PARIS – Peugeot will deliver its first diesel hybrid in November, the 3008 HY4 cross/utility vehicle, and marketing chief Xavier Peugeot says the auto maker believes demand will quickly ramp up to 10%-15% of production.

Capacity for the 3008 is 600-700 cars a day at the PSA Peugeot Citroen plant in Sochaux, France. The company anticipates demand for the hybrid reaching 60-100 units daily, or as many as 25,000 a year.

The 3008 HY4 uses a parallel powertrain, with a 163-hp 2.0L diesel driving the front wheels, and a 37-hp electric motor from Bosch driving the rear axle.

An electronically controlled 6-speed manual transmission governs thermal engine output. An 8-kW Bosch alternator provides stop/start energy and allows a permanent 4WD mode, even when the nickel-metal-hydride battery is depleted.

PSA has worked for at least five years on the project, and its engineers – under hybrid project chief Victor Basso – now are working with BMW in a joint venture to develop next-generation hybrid components.

Meanwhile, the first-generation system soon will appear in the Peugeot 508 and Citroen DS5 sedans, and it may be integrated in all PSA vehicles based on platforms 2 and 3.

Engineers in China are developing software to control the system with gasoline engines.

Basso says doubling the volume of the modular powertrain should reduce costs by about 20%.

Software essentially is the heart of the parallel hybrid system.

An information screen instantly shows whether the engine or motor is producing torque or delivering energy to the battery. Traveling along a typical French road in full automatic mode, the sensation is similar to driving a midsize car with an automatic transmission.

But the screen shows frequent changes among FWD, RWD and 4WD, as well as electricity being delivered to the battery from the Bosch alternator or from the rear axle’s electric motor-turned-generator when the car is decelerating.

The electric motor starts the car moving from a dead stop, which improves the efficiency of the diesel when it takes over. The motor adds torque when the electronics in the manual transmission shift gears, reducing the small torque lag normally associated with such manuals during shifting.

When driving below 35-40 mph (56 -64 km/h), the electric motor often is the only source of torque. On a typical drive on 55-mph (88-km/h) country roads passing through 35-mph (56-km/h) villages, the diesel is running about two-thirds of the time, and works one-third of the time in city driving, Peugeot says.

The result is a 3,650-lb. (1,660-kg) Peugeot 3008 HY4 that emits 104 g/km of carbon dioxide, while the same Peugeot 3008 with the same diesel engine and a full-automatic transmission that weighs 266 lbs. (121 kg) less emits 176 g/km.

The improvement is a selling point that leads PSA to believe the project will be a commercial success.

Among other things, the hybrid in France will qualify for a E2,000 ($2,800) government bonus because of its efficiency, while the 3008 with a full automatic pays a E750 ($1,050) penalty for its poor performance. The hybrid sticker price is E37,400 ($52,360) and the non-hybrid top-of-the-line is priced at E32,100 ($44,940), but in France with the bonus-malus system, the hybrid will cost just E2,550 ($3,570) more.

Vincent Rambaud, general manager of Peugeot, says the hybrid may siphon away some non-hybrid sales, especially when a hybrid with smaller tires and no panoramic roof is launched in early 2012 with a sticker price of E35,200 ($49,280). The tires lower CO2 output to 99 g/km.

Peugeot expects half its hybrid sales to go to fleets and businesses, which in France get significant tax benefits because of their fuel efficiency. In France, Peugeot calculates the total cost of ownership for a business to be E200 ($280) a month less than the automatic version, a savings of E7,200 ($10,080) over three years.

Taxicab fleets are one high-potential target, says Rambaud.

In Paris, the Toyota Prius is the basis for many taxis, their fuel efficiency overcoming the deficiency of a relatively small trunk that required regulators to exempt the hybrid from normal taxi rules.

The 3008 HY4 CUV is a natural design for a taxi, Rambaud says, with a large trunk (although it loses 10% of its space to accommodate the big battery underneath) and good interior room. Some taxis already are diesel-powered.

French taxis average about 43,400 miles (70,000 km) a year, according to media that follow the segment, so fuel savings quickly will offset the higher cost of a hybrid.

Rambaud says Peugeot’s goal was not to produce the most economic diesel hybrid, but to make “a true car designed for people who want both efficiency and pleasure. If there is no emotion in an automobile, we are dead.”

Drivers can set their gear-selection lever to R-reverse, N-neutral, A-automatic or M-manual, if the driver wants to switch gears with the paddles on the steering wheel. There is no P for park because an electric parking brake is automatic. Where a driver of an automatic transmission might expect a D for drive, the 3008 HY4 offers the A.

“It could stand for (advance) instead,” jokes Basso. “The French touch.”

The software takes over and drives the car its own way whenever the driver tries something impossible, such as hitting 100 mph (161 km/h) in second gear, or forcing the car to run on electric power only when the battery is empty.

The software also is oriented to provide the best fuel economy, given the driver’s desire.

For example, an “eco-off” button could be used on the hottest or coldest days, when the driver decides to choose heat or air-conditioning over fuel efficiency. Both systems are linked to the diesel engine.

In regular automatic mode, the diesel will come on sometimes to provide air conditioning or heat, but allows the cabin temperature to fluctuate a bit.

With “eco-off,” temperatures are kept closer to the desired level, but the software always will allow enough energy to be pumped toward the NiMH battery so the basic hybrid system can operate.

The battery comes from Sanyo and is designed to last the life of the car, Basso says. The powertrain guarantee is for five years.

The alternator, motor and power electronics are from Bosch. Three high-tension cables carry the electricity between the front and rear of the car, packaged with a fourth communication cable.

Electricity generated by the 200V alternator is transformed to 12V to feed the standard battery and electric system for regular features like lights, wipers, locks and radio.

Rambaud says the 3008 HY4 fits perfectly with the brand’s efforts to improve its sales and image.

While Peugeot is working to sell more cars outside France, the home market will be its best for the 3008 HY4. During the conventional 3008’s first 18 months on the market through June, Peugeot sold 277,500 units, including 101,140 in France.