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Now, Audi is enjoying the payoff for its diesel-touting investments. Barely a year after their introduction here, about half of the A3 compact sedans Audi sells and 40% of the Q7s are Turbo Direct Injection (TDI) diesel versions. Those sales shares are more than double Audi’s initial expectations. So from those numbers alone, it’s easy to agree with Keogh that diesel has played a significant role in powering Audi’s rise here.
Encouraged by outside recognition such as the A3 TDI’s selection as the 2010 Green Car of the Year by the Green Car Journal, American car buyers are warming up to diesel philosophically as well. “The types of people jumping into these cars are the creative class, who want to make a real statement with it – a green statement,” Keogh said. “They also see that it’s making sense on the rational side.”
The technology has real green chops because diesel fetches up to 40% better mileage than gasoline engines and emits up to 30% less in greenhouse gases. It offers exceptional torque, while hybrids produce little. Diesel is ideal for long-distance driving and pulling loads, while hybrids aren’t – and “range anxiety” will prove the biggest drawback to upcoming all-electric models such as the Nissan Leaf.
“The engines are much quieter than previous [diesel] engines,” added Stuart Johnson, manager of the engineering and environmental office for Volkswagen of America. “That contributes to the fun-to-drive aspect.”
Perhaps most important, diesel has cleaned up its act. The recent development of low-sulfur diesel fuel and exhaust systems that cut nitrous-oxide emissions to levels acceptable even in California have created a “50-state” clean-diesel market for the first time in decades. Today’s diesels are incomparably better than the smelly, balky sedans fielded by General Motors in the Eighties.
As a result, diesel has begun climbing back toward its 2006 peak share of the U.S. market, 4%, with a 2.2% share this year and 2.9% by 2013, predicts Edmunds.com, the Santa Monica, Calif.-based auto-information concern. More optimistically, market researcher Frost & Sullivan predicts that diesel-unit sales in the U.S. will triple by 2015 from 2009 levels.
(The impact of the ascent of German-luxury diesel versions, while pronounced, hasn’t had a more noticeable impact on diesel’s overall market share because the vast majority of U.S. diesel-engine sales remain the heavy-duty versions of General Motors, Ford and Chrysler pickup trucks. Diesel comprises about 65% of sales of the Ford SuperDuty FSeries pickup, for instance.)
Meanwhile, hybrids are expected to rise to 4.8% of the 2013 market from 3.2% this year – and only that after a decade of hype behind the technology and carmakers’ offerings of dozens of hybrid models.
“Getting Americans to buy diesel for their everyday car purchase is still a work in progress,” concluded Rebecca Lindland, automotive analyst for IHS Global Insight, a market-research firm in Lexington, Mass. “But it’s still a work in progress for hybrids as well.”
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In fact, automakers in America have divided sharply over the issue of diesel’s future. Only the German luxury marques and Volkswagen, Audi’s parent, are backing it for mainstream vehicles. Japanese makers aren’t interested in diesel; Honda, in fact, shoved earlier plans to bring a diesel-powered Acura luxury model to this country as early as last year.
The Big Three remain dedicated to diesel for big pickups and continually improve their workhouse power plants. But all three Detroit-based companies have declined to go smaller with diesel. Ford maintains that its new EcoBoost technology will achieve 20-percent fuel-efficiency gains in gasoline engines and so obviate any need for diesel in its staple vehicles.
Diesel power long has been popular in Europe, of course, where an earlier stress on fuel economy, and tax breaks encouraging diesel, have kept its share at about half the market. Around the world, the fastest-rising diesel market is India, which already is No. 2 to Europe in the technology’s market penetration.
China is the No. 3 global diesel market even though its potential is being thwarted there over “questions about what the government there wants,” said Bernd Boisten, regional vice president of Bosch Diesel Systems North America, a major component supplier.
In the United States:
Volkswagen was the last big diesel seller of mainstream models in the pre-clean-diesel era, through about 2006. Once again it is the only budget-priced diesel provider and also offers the broadest diesel lineup in this country, ranging from the Golf and Jetta compact sedans, to the Jetta Sportwagen utility, to the Touareg SUV, with starting prices from about $22,000 to about $44,000 and diesel-price premiums of around $1,200.
