VW Sees ’04 Diesel Penetration Increasing

DETROIT – Volkswagen of America Inc. is counting on more than new product for its U.S. diesel sales push in 2004.

The company also is looking to rising gasoline prices to stimulate diesel sales, which currently account for between 10%-15% of the German auto maker’s total U.S. sales, says Kenneth Moriarty, Volkswagen of America leader-corporate strategy and coordination.

“Whenever fuel jumps into the neighborhood of $1.96 per gallon, diesel sales for us go up,” he tells the Society of Automotive Engineers World Congress being held here. “When gas prices have been $1.90-$2.00, Volkswagen has not been able to supply dealers with enough diesel vehicles to keep up with demand.”

According to the American Automobile Assn., regular gasoline prices are on the rise in the U.S., reaching as high as $2.08 per gallon in California. In Michigan, prices have increased $0.21 thus far in 2004, to an average of $1.72.

David Cole, chairman of the Center for Automotive Research in Ann Arbor, MI , says fuel prices are “fairly unpredictable” right now and could continue to rise in the U.S. in response to increased demand in emerging markets, such as China.

Then again, he says, they could decrease as Iraq’s oil supply comes “back on line” and the Saudi Arabians push to drive the price of a barrel of oil below $30 from the current $37.

Even without soaring gas prices, Volkswagen is poised to offer the most prolific diesel lineup available in the U.S. in 2004, with the introduction of a diesel V-10 Touareg SUV and a turbodiesel-powered Passat sedan. The new offerings join diesel versions of the Golf and Jetta.

DaimlerChrysler AG says it will begin selling diesel Mercedes-Benz models and Jeep Liberties in the U.S. this year, and Ford Motor Co. plans to offer a diesel-version of its Focus small car

Moriarty says Volkswagen is going after more of a mainstream buyer with the introduction of bigger, diesel utility vehicles, such as the Touareg. But he is quick to point out that diesels make sense for such applications because of their durability, fuel efficiency and low-end torque performance.

“We’ll find out pretty soon if there is pent-up demand for cleaner diesels (in larger vehicles),” he says.

Volkswagen plans to sell 12% of its Touaregs in the U.S. with diesel engines, once the vehicle goes on sale in the next quarter.

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