GigaOm

Can Diesel Save Detroit?


Plug-in vehicles held the spotlight in the turnaround plans drafted by General Motors and Chrysler in recent months, and Congress has allocated billions of dollars for investment in plug-in car and battery research, production, and infrastructure. But there's another technology in the mix that could end up doing more to help automakers meet tightening fuel-economy standards over the near term, while also creating new opportunities for entrepreneurs: diesel.

The latest generation of diesel engines isn't what you might remember from years past—as Volkswagen is going to pains to explain with its new TDI Truth & Dare site, which aims to disprove commonly held beliefs among U.S. drivers that diesels are sluggish, pricey, and polluting.

Diesel Tech Startups

Volkswagen's underlying motive, of course, is to help boost sales of its diesel Jetta TDIs. Less vocal, but no less vested in the future of diesel is a group of stealthy clean-tech startups and their investors. For example, San Diego startup Achates Power, backed by VC firms including Sequoia Capital, is working on a high-efficiency, two-stroke diesel engine that it says will have higher power density (more power, less weight) and lower emissions than those currently on the market. After more than a decade of research and development, the company said in February that it plans to start licensing the technology to the military and/or big automakers next year. And just last week, Khosla Ventures-backed startup Transonic Combustion raised a third round of funding to move its fuel-injection system for high-compression diesel engines closer to commercialization.

While wooing big automakers as customers won't be easy for young companies with unproven technologies, diesel engines do have a role to play in the next generation of vehicles on U.S. roads. Startups ready to license technology to U.S. companies or sell plug-and-play components may be able to ride that wave.

We've heard the virtues of diesel before. Last summer, when U.S. gasoline prices careened past the $4 mark, automakers like Volkswagen readied so-called "50-state" diesels for their 2009 and 2010 model years with low enough emissions to meet even California's tougher pollution standards. There was a strong business case at the time, not because diesel fuel was cheap—it had risen to about $5 a gallon—but because diesel engines are more efficient. Ford was among the U.S. companies jockeying to get into the diesel game last year, with a diesel version of its F-150 pickup scheduled to launch in 2010. But on May 8 the company said it's delaying the introduction indefinitely. While analysts expect gas prices to surpass diesel again this summer, current fuel prices make diesel a harder sell.

A Step on the Way to Electric

In the next few years, automakers will have much more than fuel prices driving their lineup decisions. Already, tighter emissions controls and corporate average fuel economy (CAFE) standards loom large, especially for struggling companies. Take the new Chrysler-Fiat tie-up. It faces the U.S. mandate to achieve an average 30.2 mpg across all of its passenger vehicles, starting with 2011 models. A minimum 35 mpg fleet average awaits for 2020. According to J.D. Power & Associates powertrain analyst Mike Omotoso, Chrysler and Fiat are likely to pick the lowest hanging fruit—Fiat's existing 4-cylinder, highly efficient diesel engines—to meet those requirements.

Diesel also offers automakers an interim step to reducing greenhouse gas emissions from their fleets, even if they expect to eventually churn out electric vehicles. As The New York Times notes, the new diesels emit roughly 20% less carbon dioxide than their gas-powered counterparts. If startups can deliver on their goals, that percentage could increase still more. It's still a long way from zero tailpipe emissions, but could be enough to put diesel—and diesel tech startups—out in front once the dust from the auto shakeout finally settles.

Graphic courtesy U.S. Energy Information Administration

Provided by GigaOm


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