Clean Diesel Is Coming! Clean Diesel Is Coming!

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CAFE Rules May Help Boost Sales

Environmentalists have long battled against diesel. But between the low-sulfur diesel the U.S. pumps today and pollution traps that companies like Audi and Mercedes employ on the cars, the exhaust is cleaner than from most regular gas-fed engines. J.D. Power & Associates predicts that new Corporate Average Fuel Economy (CAFE) regulations could push diesels from 5% of total sales now to at least 10% or more by 2015 if Honda (HMC) and Ford (F) make good on plans to bring some diesels to showrooms.

Audi figures the energy security pitch may crack through consumer bias against diesel as a dirty fuel that creates black plumes of smoke from big-rig trucks and fueled noisy, glitch-filled cars in the late 1970s.

But just as Audi has ramped up its effort to get Americans thinking about diesel, some of its rivals are dialing back plans, which could set the whole effort back a few years. Honda, Chrysler, Ford, General Motors, Nissan (NSANY), and Toyota (TM) have all halted diesel programs because of the rising costs of technology, the softening economy, and other problems. Since the Germans make vehicles with high profit margins that better cover the costs of diesel engines and pollution traps, they will achieve even greater economies of scale if they can get Americans to bite.

A diesel engine, say experts, typically delivers fuel economy 20% to 30% better than that of a gas engine. But a diesel can also add between $3,000 and $8,000 to a vehicle's price.

Unpredictable Price at the Pump

And those automakers still holding out on bringing diesels to market point to tax and supply system issues in the U.S. that make the cost of diesel at the pump too unpredictable for most consumers. While diesel can be cheaper than gas during some parts of the year, it can be 30¢ or more per gallon higher than gas at other times. During last summer's surge in gas prices, diesel frequently cost even more than premium.

Roland Hwang, vehicle research director at the Natural Resources Defense Board, has spent years battling the ills of diesel engines in trucks and farm vehicles that don't employ the latest technology, as well as arguing for the cleaner, low-sulfur diesel standard the U.S. adopted in 2006. He says Audi, as well as other carmakers, have gotten diesel vehicles nearly as green as hybrids and greener than most gas engines. What's needed now, he says, is "some energy policy that will keep diesel prices competitive with gasoline, and a better image with consumers."

Audi figures the way to do that may just be to get lawmakers and consumers to appreciate diesel as a cause, even a candidate to help bring energy independence to the U.S., and maybe they'll vote for it the next time they go to buy a car.

Click here to see what diesels will be coming to a dealer near you.

Kiley is a senior correspondent in BusinessWeek's Detroit bureau.

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