TDI accounted for a whopping 86 percent of Sportwagen sales in June. “Compare that with take rates of only 5 to 6% for hybrid versions of Camry and other popular sedans,” said Andres Valbuena, a VW product planner.
Mercedes-Benz sells three SUVs – ML, GL and R Class – in its Bluetec diesel package with price premiums of up to about $4,000, as well as an E-Class sedan. U.S. diesel sales actually are down compared with two years ago as the company prepares to import an improved version of its E-Class by the end of the year.
“ But diesel is an important part of our product portfolio, and it will be here to stay,” said Sascha Simon, head of advanced product planning for Mercedes-Benz USA. One reason: “Dealers tell us that their best sales tool is to put someone in a diesel version without telling them it’s diesel.”
BMW has pursued a power strategy, inserting a six-cylinder, 265-horswepower diesel engine in its small 335 sedan as well as in its X5 SUV, at a premium of around $2,500. Take rates for diesel are about one-third for X5 but much lower for the 335.
“We wanted to show that diesels can be nimble, agile, swift and responsive, and no vehicular platform can prove that better than the 3 Series,” said Martin Birkmann, manager of product planning for BMW North America.
Audi chose a different path for its A3, inserting a four-cylinder diesel with just 140 horsepower and adding only $1,300 to the price. “In cars, the No. 1 thing consumers want to see is fuel efficiency; they’ll take torque and performance as a secondary thing,” Audi’s Keogh said.
Enthusiastically, Audi plans to add TDI options for at least two more U.S. models over the coming year, Keogh said, hinting that the A4 sedan and Q5 crossover might be on that roster.
In addition to the fuel-economy edge, resale values of clean-diesel models already have established themselves about 10% to 20% higher than their gasoline counterparts. “This is a significant contributor to the economic decision about what car to buy,” said Bosch’s Boisten.
Yet the economics of diesel remain a tough sell to some American consumers. In addition to price premiums, there is the year-end expiration of federal tax credits of up to about $2,000 on a clean-diesel purchase (as well as on hybrids). The volatility of diesel-fuel prices – which spiked as much as $1 higher than gasoline in the summer of 2008 but have fallen to close to par since then – is another holdback.
And diesel still presents some inconveniences. Torque abounds, but not “off-the-line” power. Larger vehicles require refilling tanks with urea, a component of the emissions system. Diesel engines take longer to warm up, so the Audi TDIs must rely on cabin space heaters. Some consumers insist that a slight odor is still a problem when refueling a diesel vehicle.
Plus, California may impose even tougher emissions regulations for the 2014 model year, and regulators there are even flirting with a finding that diesel is carcinogenic. Automakers have “a high level of confidence that we can meet those standards, even if they call for significant [emissions] reductions,” said VW’s Johnson.
Just in case, all the German makers are hedging their bets with plans to introduce more hybrids and even fuel-cell electric vehicles to the United States. You never know when California – or even all of America – might fall out of love with diesels again. [24-Sep-2010]
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Dale Buss is a journalist and editorial consultant in Rochester Hills, Michigan. He's a former reporter for The Wall Street Journal and writes about marketing and branding for a variety of publications.
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Cruise brands are struggling. In the choppy sea of brand differentiation, it is getting more difficult to tell Carnival from Royal Caribbean from Norwegian. The problem: similar routes, ships, and offerings.
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One Year Later, What Does General Motors Mean to America? -- Dale Buss
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The crash in the U.S. auto market, the historic political calculations, the wrenching financial pain for everyone from executives to bondholders to car dealers to employees – all of those epochal developments are beginning to recede, each at its own pace, into the 102 years of history of the General Motors Corporation.
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Audi has stood alone now for almost three years promoting diesel: http://wp.me/pGyRI-24It's a shame that the more fashionable electric technologies seem to be all our government is interested in promoting.http://autoperspectives.com 
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