Mercedes Drops Diesel – Temporarily – in Three More States
August 23, 2007

By Bill Visnic

It’s two steps forward and one step back for Mercedes-Benz USA, one of the primary players eager to promote new-generation diesel engines to U.S. customers: In a quirky interplay between automakers and regulators, the rollout of ’08 Mercedes models earlier this month forced the company to temporarily suspend diesel-vehicle sales in three states: Pennsylvania, Connecticut and Rhode Island.

Why? Beginning with ’08 models, these states officially adopt California’s emissions regulations, which currently are tougher on diesels than are federal emissions regulations. California’s emissions regulations already had been adopted by four other states, meaning Mercedes –- and Jeep, the only other brand selling a diesel-powered light vehicle for the ’07 model year -– had been selling diesel vehicles in just 45 states.

With Pennsylvania, Connecticut and Rhode Island hopping the bandwagon for ’08, Mercedes cannot sell its diesel vehicles in a total of eight states –- including California, the nation’s largest vehicle market.

Losing three states’ worth of sales, while presumably not helpful to the reeducation of U.S. consumers regarding new-age diesels, doesn’t have Mercedes marketers too worried, however. It’s a temporary situation and supply is tight enough that any lost sales in the three new states likely will be easily absorbed in other states, Mercedes officials tell AutoObserver.

“Diesels have been very popular -– we haven’t had an issue with selling them,” says Anupa Bhise, product specialist for the ML-Class, one of four Mercedes lines currently offering diesel motivation.

“We’re not too concerned [about losing sales],” she adds. Mercedes doesn’t break out sales of diesel-engined vehicles from the rest of the lineup. In addition to the ML320 CDI, Mercedes offers its exemplary 3.0-liter V6 turbodiesel in the R-Class, E-Class and GL-Class.

The situation remains a minor setback, says Bhise. Around this time next year, Mercedes will be able to begin selling diesel vehicles in all 50 states when it fits the ML320 CDI with the most advanced form of its Bluetec emissions-reduction system that enables diesels to meet even California’s emissions regulations.

For ’09, Bhise says the ML-Class diesel will be 50-state emissions-compliant. The E-Class, currently the only diesel-powered Mercedes passenger car, and the other models offering the V6 turbodiesel are on a different product-development cycle, she says, so those models will continue with 42-state sales until they are upgraded with the advanced Bluetec system.

The E320 Bluetec, for example, will be 50-state compliant for the ’10 model year, she says.

When each 50-state model is launched, Mercedes faces another diesel flash point: the full-blown Bluetec emissions system includes a urea-injection system not used for current diesel-powered vehicles, and the addition hardware (and software controlling it) is reputed to be expensive.

Problem is, Mercedes currently is getting a scant $1,000 more for a diesel-powered vehicle compared to the base model, but the addition of urea injection is certain to add considerable extra cost to what already are expensive engines.

Using Bluetec with urea injection, Mercedes presumably will have to charge more -– perhaps much more –- than the $1,000 it’s asking for diesel today.

Or not.

Could the “s-word” –- subsidizing -– come into play to help ensure nascent diesel sales remain on their upward trajectory?

“I don’t know what the premium will be,” for diesel vehicles sporting full-blown Bluetec hardware, say Bhise.

“But [Mercedes parent company] Daimler knows how important diesel is in this market, and I’m sure they want to provide value to the customer.

“I know there will be a big push. Really, it’s our answer for fuel-efficiency.”

Posted by Michelle Krebs at 5:17 PM under Analysis , Companies , Technology | Comments (0) | digg this | Seed Newsvine