PSA Peugeot Citroen, whose CEO Jean-Martin Folz said in 2004 that hybrid-electric vehicles were not a good idea, unveils a pair of diesel-engine HEVs.

PSA's technology, under development for more than a year with the U.K.'s Ricardo Engineering, originally was designed for the Citroen Berlingo, a small commercial vehicle.

However, during the last year, the French government has put pressure on auto makers to come up with a family car capable of achieving 67 mpg (3.5 L/100 km).

PSA is gambling that if half of Europeans are willing to pay about €1,500 ($1,813) or more for a diesel than a gasoline engine, some Europeans will be willing to pay the same amount for a hybridized diesel in 2010.

In a presentation in Paris, PSA shows a hybrid HDi Peugeot 307 and Citroen C4, each with a 1.6L 4-cyl. turbodiesel and a nickel-metal hydride (NiMH) battery pack that gets 69 mpg (3.4 L/100 km) in the mixed European driving cycle.

In the urban driving cycle, where HEV technology is at its best, the cars consume 40% less than if powered by a diesel alone.

Those are figures that could help Peugeot win its bet that customers will pay a reasonable amount extra for HEV economy.

A current standard Citroen C4 with the same 1.6L HDi turbodiesel gets about 50 mpg (4.7 L/100 km), a 38% improvement over the same car with 1.6L gasoline 4-cyl. rated at 33 mpg (7.1 L/100 km).

The trick will be in reducing the price. Today, the cost of hybridizing a car is nearly three times higher than it needs to be, the company claims. A customer would have to pay about €4,500 ($5,400) more for an HEV version of the C4, and PSA does not believe the market will support that figure.

The auto maker will not be ready with its HEV before 2010, says Folz, and it could be delayed beyond that date if PSA does not get the help from France it expects.

PSA has proposed to the French Agency of Industrial Innovation that it lead a €100 million ($121 million) project to develop the diesel HEV system, which would meet the government's goal for a 67-mpg (3.5L/100km) family sedan.

Contrary to earlier reports, PSA's development of the C4 and 307 HEV prototypes is not related to the Citroen Berlingo project supported by the U.K. government, which will be unveiled to the media in April, more than six months later than originally scheduled.

If costs come down and customers accept diesel HEVs, it will go a long way to reducing European fuel consumption. The mixed-cycle carbon dioxide output of the PSA hybrid HDi vehicles is 90 g/km. The European industry has a goal of achieving an industry average of 140 g/km. The current average is about 170 g/km.

PSA also notes proudly its diesel HEV provides about 25% better economy than an HEV with an equivalent gasoline engine.

Folz, originally an HEV critic because of their expense, calls the development “a genuine technological rupture, equivalent to that which occurred several years ago with diesel direct injection.”

PSA's HEV approach combines a new automated manual transmission, the “mild”-HEV Stop and Go system that shuts down the engine when the vehicle is stationary, and electric motors powered by the 288-volt NiMH battery.

The auto maker says the HEV components add about 243 lbs. (110 kg), or about 8%, to the weight of the vehicles.

Because PSA uses a parallel HEV approach, the cars can be propelled either by the diesel engine or the electric motors, or a combination of the two.

On battery power alone, the car has a range of about 3.1 miles (5 km) as a zero-emission vehicle. Top speed under electric-only power is 31 mph (50 km/h).