France Eyes Burgeoning U.S. Diesel Market

For a generation, light-duty diesels barely have been a blip on the radar screen for most Americans.

Diesel-powered Volkswagens and Mercedes-Benzes have been little more than oddities on the U.S. landscape for the past 25 years or so, and they have done little to change the bad impression most American consumers have of compression-ignition engines.

Thanks to the recent introduction of ultra-low sulfur diesel fuel in the U.S. and rising concerns about fuel economy, that all is about to change dramatically.

Beginning this year and running through 2010, more than 20 world-class diesel-powered vehicles are expected to invade the U.S. market, from ultra-efficient small sedans to big, but economical, pickups and cross/utility vehicles.

Will Americans fall in love with the diesel's efficiency and low-end torque as the Europeans already have?

That remains to be seen. Unlike Europe, where it is cheaper than gasoline, diesel is the costliest choice in the U.S. per gallon, making oil burners a little less compelling.

Even so, Europe's — and particularly France's — love affair is hardly superficial. In fact, the market has become so saturated France's diesel industry now is hungrily looking at the burgeoning U.S. diesel sector for growth.

That has led a French delegation of a dozen companies to the SAE Congress and Exhibition this month to pitch their diesel-related products, technologies and services.

The evolution of the diesel in France could not be more different from the U.S.

For decades, France has been Europe's leading consumer of diesel engines in passenger cars. The reasons are historic, fiscal and technical.

France decided in the 1970s to create an oil industry although it had no significant oil fields of its own. A lower tax was set to encourage diesel consumption, meaning fewer barrels of petroleum would need to be imported. The policy worked: France's Total SA now is one of the world's petroleum giants.

Peugeot introduced its first diesel in taxis and commercial vehicles in 1936, and diesels remained a favorite of taxis and delivery vans because of their longevity. The more kilometers driven on a diesel, the more one saves compared to gasoline.

For decades overall penetration was limited in spite of the economic advantages because diesels could be rough, noisy and dirty. But when common-rail high-pressure injection came along in the 1990s, diesels boomed across Europe. Multiple injections of atomized fuel reduce pollution at the same time they boost torque.

Suddenly, owning a diesel was both a wise and passionate choice, and auto makers began offering the engines in convertibles, coupes and small cars.

Taxes remain lower on diesel fuel than on gasoline, but the price gap is disappearing because of the rising cost of oil and increasing demand for diesel fuel compared with gasoline.

Where diesel cost E0.80 ($1.24) per liter and gasoline E1 ($1.55) per liter a few years ago, today diesel averages about E1.26 ($1.97) a liter near Paris, and gasoline is at E1.38 ($2.16).

Translated into U.S. dollars, today's prices in France are roughly $6.98 a gallon for diesel and $7.65 a gallon for gasoline, reason enough to search for fuel efficiency.

A new French system of credit for buying fuel-efficient cars and taxes on gas hogs at the end of 2007 gave yet another boost to diesel engines, which have about a 20% efficiency advantage over gasoline powertrains.

Diesels accounted for 73.9% of new cars sold last year in France, but after two full months of the French bonus/malus system, diesel penetration in 2008 is 77.9% and rising.

“This is a massive jump,” says Peter Schmidt, founder of the Automotive Industry Data consultancy in Great Britain and a long-time diesel observer. “Even though diesel fuel prices are getting closer to petrol, people know that driving a diesel, they get much better fuel economy for the same tankful.”

With Finland, Ireland and other countries putting carbon dioxide tax policies into place, Schmidt predicts diesels will grab 55% of the market this year.

French appreciation of diesels has reached the point where not all the purchases are rational. In Peugeot's small city car, the 107, both the 1.4L diesel and 1.0L gasoline engine emit 109 g/km, and the diesel raises a typical purchase price from E9,000 ($14,000) to E10,500 ($16,300).

With diesel fuel's price advantage of E0.13 ($0.20) per liter, it would take about 130,000 km (75,000 miles) of driving to amortize the E1,500 ($2,330) higher cost of the engine, yet half the 107s in France are purchased with the diesel.

If Americans turn out to be only a fraction as enamored with diesels, that still could be very good news indeed to France's diesel supply base.

The Coming U.S. Diesel Invasion*

Audi (2009)
3.0L TDI V-6
Q7 cross/utility vehicle

BMW
3.0L twin-turbo I-6 (2009)
335d, X5 35d

Chrysler/Cummins (2009)
4.5L V-8
Dodge Ram, light trucks.

Chrysler/Jeep (current)
3.0L V-6
Grand Cherokee

Ford 4.4L V-8 mini Powerstroke (2009 or 2010)
Ford F-150/Expedition, Super Duty

GM 4.5L mini Duramax (2009)
Silverado/GMC Sierra half-ton pickups, Hummer H2

Honda/Acura (2009)
2.4L I-4, possible V-6
Acura TSX, TL or RDX,
Honda CR-V, Pilot

Mahindra (2009)
2.4L turbodiesel I-4
Pickup truck

Mercedes-Benz (Fall 2008)
3.0L Bluetec V-6
GL, ML, R-Class CUVs
(3.0L CDI already available)
2.2L I-4 (2009)
GLK CUV

Nissan 3.0L V-6 (2010)
Maxima
Light-duty diesel (2010 or 2011)
Titan pickup

Subaru (2009)
2.2L H-4
Legacy, Impreza

Toyota (2010)
V-8
Tundra, Sequoia

VW (Fall 2008)
2.0L TDI I-4
Jetta sedan, SportWagen
3.0L TDI V-6 (2009)
VW Touareg CUV

*Ward's and industry sources