at $44,725. That's $10 grand more expensive than the least-expensive 3 Series, the $34,225 328i.
But the more performance-equivalent model -- and one more likely to be closer to the diesel-engine 335d on an equipment-adjusted basis -- is the 300-horsepower 335i, and it starts at $40,925. Compared to the best gasoline-engine 3 Series -- and factoring in its standard-equipment six-speed automatic transmission ($1,200) -- the coming diesel-engine 3 Series is around $2,800 more.
The price-bandwidth comparison is narrower for BMW's other pending diesel-engine model, the X5 XDrive 35d: it starts at $52,025, compared with a gasoline six-cylinder X5 XDrive 30i at $47,925 and the V8 X5 XDrive 48i at $56,625.
The "diesel premium" nonetheless is far from negligible for either model: a minimum of almost $2,800 for the 3 Series car and around $4,100 for the X5 crossover. Tax incentives will reduce the bite, however: the 335d qualifies for a $900 tax rebate and the X5 nets a $1,550 tax cut.
Much of the diesels' extra cost can be attributed to the added beefiness and complexity of the engine itself -- a marvelously engineered inline six-cylinder with twin turbochargers to help it churn out 265 horsepower and (note how we will not say "whopping," even though it is) 425 lb-ft of torque. But the urea-injecting selective catalytic reduction emissions-control system that enables both new diesel-engine BMWs to be sold nationwide is expensive, too.
Much speculation about pricing also surrounded the long decline of the dollar versus the euro. Despite hedging by many European automakers, the dollar's weakness had been causing considerable consternation about pricing; the dollar's recent and marked strengthening, combined with the fact the X5 is assembled in the U.S., likely produced a diesel premium that is at least palatable.
The fuel economy comparison appears to favor BMW's assertion that diesel deserves a meaningful role in a U.S. vehicle market that has quickly recalibrated toward fuel-economy and environmental emphasis. The 335d's 23/36 rating compares with 17/26 for the gasoline 335i -- a better than 30 percent improvement in city driving and almost 40 percent on the highway.
The X5 XDrive 35d, says BMW, will generate a 19/26 rating -- a plump increase over the 15/21 mpg for X5 with a six-cylinder gasoline engine and a significant hike over the 14/19 consumption of the V8-powered X5.
BMW executives say that although the fluctuating price of diesel fuel remains a concern for those doing the math of the whole thing, they expect the current prevailing premium for diesel fuel (compared with historical norms) to recede to more consistent levels. That means, like competing powertrain engineers have told AutoObserver, they expect diesel-fuel pricing to soon settle around the price of premium-unleaded gasoline.
BMW's officials say they will watch demand for the first two diesel models -- BMW did not yet indicate when the vehicles will first be available in U.S. showrooms, saying dealers will have demo models by the end of the year -- in order to gauge the possibility for introducing other diesel-engine models for the U.S.
BMW shied away from providing a forecast of diesel-vehicle sales for the U.S., however. Diesels currently account for about 40 percent of BMW's worldwide sales, and a major 67 percent of its sales in Europe.
Although diesels have negative perceptions to overcome in the U.S. and must fight for their environmental chops with more-popular hybrid-electric technology, BMW U.S. Holding chairman and CEO Jim O'Donnell says that despite diesel fuel's recent high pricing, diesel technology still provides a "net benefit in operating costs" when compared with hybrids.
Photos by BMW:
1. The 2009 335d delivers compact-car rivaling fuel economy: 23 mpg city and 36 mpg on the highway.
2. Yup, that's a lot of stuff hooked onto the diesel variant of BMW's legendary inline six-cylinder engine; most of it is required for nationwide emissions compliance.