Diesel autos may be due rebound in U.S.

Europeans prize diesel engines for their fuel efficiency and power, but U.S. buyers have been slow to embrace them because of environmental concerns and bad memories of the belching diesels of the 1980s. Only about 3 percent of the vehicles sold in the United States last year had diesel engines, compared with half the vehicles in Europe.

But automakers are betting that will change now that diesel is getting cleaner, gas prices are rising and consumers are paying more attention to fuel economy. Diesels are 30 percent more efficient than gas engines, and unlike gas-electric hybrids, which get better fuel economy in city driving, diesels are equally efficient on the highway.

"This really, I think, is a whole new direction this market can take," DaimlerChrysler chief executive Dieter Zetsche said this week at the North American International Auto Show.

Zetsche promoted DaimlerChrysler's Bluetec diesel technology, which will make its U.S. debut this fall on the 2007 Mercedes E 320 sedan. DaimlerChrysler says Bluetec is so clean it can meet emissions regulations in all 50 states, including the five states where diesels aren't currently sold because they can't meet emissions standards: California, Massachusetts, Maine, New York and Vermont.

Zetsche said DaimlerChrysler plans to add Bluetec technology to other brands in its lineup, including Chrysler and Jeep.

Ford is displaying the Ford Reflex concept car at the auto show. It is a sports car with a hybrid-diesel engine Ford says can get 65 mpg. Honda, which sells diesels in Europe, said it's monitoring U.S. demand.

Federal and state regulations have stunted the growth of diesel, which emits smog-forming pollutants, and environmental groups remain wary. The Union of Concerned Scientists says even if cleaner diesels are aggressively adopted, the reduction in carbon emissions -- which may cause global warming -- would be modest. The group suggests hybrids offer greater benefits.

Diesel fuel is also less available. It's at approximately 42 percent of fuel stations in the United States, according to the Diesel Technology Forum, a Frederick, Md.-based diesel advocacy group funded by automakers, diesel engine manufacturers and others. Diesel fuel also costs about a dime more per gallon.

Diesels will get a big boost this October, when U.S. diesel retailers are required to begin selling low-sulfur diesel. In the past, diesel could have a sulfur level of up to 500 parts per million; low-sulfur diesel has no more than 15 parts per million.

Allen Schaeffer, executive director of the Diesel Technology Forum, said low-sulfur diesel is a critical piece of the puzzle for manufacturers, which have vastly improved technology but still can't meet strict standards such as California's.

"This opens the first real window of opportunity for manufacturers to have a shot at meeting these standards," Schaeffer said.

Better fuel and better technology will help diesels meet new federal emissions standards being phased in through 2009. Automakers also have another reason to improve diesel technology. Under a new federal law, diesels are eligible for tax credits of up to $3,400 per vehicle through 2010 as long as they emit a certain low level of smog-producing nitrogen oxide. California and the four states that have adopted its standards are the only states that now require such a low level of nitrogen oxide, Schaeffer said.

"Ultimately, it will not be a question of whether technology can meet these standards," Schaeffer said. "The question for manufacturers is one, really, of cost."

The 20 or so diesel models now available in most U.S. states cost between $300 and $1,000 more than comparable vehicles with gas engines, Schaeffer said, but that could go up if the price of the technology rises. Still, it's lower than the average premium of $3,500 on hybrid cars.

Even with the hybrid premiums, analyst Anthony Pratt of the consulting firm J.D. Power and Associates predicts U.S. diesel sales will nearly double in the next few years, from 550,000 in 2005 to more than 1 million in 2010.

Currently, GM offers the most diesel models in the U.S. market, mostly trucks or vans, according to the Diesel Technology Forum. Volkswagen sells diesel versions of its Beetle, Gulf and Jetta cars.